Xylem Inc
For the period ended Dec 31, 2024. Filed Mar 3, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 3, 2025
XYL$97.83-2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-28.
0001524472-24-000006
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-03.
0001524472-25-000013
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 169 previous paragraphs and 193 current paragraphs.
86 unchanged; 48 reworded; 44 added; 35 removed; 0 previous and 15 current paragraphs rearranged.
Tables are not compared: 15 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (44)
Current report
On May 24, 2023, Xylem completed the acquisition of Evoqua. Commencing from the acquisition date, Xylem’s financial statements include the assets, liabilities, operating results and cash flows of Evoqua. Refer to Note 3, "Acquisitions and Divestitures," for additional information.
Current report
(c)The tax-related special items in 2023 primarily relate to $70 million of tax benefits from tax exam impacts and $27 million of tax benefits relating to tax law changes.
Current report
Revenue generated for 2024 was $8,562 million, an increase of $1,198 million, or 16.3%, compared to $7,364 million in 2023. The increase at constant currency consists of revenue from acquisitions of $786 million and an increase in organic revenue of $424 million, reflecting organic growth across all major geographic regions, with organic growth in the Measurement and Control Solutions, Water Infrastructure, and Water Solutions and Services segments, more than offsetting organic declines in the Applied Water segment.
Current report
(a)Foreign currency translation impact for the year primarily due to the weakening in value of various currencies against the U.S. Dollar, the largest being the Canadian Dollar, Chinese Yuan, Chilean Peso, Brazilian Real and the Hungarian Forint, offset by the strengthening in the British Pound.
Current report
Water Infrastructure revenue increased $340 million, or 15.3%, to $2,555 million in 2024 compared to 2023. Revenue growth was partially made up of the revenue contributed by acquisitions of $221 million, with the remainder of the increase coming from organic revenue growth of $123 million, or 5.5%. Revenue was negatively impacted by $4 million of foreign currency translation. The transport application had $79 million of organic revenue growth, driven by strength in all of our major geographic regions, led by increased sales volume and price realization in the U.S. and Canada, and backlog execution and infrastructure projects in western Europe. Organic revenue for the transport application also benefited from increased infrastructure projects in the emerging markets. Organic revenue for the treatment applications grew by $44 million, led by infrastructure projects in the U.S. and emerging markets.
Current report
Applied Water revenue decreased $60 million, or 3.3%, to $1,793 million in 2024 compared to 2023. Revenue was negatively impacted by $2 million of foreign currency translation, with the change at constant currency coming entirely from organic declines of $58 million. Industrial organic revenue decreased by $32 million due to timing of projects and softness across all major geographic regions. Organic revenue from building solutions declined $26 million driven by softness in the U.S.
Current report
Measurement and Control Solutions revenue increased $259 million, or 16.1%, to $1,871 million in 2024 compared to 2023. Foreign currency translation was flat during the year, with the change at constant currency coming from organic growth of $255 million, and $4 million of acquisition activity. Smart metering and other applications had $261 million of organic growth, driven by increased sales volume due to backlog execution in the U.S. Organic growth was partially offset by $6 million of organic decline in analytics, driven by lapping of project deliveries and backlog execution in the U.S. and emerging markets in the prior year.
Current report
Water Solutions and Services revenue increased $659 million, or 39.2% to $2,343 million in 2024 compared to 2023. Revenue growth was partially made up of the revenue contributed by acquisitions of $561 million, with the remainder of the increase coming from organic revenue growth of $104 million, or 6.2%. Revenue was negatively impacted by $6 million of foreign currency translation. Organic revenue growth was primarily from strength in the dewatering applications in the emerging markets and the U.S. due to increased sales volume, strong rental demand and increased capital project revenue in Canada.
Current report
(a)Foreign currency translation impact for the year primarily due to the weakening in value of various currencies against the U.S. Dollar, the largest being the Canadian Dollar, Chinese Yuan, Chilean Peso, Brazilian Real and the Hungarian Forint, offset by the strengthening in the British Pound.
Current report
Gross margin as a percentage of consolidated revenue increased 60 basis points to 37.5% in 2024 as compared to 36.9% in 2023. The gross margin increase included 40 basis points of favorable impacts from decreases in realignment costs and special charges as compared to the prior year and 10 basis points of unfavorable impacts from increased intangible amortization expense. The gross margin increase for the year included favorable operational impacts of 280 basis points, driven by 180 basis points of productivity savings and 90 basis points of price realization. These impacts were partially offset by 250 basis points of negative operating impacts, driven by 150 basis points of inflation, 50 basis points of unfavorable impacts from the Evoqua acquisition, and 30 basis points of increased spending on strategic investments.
Current report
SG&A expenses increased by $154 million (increase of 8.8%) to 22.3% of revenue in 2024, as compared to 23.9% of revenue in 2023. Cost increases were driven by $146 million of additional operational SG&A from the acquisition of Evoqua, $49 million of inflation, $36 million of increased spending on strategic investments, $24 million of increased acquired intangible asset amortization and $11 million of increased volume, partially offset by $61 million of savings from productivity initiatives and $56 million of decreased special charges, primarily costs associated with the Evoqua acquisition in the prior year.
Current report
For the year ended December 31, 2024, the charges incurred primarily related to actions taken to further streamline our organization in order to strengthen our competitive positioning and the ability to better serve our customers. The charges incurred were across all of our segments, with the majority of the charges impacting the Water Solutions and Services and Water Infrastructure segments.
Current report
Refer to Note 5, "Restructuring and Asset Impairment Charges" for more information.
Current report
Refer to Note 12, "Goodwill and Other Intangible Assets," for more information on intangible asset impairment charges incurred during the years ended December 31, 2024 and 2023.
Current report
Operating income was $1,009 million (operating margin of 11.8%) during 2024, an increase of $357 million, or 54.8%, when compared to operating income of $652 million (operating margin of 8.9%) during the prior year. Operating margin included favorable impacts of 150 basis points from a net decrease in special charges, restructuring and realignment costs, and acquired intangible asset amortization as compared to the prior year. Additionally, operating margin included 490 basis points of expansion from favorable operating impacts, driven by a 270 basis point increase from productivity savings, 130 basis points from price realization, and 80 basis points from favorable volume. Margin expansion was offset by 350 basis points of unfavorable impacts driven by 210 basis points of inflation and 80 basis points of increased spending on strategic investments. Excluding special charges, acquired intangible asset amortization, and restructuring and realignment costs, adjusted operating income was $1,373 million (adjusted operating margin of 16.0%) for 2024 as compared to adjusted operating income of $1,072 million (adjusted operating margin of 14.6%) during the prior year.
Current report
Net income was $890 million (net income margin of 10.4%) during 2024, an increase of $281 million as compared to net income in the prior year of $609 million (net income margin of 8.3%). The increase in net income was driven by increased operating income of $357 million and a non-recurring gain on the remeasurement of our previously held equity interest in Idrica of $152 million. Net income growth was partially offset by increased income tax expense of $171 million, increased loss on sale of businesses of $45 million, and increased interest and non-operating expense of $12 million. Adjusted EBITDA was $1,763 million (adjusted EBITDA margin of 20.6%) during 2024, an increase of $371 million, or 26.7%, when compared to adjusted EBITDA of $1,392 million (adjusted EBITDA margin of 18.9%) during the prior year. The increase in adjusted EBITDA margin was primarily due to the same factors impacting adjusted operating margin noted above; however, adjusted EBITDA was not negatively impacted by the relative impact of increased depreciation and software amortization expense.
Current report
Operating income was $356 million for our Water Infrastructure segment (operating margin of 13.9%) during 2024, an increase of $81 million, or 29.5%, when compared to operating income of $275 million (operating margin of 12.4%) during the prior year, or a total increase of 150 basis points of operating margin. Operating margin growth included favorable impacts of 30 basis points from a minor overall net increase in acquired intangible asset amortization, restructuring and realignment costs, and special charges relative to the increase in revenue as compared to the prior year. Additionally, operating margin increases included 520 basis points from favorable operating impacts, driven by 270 basis points from productivity savings, 90 basis points of price realization, 60 basis points of favorable mix, and 40 basis points of favorable volume. Operating margin growth was partially offset by negative operating impacts of 400 basis points including 190 basis points of inflation, 60 basis points of increased spending on strategic investments and 40 basis points of negative operating impact from the impact of the Evoqua acquisition. Excluding acquired intangible asset amortization, special charges and restructuring and realignment costs, adjusted operating income was $455 million (adjusted operating margin of 17.8%) during 2024 as compared to adjusted operating income of $368 million (adjusted operating margin of 16.6%) during the prior year.
Current report
Adjusted EBITDA was $529 million (adjusted EBITDA margin of 20.7%) during 2024, an increase of $103 million, or 24.2%, when compared to adjusted EBITDA of $426 million (adjusted EBITDA margin of 19.2%) during the prior year. The increase in adjusted EBITDA margin was primarily due to the same factors impacting the increase in adjusted operating margin; however, adjusted EBITDA was not negatively impacted by the relative impact of increased depreciation and software amortization expense.
Current report
Operating income was $271 million for our Applied Water segment (operating margin of 15.1%) during 2024, a decrease of $39 million, or 12.6%, when compared to operating income of $310 million (operating margin of 16.7%) during the prior year, or a total decrease of 160 basis points of operating margin. The decrease in operating margin included unfavorable impacts of 10 basis points from a slight increase in restructuring and realignment costs as compared to the prior year. Operating margin also included negative operating impacts of 470 basis points, driven by 220 basis points of inflation, 110 basis points of unfavorable volume, and 80 basis points of unfavorable mix. Declines were partially offset by 320 basis points of favorable operating impacts, consisting of 270 basis points from productivity savings and 50 basis points of price realization. Excluding restructuring and realignment costs, adjusted operating income was $286 million (adjusted operating margin of 16.0%) during 2024 as compared to adjusted operating income of $324 million (adjusted operating margin of 17.5%) during the prior year.
Current report
Adjusted EBITDA was $317 million (adjusted EBITDA margin of 17.7%) during 2024, a decrease of $35 million, or (9.9)%, when compared to adjusted EBITDA of $352 million (adjusted EBITDA margin of 19.0%) during the prior year. The decrease in adjusted EBITDA margin was primarily due to the same factors impacting the decrease in adjusted operating margin.
Current report
Operating income was $247 million for our Measurement and Control Solutions segment (operating margin of 13.2%) during 2024, an increase of $114 million, or 85.7%, when compared to operating income of $133 million (operating margin of 8.3%) during the prior year, or a total increase of 490 basis points of operating margin. Operating margin increases included favorable impacts of 60 basis points from the net impact of restructuring and realignment costs, acquired intangible asset amortization, and special charges being flat as compared to the prior year relative to an increase in revenue. Additionally, the operating margin increase included 870 basis points from favorable operating impacts driven by 340 basis points from productivity savings, 260 basis points of price realization, and 240 basis points from favorable volume. Favorable impacts were partially offset by 440 basis points of unfavorable impacts driven by 270 basis points of inflation, 80 basis points of increased spending on strategic investments, and 60 basis points of increased inventory management costs. Excluding restructuring and realignment costs, acquired intangible asset amortization, and special charges, adjusted operating income was $327 million (adjusted operating margin of 17.5%) during 2024 as compared to adjusted operating income of $213 million (adjusted operating margin of 13.2%) during the prior year.
Current report
Adjusted EBITDA was $395 million (adjusted EBITDA margin of 21.1%) during 2024, an increase of $114 million, or 40.6%, when compared to adjusted EBITDA of $281 million (adjusted EBITDA margin of 17.4%) during the prior year. The increase in adjusted EBITDA margin was due to the same factors as those impacting the increase in adjusted operating margin; however, adjusted EBITDA margin was negatively impacted by increased non-operating expense and did not benefit from the relative impact of decreased share-based compensation expense.
Current report
Operating income was $219 million for our Water Solutions and Services segment (operating margin of 9.3%) during 2024 an increase of $87 million, or 65.9%, when compared to operating income of $132 million (operating margin of 7.8%) during the prior year, or a total increase of 150 basis points of operating margin. Operating margin increases included favorable impacts of 40 basis points from increases in revenue outpacing a net increase in acquired intangible asset amortization, restructuring and realignment costs, and special charges as compared to the prior year. Additionally, the operating margin increase included 490 basis points from favorable operating impacts consisting of 160 basis points from productivity savings, 150 basis points from favorable volume, 130 basis points of price realization, and 50 basis points of positive operating impact from the impact of the Evoqua acquisition. Favorable impacts were partially offset by 380 basis points of unfavorable impacts driven by 150 basis points of inflation, and 150 basis points of increased spending on strategic investments. Excluding acquired intangible asset amortization, restructuring and realignment costs, and special charges, adjusted operating income was $368 million (adjusted operating margin of 15.7%) during 2024 as compared to adjusted operating income of $246 million (adjusted operating margin of 14.6%) during the prior year.
Current report
Adjusted EBITDA was $548 million (adjusted EBITDA margin of 23.4%) during 2024, an increase of $179 million, or 49%, when compared to adjusted EBITDA of $369 million (adjusted EBITDA margin of 21.9%) during the prior year. The increase in adjusted EBITDA margin was due to the same factors as those impacting the increase in adjusted operating margin; however, adjusted EBITDA was not unfavorably impacted by the increase in depreciation and software amortization expense.
Current report
Operating loss was $84 million for corporate and other during 2024, a decrease of $114 million, or 57.6% when comparing to operating loss of $198 million during the prior year. The decrease in operating loss for the year was primarily due to lower special charges and restructuring and realignment costs as compared to the prior year. Excluding special charges and restructuring and realignment costs, adjusted operating loss decreased $16 million during 2024 or 20.3%, compared to the prior year. The decrease in adjusted operating loss is primarily driven by lower employee costs and productivity savings.
Current report
Interest expense was $44 million and $49 million for 2024 and 2023, respectively. The decrease in interest expense was primarily driven by increased interest income generated on cross currency swaps offsetting interest expense, and decreased interest from commercial paper. See Note 15, "Credit Facilities and Debt", of our consolidated financial statements for a description of our credit facilities and long-term debt and related interest.
Current report
2023 versus 2022
Current report
Revenue
Current report
The following table illustrates the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to revenue during 2023 as recast by segment structure change effective on January 1, 2024:
Current report
Water Solutions and Services revenue increased $890 million, or 112.1%, in 2023 compared to 2022. The increase in revenue consisted primarily of $815 million contributed from the Evoqua acquisition and $82 million of organic growth. Revenue was negatively impacted by $7 million of foreign currency translation. Organic revenue growth was led by the U.S. due to higher volume in the dewatering business.
Current report
Orders/Backlog
Current report
Backlog
Current report
Gross Margin
Current report
Operating Expenses
Current report
Restructuring and Asset Impairment Charges
Current report
Refer to Note 12, "Goodwill and Other Intangible Assets," for more information on intangible asset impairment charges incurred during the years ended December 31, 2023 and 2022.
Current report
Adjusted EBITDA was $426 million (adjusted EBITDA margin of 19.2%) during 2023, an increase of $100 million, or 31%, when compared to adjusted EBITDA of $326 million (adjusted EBITDA margin of 19.3%) during 2022. The slight increase in adjusted EBITDA margin was primarily due to the same factors impacting the decrease in adjusted operating margin; however, adjusted EBITDA was not negatively impacted by the relative impact of the increase in depreciation and amortization and share-based compensation expense.
Current report
Operating income was $133 million for our Measurement and Control Solutions segment (operating margin of 8.3%) during 2023, an increase of $114 million, or 600.0%, when compared to operating income of $19 million (operating margin of 1.5%) during 2022, or a total increase of 680 basis points of operating margin. Operating margin increases included favorable impacts of 140 basis points driven by no net increase in special charges, acquired intangible asset amortization, and restructuring and realignment costs on increased revenue as compared to 2022. Additionally, the operating margin increase included 1,360 basis points from favorable operating impacts consisting of 650 basis points from favorable volume, 360 basis points from productivity savings and 350 basis points of price realization. Favorable impacts were partially offset by 820 basis points of unfavorable impacts driven by 400 basis points of inflation, 160 basis points of increased inventory management costs, 70 basis points of increased spending on strategic investments, 50 basis points of unfavorable mix, and 30 basis points of increased employee related costs. Excluding special charges, acquired intangible asset amortization, and restructuring and realignment costs, adjusted operating income was $213 million (adjusted operating margin of 13.2%) during 2023 as compared to adjusted operating income of $99 million (adjusted operating margin of 7.8%) during 2022.
Current report
Adjusted EBITDA was $281 million (adjusted EBITDA margin of 17.4%) during 2023, an increase of $117 million, or 71.3%, when compared to adjusted EBITDA of $164 million (adjusted EBITDA margin of 12.9%) during 2022. The increase in adjusted EBITDA margin was due to the same factors as those impacting the increase in adjusted operating margin; however, adjusted EBITDA was not favorably impacted by the relative impact of only slight increases in depreciation and amortization expense relative to increased revenue.
Current report
Operating income was $132 million for our Water Solutions and Services segment during 2023 (operating margin of 7.8%), an increase of $10 million, or 8%, when compared to operating income of $122 million (operating margin of 15.4%) during 2022, or a total decrease of 760 basis points of operating margin. Operating margin declines included unfavorable impacts of 510 basis points from an increase in acquired intangible asset amortization, special charges and restructuring and realignment costs as compared to 2022. Additionally, operating margin declines included 580 basis points from unfavorable operating impacts, driven by 210 basis points of negative operating impact from the Evoqua acquisition, 160 basis points of inflation, 60 basis points of increased spending on strategic investments, and 30 basis points of unfavorable mix. Operating margin declines were offset by 330 basis points of favorable impacts, including 180 basis points of price realization, 60 basis points from productivity savings, and 40 basis points of favorable volume. Excluding amortization of acquired intangible asset amortization, special charges and restructuring and realignment costs, adjusted operating income was $246 million (adjusted operating margin of 14.6%) during 2023 as compared to adjusted operating income of $136 million (adjusted operating margin of 17.1%) during 2022.
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Removed paragraphs (35)
Previous report
On January 22, 2023, Xylem entered into a definitive agreement to acquire Evoqua, a leader in mission-critical water treatment solutions and services, in an all-stock transaction that reflected an implied enterprise value of approximately $7.5 billion. The transaction closed on May 24, 2023. See Note 3, "Acquisitions and Divestitures," to the consolidated financial statements for further information.
Previous report
Coinciding with the Evoqua acquisition, Xylem has updated our adjusted operating income and adjusted earnings per share to add back non-cash purchase accounting intangible amortization and recast 2022 amounts to reflect the change on a comparative basis
Previous report
Evoqua, a leader in North America water treatment, complements Xylem’s distinctive portfolio of solutions with advanced water and wastewater treatment capabilities, a powerful and extensive network of service professionals and access to a number of attractive industrial markets with resilient, recurring revenue streams.
Previous report
(b)The special charges in the year primarily relate to the U.K. pension settlement expense of $140 million and asset impairment charges of $14 million recorded in the period.
Previous report
NM Not Meaningful
Previous report
Water Infrastructure revenue increased $603 million, or 25.5%, to $2,967 million in 2023 (26.1% increase on a constant currency basis) compared to 2022. Revenue growth was partially made up of the revenue contributed by acquisitions from APT of $362 million, with the remainder of the increase coming from organic revenue growth of $255 million, or 10.8%. Revenue was negatively impacted by $14 million of foreign currency translation. Organic growth for the year was driven by strength in both the utility and industrial end markets. The utilities end market experienced organic growth of $150 million led by strength in the U.S. driven by strong price realization, increased sales volume bolstered by backlog execution, and higher rental revenue. Western Europe also experienced strong organic growth due to demand from utility capital projects and strong price realization. The emerging markets grew organically due to increased project revenue. The industrial end market had $105 million of organic growth across all major geographic regions, due to strong price realization and increased sales volume in the U.S. and timing of capital projects and strong price realization in western Europe.
Previous report
Measurement and Control Solutions revenue increased $338 million, or 24.3%, in 2023 (24.4% increase on a constant currency basis) compared to 2022. Revenue was negatively impacted by $1 million of foreign currency translation during the year, with the change at constant currency coming entirely from organic growth during the year of $339 million. We experienced organic revenue growth across all three major geographic regions and in both of the segment's end markets for the year, driven by $327 million of organic growth in the utility end market, primarily in the U.S., driven by increased sales volume and backlog execution, enabled by significant improvement of supply chain constraints, and $12 million in the industrial end market driven by strong backlog execution in our test business.
Previous report
Integrated Solutions and Services revenue consists entirely of $815 million for the year ended December 31, 2023 contributed from the Evoqua acquisition.
Previous report
Water Infrastructure segment orders increased $453 million, or 17.4%, to $3,060 million, with $352 million in contributions from the acquisition of the APT business, and organic order growth of $124 million or 4.8%. Order intake for the period was negatively impacted by $23 million of foreign currency translation. Organic orders increased during the year primarily in the transport applications, led by the dewatering business in the U.S., where we benefited from strong price realization and demand, the emerging markets, where we had increased capital project orders, and western Europe where we saw increased demand and capital project orders. The treatment applications also saw organic growth primarily in the U.S. and in the emerging markets where we saw higher capital project orders in these regions.
Previous report
Applied Water segment orders decreased $24 million, or 1.3%, to $1,770 million (flat on a constant currency basis). Order intake during the year was negatively impacted by $18 million of foreign currency translation, with organic orders being essentially flat. Weakness in the U.S. from lower demand and timing of orders was partially offset by strength in the emerging markets due to strong project orders and recovery from prior year COVID-19 impacts.
Previous report
Measurement and Control Solutions segment orders decreased $53 million, or 2.9%, to $1,803 million, with no impact from foreign currency translation. Organic order weakness for the year was driven by the energy applications, particularly in the U.S., where we saw lower demand in gas metrology. Order declines were marginally offset by growth in the water applications, primarily in the U.S., and western Europe, driven by increased digital and service orders, as well as demand in our pipeline assessment services business.
Previous report
The Integration Solutions and Services segment contributed total orders of $868 million for the year ended December 31, 2023 See Note 3, "Acquisitions and Divestitures," to the consolidated financial statements for further information.
Previous report
Restructuring
Previous report
The following table presents the total costs expected to be incurred, the amount incurred in the period, and the cumulative costs incurred to date for our 2023, 2022 and 2021 restructuring actions:
Previous report
The Water Infrastructure, Applied Water, Measurement and Control Solutions, Integrated Solutions and Services and Corporate actions commenced in 2023 consist primarily of severance charges. The actions are expected to continue through the end of 2024.
Previous report
The Water Infrastructure, Applied Water and Measurement and Control Solutions actions commenced in 2022 consist primarily of severance charges. The actions commenced in 2022 are complete.
Previous report
The Water Infrastructure actions commenced in 2021 consist primarily of severance charges. The actions commenced in 2021 are complete.
Previous report
Asset Impairment
Previous report
During the fourth quarter of 2023, we determined that internally developed in-process software within our Measurement and Control Solutions segment was impaired as a result of actions taken to prioritize strategic investments and we therefore recognized an impairment charge of $1 million. Refer to Note 12, "Goodwill and Other Intangible Assets," for additional information.
Previous report
During the third quarter of 2023, we recognized a $1 million impairment charge for certain fixed assets within our Measurement and Control Solutions segment.
Previous report
During the first quarter of 2023, we determined that internally developed in-process software within our Measurement and Control Solutions segment was impaired as a result of actions taken to prioritize strategic investments and we therefore recognized an impairment charge of $2 million. Refer to Note 12, "Goodwill and Other Intangible Assets," for additional information.
Previous report
During the third quarter of 2022, we determined that certain assets including software and customer relationships within our Measurement and Control Solutions segment were impaired. Accordingly, we recognized an impairment charge of $14 million. Refer to Note 12,"Goodwill and Other Intangible Assets," for additional information.
Previous report
Operating Income and Adjusted EBITDA
Previous report
NM Not Meaningful
Previous report
Adjusted EBITDA was $598 million (adjusted EBITDA margin of 20.2%) during 2023, an increase of $118 million, or 24.6%, when compared to adjusted EBITDA of $480 million (adjusted EBITDA margin of 20.3%) during the prior year. The slight decrease in adjusted EBITDA margin was primarily due to the same factors impacting the decrease in adjusted operating margin; however, adjusted EBITDA was not negatively impacted by the relative impact of the increase in stock based compensation expense.
Previous report
Operating income was $113 million for our Measurement and Control Solutions (operating margin of 6.5%) during 2023, an increase of $111 million, or 5,550.0%, when compared to operating income of $2 million (operating margin of 0.1%) during the prior year, or a total increase of 640 basis points of operating margin. Operating margin increases included favorable impacts of 150 basis points from a decrease in special charges, acquired intangible asset amortization, and restructuring and realignment costs as compared to the prior year. Additionally, the operating margin increase included 1,310 basis points from favorable operating impacts consisting of 630 basis points from favorable volume, 350 basis points from productivity savings and 330 basis points of price realization. Favorable impacts were partially offset by 820 basis points of unfavorable impacts driven by 370 basis points of inflation, 130 basis points of increased inventory management costs, 70 basis points of unfavorable mix, 70 basis points of increased spending on strategic investments, 40 basis points of increased employee related costs. Excluding special charges, acquired intangible asset amortization, and restructuring and realignment costs, adjusted operating income was $203 million (adjusted operating margin of 11.7%) during 2023 as compared to adjusted operating income of $94 million (adjusted operating margin of 6.8%) during the prior year.
Previous report
Operating income was $8 million for our Integrated Solutions and Services segment during 2023 (operating margin of 1.0%). Excluding amortization of acquired intangible asset amortization, special charges and restructuring and realignment costs, adjusted operating income was $105 million (adjusted operating margin of 12.9%).
Previous report
Adjusted EBITDA was $181 million for our Integrated Solutions and Services segment during 2023 (adjusted EBITDA margin of 22.2%).
Previous report
•In the Water Infrastructure segment, we expect organic revenue growth in the mid-single-digits in 2024, driven by our mission-critical applications, as well as strong capital project demand. We will continue to monitor softness within China.
Previous report
•In the Applied Water segment, we expect organic revenue declines in the low-single-digits in 2024, due to decreased demand in the industrial and buildings solutions applications and headwinds due to normalizing backlog levels.
Previous report
•We expect Measurement and Control Solutions segment organic revenue growth in the low-double-digits in 2024, supported by our strong backlog. We expect demand for our AMI solutions to remain strong in 2024. Additionally, we have a positive outlook in our test and measurement businesses.
Previous report
•We expect organic revenue growth in the mid-single-digits in the Integrated Solutions and Services segment in 2024, driven by growth in our capital and service businesses and our strong backlog.
Previous report
Effective January 1, 2024, we unified our Integrated Solutions and Services segment, the dewatering business within our Water Infrastructure segment and the assessment services business within our Measurement and Control Solutions segment to form a new segment called Water Solutions and Services. Certain recast financial information for the new reportable segments will be provided in the first quarter of 2024.
Previous report
The integration of Evoqua is on track with our integration plan, and we will continue to strategically execute restructuring and realignment actions in an effort to optimize our cost structure, improve our operational efficiency and effectiveness, strengthen our competitive positioning and better serve our customers. During 2023, we incurred $72 million and $34 million in restructuring and realignment costs, respectively. During 2024, we currently expect to incur between $50 million and $70 million in restructuring and realignment costs.
Previous report
We are strongly positioned to deliver on our 2024 commitments with commercial and operational momentum. Our comprehensive platform provides critical solutions in our largest end markets. Our 2024 commitments are supported by robust backlog, resilient end markets, and recurring service revenue to support growth. Beyond 2024, we remain on track to deliver our longer-term strategic and financial milestones.
Reworded paragraphs (48)
Previous wording
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Current wording
This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Due to the change in reportable segments effective January 1, 2024, we have provided an updated discussion covering 2023 and 2022 and year-to-year comparisons between 2023 and 2022, reflective of the current reportable segments.
Previous wording
Xylem is a leading global water technology company. We design, manufacture and service highly engineered products and solutions ranging across a wide variety of critical applications in utility, industrial, residential and commercial building services settings. Our broad portfolio of solutions addresses customer needs across the water cycle, from the delivery, measurement and use of drinking water to the collection, test, treatment and analysis of wastewater to the return of water to the environment. Our product and service offerings are organized into four reportable segments that are aligned around the critical market applications they provide: Water Infrastructure, Applied Water, Measurement and Control Solutions and Integrated Solutions and Services.
Current wording
Xylem is a leading global water technology company. We design, manufacture and service highly engineered products and solutions ranging across a wide variety of critical applications in utility, industrial, residential and commercial building services settings. Our broad portfolio of solutions addresses customer needs across the water cycle, from the delivery, measurement and use of drinking water to the collection, test, treatment and analysis of wastewater, to the return of water to the environment. Our product and service offerings are organized into four reportable segments that are aligned around the critical market applications they provide: Water Infrastructure, Applied Water, Measurement and Control Solutions and Water Solutions and Services.
Previous wording
•Water Infrastructure serves the water infrastructure sector with pump systems that transport water from aquifers, lakes, rivers and seas; with filtration, ultraviolet and ozone systems that provide treatment, making the water fit to use; and pumping solutions that move the wastewater and storm water to treatment facilities where our mixers, biological treatment, monitoring and control systems provide the primary functions in the treatment process. We also provide sales and rental of specialty dewatering pumps and related equipment and services. Additionally, our offerings use monitoring and control, smart and connected technologies to allow for remote monitoring of performance and enable products to self-optimize pump operations maximizing energy efficiency and minimizing unplanned downtime and maintenance for our customers. In the Water Infrastructure segment, we provide the majority of our sales directly to customers along with strong applications expertise, while the remaining amount is through distribution partners. The Water Infrastructure segment also includes legacy-Evoqua's Applied Product Technologies ("APT") segment. APT provides a range of highly differentiated and scalable products and technologies with product offerings in the filtration and separation, disinfection, wastewater solutions, anode and electrochlorination technology, and aquatics technologies and solutions spaces.
Current wording
•Water Infrastructure serves the water infrastructure sector with pump systems that transport water from aquifers, lakes, rivers and seas; with filtration, ultraviolet and ozone systems that provide treatment, making the water fit to use; and pumping solutions that move the wastewater and storm water to treatment facilities where our mixers, biological treatment, monitoring and control systems provide the primary functions in the treatment process. Additionally, our offerings use monitoring and control, smart and connected technologies to allow for remote monitoring of performance and enable products to self-optimize pump operations maximizing energy efficiency and minimizing unplanned downtime and maintenance for our customers. The Water Infrastructure segment also provides a range of highly differentiated and scalable products and technologies with product offerings in the filtration and separation, disinfection, and wastewater solutions, for municipal and industrial applications. In the Water Infrastructure segment, we provide the majority of our sales directly to customers along with strong applications expertise, while the remaining amount is through distribution partners.
Previous wording
•Applied Water serves the water usage applications sector with water pressure boosting systems for heating, ventilation and air conditioning, and for fire protection systems to the residential and commercial building services markets. In addition, our pumps, heat exchangers and controls provide cooling to power plants and manufacturing facilities, circulation for food and beverage processing, as well as boosting systems for agricultural irrigation. In the Applied Water segment, we provide the majority of our sales through long-standing relationships with many of the leading independent distributors in the markets we serve, with the remainder going directly to customers.
Current wording
•Applied Water serves the water usage applications sector with water pressure boosting systems for heating, ventilation and air conditioning, and for fire protection systems to the residential and commercial building solutions markets. In addition, our pumps, heat exchangers and controls provide cooling to power plants and manufacturing facilities, circulation for food and beverage processing, as well as boosting systems for agricultural irrigation. In the Applied Water segment, we provide the majority of our sales through long-standing relationships with many of the leading independent distributors in the markets we serve, with the remainder going directly to customers.
Previous wording
•Measurement and Control Solutions primarily serves the utility infrastructure solutions and services sector by delivering communications, smart metering, measurement and control technologies and critical infrastructure technologies that allow customers to more effectively use their distribution networks for the delivery, monitoring and control of critical resources such as water, electricity and natural gas. We also provide analytical instrumentation used to measure and analyze water quality, flow and level in clean water, wastewater, and outdoor environments. Additionally, we offer software and services including cloud-based analytics, remote monitoring and data management, leak detection, condition assessment, asset management and pressure monitoring solutions. In the Measurement and Control Solutions segment, we generate our sales through a combination of long-standing relationships with leading distributors and dedicated channel partners as well as direct sales depending on the regional availability of distribution channels and the type of product.
Current wording
•Measurement and Control Solutions primarily serves the utility infrastructure solutions and services sector by delivering communications, smart metering, measurement and control capabilities and critical infrastructure technologies that allow customers to more effectively use their distribution networks for the delivery, monitoring and control of critical resources such as water, electricity and natural gas. We also provide analytical instrumentation used to measure and analyze water quality, flow and level in clean water, wastewater and outdoor water environments. Additionally, we offer software and services which have been further enhanced by our Xylem Vue platform to enable a holistic view of the water cycle for our customers through cloud-based analytics, remote monitoring and data management with the purpose of optimizing their operating efficiency. In the Measurement and Control Solutions segment, we generate our sales through a combination of long-standing relationships with leading distributors and dedicated channel partners, as well as direct sales depending on the regional availability of distribution channels and the type of product.
Previous wording
•Integrated Solutions and Services serves the industrial and municipal sectors with tailored services and solutions in collaboration with the customers backed by life‑cycle services including on‑demand water, outsourced water, recycle / reuse, and emergency response service alternatives to improve operational reliability, performance, and environmental compliance. Key offerings within this segment also include equipment systems for industrial needs (influent water, boiler feed water, ultrahigh purity, process water, wastewater treatment, and recycle / reuse), full-scale outsourcing of operations and maintenance, and municipal services, including odor and corrosion control services.
Current wording
•Water Solutions and Services provides tailored services and solutions, in collaboration with customers, including on‑demand water, outsourced water, recycle/reuse, pipeline assessment services, specialty dewatering and emergency response service alternatives to improve operational reliability, performance and environmental compliance. Key offerings within this segment also include equipment systems for industrial needs (influent water, boiler feed water, ultrahigh purity, process water, wastewater treatment, and recycle/reuse), full-scale outsourcing of operations and maintenance, and municipal services, including odor and corrosion control services, as well as leak detection, condition assessment and asset management and pressure monitoring solutions.
Previous wording
•"adjusted net income" and "adjusted earnings per share" defined as net income and earnings per share, respectively, adjusted to exclude restructuring and realignment costs, amortization of acquired intangible assets, gain or loss from sale of businesses, special charges and tax-related special items, as applicable. A reconciliation of adjusted net income and adjusted earnings per share is provided below.
Current wording
•"adjusted net income" and "adjusted earnings per share" defined as net income and earnings per share, respectively, adjusted to exclude restructuring and realignment costs, amortization of acquired intangible assets, gain or loss from sale of businesses, gain on remeasurement of previously held equity interest, special charges and tax-related special items, as applicable. A reconciliation of adjusted net income and adjusted earnings per share is provided below.
Previous wording
(a)The special charges in the year primarily relate to $126 million of acquisition and integration related costs.
Current wording
(a)The special charges in the years end December 31, 2024 and 2023 primarily relate to $50 million and $134 million of acquisition and integration related costs, respectively.
Previous wording
(c)The tax effects of adjustments are calculated using the statutory tax rate, taking into consideration the nature of the item and the relevant taxing jurisdiction.
Current wording
(b)The tax effects of adjustments are calculated using the statutory tax rate, taking into consideration the nature of the item and the relevant taxing jurisdiction.
Previous wording
▪"adjusted operating expenses" defined as operating expenses adjusted to exclude amortization of acquired intangible assets, restructuring and realignment costs and special charges.
Current wording
▪"adjusted operating expenses" defined as operating expenses adjusted to exclude amortization of acquired intangible assets, restructuring and realignment costs and special charges, as applicable.
Previous wording
▪"adjusted operating income" defined as operating income, adjusted to exclude restructuring and realignment costs and special charges, and "adjusted operating margin" defined as adjusted operating income divided by total revenue.
Current wording
▪"adjusted operating income" defined as operating income, adjusted to exclude restructuring and realignment costs, amortization of acquired intangible assets, gain or loss from sale of businesses, gain on remeasurement of previously held equity interest, special charges and tax-related special items, as applicable, and "adjusted operating margin" defined as adjusted operating income divided by total revenue.
Previous wording
▪“EBITDA” defined as earnings before interest, taxes, depreciation and amortization expense, "EBITDA margin" defined as EBITDA divided by total revenue, "adjusted EBITDA" reflects the adjustment to EBITDA to exclude share-based compensation charges, restructuring and realignment costs, gain or loss from sale of businesses and special charges, and "adjusted EBITDA margin" defined as adjusted EBITDA divided by total revenue.
Current wording
▪“EBITDA” defined as earnings before interest, taxes, depreciation and amortization expense, "EBITDA margin" defined as EBITDA divided by total revenue, "adjusted EBITDA" reflects the adjustment to EBITDA to exclude share-based compensation charges, restructuring and realignment costs, gain or loss from sale of businesses, gain on remeasurement of previously held equity interest and special charges, and "adjusted EBITDA margin" defined as adjusted EBITDA divided by total revenue.
Previous wording
Xylem reported revenue of $7,364 million for 2023, an increase of $1,842 million, or 33.4%, from $5,522 million reported in 2022. On a constant currency basis, revenue increased by $1,867 million, or 33.8%, during the year. The increase at constant currency consists of revenue from acquisitions of $1,177 million and an increase in organic revenue of $690 million reflecting strong organic growth in all segments as well as across all major geographic regions.
Current wording
Xylem reported revenue of $8,562 million for 2024, an increase of $1,198 million, or 16.3%, from $7,364 million reported in 2023. On a constant currency basis, revenue increased by $1,210 million, or 16.4%, during the year. The increase at constant currency consists of revenue from acquisitions of $786 million and an increase in organic revenue of $424 million reflecting organic growth across all major geographic regions, with organic growth in the Measurement and Control Solutions, Water Infrastructure, and Water Solutions and Services segments, more than offsetting organic declines in the Applied Water segment.
Previous wording
Operating income for 2023 was $652 million, reflecting an increase of $30 million, or 4.8%, compared to $622 million in 2022. Operating margin was 8.9% and 11.3% for 2023 and 2022, respectively. The increase in operating income for 2023 included an increase in special charges of $122 million, an increase in purchased intangible amortization of $104 million, and an increase in restructuring and realignment costs of $72 million as compared to 2022. Excluding the impact of these items, adjusted operating income was $1,072 million, with an adjusted operating margin of 14.6% in 2023 as compared to adjusted operating income of $744 million with an adjusted operating margin of 13.5% in 2022, an increase of 110 basis points.
Current wording
Operating income for 2024 was $1,009 million, reflecting an increase of $357 million, or 54.8%, compared to $652 million in 2023. Operating margin was 11.8% in 2024, up 290 basis points from 8.9% in 2023. The increase in operating income for 2024 included a decrease in special charges of $81 million, an increase in purchased intangible amortization of $40 million, and a decrease in restructuring and realignment costs of $15 million as compared to 2023. Excluding the impact of these items, adjusted operating income was $1,373 million, with an adjusted operating margin of 16.0% in 2024 as compared to adjusted operating income of $1,072 million with an adjusted operating margin of 14.6% in 2023, an increase of 140 basis points.
Previous wording
•Net income of $609 million, or $2.79 per diluted share, up 42.3% ($825 million or $3.78 per diluted share on an adjusted basis, up 20.0% from 2022)
Current wording
•Net income of $890 million, or $3.65 per diluted share, up 30.8% ($1,041 million or $4.27 per diluted share on an adjusted basis, up 13.0% from 2023)
Previous wording
•Net cash provided by operating activities of $837 million and free cash flow of $599 million, up 54% from 2022
Current wording
•Net cash provided by operating activities of $1,263 million, up 51% from 2023, and free cash flow of $942 million, up 66% from 2023
Previous wording
•Orders of $7,501 million, up 19.9% from $6,257 million in 2022 (up 1.0% on an organic basis)
Current wording
•Orders of $8,730 million, up 16.4% from $7,501 million in 2023 (up 4.7% on an organic basis)
Previous wording
•Dividends paid to shareholders increased 10% in 2023.
Current wording
•Dividends paid to shareholders increased 9% in 2024.
Previous wording
An order represents a legally enforceable, written document that includes the scope of work or services to be performed or equipment to be supplied to a customer, the corresponding price and the expected delivery date for the applicable products or services to be provided. An order often takes the form of a customer purchase order or a signed quote from a Xylem business. Orders received during 2023 increased by $1,244 million, or 19.9%, to $7,501 million (20.5% increase on a constant currency basis). Order intake increased due to $1,220 million of increased orders related to the Evoqua acquisition. The increase in orders was partially offset by $41 million of unfavorable foreign currency translation. Organic order growth for the year was $65 million, or 1.0%.
Current wording
An order represents a legally enforceable, written document that includes the scope of work or services to be performed or equipment to be supplied to a customer, the corresponding price and the expected delivery date for the applicable products or services to be provided. An order often takes the form of a customer purchase order or a signed quote from a Xylem business.
Previous wording
As a result of the actions initiated in 2023, we achieved savings of approximately $9 million in 2023 and estimate annual future net savings beginning in 2024 of approximately $51 million, resulting in $42 million of incremental savings from 2023 actions.
Current wording
As a result of the actions initiated in 2024, we achieved savings of approximately $8 million in 2024 and estimate annual future net savings beginning in 2025 of approximately $55 million, resulting in $47 million of incremental savings from 2024 actions.
Previous wording
From an application perspective, excluding the $362 million contributed by acquisitions, organic revenue growth was driven by our transport applications. Transport experienced $240 million of revenue growth. All three of our major geographic regions contributed to the organic revenue growth in transport, led by the U.S. due to strong backlog execution and price realization and higher volume in the dewatering business. Western Europe also experienced increases driven by strong price realization and delivery on capital projects. Organic revenue growth for the treatment application was $15 million for the year due to increased sales volume in the U.S. driven by strong backlog execution.
Current wording
Water Infrastructure revenue increased $529 million, or 31.4%, to $2,215 million in 2023 (31.9% increase on a constant currency basis) compared to 2022. Revenue growth was partially made up of the revenue contributed by acquisitions from Applied Product Technologies of $362 million, with the remainder of the increase coming from organic revenue growth of $175 million, or 10.4%. Revenue was negatively impacted by $8 million of foreign currency translation. Organic revenue growth was driven by our transport applications. Transport experienced $160 million of revenue growth. All three of our major geographic regions contributed to the organic revenue growth in transport. Western Europe also experienced increases driven by strong price realization and delivery on capital projects. Organic revenue growth for the treatment application was $15 million for the year due to increased sales volume in the U.S. driven by strong backlog execution.
Previous wording
From an application perspective, organic revenue growth during the year was led by growth in the water application of $229 million led by the U.S., where we saw increased sales volume, enabled by recovery on prior year component constraints, and western Europe, due to strong backlog execution. We also had organic revenue growth in the energy application of $110 million, driven by improved component availability and metrology sales in the U.S.
Current wording
Measurement and Control Solutions revenue increased $337 million, or 26.4%, in 2023, consisting entirely of organic growth. Organic revenue growth during the year was led by growth in the smart metering and other applications of $312 million led by the U.S., where we saw increased sales volume enabled by recovery on prior year component constraints, and western Europe due to strong backlog execution. We also had organic revenue growth in the analytics application of $25 million, driven by strong backlog execution in the U.S.
Previous wording
Backlog includes orders on hand as well as contractual customer agreements at the end of the period. Delivery schedules vary from customer to customer based on their requirements. Annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the long-term nature of the contracts. As such, beginning total backlog, plus orders, minus revenues, will not equal ending total backlog due to contract adjustments, foreign currency fluctuations, and other factors. Typically, large projects require longer lead production cycles and deployment schedules and delays occur from time to time. Total backlog was $5,088 million at December 31, 2023 and $3,605 million at December 31, 2022, an increase of 41.1%, with backlog from the acquisition of Evoqua contributing $1,268 million, or 35.2%, of the increase. We anticipate that more than 50% of our total backlog at December 31, 2023 will be recognized as revenue during 2024.
Current wording
Backlog includes orders on hand as well as contractual customer agreements at the end of the period. Delivery schedules vary from customer to customer based on their requirements. Annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the long-term nature of the contracts. As such, beginning total backlog, plus orders, minus revenues, will not equal ending total backlog due to contract adjustments, foreign currency fluctuations, and other factors. Typically, large projects require longer lead production cycles and deployment schedules and delays occur from time to time. Total backlog was $5,088 million at December 31, 2023 and $3,605 million at December 31, 2022, an increase of 41.1%, with backlog from the acquisition of Evoqua contributing $1,268 million, or 35.2%, of the increase.
Previous wording
Gross margin as a percentage of consolidated revenue decreased 80 basis points to 36.9% in 2023 as compared to 37.7% in 2022. The gross margin decline for the year included 60 basis points from increases in acquired intangible asset amortization and special charges as compared to the prior year. Additionally, the gross margin decline for the year included 530 basis points of negative operating impacts, driven by 230 basis points of inflation, 140 basis points of unfavorable impacts from the Evoqua acquisition, 80 basis points of unfavorable mix, and 30 basis points of increased spending on strategic investments. These impacts were partially offset by favorable impacts of 510 basis points, driven by 270 basis points of price realization and 210 basis points of productivity savings.
Current wording
Gross margin as a percentage of consolidated revenue decreased 80 basis points to 36.9% in 2023 as compared to 37.7% in 2022. The gross margin decline for the year included 60 basis points from increases in acquired intangible asset amortization and special charges as compared to 2022. Additionally, the gross margin decline for the year included 530 basis points of negative operating impacts, driven by 230 basis points of inflation, 140 basis points of unfavorable impacts from the Evoqua acquisition, 80 basis points of unfavorable mix, and 30 basis points of increased spending on strategic investments. These impacts were partially offset by favorable impacts of 510 basis points, driven by 270 basis points of price realization and 210 basis points of productivity savings.
Previous wording
During 2023, we incurred these charges primarily as a result of our acquisition of Evoqua. Approximately $27 million of the charges related to stock-based compensation expense due to acceleration clauses in Evoqua's equity compensation agreements. Approximately $15 million of the charges represented the reduction of headcount related to the integration of Evoqua. Additionally, during 2023 we incurred $30 million of charges related to our efforts to reposition our businesses to optimize our cost structure, improve our operational efficiency and effectiveness, strengthen our competitive positioning and better serve our customers. The charges were incurred across all of our segments.
Current wording
During 2023, we incurred these charges primarily as a result of our acquisition of Evoqua. Approximately $27 million of the charges related to share-based compensation expense due to acceleration clauses in Evoqua's equity compensation agreements. Approximately $15 million of the charges represented the reduction of headcount related to the integration of Evoqua. Additionally, during 2023 we incurred $30 million of charges related to our efforts to reposition our businesses to optimize our cost structure, improve our operational efficiency and effectiveness, strengthen our competitive positioning and better serve our customers. The charges were incurred across all of our segments.
Previous wording
During 2022, we incurred restructuring charges primarily as a continuation of our efforts to reposition our European and North American businesses to optimize our cost structure and improve our operational efficiency and effectiveness. The charges included the reduction of headcount across the Water Infrastructure, Applied Water and Measurement and Control Solutions segments
Current wording
During 2022, we incurred restructuring charges primarily as a continuation of our efforts to reposition our European and North American businesses to optimize our cost structure and improve our operational efficiency and effectiveness. The charges included the reduction of headcount across all of our segments.
Previous wording
Operating income was $652 million (operating margin of 8.9%) during 2023, an increase of $30 million, or 4.8%, when compared to operating income of $622 million (operating margin of 11.3%) during the prior year. Operating margin included unfavorable impacts of 350 basis points from increases in special charges, acquired intangible asset amortization, and restructuring and realignment costs as compared to the prior year. Additionally, operating margin included 780 basis points of expansion from favorable operating impacts, consisting of a 370 basis point increase from price realization, 280 basis points from productivity savings and 130 basis points from favorable volume. Margin expansion was offset by 670 basis points of unfavorable impacts driven by 310 basis points of inflation, 110 basis points of increased spending on strategic investments, 80 basis points of unfavorable mix, and 50 basis points of increased employee related costs. Excluding special charges, acquired intangible asset amortization, and restructuring and realignment costs, adjusted operating income was $1,072 million (adjusted operating margin of 14.6%) for 2023 as compared to adjusted operating income of $744 million (adjusted operating margin of 13.5%) during the prior year.
Current wording
Operating income was $652 million (operating margin of 8.9%) during 2023, an increase of $30 million, or 4.8%, when compared to operating income of $622 million (operating margin of 11.3%) during 2022. Operating margin included unfavorable impacts of 350 basis points from increases in special charges, acquired intangible asset amortization, and restructuring and realignment costs as compared to 2022. Additionally, operating margin included 780 basis points of expansion from favorable operating impacts, consisting of a 370 basis point increase from price realization, 280 basis points from productivity savings and 130 basis points from favorable volume. Margin expansion was offset by 670 basis points of unfavorable impacts driven by 310 basis points of inflation, 110 basis points of increased spending on strategic investments, 80 basis points of unfavorable mix, and 50 basis points of increased employee related costs. Excluding special charges, acquired intangible asset amortization, and restructuring and realignment costs, adjusted operating income was $1,072 million (adjusted operating margin of 14.6%) for 2023 as compared to adjusted operating income of $744 million (adjusted operating margin of 13.5%) during 2022.
Previous wording
Adjusted EBITDA was $1,392 million (adjusted EBITDA margin of 18.9%) during 2023, an increase of $452 million, or 48.1%, when compared to adjusted EBITDA of $940 million (adjusted EBITDA margin of 17.0%) during the prior year. The increase in adjusted EBITDA margin was primarily due to the same factors impacting adjusted operating margin noted above; however, adjusted EBITDA was not negatively impacted by the relative impact of depreciation and software amortization expense.
Current wording
Net income was $609 million (net income margin of 8.3%) during 2023, an increase of $254 million as compared to net income in 2022 of $355 million (net income margin of 6.4%). The increase in net income was almost entirely due to increased operating income of $30 million, $140 million of charges related to the U.K. pension plan buy-out in the prior year that did not recur, decreased income tax expense of $59 million, and an increase in other non-operating income of $24 million. Adjusted EBITDA was $1,392 million (adjusted EBITDA margin of 18.9%) during 2023, an increase of $452 million, or 48.1%, when compared to adjusted EBITDA of $940 million (adjusted EBITDA margin of 17.0%) during 2022. The increase in adjusted EBITDA margin was primarily due to the same factors impacting adjusted operating margin noted above; however, adjusted EBITDA was not negatively impacted by the relative impact of depreciation and software amortization expense.
Previous wording
Operating income was $419 million for our Water Infrastructure segment (operating margin of 14.1%) during 2023, an increase of $1 million, or 0.2%, when compared to operating income of $418 million (operating margin of 17.7%) during the prior year, or a total decrease of 360 basis points of operating margin. Operating margin declines included unfavorable impacts of 280 basis points from an increase in acquired intangible asset amortization, special charges and restructuring and realignment costs as compared to the prior year. Additionally, operating margin declines included 840 basis points from unfavorable operating impacts, driven by 330 basis points of inflation, 160 basis points of unfavorable mix, 150 basis points of increased spending on strategic investments, 40 basis points of employee-related expenses and 40 basis points of negative operating impact from the impact of the Evoqua acquisition. Operating margin declines were offset by 760 basis points of favorable impacts, consisting of 420 basis points of price realization, 230 basis points from productivity savings and 110 basis points of favorable volume. Excluding acquired intangible asset amortization, special charges and restructuring and realignment costs, adjusted operating income was $519 million (adjusted operating margin of 17.5%) during 2023 as compared to adjusted operating income of $433 million (adjusted operating margin of 18.3%) during the prior year.
Current wording
Operating income was $275 million for our Water Infrastructure segment (operating margin of 12.4%) during 2023, a decrease of $4 million, or 1.4%, when compared to operating income of $279 million (operating margin of 16.5%) during 2022, or a total decrease of 410 basis points of operating margin. Operating margin declines included unfavorable impacts of 340 basis points from an increase in acquired intangible asset amortization, special charges and restructuring and realignment costs as compared to 2022. Additionally, operating margin declines included 910 basis points from unfavorable operating impacts, driven by 340 basis points of inflation, 210 basis points of unfavorable mix, 160 basis points of increased spending on strategic investments, 30 basis points of increased inventory management costs and 20 basis points of negative operating impact from the impact of the Evoqua acquisition. Operating margin declines were offset by 840 basis points of favorable impacts, consisting of 440 basis points of price realization, 280 basis points from productivity savings and 120 basis points of favorable volume. Excluding acquired intangible asset amortization, special charges and restructuring and realignment costs, adjusted operating income was $368 million (adjusted operating margin of 16.6%) during 2023 as compared to adjusted operating income of $292 million (adjusted operating margin of 17.3%) during 2022.
Previous wording
Operating income was $310 million for our Applied Water segment (operating margin of 16.7%) during 2023, an increase of $52 million, or 20.2%, when compared to operating income of $258 million (operating margin of 14.6%) during the prior year, or a total increase of 210 basis points of operating margin. Operating margin expansion was partially offset by unfavorable impacts of 10 basis points from increases in restructuring and realignment costs as compared to the prior year. Operating margin increases included 820 basis points of favorable operating impacts, consisting of 470 basis points of price realization and 350 basis points from productivity savings. Margin expansion was partially offset by negative operating impacts of 600 basis points, consisting of 320 basis points of inflation, 100 basis points of unfavorable volume, 80 basis points of increased spending on strategic investments and 50 basis points of increased employee related costs. Excluding restructuring and realignment costs, adjusted operating income was $324 million (adjusted operating margin of 17.5%) during 2023 as compared to adjusted operating income of $271 million (adjusted operating margin of 15.3%) during the prior year.
Current wording
Operating income was $310 million for our Applied Water segment (operating margin of 16.7%) during 2023, an increase of $52 million, or 20.2%, when compared to operating income of $258 million (operating margin of 14.6%) during 2022, or a total increase of 210 basis points of operating margin. Operating margin expansion was partially offset by unfavorable impacts of 10 basis points from increases in restructuring and realignment costs as compared to 2022. Operating margin increases included 820 basis points of favorable operating impacts, consisting of 470 basis points of price realization and 350 basis points from productivity savings. Margin expansion was partially offset by negative operating impacts of 600 basis points, consisting of 320 basis points of inflation, 100 basis points of unfavorable volume, 80 basis points of increased spending on strategic investments and 50 basis points of increased employee related costs. Excluding restructuring and realignment costs, adjusted operating income was $324 million (adjusted operating margin of 17.5%) during 2023 as compared to adjusted operating income of $271 million (adjusted operating margin of 15.3%) during 2022.
Previous wording
Adjusted EBITDA was $346 million (adjusted EBITDA margin of 18.7%) during 2023, an increase of $54 million, or 18.5%, when compared to adjusted EBITDA of $292 million (adjusted EBITDA margin of 16.5%) during the prior year. The increase in adjusted EBITDA margin was due to the same factors impacting the increase in adjusted operating margin.
Current wording
Adjusted EBITDA was $352 million (adjusted EBITDA margin of 19.0%) during 2023, an increase of $54 million, or 18.1%, when compared to adjusted EBITDA of $298 million (adjusted EBITDA margin of 16.9%) during 2022. The increase in adjusted EBITDA margin was due to the same factors impacting the increase in adjusted operating margin.
Previous wording
Adjusted EBITDA was $278 million (adjusted EBITDA margin of 16.1%) during 2023, an increase of $111 million, or 66.5%, when compared to adjusted EBITDA of $167 million (adjusted EBITDA margin of 12.0%) during the prior year. The increase in adjusted EBITDA margin was due to the same factors as those impacting the increase in adjusted operating margin; however, adjusted EBITDA was not favorably impacted by the relative impact of depreciation and software amortization expense.
Current wording
Adjusted EBITDA was $369 million for our Water Solutions and Services segment during 2023 (adjusted EBITDA margin of 21.9%), an increase of $191 million, or 107.3%, when compared to adjusted EBITDA of $178 million (adjusted EBITDA margin of 22.4%) during 2022. The increase in adjusted EBITDA margin was due to the same factors as those impacting the increase in adjusted operating margin; however, adjusted EBITDA was not favorably impacted by the relative impact of depreciation and software amortization and share-based compensation expense.
Previous wording
Operating loss for corporate and other increased $142 million, or 253.6%, compared to the prior year. The increase in operating loss for the year was primarily due to higher special charges and restructuring and realignment costs as compared to the prior year. Excluding special charges and restructuring and realignment costs, adjusted operating loss increased $25 million, or 46.3%, compared to the prior year. The increase in adjusted operating loss is primarily related to increased operating expense due to the acquisition of Evoqua, increased employee costs and spending on strategic investments.
Current wording
Operating loss for corporate and other increased $142 million during 2023, or 253.6%, compared to 2022. The increase in operating loss for the year was primarily due to higher special charges and restructuring and realignment costs as compared to 2022. Excluding special charges and restructuring and realignment costs, adjusted operating loss increased $25 million during 2023, or 46.3%, compared to 2022. The increase in adjusted operating loss is primarily related to increased operating expense due to the acquisition of Evoqua, increased employee costs and spending on strategic investments.
Previous wording
The income tax provision for 2023 was $26 million at an effective tax rate of 4.1% as compared to $85 million at an effective tax rate of 19.2% in 2022. The 2023 effective tax rate differs from that of 2022 primarily due to the impact of audit settlements and tax rate changes in the current period. See Note 7, "Income Taxes", of our consolidated financial statements for a description of our credit facilities and long-term debt and related interest.
Current wording
The income tax provision for 2023 was $26 million at an effective tax rate of 4.1% as compared to $85 million at an effective tax rate of 19.2% in 2022. The 2023 effective tax rate differs from that of 2022 primarily due to the impact of audit settlements and tax rate changes in 2023. See Note 7, "Income Taxes", of our consolidated financial statements for a description of our credit facilities and long-term debt and related interest.
Previous wording
(a)The favorable impact of foreign exchange as compared to 2022 is primarily due to strengthening of the Euro, Chinese Yuan and the Canadian Dollar.
Current wording
(a)The impact of foreign exchange is primarily due to weakening of the Euro, Canadian Dollar and the Chilean Peso.
Previous wording
During 2023, net cash provided by operating activities was $837 million, compared to $596 million in 2022. The $241 million year-over-year increase was primarily driven by higher cash earnings and improved working capital driven by reduction of safety stock. These increases were partially offset by the payment of transaction costs associated with the acquisition of Evoqua and the investment in a distribution agreement of select technology in 2023, as well as increased payments for taxes and restructuring versus the prior year.
Current wording
During 2024, net cash provided by operating activities was $1,263 million, compared to $837 million in 2023. The $426 million year-over-year increase was primarily driven by higher cash earnings and non-recurring payments made in 2023 associated with transaction costs related to the acquisition of Evoqua and the investment in a distribution agreement of select technology. Higher use of net working capital partially offset the improved cash performance, driven by increases in inventory and receivables from strong demand in the fourth quarter, partially offset by timing of payables.
Previous wording
Cash used in investing activities was $628 million in 2023, compared to $191 million in 2022. This increase in cash used of $437 million reflects the acquisition of Evoqua, increased capital expenditures and cash paid for equity investments. Cash received from the sales of businesses and cash received from the termination of acquired interest rate swaps partially offset these items.
Current wording
Cash used in investing activities was $482 million in 2024, compared to $628 million in 2023. This decrease in cash used of $146 million reflects higher spending in 2023 on acquisitions, primarily the acquisition of Evoqua, and reduced cash used to fund equity investments in 2024. Reduced proceeds from the sale of businesses, higher capital expenditures and cash received from interest rates swaps in 2023 that did not recur in 2024 partially offset the decrease in cash used.
Previous wording
Cash used in financing activities was $157 million in 2023, compared to $790 million in 2022. The year-over-year decrease in cash used was mainly driven by lower debt repayments, with the early payment in December 2022 of the Senior Notes due in March 2023, cash received from a new term loan facility in 2023, as well as an increase cash received from the exercise of employee stock options and a reduction of repurchases of common stock. Higher dividend payments partially offset these items.
Current wording
Cash used in financing activities was $615 million in 2024, compared to $157 million in 2023. The year-over-year increase in cash used was mainly driven by cash received from a term loan in connection with the Evoqua acquisition in 2023 that was repaid in 2024 and higher dividend payments. These increased outflows were partially offset by the repayment of a receivable securitization program in 2023 that did not recur in the current year.
Previous wording
Based on our current global cash positions, cash flows from operations and access to the capital markets, we believe there is sufficient liquidity to meet our funding requirements and service debt and other obligations in both the U.S. and outside of the U.S. over the next twelve months. Currently, we have available liquidity of approximately $2 billion, consisting of $1 billion of cash and $1 billion of available credit facilities as disclosed in Note 15, "Credit Facilities and Debt", of our consolidated financial statements.
Current wording
Based on our current global cash positions, cash flows from operations and access to the capital markets, we believe there is sufficient liquidity to meet our funding requirements and service debt and other obligations in both the U.S. and outside of the U.S. over the next twelve months. Currently, we have available liquidity of approximately $2.1 billion, consisting of $1.1 billion of cash and $1 billion of available credit facilities as disclosed in Note 15, "Credit Facilities and Debt", of our consolidated financial statements.
Previous wording
The Company has future unconditional purchase commitments which are legally binding and that specify all significant terms including price and/or quantity. Total future commitments within the next twelve months for these obligations is $438 million, excluding contracts that can be canceled without penalty.
Current wording
The Company has future unconditional purchase commitments which are legally binding and that specify all significant terms including price and/or quantity. Total future commitments within the next twelve months for these obligations is $664 million, excluding contracts that can be canceled without penalty.
Showing the first 40 of 48 pairs. Open the source sections for the rest.
Rearranged current paragraphs (15)
Current report — wording carried from elsewhere
Backlog includes orders on hand as well as contractual customer agreements at the end of the period. Delivery schedules vary from customer to customer based on their requirements. Annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the long-term nature of the contracts. As such, beginning total backlog, plus orders, minus revenues, will not equal ending total backlog due to contract adjustments, foreign currency fluctuations, and other factors. Typically, large projects require longer lead production cycles and deployment schedules and delays occur from time to time. Total backlog was $5,070 million at December 31, 2024 and $5,088 million at December 31, 2023, a decrease of 0.4%. We anticipate that more than 50% of our total backlog at December 31, 2024 will be recognized as revenue during 2025.
Current report — wording carried from elsewhere
R&D expense was $230 million, or 2.7% of revenue, in 2024 which was fairly consistent with the 2023 expense of $232 million, or 3.2% of revenue.
Current report — wording carried from elsewhere
From time to time, the Company will incur costs related to restructuring actions in order to optimize our cost base and more strategically position itself. Restructuring charges were $55 million in 2024 as compared to $72 million in 2023.
Current report — wording carried from elsewhere
For the year ended December 31, 2023, we incurred these charges primarily as a result of our acquisition of Evoqua. Approximately $27 million of the charges related to share-based compensation expense due to acceleration clauses in Evoqua's equity compensation agreements. Approximately $15 million of the charges represented the reduction of headcount related to the integration of Evoqua. Additionally, during 2023 we incurred $30 million of charges related to our efforts to reposition our businesses to optimize our cost structure, improve our operational efficiency and effectiveness, strengthen our competitive positioning and better serve our customers. The charges were incurred across all of our segments.
Current report — wording carried from elsewhere
Operating Income, Net Income, and Adjusted EBITDA
Current report — wording carried from elsewhere
The income tax provision for 2024 was $197 million at an effective tax rate of 18.1% as compared to $26 million at an effective tax rate of 4.1% in 2023. The 2024 effective tax rate differs from that of 2023 primarily due to the impact of audit settlements and tax rate changes in the prior period. See Note 7, "Income Taxes", of our consolidated financial statements for additional details on our tax attributes and related tax expense.
Current report — wording carried from elsewhere
An order represents a legally enforceable, written document that includes the scope of work or services to be performed or equipment to be supplied to a customer, the corresponding price and the expected delivery date for the applicable products or services to be provided. An order often takes the form of a customer purchase order or a signed quote from a Xylem business.
Current report — wording carried from elsewhere
The following table illustrates the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to orders during 2023:
Current report — wording carried from elsewhere
Selling, General and Administrative ("SG&A") Expenses
Current report — wording carried from elsewhere
Research and Development ("R&D") Expenses
Current report — wording carried from elsewhere
The following is a roll-forward of employee position eliminations associated with restructuring activities for the years ended December 31, 2023 and 2022:
Current report — wording carried from elsewhere
Operating Income, Net Income, and Adjusted EBITDA
Current report — wording carried from elsewhere
The table below provides a reconciliation of total and each segment's operating income to adjusted operating income, and a calculation of the corresponding adjusted operating margin:
Current report — wording carried from elsewhere
The table below provides a reconciliation of net income to consolidated EBITDA and adjusted EBITDA:
Current report — wording carried from elsewhere
The tables below provide a reconciliation of each segment's operating income (loss) to EBITDA and adjusted EBITDA: