SHARE < View all Press Releases Xylem Reports Third Quarter 2021 Results NOVEMBER 2, 2021 Orders growth of 22% on a reported basis, 20% organically, from strong underlying demand across segments Revenue growth 4% on a reported basis, 2% organically Net income as a percentage of revenue of 9.0%, up 600 basis points; adjusted EBITDA margin of 17.9%, down 30 basis points Reported net income of $114 million or $0.63 per share; adjusted net income of $116 million or $0.63 per share Lowers full-year organic revenue and earnings per share guidance to ranges of 3% to 4%, and $2.40 to $2.50, respectively RYE BROOK, N.Y.--(BUSINESS WIRE)-- Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported third quarter 2021 revenue of $1.27 billion. Revenues grew 4 percent on a reported basis, and 2 percent organically. Strong global demand was moderated by supply constraints slowing order-to-revenue conversion. Third quarter adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin decreased 30 basis points to 17.9 percent. Inflation and strategic investments were partially offset by productivity, price realization and cost containment. Xylem generated net income of $114 million, or $0.63 per share, and adjusted net income of $116 million, or $0.63 per share, which excludes the impact of restructuring, realignment and special charges. “Global demand for water solutions continues to be robust, across our business,” said Patrick Decker, Xylem’s president and CEO. “The team capitalized on that broad-based underlying demand, delivering strong growth in new orders and backlog in all segments. This positions us well to achieve our 2025 growth and strategic milestones, which we outlined at our investor day, last month.” “The team has done an outstanding job managing inflationary effects with productivity and cost discipline, delivering solid margin and earnings performance,” continued Decker. “Nevertheless, we foresee the global supply challenges continuing – particularly the chip shortages being experienced across the technology sector. While we expect strong demand to continue, nearer term supply constraints have slowed order-to-revenue conversion more than expected, leading us to moderate our view of full-year revenues and, therefore, earnings.” Updated Outlook Xylem now expects full-year organic revenue growth to be in the range of 3 to 4 percent, which would be approximately $5.1 to $5.2 billion on a reported basis. This represents a decrease from the Company’s previous full-year organic revenue guidance of 6 to 8 percent, or $5.3 to $5.4 billion on a reported basis. Full-year adjusted earnings per share is now expected to be in the range of $2.40 to $2.50, from $2.55 to $2.70. Full-year free cash flow conversion outlook remains unchanged at 80 to 90 percent.The revised guidance reflects the impact of increased supply chain challenges, partially offset by strong cost discipline. Third Quarter Segment Results Water Infrastructure Xylem’s Water Infrastructure segment consists of its portfolio of businesses serving wastewater transport and treatment, clean water delivery, and dewatering. Third quarter 2021 revenue was $547 million, up 4 percent on a reported basis, and up 2 percent organically, compared with the same period in 2020. Strong growth in industrial end markets from broad pandemic recovery and demand in Emerging Markets offset some softness in the utility markets due to timing delays caused by supply chain disruptions. Third quarter adjusted EBITDA margin was 21.2 percent, up 100 basis points versus the prior year period. Reported operating income for the segment was $101 million and adjusted operating income, which excludes $1 million of restructuring and realignment costs, was $102 million. The segment reported operating margin was 18.5 percent, up 150 basis points versus the prior year period. Adjusted operating margin rose 10 basis points to 18.6 percent. Strong productivity savings and price realization offset inflation and supply chain constraints. Applied Water Xylem’s Applied Water segment consists of its portfolio of businesses in industrial, commercial building, and residential applications. Third quarter 2021 revenue was $400 million, up 10 percent on a reported basis, and up 8 percent organically, compared with the same period in 2020. Broad reopening activity drove strong demand in industrial and commercial end markets compared to COVID-19 challenges in the prior year. Third quarter adjusted EBITDA margin was 17.0 percent, down 60 basis points from the prior year period. Reported operating income for the segment was $60 million and adjusted operating income, which excludes $2 million of restructuring and realignment costs, was $62 million. The segment reported operating margin was 15.0 percent, down 40 basis points versus the prior year period. Adjusted operating margin decreased 40 basis points to 15.5 percent. Inflation, supply chain disruption and investments more than offset productivity benefits and price realization. Measurement & Control Solutions Xylem’s Measurement & Control Solutions segment consists of its portfolio of businesses in smart metering, network technologies, advanced infrastructure analytics and analytic instrumentation. Third quarter 2021 revenue was $318 million, down 4 percent on a reported basis, and down 5 percent organically, compared with the same period in 2020. Soft performance in the business was driven by chip supply shortages impacting our smart metering business, partially offset by demand in water quality testing applications and pipeline assessment services businesses. Third quarter adjusted EBITDA margin was 14.2 percent, down 60 basis points from the prior year period. Reported operating income for the segment was $7 million and adjusted operating income, with $1 million restructuring and realignment income in the quarter, was $6 million. The segment reported operating margin was 2.2 percent, up 2,090 basis points versus the prior year period. Adjusted operating margin decreased 170 basis points to 1.9 percent. Volume declines from component shortages and higher inflation offset productivity and price realization. Supplemental information on Xylem’s third quarter 2021 earnings and reconciliations for certain non-GAAP items are posted at www.xylem.com/investors. About Xylem Xylem (XYL) is a leading global water technology company committed to solving critical water and infrastructure challenges with innovation. Our more than 16,000 diverse employees delivered revenue of $4.88 billion in 2020. We are creating a more sustainable world by enabling our customers to optimize water and resource management, and helping communities in more than 150 countries become water-secure. Join us at www.xylem.com. Forward-Looking Statements This press release contains “forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “contemplate,” “predict,” “forecast,” “likely,” “believe,” “target,” “goal,” “will,” “could,” “would,” “should,” "potential," "may" and similar expressions or their negative, may, but are not necessary to, identify forward-looking statements. By their nature, forward-looking statements address uncertain matters and include any statements that are not historical, such as statements about our strategy, financial plans, outlook, objectives, plans, intentions or goals; or address possible or future results of operations or financial performance, including statements relating to orders, revenues, operating margins and earnings per share growth. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Additionally, many of these risks and uncertainties are, and may continue to be, amplified by the ongoing coronavirus (“COVID-19”) pandemic. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include, among others, the following: overall industry and economic conditions, including industrial, governmental and private sector spending and the strength of the residential and commercial real estate markets; geopolitical, regulatory, economic and other risks associated with international operations; continued uncertainty around the COVID-19 pandemic’s magnitude, duration and impacts on our business, operations, growth, and financial condition, as well as uncertainty around approved vaccines and the pace of recovery when the pandemic subsides; actual or potential other epidemics, pandemics or global health crises; availability, shortage or delays in receiving products, parts, electronic components and raw materials from our supply chain; manufacturing and operating cost increases due to inflation, prevailing price changes, tariffs and other factors; fluctuations in foreign currency exchange rates; disruption, competition and pricing pressures in the markets we serve; cybersecurity incidents or other disruptions of information technology systems on which we rely, or involving our products; disruptions in operations at our facilities or that of third parties upon which we rely; availability, regulation and interference with radio spectrum used by some of our products; our ability to retain and attract senior management and other key talent; uncertainty related to restructuring and realignment actions and related charges and savings; our ability to continue strategic investments for growth; our ability to successfully identify, execute and integrate acquisitions; risks relating to products, including defects, security, warranty and liability claims, and recalls; difficulty predicting our financial results, including uncertainties due to the nature of our short- and long-cycle businesses; volatility in our results due to weather conditions, including the effects of climate change; our ability to borrow or refinance our existing indebtedness and the availability of liquidity sufficient to meet our needs; risk of future impairments to goodwill and other intangible assets; failure to comply with, or changes in, laws or regulations, including those pertaining to anti-corruption, data privacy and security, export and import, competition, and the environment and climate change; changes in our effective tax rates or tax expenses; legal, governmental or regulatory claims, investigations or proceedings and associated contingent liabilities; and other factors set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 ("2020 Annual Report") and in subsequent filings we make with the Securities and Exchange Commission (“SEC”). All forward-looking statements made herein are based on information currently available to us as of the date of this press release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. XYLEM INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) (in millions, except per share data) Three Months Nine Months For the periods ended September 30, 2021 2020 2021 2020 Revenue $ 1,265 $ 1,220 $ 3,872 $ 3,503 Cost of revenue 793 759 2,390 2,199 Gross profit 472 461 1,482 1,304 Selling, general and administrative expenses 273 266 878 851 Research and development expenses 49 45 152 138 Restructuring and asset impairment (recoveries) charges (2 ) 19 7 69 Goodwill impairment charge — 58 — 58 Operating income 152 73 445 188 Interest expense 21 22 63 56 Other non-operating income (expense), net 2 (1 ) 1 (5 ) Gain from sale of business — — 2 — Income before taxes 133 50 385 127 Income tax expense 19 13 71 21 Net income $ 114 $ 37 $ 314 $ 106 Earnings per share: Basic $ 0.63 $ 0.20 $ 1.74 $ 0.59 Diluted $ 0.63 $ 0.20 $ 1.73 $ 0.58 Weighted average number of shares: Basic 180.2 180.0 180.2 180.1 Diluted 181.6 181.0 181.5 181.0 XYLEM INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions, except per share amounts) September 30, 2021 December 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 1,255 $ 1,875 Receivables, less allowances for discounts, returns and credit losses of $43 and $46 in 2021 and 2020, respectively 973 923 Inventories 679 558 Prepaid and other current assets 150 167 Total current assets 3,057 3,523 Property, plant and equipment, net 618 657 Goodwill 2,816 2,854 Other intangible assets, net 1,037 1,093 Other non-current assets 623 623 Total assets $ 8,151 $ 8,750 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 577 $ 569 Accrued and other current liabilities 737 787 Short-term borrowings and current maturities of long-term debt — 600 Total current liabilities 1,314 1,956 Long-term debt 2,455 2,484 Accrued post-retirement benefits 492 519 Deferred income tax liabilities 270 242 Other non-current accrued liabilities 518 573 Total liabilities 5,049 5,774 Stockholders’ equity: Common Stock – par value $0.01 per share: Authorized 750.0 shares, issued 195.5 shares and 194.9 shares in 2021 and 2020, respectively 2 2 Capital in excess of par value 2,077 2,037 Retained earnings 2,092 1,930 Treasury stock – at cost 15.2 shares and 14.5 shares in 2021 and 2020, respectively (656 ) (588 ) Accumulated other comprehensive loss (422 ) (413 ) Total stockholders’ equity 3,093 2,968 Non-controlling interests 9 8 Total equity 3,102 2,976 Total liabilities and stockholders’ equity $ 8,151 $ 8,750 XYLEM INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) For the nine months ended September 30, 2021 2020 Operating Activities Net income $ 314 $ 106 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 90 88 Amortization 96 101 Share-based compensation 25 19 Restructuring and asset impairment charges 7 69 Goodwill impairment charge — 58 Gain from sale of business (2 ) — Other, net 3 33 Payments for restructuring (21 ) (25 ) Changes in assets and liabilities (net of acquisitions): Changes in receivables (78 ) 43 Changes in inventories (135 ) (48 ) Changes in accounts payable 19 (91 ) Changes in accrued taxes — (5 ) Other, net — 106 Net Cash – Operating activities 318 454 Investing Activities Capital expenditures (127 ) (136 ) Proceeds from sale of business 2 — Proceeds from the sale of property, plant and equipment 1 1 Cash paid for investments — (200 ) Other, net 11 9 Net Cash – Investing activities (113 ) (326 ) Financing Activities Short-term debt issued, net — 359 Short-term debt repaid — (600 ) Long-term debt issued, net — 985 Long-term debt repaid (600 ) — Repurchase of common stock (68 ) (61 ) Proceeds from exercise of employee stock options 15 10 Dividends paid (152 ) (142 ) Other, net (1 ) (1 ) Net Cash – Financing activities (806 ) 550 Effect of exchange rate changes on cash (19 ) — Net change in cash and cash equivalents (620 ) 678 Cash and cash equivalents at beginning of year 1,875 724 Cash and cash equivalents at end of period $ 1,255 $ 1,402 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 83 $ 46 Income taxes (net of refunds received) $ 71 $ 27 Xylem Inc. Non-GAAP Measures Management reviews key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, working capital and backlog, among others. In addition, we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating performance for the periods presented, and to provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives, including but not limited to, dividends, acquisitions, share repurchases and debt repayment. Excluding revenue, Xylem provides guidance only on a non-GAAP basis due to the inherent difficulty in forecasting certain amounts that would be included in GAAP earnings, such as discrete tax items, without unreasonable effort. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. We consider the following items to represent the non-GAAP measures we consider to be key performance indicators, as well as the related reconciling items to the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures may not be comparable to similarly titled measures reported by other companies. “Organic revenue" and "Organic orders” defined as revenue and orders, respectively, excluding the impact of fluctuations in foreign currency translation and contributions from acquisitions and divestitures. Divestitures include sales or discontinuance of insignificant portions of our business that did not meet the criteria for classification as a discontinued operation. The period-over-period change resulting from foreign currency translation impacts is determined by translating current period and prior period activity using the same currency conversion rate. “Constant currency” defined as financial results adjusted for foreign currency translation impacts by translating current period and prior period activity using the same currency conversion rate. This approach is used for countries whose functional currency is not the U.S. dollar. “EBITDA” defined as earnings before interest, taxes, depreciation and amortization expense. “Adjusted EBITDA” and "Adjusted Segment EBITDA" reflects the adjustments to EBITDA and segment EBITDA, respectively, to exclude share-based compensation charges, restructuring and realignment costs, gain or loss from sale of businesses and special charges. "Adjusted EBITDA Margin" and "Adjusted Segment EBITDA margin" defined as adjusted EBITDA and adjusted segment EBITDA divided by total revenue and segment revenue, respectively. "Adjusted Operating Income", "Adjusted Segment Operating Income", "Adjusted Net Income" and “Adjusted EPS” defined as operating income, segment operating income, net income and earnings per share, adjusted to exclude restructuring and realignment costs, gain or loss from sale of businesses, special charges and tax-related special items, as applicable. "Adjusted Operating Margin" and "Adjusted Segment Operating Margin" defined as adjusted operating income and adjusted segment operating income divided by total revenue and segment revenue, respectively. “Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flows, less capital expenditures, and "Free Cash Flow Conversion" defined as Free Cash Flows divided by net income, excluding the gain on sale of businesses, non-cash impairment charges and significant deferred tax items. Our definitions of "free cash flow" and "free cash flow conversion" do not consider certain non-discretionary cash payments, such as debt. “Realignment costs” defined as costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, severance, relocation, travel, facility set-up and other costs. “Special charges" defined as costs incurred by the Company, such as acquisition and integration related costs, non-cash impairment charges and both operating and non-operating adjustments for pension costs. “Tax-related special items" defined as tax items, such as tax return versus tax provision adjustments, tax exam impacts, tax law change impacts, excess tax benefits/losses and other discrete tax adjustments. Xylem Inc. Non-GAAP Reconciliation Reported vs. Organic & Constant Currency Orders ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) Constant Currency (A) (B) (C) (D) (E) = B+C+D (F) = E/A (G) = (E - C) / A Change % Change Acquisitions / Divestitures Change % Change Orders Orders 2021 v. 2020 2021 v. 2020 FX Impact Adj. 2021 v. 2020 Adj. 2021 v. 2020 2021 2020 Nine Months Ended September 30 Xylem Inc. 4,716 3,739 977 26% 10 (147 ) 840 22 % 22% Water Infrastructure 1,873 1,670 203 12% - (80 ) 123 7 % 7% Applied Water 1,409 1,073 336 31% - (40 ) 296 28 % 28% Measurement & Control Solutions 1,434 996 438 44% 10 (27 ) 421 42 % 41% Quarter Ended September 30 Xylem Inc. 1,518 1,246 272 22% 2 (24 ) 250 20 % 20% Water Infrastructure 623 558 65 12% - (12 ) 53 9 % 9% Applied Water 446 375 71 19% - (7 ) 64 17 % 17% Measurement & Control Solutions 449 313 136 43% 2 (5 ) 133 42 % 42% Quarter Ended June 30 Xylem Inc. 1,660 1,232 428 35% 1 (74 ) 355 29 % 29% Water Infrastructure 639 598 41 7% - (41 ) - 0 % 0% Applied Water 486 326 160 49% - (20 ) 140 43 % 43% Measurement & Control Solutions 535 308 227 74% 1 (13 ) 215 70 % 69% Quarter Ended March 31 Xylem Inc. 1,538 1,261 277 22% 7 (49 ) 235 19 % 18% Water Infrastructure 611 514 97 19% - (27 ) 70 14 % 14% Applied Water 477 372 105 28% - (13 ) 92 25 % 25% Measurement & Control Solutions 450 375 75 20% 7 (9 ) 73 19 % 18% Xylem Inc. Non-GAAP Reconciliation Reported vs. Organic & Constant Currency Revenue ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) Constant Currency (A) (B) (C) (D) (E) = B+C+D (F) = E/A (G) = (E - C) / A Change % Change Acquisitions / Divestitures Change % Change Revenue Revenue 2021 v. 2020 2021 v. 2020 FX Impact Adj. 2021 v. 2020 Adj. 2021 v. 2020 2021 2020 Nine Months Ended September 30 Xylem Inc. 3,872 3,503 369 11% 7 (130 ) 246 7 % 7% Water Infrastructure 1,625 1,463 162 11% - (70 ) 92 6 % 6% Applied Water 1,207 1,039 168 16% - (36 ) 132 13 % 13% Measurement & Control Solutions 1,040 1,001 39 4% 7 (24 ) 22 2 % 1% Quarter Ended September 30 Xylem Inc. 1,265 1,220 45 4% 2 (20 ) 27 2 % 2% Water Infrastructure 547 524 23 4% - (10 ) 13 2 % 2% Applied Water 400 364 36 10% - (7 ) 29 8 % 8% Measurement & Control Solutions 318 332 (14 ) (4%) 2 (3 ) (15 ) (5 %) (5%) Quarter Ended June 30 Xylem Inc. 1,351 1,160 191 16% 3 (66 ) 128 11 % 11% Water Infrastructure 569 501 68 14% - (36 ) 32 6 % 6% Applied Water 414 337 77 23% - (18 ) 59 18 % 18% Measurement & Control Solutions 368 322 46 14% 3 (12 ) 37 11 % 11% Quarter Ended March 31 Xylem Inc. 1,256 1,123 133 12% 2 (44 ) 91 8 % 8% Water Infrastructure 509 438 71 16% - (24 ) 47 11 % 11% Applied Water 393 338 55 16% - (11 ) 44 13 % 13% Measurement & Control Solutions 354 347 7 2% 2 (9 ) - 0 % (1%) Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) Q1 Q2 Q3 YTD 2021 2020 2021 2020 2021 2020 2021 2020 Total Revenue • Total Xylem 1,256 1,123 1,351 1,160 1,265 1,220 3,872 3,503 • Water Infrastructure 509 438 569 501 547 524 1,625 1,463 • Applied Water 393 338 414 337 400 364 1,207 1,039 • Measurement & Control Solutions 354 347 368 322 318 332 1,040 1,001 Operating Income (Loss) • Total Xylem 133 61 160 54 152 73 445 188 • Water Infrastructure 71 39 93 73 101 89 265 201 • Applied Water 66 47 64 41 60 56 190 144 • Measurement & Control Solutions 9 (12 ) 13 (46 ) 7 (62 ) 29 (120 ) • Total Segments 146 74 170 68 168 83 484 225 Operating Margin • Total Xylem 10.6 % 5.4 % 11.8 % 4.7 % 12.0 % 6.0 % 11.5 % 5.4 % • Water Infrastructure 13.9 % 8.9 % 16.3 % 14.6 % 18.5 % 17.0 % 16.3 % 13.7 % • Applied Water 16.8 % 13.9 % 15.5 % 12.2 % 15.0 % 15.4 % 15.7 % 13.9 % • Measurement & Control Solutions 2.5 % (3.5 %) 3.5 % (14.3 %) 2.2 % (18.7 %) 2.8 % (12.0 %) • Total Segments 11.6 % 6.6 % 12.6 % 5.9 % 13.3 % 6.8 % 12.5 % 6.4 % Special Charges • Total Xylem 2 - - 11 1 70 3 81 • Water Infrastructure - - - - - - - - • Applied Water 1 - - - - - 1 - • Measurement & Control Solutions - - - 10 - 69 - 79 • Total Segments 1 - - 10 - 69 1 79 Restructuring & Realignment Costs • Total Xylem 8 9 6 43 2 15 16 67 • Water Infrastructure 5 5 4 8 1 8 10 21 • Applied Water 1 2 2 4 2 2 5 8 • Measurement & Control Solutions 2 2 - 31 (1 ) 5 1 38 • Total Segments 8 9 6 43 2 15 16 67 Adjusted Operating Income (Loss) • Total Xylem 143 70 166 108 155 158 464 336 • Water Infrastructure 76 44 97 81 102 97 275 222 • Applied Water 68 49 66 45 62 58 196 152 • Measurement & Control Solutions 11 (10 ) 13 (5 ) 6 12 30 (3 ) • Total Segments 155 83 176 121 170 167 501 371 Adjusted Operating Margin • Total Xylem 11.4 % 6.2 % 12.3 % 9.3 % 12.3 % 13.0 % 12.0 % 9.6 % • Water Infrastructure 14.9 % 10.0 % 17.0 % 16.2 % 18.6 % 18.5 % 16.9 % 15.2 % • Applied Water 17.3 % 14.5 % 15.9 % 13.4 % 15.5 % 15.9 % 16.2 % 14.6 % • Measurement & Control Solutions 3.1 % (2.9 %) 3.5 % (1.6 %) 1.9 % 3.6 % 2.9 % (0.3 %) • Total Segments 12.3 % 7.4 % 13.0 % 10.4 % 13.4 % 13.7 % 12.9 % 10.6 % Xylem Inc. Non-GAAP Reconciliation Adjusted Diluted EPS ($ Millions, except per share amounts) Q3 2021 Q3 2020 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 1,265 - 1,265 1,220 - 1,220 Operating Income 152 3 a 155 73 85 a 158 Operating Margin 12.0 % 12.3 % 6.0 % 13.0 % Interest Expense (21 ) - (21 ) (22 ) - (22 ) Other Non-Operating Income (Expense) 2 1 b 3 (1 ) 1 b - Gain/(Loss) From Sale of Business - - - - - - Income before Taxes 133 4 137 50 86 136 Provision for Income Taxes (19 ) (2 ) c (21 ) (13 ) (9 ) c (22 ) Net Income Attributable to Xylem 114 2 116 37 77 114 Diluted Shares 181.6 181.6 181.0 181.0 Diluted EPS $ 0.63 $ - $ 0.63 $ 0.20 $ 0.42 $ 0.62 Year-over-year currency translation impact on current year diluted EPS $ 0.01 $ (0.01 ) $ - Diluted EPS at Constant Currency $ 0.62 $ 0.01 $ 0.63 Q3 YTD 2021 Q3 YTD 2020 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 3,872 - 3,872 3,503 - 3,503 Operating Income 445 19 a 464 188 148 a 336 Operating Margin 11.5 % 12.0 % 5.4 % 9.6 % Interest Expense (63 ) - (63 ) (56 ) - (56 ) Other Non-Operating Income (Expense) 1 5 b 6 (5 ) 4 b (1 ) Gain/(Loss) From Sale of Business 2 (2 ) - - - - Income before Taxes 385 22 407 127 152 279 Provision for Income Taxes (71 ) 1 c (70 ) (21 ) (29 ) c (50 ) Net Income Attributable to Xylem 314 23 337 106 123 229 Diluted Shares 181.5 181.5 181.0 181.0 Diluted EPS $ 1.73 $ 0.13 $ 1.86 $ 0.58 $ 0.67 $ 1.25 Year-over-year currency translation impact on current year diluted EPS $ 0.10 $ 0.01 $ 0.11 Diluted EPS at Constant Currency $ 1.63 $ 0.12 $ 1.75 a Quarter-to-date: Restructuring & realignment costs of $2 million in 2021 and $15 million in 2020, as well as special charges of $1 million in 2021 and $70 million ($69 million of intangible asset and goodwill impairment and $1 million of other charges) in 2020. Year-to-date: Restructuring & realignment costs of $16 million and $67 million in 2021 and 2020, respectively; special charges of $3 million ($1 million of intangible asset impairment charges and $2 million of other charges) and $81 million of special charges in 2020 ($79 million of intangible asset and goodwill impairment charges and $2 million of other charges). b Quarter-to-date: Special non-operating charges consist of $1 million, in each of 2021 and 2020, for pension costs related to the UK pension plan that is going to be part of a buyout. Year-to-date: Special non-operating charges consist of $5 million in 2021 and $4 million in 2020, for pension costs related to the UK pension plan that is going to be part of a buyout. c Quarter-to-date: Net tax impact on restructuring & realignment costs of $1 million in 2021 and $3 million in 2020; and $1 million of negative adjustment from tax related special benefits in 2021 and $6 million net tax impact on special charges in 2020. Year-to-date: Net tax impact on restructuring & realignment costs of $4 million and $15 million in 2021 and 2020, respectively; $1 million and $9 million of net tax impact on special charges in 2021 and 2020, respectively; and $6 million of positive adjustment from tax related special charges in 2021 and $5 million of negative adjustment from tax related special benefits in 2020, respectively. Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter ($ Millions) 2021 Q1 Q2 Q3 Q4 Total Net Income 87 113 114 314 Income Tax Expense 27 25 19 71 Interest Expense (Income), net 19 19 20 58 Depreciation 30 29 31 90 Amortization 32 33 31 96 EBITDA 195 219 215 - 629 Share-based Compensation 9 8 8 25 Restructuring & Realignment 8 6 2 16 Loss/(Gain) from sale of business - (2 ) - (2 ) Special Charges 3 3 2 8 Adjusted EBITDA 215 234 227 - 676 Revenue 1,256 1,351 1,265 3,872 Adjusted EBITDA Margin 17.1 % 17.3 % 17.9 % 17.5 % 2020 Q1 Q2 Q3 Q4 Total Net Income 38 31 37 148 254 Income Tax Expense 4 4 13 10 31 Interest Expense (Income), net 14 16 20 20 70 Depreciation 29 29 30 29 117 Amortization 35 33 33 33 134 EBITDA 120 113 133 240 606 Share-based Compensation 8 8 3 7 26 Restructuring & Realignment 9 43 15 10 77 Special Charges 1 13 71 1 86 Adjusted EBITDA 138 177 222 258 795 Revenue 1,123 1,160 1,220 1,373 4,876 Adjusted EBITDA Margin 12.3 % 15.3 % 18.2 % 18.8 % 16.3 % Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter ($ Millions) Water Infrastructure 2021 Q1 Q2 Q3 Q4 Total Pre-Tax Income 70 92 102 264 Interest Expense (Income), net (1 ) (1 ) - (2 ) Depreciation 11 11 11 33 Amortization 2 2 1 5 EBITDA 82 104 114 - 300 Share-based Compensation 1 - 1 2 Restructuring & Realignment 5 4 1 10 Adjusted EBITDA 88 108 116 - 312 Revenue 509 569 547 1,625 Adjusted EBITDA Margin 17.3 % 19.0 % 21.2 % 19.2 % 2020 Q1 Q2 Q3 Q4 Total Pre-Tax Income 37 71 85 116 309 Interest Expense (Income), net - (1 ) - - (1 ) Depreciation 11 11 11 11 44 Amortization 4 5 2 2 13 EBITDA 52 86 98 129 365 Share-based Compensation - 1 - 1 2 Restructuring & Realignment 5 8 8 7 28 Adjusted EBITDA 57 95 106 137 395 Revenue 438 501 524 616 2,079 Adjusted EBITDA Margin 13.0 % 19.0 % 20.2 % 22.2 % 19.0 % Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter ($ Millions) Applied Water 2021 Q1 Q2 Q3 Q4 Total Pre-Tax Income 66 65 60 191 Interest Expense (Income), net - - - - Depreciation 5 5 5 15 Amortization 1 1 - 2 EBITDA 72 71 65 - 208 Share-based Compensation 1 1 1 3 Restructuring & Realignment 1 2 2 5 Loss/(Gain) from sale of business - (2 ) - (2 ) Special Charges 1 - - 1 Adjusted EBITDA 75 72 68 - 215 Revenue 393 414 400 1,207 Adjusted EBITDA Margin 19.1 % 17.4 % 17.0 % 17.8 % 2020 Q1 Q2 Q3 Q4 Total Pre-Tax Income 47 42 55 60 204 Interest Expense (Income), net - - - - - Depreciation 5 5 6 5 21 Amortization 1 - 1 1 3 EBITDA 53 47 62 66 228 Share-based Compensation 1 1 - 1 3 Restructuring & Realignment 2 4 2 1 9 Adjusted EBITDA 56 52 64 68 240 Revenue 338 337 364 395 1,434 Adjusted EBITDA Margin 16.6 % 15.4 % 17.6 % 17.2 % 16.7 % Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter ($ Millions) Measurement & Control Solutions 2021 Q1 Q2 Q3 Q4 Total Pre-Tax Income 16 12 7 35 Interest Expense (Income), net - - - - Depreciation 9 10 11 30 Amortization 27 27 27 81 EBITDA 52 49 45 - 146 Share-based Compensation 1 2 1 4 Restructuring & Realignment 2 - (1 ) 1 Adjusted EBITDA 55 51 45 - 151 Revenue 354 368 318 1,040 Adjusted EBITDA Margin 15.5 % 13.9 % 14.2 % 14.5 % 2020 Q1 Q2 Q3 Q4 Total Pre-Tax (Loss) Income (13 ) (46 ) (62 ) 14 (107 ) Interest Expense (Income), net - - - - - Depreciation 9 8 9 9 35 Amortization 27 26 27 27 107 EBITDA 23 (12 ) (26 ) 50 35 Share-based Compensation 2 1 1 1 5 Restructuring & Realignment 2 31 5 2 40 Special Charges - 10 69 - 79 Adjusted EBITDA 27 30 49 53 159 Revenue 347 322 332 362 1,363 Adjusted EBITDA Margin 7.8 % 9.3 % 14.8 % 14.6 % 11.7 % View source version on businesswire.com: https://www.businesswire.com/news/home/20211102005632/en/ Media Houston Spencer +1 (914) 240-3046 houston.spencer@xylem.com Investors Matt Latino +1 (914) 323-5821 matthew.latino@xylem.com Source: Xylem Inc. 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