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- **Record Q3 Performance**: 7% revenue growth, 23.1% EBITDA margin (200 bps YoY), and $1.37 EPS (+23%).
- **MCS Divestiture**: $125M sale of international metering business to focus on high-margin North America AMI.
- **Guidance Uptick**: Full-year EBITDA margin 22-22.3% (vs. prior 21.3-21.8%), EPS $5.03-5.08.
- **80/20 Momentum**: 100 bps margin improvement from restructuring, with 2026+ acceleration.
- **China Restructuring**: 40% workforce reduction to adapt to slower demand.

**【CEO Opening Remarks】**
- Q3 2025 revenue grew across all segments, with double-digit growth in Measurement and Control Solutions (MCS) and Water Solutions and Services (WSS). EBITDA margin reached 23.1%, up 200 basis points YoY, driven by operational efficiency and 80/20 initiatives.
- Orders in MCS rose 11% organically, led by smart metering. The company divested its international metering business for $125M, targeting a 100 bps margin improvement in MCS.
- Full-year guidance raised to $9B revenue (5-6% growth), 22-22.3% EBITDA margin, and $5.03-5.08 EPS, up from prior targets.

**【CFO Financial Commentary】**
- Q3 revenue: $2.3B (+7% YoY), driven by MCS (+11%) and WSS (+10%). North America growth offset softness in China and Europe.
- EBITDA: $532M (+14% YoY), margin 23.1% vs. 21.1% YoY. Free cash flow: $228M (9% margin), impacted by restructuring and outsourced projects.
- Segment highlights:
  - MCS: $507M (+11%), EBITDA margin 21.8% (+60 bps). Backlog $1.5B, targeting 10%+ 2026 growth.
  - Water Infrastructure: $839M (+5%), EBITDA 24.4% (+400 bps). Applied Water: $314M (+1%), EBITDA 21.7% (+310 bps).
  - WSS: $204M (+10%), EBITDA 26.3% (+160 bps).
- Tariffs: $180M annualized impact, partially offset by pricing and supply chain adjustments.

**【Q&A Highlights】**
- **Margin Expansion**: 2025 EBITDA margin guide 22-22.3% (vs. 2024's 20.6%). CFO expects 140-170 bps improvement, citing 80/20 acceleration.
- **MCS Outlook**: 2026 growth ~10% (water +5%, energy +10%), supported by strong backlog and AMI adoption.
- **China Strategy**: Restructuring to reduce China exposure, with 40% workforce reduction. Focus on high-margin North America and Europe.
- **M&A**: $1B annual capital deployment target, prioritizing small bolt-ons. Dividend policy remains unchanged.
- **Tariff Impact**: No volume decline, but decision delays. Pricing and supply chain levers mitigate margin dilution.


Xylem Inc. (XYL) Q3 2025 Earnings Call Transcript

- **Revenue Beat**: Q2 revenue +6% YoY, driven by MCS (+10%), with FY25 guidance raised to $8.9B-$9B.
- **Margin Expansion**: Adjusted EBITDA 21.8% (up 100bps YoY), Applied Water margin +420bps to 21.7%.
- **Order Momentum**: Smart metering orders +12%, Applied Water orders +4Q streak, WSS services up 5%.
- **Tariff Mitigation**: Pricing and supply chain actions offsetting costs; slight margin dilution expected.
- **Simplification Success**: 80/20 driving on-time delivery record (600bps YoY in June), with 80% of business implementing tools.
- **Strategic Acquisitions**: Recent deals (Vacom, Envirex) enhance advanced treatment portfolio with high returns.

**【CEO Summary Section】**
- Q2 revenue grew 6% YoY, driven by strong performance across all segments, with MCS leading at 10% growth.
- Adjusted EBITDA margin reached 21.8% (up 100bps YoY), with Applied Water expanding 420bps to 21.7%.
- Orders up 4% YoY, with smart metering (AMI) orders growing 12% in MCS.
- Guidance raised: FY25 revenue $8.9B-$9B (+4-5% organic), EPS $4.70-$4.85 (vs. prior $4.50-$4.70).
- Tariff mitigation via pricing and supply chain adjustments; expects slight margin dilution.
- 80/20 simplification driving on-time delivery record (600bps YoY in June).

**【CFO Financial Commentary】**
- Q2 GAAP net income $420M, Non-GAAP EPS $1.26 (+16% YoY), beating midpoint by $0.12.
- Free cash flow $61M (down 12% YoY due to outsourced projects and tax timing).
- Segment highlights:
  - **MCS**: Orders +12%, revenue +10%, EBITDA margin 23.1% (down 30bps YoY).
  - **Water Infrastructure**: Revenue +4%, EBITDA margin +200bps to 21.8%.
  - **Applied Water**: Revenue +5%, EBITDA margin +420bps to 21.7%.
  - **WSS**: Orders +5%, revenue +5%, EBITDA margin +60bps to 24.4%.
- Backlog remains strong at $5B+ (excluding MCS normalization).

**【Q&A Highlights】**
- **MCS Orders**: Sequential improvement expected, with book-to-bill >1 in H2.
- **Simplification Progress**: 80% of business implementing 80/20; Applied Water and Water Infrastructure leading margin gains.
- **M&A Strategy**: Focused on high-return, niche acquisitions (e.g., Vacom, Envirex) for advanced treatment.
- **Tariff Impact**: Pricing and supply chain actions offsetting costs; 10-25bps margin dilution assumed.
- **China Risks**: Orders down 18% YoY, but <5% of total business.
- **On-Time Delivery**: June on-time rate up 600bps YoY, nearing best-in-class levels.

Xylem Inc. (XYL) Q2 2025 Earnings Call Transcript

- **Q1 2025 Strong Beat**: 3% revenue growth, 120bps EBITDA margin expansion, $1.03 EPS (+14% YoY). Full year guidance reaffirmed: $8.7-8.8B revenue, $4.50-4.70 EPS.
- **Tariff Mitigation Success**: Pricing actions offset 80%+ of tariff costs. Mexico net cost $30M, China impact $80M+ but 75% imports now USMCA-exempt.
- **Organizational Agility**: 2,000+ workforce realignment underway; 80/20 prioritization driving 300bps+ margin improvement in Applied Water.
- **Sustainability Leadership**: Exceeded 2025 goals, new 2030 targets announced. WSS segment 12-month rolling growth guidance to smooth volatility.
- **M&A Momentum**: $150M+ incremental pricing from Q1/Q2 actions; Vacom acquisition adds ZLD capability for microelectronics and energy markets.

**【CEO Summary Section】**
- Q1 2025 revenue grew 3% YoY, driven by outperformance in Measurement & Control Solutions (MCS) and strong demand across all segments. EBITDA margin expanded 120bps to 20.4%, and EPS of $1.03 exceeded guidance by $0.08.
- Tariff mitigation strategies include pricing actions and supply chain diversification (e.g., 75% of Mexico imports covered by USMCA exemptions). Full year 2025 guidance reaffirmed: $8.7-8.8B revenue and $4.50-4.70 EPS.
- Organizational simplification efforts (e.g., 80/20 prioritization, 16 divisional P&Ls) are driving agility and productivity, with 2,000+ workforce realignment underway.
- Sustainability leadership: exceeded 2025 customer sustainability goals ahead of schedule, with new 2030 targets announced.

**【CFO Financial Commentary】**
- **MCS**: Orders down 8% YoY (tough comps in smart metering), but revenue +6% YoY. EBITDA margin 21% vs. 22.7% prior year, impacted by energy-water mix. Q2 margin expected to be lowest for the year before sequential improvement.
- **Water Infrastructure**: Orders +1% YoY (strong treatment demand), revenue +5% YoY. EBITDA margin +290bps to 23.5%, driven by productivity and price.
- **Applied Water**: Orders +3% YoY (5th straight quarter growth), revenue +1% YoY. EBITDA margin +300bps YoY, best quarterly improvement.
- **Water Solutions & Services**: Orders -5% YoY (tough comp), revenue +1% YoY. EBITDA margin -60bps YoY due to mix and volume.
- Tariff impact: $30M net increase from Mexico, $80M+ from China. Pricing actions offset ~80% of costs, with ~$150M incremental pricing in Q1 and early Q2.

**【Q&A Highlights】**
- **Tariff Mitigation**: 2/3 price increases, 1/3 surcharges. Pricing actions in Q1 and early Q2; ~$150M incremental revenue impact. Anticipate potential demand softening in H2, but FX tailwinds and strong Q1 backlog provide buffer.
- **M&A Activity**: Active pipeline focused on advanced treatment, intelligent solutions, and services. Recent Vacom acquisition adds zero liquid discharge (ZLD) capability.
- **Organizational Simplification**: 80/20 prioritization reducing complexity, freeing up capacity for growth. Pulse survey shows +20% colleague satisfaction with speed and decision-making.
- **Segment Volatility**: Water Solutions & Services (WSS) lumpy due to large capital projects (e.g., $150M outsourced water project in Q1 2024). Focus on 12-month rolling growth for WSS stability.
- **Tariff Timing Impact**: Pricing actions in Q1/Q2; demand impact likely back-half loaded. No pre-positioning inventory from customers or company in Q1.


Xylem (XYL)-29 Apr 25-2025 Q1 Earnings call transcript

- **Record 2024 Performance**: 6% revenue growth, 170bp EBITDA margin expansion, and double-digit EPS increase.
- **2025 Growth Drivers**: 3-4% organic revenue growth, 70-120bp EBITDA margin expansion, and $4.50-$4.70 EPS.
- **Simplification & Restructuring**: $130M net benefits from 80/20 actions, 10% workforce reduction, and Idrica majority ownership to accelerate digital solutions.
- **Risk Mitigation**: Tariff mitigation strategies, FX hedging, and operational efficiency improvements.
- **Market Momentum**: Strong demand in North America and Europe, with WSS backlog of $1B supporting mid-single-digit growth.


**【CEO Summary Section】**
- Full year 2024 revenue grew 6%, EBITDA margins expanded 170 basis points, and EPS increased double digits. The integration of Evoqua delivered cost synergies 18 months ahead of schedule.
- 2025 outlook includes organic revenue growth of 3-4% and EBITDA margin expansion of 70-120 basis points. Key initiatives include simplifying the operating model, exiting unprofitable businesses, and majority ownership of Idrica to accelerate digital transformation.
- Restructuring actions will impact ~10% of the workforce, with $95-115 million in pretax charges and $130 million in net benefits over two years.

**【CFO Financial Commentary】**
- Q4 2024 revenue grew 7% YoY, driven by strong demand across all segments. EBITDA margin improved 140 basis points to 21%, and EPS reached $1.18, surpassing guidance by $0.05.
- Full year 2024 free cash flow increased 29%, with conversion rate of 116%. 2025 guidance includes EBITDA margin of 21.3-21.8% and EPS of $4.50-$4.70, reflecting productivity gains and price realization.
- 2025 segment outlook: MCS (high single-digit growth), Water Infrastructure (mid-single digits), Applied Water (low single digits), Water Solutions & Services (mid-single digits).

**【Q&A Key Themes】**
- **Restructuring Impact**: 80/20 actions will reduce complexity, with ~$75 million in 2025 benefits offsetting mix headwinds in MCS. Margins expected to improve sequentially through 2025.
- **Tariff Risks**: U.S. tariffs on China, Mexico, and Canada could impact 5% of material costs. Teams are implementing price actions and supply chain diversification to mitigate effects.
- **Market Trends**: Strong demand in North America and Europe, with softness in China's utility sector. Applied Water recovery and WSS backlog ($1B) support growth.
- **Regulatory Environment**: Bipartisan support for water infrastructure funding; new EPA leadership emphasizes PFAS cleanup and water security.

**【Strategic Priorities】**
- Accelerate digital transformation via Idrica majority ownership.
- Optimize portfolio through divestitures (e.g., non-core Evoqua business) and targeted M&A.
- Enhance operational efficiency with 80/20 simplification and restructuring savings.

**【Risk Management】**
- Monitor FX volatility, which could reduce EPS growth by ~200 basis points in 2025.
- Manage mix headwinds in MCS (energy vs. water meter demand) through sequential margin improvement.
- Mitigate inflation and supply chain disruptions with pricing, productivity, and diversification.


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