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What were the key takeaways from Xylem’s earnings call?

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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

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

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Income Tax Expense

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Net Income from Continuing Operations

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Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

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Other Comprehensive Income

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Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

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Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

XYL

XYL fundamentals

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