Evoqua Integration Synergies
Q: Update on Evoqua integration and revenue synergies?
A: The Evoqua integration is progressing well, with cost synergies tracking to meet the $100 million run rate in our 2024 plan. " Revenue synergies are ramping up, and we'll share tangible proof points at our upcoming Investor Day. " We've also secured a $100-million-plus, 20-year outsourced water project to support a large hydrogen plant, showcasing our ability to win significant new contracts. " "

M&A Focus During Optimization
Q: Are you still pursuing M&A during portfolio optimization?
A: Yes, we're focused on executing on the platform built over the past decade, particularly with the Evoqua acquisition, to drive above-market growth. " While we're simplifying our business, we're also concentrating on capital deployment in high-growth markets with accretive margins and will be more consistent in our M&A activities. "

Applied Water Segment Performance
Q: How is the Applied Water segment performing?
A: The Applied Water segment is largely performing as expected, with a low single-digit decline anticipated this year. " We experienced a tough compare due to strong prior Q1s, and softness continues, especially in Europe and emerging markets where orders were down. " We're monitoring the situation closely and have initiatives in place to reduce complexity and drive growth. "

PFAS Opportunities and EPA Rules Impact
Q: How do new EPA PFAS rules affect Xylem?
A: The finalized EPA PFAS rules provide clarity on compliance timelines, with impacted utilities having three years for testing and five years for PFAS removal, which is longer than initially anticipated. " We're well-positioned with over 80 PFAS installations completed and are ready to partner with utilities on PFAS solutions. " We're also advancing destruction technology through our Innovation Labs. "

Pricing Strategy and Inflation Offset
Q: How will pricing offset inflation going forward?
A: We're focusing on offsetting material inflation with price increases and letting productivity handle indirect and SG&A inflation. " Our teams are enhancing strategic pricing approaches to capture the value we offer customers, aiming to manage the price-cost spread effectively. "

M&CS Margin Improvement
Q: What's driving the M&CS margin improvement?
A: The Measurement & Control Solutions segment delivered an outstanding quarter, with EBITDA margin up 550 basis points and nearly 50% incrementals. " This was driven by significant productivity gains, improved pricing, and restructuring actions. " While we expect some unfavorable mix impacts in the second half, we're on track to exit the year at record margins. "

Government Funding Impact
Q: How will government funding affect growth?
A: Government funding is slowly trickling in and will support market growth over the next three to five years. " While we don't anticipate a big jump from incentives or subsidies in our long-range plan, this funding will provide a gradual layer of growth on top of the market. "

Non-Revenue Water Focus in Europe
Q: Are there opportunities in Europe's non-revenue water initiatives?
A: Yes, there's increased focus on non-revenue water in Europe, especially with upcoming AMP cycles in the UK. " Our Idrica platform allows us to offer solutions for data visualization and smart metering, addressing utilities' needs for leak detection and water management. " We see significant opportunities with analytical instrumentation and holding polluters accountable. "

Data Center Opportunities
Q: How does Xylem play into data center growth?
A: Data centers present a growth opportunity, though currently a small part of our revenue (less than $50 million). " Data centers require significant water for cooling, often in water-stressed areas. We offer comprehensive treatment solutions and outsourced water management services to address these needs. "

Synergy Targets from Evoqua Acquisition
Q: Will synergies exceed initial targets?
A: We're running toward a synergy target much higher than the initial $140 million announced with the Evoqua deal. " Any overachievement will likely be split between enhancing margins and investing in growth. " We're confident we'll deliver above the $140 million target. "

Simplification and Areas for Improvement
Q: Which areas need more focus for improvement?
A: We need to simplify our business to better serve customers and colleagues. " Over the years, complexity has impacted our margin profile. By focusing on commercial execution, reducing complexity in product offerings, and improving customer interactions, we expect significant benefits. "

Initial Impressions of New Leadership
Q: How is new leadership impacting the company?
A: In our first 100 days, we're building on momentum and executing on a great platform. " We've refined strategic priorities around value capture from the Evoqua transaction, simplification, and scaling services. " Culturally, we're fostering a high-impact culture with strong alignment across the organization. "

Orders and End-Market Dynamics
Q: Any notable changes in orders or end markets?
A: Orders show good momentum with pro forma organic growth at 7% and book-to-bill greater than 1. " Demand remains healthy across most end markets, supported by favorable drivers and government funding. " We're closely watching the Applied Water segment due to softness in Europe and emerging markets. "