Margin Expansion Outlook
Q: What's the path and opportunity for margin improvement?
A: Matthew Pine emphasized delivering the Evoqua value capture, accelerating margin expansion through productivity and operational excellence, and scaling the services business enabled by digital. He is focusing on simplifying water and driving a high-impact culture to achieve these goals.

Margin Expansion by Segment
Q: How will margin improvement translate by segment?
A: William Grogan stated that the largest impact on margin expansion in 2024 will come from the M&CS segment. After chip supply issues resolved, they've added capacity, increased pricing, and aim to exit the year at near historic record levels of EBITDA margin.

Margin Expansion Offsets
Q: What could offset expected margin expansion beyond 100bps?
A: William Grogan explained that ongoing investments to support significant growth opportunities across all segments will put pressure on margin expansion. This, along with potential macroeconomic factors, balances out the benefits from productivity and synergies.

China Sales Outlook
Q: Could you provide more granularity on China performance?
A: Matthew Pine noted that China represents mid-single-digit percentage of revenue, with about 50% tied to public utilities. Q4 orders were up 11%, full-year orders up 10%, but revenue hasn't converted due to funding delays. They expect China to be roughly flat in 2024.

Evoqua Revenue Synergies
Q: Update on revenue synergy plans for Evoqua?
A: Matthew Pine reported progress in integrating Evoqua, appointing regional synergy leads, and creating the WSS segment to accelerate synergies. They are leveraging Evoqua's products through Xylem's global channels and have seen wins, such as in South Africa.

M&A Pipeline
Q: Should we expect bolt-on acquisitions in 2024?
A: Matthew Pine acknowledged a strong M&A pipeline and flexibility due to a strong balance sheet. While focusing on integrating Evoqua, they are considering small to medium bolt-ons and will share more on capital allocation at the Investor Day in May.

Pricing Strategy
Q: How are you thinking about pricing for '24 and beyond?
A: William Grogan indicated that price expectations for next year will ramp down to just over 1%, still higher than pre-pandemic levels. The 80/20 initiative will enhance pricing methodology and capture, especially for longer-tail customers.

Utility and Industrial Markets
Q: What's the outlook for utility and industrial markets?
A: Matthew Pine stated that CapEx momentum continues strong, with treatment business orders up double digits globally. Utilities' OpEx revenue remains solid, and industrial markets show mixed performance, with strength in power, life sciences, and microelectronics.

Backlog and Chip Supply
Q: When will past due backlog in M&CS normalize?
A: Matthew Pine said they've reduced past due backlog from 30% at the start of 2023 to 20% by year-end. They expect to clear most of the backlog in 2024, with chip supply issues largely resolved and no internal capacity limitations.

Connected Utility (Endrica Partnership)
Q: How meaningful is the Endrica partnership near term?
A: Matthew Pine is bullish on the partnership, aiming to lead in aggregating utility data. They've made significant global progress, building a strong pipeline and securing wins across various regions, adopting a "land and expand" strategy.