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XI

Xylem Inc. (XYL)·Q4 2024 Earnings Summary

Executive Summary

  • Delivered a strong Q4 finish: revenue $2.256B (+7% YoY), GAAP EPS $1.34, adjusted EPS $1.18; adjusted EBITDA margin 21.0% (+140 bps YoY). Management attributed outperformance to productivity, price realization and volume; GAAP EPS benefited from a non‑recurring gain on remeasurement of the Idrica stake .
  • Orders were $2.196B (+7% YoY), book‑to‑bill near 1 (97%); ending backlog ~$5.1B, supporting 2025 visibility .
  • Announced restructuring to simplify the operating model: $95–$115M pretax charges (most in 2025/early 2026), targeting $130M net benefits over two years ($75M in 2025); impacts <10% of workforce, concentrated in SG&A (Europe most affected) .
  • 2025 guidance introduced: revenue $8.6–$8.7B (0–2% reported; 3–4% organic), adjusted EBITDA margin 21.3–21.8% (+70–120 bps), adjusted EPS $4.50–$4.70; Q1’25 EPS $0.93–$0.98. Dividend raised 11% to $0.40 (payable Mar 19, 2025) .

What Went Well and What Went Wrong

What Went Well

  • Broad‑based demand and execution: Q4 revenue +7% YoY; all segments posted order growth; adjusted EBITDA margin expanded 140 bps YoY on productivity, price and volume .
  • Segment strength: Water Infrastructure orders +10% and revenue +8% with notable margin expansion; Water Solutions & Services revenue +11% on capital projects and dewatering strength .
  • Portfolio and digital strategy: Increased stake to majority in Idrica (core to Xylem View) and tuck‑in M&A to enhance offerings; CEO: “The team delivered a strong fourth quarter to close a record‑breaking year… We set new benchmarks for full‑year revenue, net income and adjusted EBITDA margins, and earnings per share” .

What Went Wrong

  • MCS margin mix headwind: MCS EBITDA margin down YoY on higher energy meter mix; management expects Q4 to be the trough with sequential improvement through 2025 .
  • Applied Water top‑line softness: Q4 revenue modestly down YoY (-1%) amid emerging markets softness; growth expected to resume in 2025, partially offset by 80/20 exits .
  • 2025 growth dampened by simplification: Organic growth guided to 3–4% (0–2% reported) reflecting early‑phase 80/20 actions and China utility weakness; FX a “meaningful headwind” to EPS .

Financial Results

Consolidated results by quarter (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$2.169 $2.104 $2.256
GAAP Diluted EPS ($)$0.80 $0.89 $1.34
Adjusted EPS ($)$1.09 $1.11 $1.18
Adjusted EBITDA Margin %20.8% 21.2% 21.0%
Operating Margin % (GAAP)11.7% 13.3% 11.8%
Orders ($USD Billions)$2.087 $2.201 $2.196

Q4 2024 vs prior periods and vs estimates

MetricQ4 2024vs Q3 2024vs Q4 2023vs Consensus
Revenue ($B)$2.256 +$0.152 +$0.138 N/A (S&P Global consensus unavailable via tool)
GAAP EPS ($)$1.34 +$0.45 +$0.24 N/A
Adjusted EPS ($)$1.18 +$0.07 +$0.19 N/A
Adj. EBITDA Margin (%)21.0% -0.2 ppt +1.4 ppt N/A

Note: Company stated Q4 revenue and earnings exceeded its prior guidance; consensus data from S&P Global was not retrievable via the tool at this time .

Segment revenue and growth (Q4 YoY)

SegmentQ4 2023 Revenue ($M)Q4 2024 Revenue ($M)YoY %
Water Infrastructure674 727 8%
Applied Water457 454 -1%
Measurement & Control Solutions437 469 7%
Water Solutions & Services550 606 10%

Segment adjusted operating margins (Q4)

SegmentQ4 2023 Adj Op MarginQ4 2024 Adj Op Margin
Water Infrastructure17.7% 21.3%
Applied Water16.0% 17.0%
Measurement & Control Solutions14.4% 13.4%
Water Solutions & Services15.1% 15.2%
Total Xylem14.8% 16.7%

KPIs and other highlights

KPIQ4 2024
Orders ($B) / YoY$2.196 / +7%
Book‑to‑Bill (Quarter)97%
Ending Backlog~$5.1B
Net debt / Adj. EBITDA~0.5x
2024 FCF Conversion116% (YTD)
Dividend$0.40 per share (Q1 2025 payout; +11%)

Non‑GAAP adjustments: Q4 GAAP EPS ($1.34) includes a $152M remeasurement gain on the previously held Idrica equity interest; adjusted EPS ($1.18) excludes this and other items (amortization, restructuring/realignment, special charges, loss on sale) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY 2025N/A (first issuance)$8.6–$8.7 New
Organic Revenue GrowthFY 2025N/A~3–4% New
Adjusted EBITDA MarginFY 2025N/A21.3%–21.8% (+70–120 bps YoY) New
Adjusted EPS ($)FY 2025N/A$4.50–$4.70 New
Revenue Growth (reported/organic)Q1 2025N/A0–2% / 1–2% New
EBITDA MarginQ1 2025N/A~19.5%–20.0% New
EPS ($)Q1 2025N/A$0.93–$0.98 New
DividendQ1 2025Prior quarterly dividend$0.40 (+11%) Raised

Management notes: Guidance excludes explicit tariff impacts (viewed as immaterial currently) and anticipates FX as a meaningful headwind to 2025 EPS; 80/20 simplification actions temper reported growth early in the year .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Simplification & RestructuringQ2: Integration on track; raised FY guide . Q3: Simplification benefits beginning; narrowing FY guide .Formal program: $95–$115M charges; $130M benefits over 2 years ($75M in 2025); <10% workforce; Europe most impacted .Accelerating; larger 2H’25 benefit realization.
MCS mix and marginsQ2/Q3: Strong revenue growth and backlog conversion .Energy meter mix pressured Q4 margins; Q4 likely trough; sequential improvement expected through 2025 .Near‑term headwind, improving trajectory.
Tariffs/MacroNot highlighted in Q2/Q3 docs [19][13].Anticipated immaterial in 2025; playbook includes pricing and second‑sourcing; exposure ~5% of material cost; Mexico affects MCS/AW .Monitored; mitigations in place.
Digital/TechnologyQ2/Q3: Evoqua synergies ahead of plan .Majority stake in Idrica (core to Xylem View) to accelerate digital strategy .Building digital platform leverage.
PFAS/RegulatoryNot in Q2/Q3 releases [19][13].Municipal PFAS rules intact; industrial timing pushed; state tailwinds (e.g., GA) .Supportive municipal backdrop; industrial timing deferred.
Regional dynamicsQ3: Order resilience across segments .China utility weakness expected; Europe pockets of softness in MCS; strong U.S. projects .Mixed: U.S. strength vs China softness.
WSS project cadenceQ2: Strong growth (+76% YoY revenue) . Q3: -2% YoY revenue on timing .Q4: +11% YoY; projects ramped faster; solid 2025 funnel .Lumpy quarter to quarter; uptrend intact.

Management Commentary

  • CEO (Prepared): “The results… reflect a strong fourth quarter finish to a record‑breaking 2024… The integration of Evoqua is delivering cost synergies significantly faster than expected.”
  • CFO (Prepared): “Orders were healthy, up 7% in the quarter… Revenue… up 7%… quarterly EBITDA margin of 21%, up 140 bps… record EPS of $1.18… Net debt to adjusted EBITDA at 0.5x.”
  • CFO (Outlook): “FY25 revenue of $8.6–$8.7B… adjusted EBITDA margin 21.3%–21.8%… EPS $4.50–$4.70… FX will be a meaningful headwind.”
  • CEO (Restructuring intent): “Taking complexity out of our business… implementation of 80/20… make it easier for our customers to do business with us.”
  • CFO (Tariffs): “Proposed Canada/Mexico and enacted China tariffs impact about 5% of our material cost as a percentage of sales… teams have lessened dependency on China; Mexico primarily impacts MCS and Applied Water.”

Q&A Highlights

  • Restructuring details: $95–$115M pretax charges (bulk in 2025/early 2026), $130M net benefits over two years ($75M in 2025); impacts <10% workforce; mostly SG&A; Water Infrastructure and Applied Water most impacted; Europe most affected .
  • Margin walk for 2025: +50 bps from productivity/price net of inflation/investments; +125 bps from restructuring and remaining Evoqua synergies; ~-75 bps mix pressure in MCS → ~+100 bps net expansion at midpoint .
  • MCS trajectory: Q4 likely bottom; sequential improvement through 2025 as mix normalizes and restructuring takes hold; energy meters to drive growth (~+40%); water meters low‑single‑digit growth .
  • Free cash flow conversion: 2025 softer (70–80%) on restructuring cash costs ($80M), build‑operate upfront capital, and systems investments; aim to return to ~100%+ in 2026 .
  • Tariffs: Company not assuming material impact; mitigation via pricing, supply chain diversification, cost controls .

Estimates Context

  • S&P Global consensus estimates (EPS, revenue, EBITDA) were not retrievable via the tool at this time; as a result, we cannot present precise beat/miss vs Street for Q4 2024, Q3 2024, or Q2 2024. The company stated Q4 revenue and earnings exceeded its prior guidance .
  • Expect estimate revisions: Management’s FY25 adjusted EPS guidance of $4.50–$4.70 and margin expansion plan, alongside restructuring benefits and FX headwinds, are likely to drive modest upward revisions to 2025 profitability assumptions ex‑FX, while reported revenue growth (0–2%) may temper top‑line models early in the year .

Key Takeaways for Investors

  • Quality beat on execution: Q4 delivered higher revenue, EPS and margins with strong orders and backlog, reinforcing resilient demand and operational discipline .
  • 2025 setup: Modest top‑line (0–2% reported) but continued margin expansion (21.3–21.8%), with restructuring and synergies as key levers; FX a meaningful headwind to EPS .
  • MCS mix headwind transient: Energy meter mix pressure weighed on Q4 margins, but management expects sequential improvement through 2025 and exit at a higher rate than 2024 .
  • Simplification as catalyst: $130M two‑year net benefits and 80/20 portfolio actions should support structurally higher margins, with more benefits back‑half weighted in 2025 .
  • Tariff risk manageable: Exposure ~5% of material costs; playbook in place (pricing and sourcing diversification) suggests limited earnings risk in 2025 .
  • WSS momentum and project cadence: Q4 upside on faster project ramps; funnel supports continued growth, though quarterly lumpiness remains .
  • Capital returns and balance sheet: Dividend up 11% to $0.40; net leverage low (~0.5x), preserving optionality for accretive M&A and buybacks as opportunities arise .

Sources: Q4 2024 8‑K and press release, non‑GAAP reconciliations, and Q4 2024 earnings call transcript and prior quarters’ 8‑Ks .