Xylem Inc. Q4 FY2025 earnings call

• The team delivered an outstanding fourth quarter, closing a record year. The operating model transformation (phase one) improved culture, structure, processes, and systems. - Entering phase two to strengthen growth engine by leveraging operating model improvements, focusing on Salesforce effectiveness, product management, and innovation. - Accelerating 8020 efforts for product and customer simplification, which creates short-term top-line headwind but drives higher quality earnings.

In Measurement and Control Solutions (MCS), backlog finished the year roughly $1.4 billion. Orders were up 22% driven by smart metering demand, revenue up 10%, EBITDA margin 20.2% (310 basis points higher than prior year). In Water Infrastructure, orders were down 1% in the quarter, revenue flat (strong double-digit growth in US offset by almost 30% decline in China), EBITDA margin up 510 basis points. In Applied Water, orders were up 5%, revenue up 3%, segment EBITDA margin increased 60 basis points year over year. In Water Solutions and Services (WSS), orders increased 7%, revenue up 4%, segment EBITDA margin 23.9% (110 basis points higher than prior year).

• 2026 full-year revenue expected $9.1 billion to $9.2 billion, organic growth 2-4%. - EBITDA margin expected 22.9-23.3% (70-110 basis points expansion vs prior year). - EPS range $5.35 to $5.60. - Q1 2026 reported revenue growth 1-2%, flat organic; EBITDA margin ~20.5-21%, EPS $1.06 to $1.11.

• Project timing delays impacting MCS orders. - Softness in China's utility market. - Broader market conditions and volatility including tariffs. - Challenges in certain segments due to 8020 actions leading to short-term headwinds.

Q: Deane Dray asks about phase two progress and margin improvement.

A: Matthew Pine and Bill Grogan discuss progress in operating model transformation, phase two focus on growth engine, and 8020 initiatives.

Q: Scott Davis asks about 8020 phasing.

A: Bill Grogan explains 8020 taking hold, 2% headwind due to product/customer portfolio evaluation and transition.

Q: Mike Halloran asks about backlog and China market.

A: Bill Grogan discusses backlog impact on 2026 cadence and China market challenges and actions.

Q: Andy Kaplowitz asks about smart meters and margin improvement.

A: Matthew Pine and Bill Grogan provide color on smart meters, memory chips, and margin outlook.

Q: Nathan Jones asks about MCS orders and divestitures.

A: Bill Grogan discusses MCS order push-out reasons and divestiture status and impact.

Q: Michael Halloran asks about energy meter margin and organic expectations.

A: Bill Grogan talks about energy meter margin glide path and organic growth expectations.

Q: William Griffin asks about seasonality and data center water report.

A: Bill Grogan discusses seasonality and Matthew Pine talks about data center water demand and Xylem's solutions.