Xylem Inc. Q1 FY2026 earnings call

• Strong first quarter financial performance despite dynamic external environment, with demand for mission-critical solutions consistent. - Increased dividend by about 8% in January, announced $1.5 billion share repurchase authorization in February, executed $581 million in Q1. - In March, signed agreement to acquire a German firm for water quality instruments. - WSS booked largest order ever in April, an $850 million outsourced water contract. - Transformation helping advance priorities, simplifying structure and processes. - Self-improvement initiatives strengthening resilience and growth engine.

Measurement and control solutions: Book-to-bill below one, backlog flat at ~$1.4B, orders up 15% (driven by smart metering), revenue up 1%, EBITDA margin 20.9% (10bps lower than prior year). Water infrastructure: Orders up 2% (driven by transport in US and India), revenue down 1% (softness in treatment offset by transport), EBITDA margin up 120bps. Applied water: Orders up 2%, book-to-bill well above 1% (lifted by large projects and data center wins), revenue flat, EBITDA margin below expectations but up 10bps year over year. Water solutions and services: Orders declined (driven by capital project timing), revenue down 2% (driven by capital project timing and weather impacts on service branch operations, partly offset by dewatering strength), segment EBITDA margin 22.1% (up 40bps vs prior year). Revenue contribution % not explicitly detailed in absolute terms but segments' performance described.

• Full-year reported revenue expected $9.2B - $9.3B (up from prior guide $9.1 - $9.2B), organic revenue growth 2% - 4% unchanged. EBITDA margin expected 22.9% - 23.3% (70 - 110bps expansion vs prior year). EPS range unchanged at $5.35 - $5.60. - Second quarter revenue growth ~2% - 3% reported, ~1% organic. Second quarter EBITDA margin ~22% - 22.5% (up 20 - 70bps). Second quarter EPS $1.31 - $1.36. - MCS EBITDA margin down year over year but expected to improve sequentially and return to margin expansion in second half.

• Broader market conditions and volatility, including Middle East conflict, changes in tariffs, other inflationary pressures, fluctuations in currency and interest rates. - China headwinds impacting revenue outlook. - Regulatory approval timing affecting international metering divestiture closing.

Q: Love to hear more about the outsource contract, customer, economics, and pipeline for more.

A: It's an existing customer in specialty chemical vertical, 75% service and 25% capital, realize 10% this year, balance capital bill next year, service tail starts 2028, and there's more pipeline.

Q: Sense of municipal demand outlook, macro, project activity.

A: Utility demand remains resilient, U.S. utility orders up double digits in Q1, WI orders up 2% supported by transport in US and India, China down 30% year over year, Western Europe has short-term noise with 80-20 initiatives.

Q: Price vs inflation across company, applied water margin.

A: Broader portfolio price-cost positive, teams proactive to offset inflation, applied water performance below expectations but confident to get back above 20% as cost actions taken and projects play at higher margin.

Q: Organic growth for year, MNCS projects, WSS capital recovery.

A: Second half ramp expected, MCS book and chip up 9%, inventory normalized, WSS big capital project, back half figures confident.

Q: Cap allocation, intent, pipeline, tuck-in acquisition.

A: Continue buyback, reassess balance of Q2, track $1B capital deployment for M&A, recent acquisition strengthens position in water quality instruments with revenue synergies.

Q: Measurement and control cycle across electric and water, China market.

A: Electric refresh cycle started, water refresh likely in next few years, China market bottoming, pressure in first and second quarter easing.

Q: MNCS order growth, margin expansion.

A: Long-term high single-digit order growth rate, margin expansion in second half due to volume and mix normalization.

Q: MCS margin cadence, 2027 margin, segment shifts.

A: MCS will sequentially increase post divestiture, exit year with EBITDA margins well in excess of 25%, no major changes to organic guide and segment makeup.

Q: Price cost, supply chain impacts, 80-20 walkaway.

A: Forward fixed contracts limited, supply chain team mitigates via alternate sources, 80-20 walkaway more weighted to first two to three quarters of year