01—Abstract
Summary
Summary of the 10-K filed February 25, 2022. Cited figures are marked; the original filing is the authoritative source.
Xylem Inc. (NYSE: XYL) reported 2021 revenue of $5.195 billiona, up $319 million, or 6.5%, from $4.876 billion in 2020, with constant-currency revenue growth of 4.0%.
Operating income rose $218 millionb, or 59.4%, to $585 million, and operating margin improved to 11.3% from 7.5%. Net income was $427 million, or $2.35 per diluted share, versus $254 million, or $1.40, in 2020. On an adjusted basis, which excludes restructuring, special charges and other items, net income was $452 million, or $2.49 per diluted share, up 20.9% from 2020.
Adjusted operating margin was 11.8%, compared with 10.8% in 2020. Cash generation weakened. Net cash provided by operating activities fell to $538 millionc from $824 million, and free cash flow declined to $330 million from $641 million, which the filing describes as down 49%.
The company attributes the decline mainly to higher working capital, including increased safety stock to mitigate supply chain volatility. Orders rose 25.2% to $6.300 billiond, and total backlog reached $3.240 billion, up 52.6%, with about 60% expected to convert to revenue in 2022. Management guides to 2022 total revenue growth of 1% to 3% and organic growth of 3% to 5%.
The balance sheet remained solid, with cash of $1.349 billion, total debt of $2.440 billion, and available liquidity of approximately $2.1 billion. The company repaid $600 million of Senior Notes in 2021 and paid dividends of $203 million.
Key risks disclosed include ongoing semiconductor and component shortages, inflation, tariffs, Buy America domestic content requirements under the Infrastructure Investment and Jobs Act, and COVID-19 uncertainty. The company also noted a Swedish tax assessment of approximately $80 million, which it is appealing and for which it has recorded no unrecognized tax benefit.
02—Key points
Key Highlights
- Revenue of $5.195 billion in 2021, up 6.5% year over year (4.0% at constant currency); organic revenue rose $210 million.
- Operating income of $585 million, up 59.4%, with operating margin of 11.3% versus 7.5% in 2020; adjusted operating margin of 11.8%.
- Net income of $427 million, or $2.35 per diluted share; adjusted diluted EPS of $2.49, up 20.9% from 2020.
- Orders of $6.300 billion, up 25.2% (22.6% organic), and total backlog of $3.240 billion, up 52.6%.
- Free cash flow declined to $330 million from $641 million as operating cash flow fell to $538 million, driven by higher working capital and safety stock.
- 2022 outlook calls for total revenue growth of 1% to 3% and organic growth of 3% to 5%.
- Balance sheet liquidity of approximately $2.1 billion, including $1.3 billion of cash, with $600 million of 2021 Senior Notes repaid in cash.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Xylem kept $0.08.
- Revenue$5.20B100.0%
- Cost of revenue−$3.22B62.0%
- Gross profit$1.98B38.0%
- Operating costs−$1.39B26.8%
- Operating income$585.0M11.3%
- Interest, other & tax−$158.0M3.0%
- Net income$427.0M8.2%
Where FY2021 revenue went
$5.20B- Cost of revenue: $3.22B, 62% of revenue
- SG&A: $1.18B, 23% of revenue
- Net income: $427.0M, 8.2% of revenue
- R&D: $204.0M, 3.9% of revenue
- Interest, other & tax: $158.0M, 3.0% of revenue
Kept 8.2% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 25, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $5.20B$4.88B | +6.5% |
| Cost of Revenue | $3.22B$3.05B | +5.7% |
| Gross Profit | $1.98B$1.83B | +7.9% |
| R&D Expenses | $204.00M$187.00M | +9.1% |
| SG&A Expenses | $1.18B$1.14B | +3.1% |
| Operating Income | $585.00M$367.00M | +59.4% |
| Interest Expense | $76.00M$77.00M | −1.3% |
| Net Income | $427.00M$254.00M | +68.1% |
| EPS (Basic) | $2.37$1.41 | +68.1% |
| EPS (Diluted) | $2.35$1.40 | +67.9% |
| Shares Outstanding (Basic) | 180.25M180.12M | +0.1% |
| Shares Outstanding (Diluted) | 181.53M181.10M | +0.2% |
05—Questions
Frequently Asked Questions
How did Xylem perform financially in 2021?
Revenue rose 6.5% to $5.195 billion and operating income rose 59.4% to $585 million. Net income was $427 million, or $2.35 per diluted share, compared with $254 million, or $1.40, in 2020. Adjusted EPS, which excludes restructuring, special charges and other items, was $2.49.
Why did free cash flow decline in 2021?
Operating cash flow fell to $538 million from $824 million. The filing attributes the decrease primarily to higher working capital levels, including increased safety stock to mitigate supply chain volatility, along with higher interest payments and tax payments that were deferred into 2021 under COVID-19 tax relief programs in the prior year. Free cash flow was $330 million versus $641 million in 2020.
What is Xylem's outlook for 2022?
Management anticipates total revenue growth of 1% to 3% and organic revenue growth of 3% to 5% in 2022. It expects restructuring and realignment costs of $25 million to $30 million and says large clean water utility project deployments will ramp up when component supply constraints ease in the second half of 2022.
What are the main risks highlighted in the filing?
Key risks include shortages of electronic components, particularly semiconductors, along with inflation, tariffs and freight costs. Other risks include the ability to meet Buy America domestic content requirements for federally funded projects, foreign currency fluctuations, COVID-19 uncertainty, and a pending Swedish tax assessment of approximately $80 million that Xylem is appealing.
How strong is Xylem's balance sheet and capital return program?
Xylem held $1.349 billion of cash and total debt of $2.440 billion at year-end 2021. It repaid $600 million of Senior Notes in cash and paid $203 million in dividends, with dividends declared at $1.12 per share. Its $500 million share repurchase authorization had $228 million remaining at year-end, and no shares were repurchased under it in the fourth quarter of 2021.
06—Continue