01—Abstract
Summary
Summary of the 10-Q filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Xylem Inc. reported first-quarter 2024 revenue of $2,033 milliona, up 40.4% from $1,448 million a year earlier.
The filing attributes $480 millionb of the increase to acquisitions and divestitures, net, and organic revenue grew 7.1%, led by Measurement and Control Solutions and Water Solutions and Services. Net income rose to $153 million from $99 million, and diluted EPS was $0.63, up 16.7% from the prior year. On an adjusted basis, EPS was $0.90 versus $0.79.
Operating income rose to $209 millionc, with an operating margin of 10.3%, and adjusted EBITDA margin expanded to 19.2% from 16.3%. The results reflect the May 2023 Evoqua acquisition, which added revenue, amortization and integration costs. Orders were $2,246 million, up 43.1%, and total backlog reached $5,272 million at March 31, 2024.
Cash flow from operations was $89 milliond, compared with a use of $19 million a year earlier, and free cash flow was $15 million. Cash and cash equivalents were $947 million, and total debt was $2,270 million. The company paid $88 million in dividends and said it had about $1.9 billion of available liquidity, including $1 billion of undrawn credit facilities.
The company updated its 2024 outlook to total revenue growth of 15% to 16% and organic revenue growth of 4% to 6%. Operating results were mixed across segments. Water Infrastructure and Measurement and Control Solutions improved, while Applied Water revenue declined 3.8% on an organic decline of $18 million driven by building solutions and industrial applications.
The filing also discloses an ongoing U.S. Attorney's Office investigation into financial misstatements in Evoqua's public filings. The company says it does not expect a material adverse effect.
02—Key points
Key Highlights
- Revenue rose 40.4% to $2,033 million, including $480 million from acquisitions and divestitures and 7.1% organic growth.
- Net income increased to $153 million from $99 million; diluted EPS was $0.63 versus $0.54, and adjusted EPS was $0.90 versus $0.79.
- Orders grew 43.1% to $2,246 million, and total backlog was $5,272 million at March 31, 2024, up 40.8% from a year earlier.
- Operating margin was 10.3% (versus 9.0%), and adjusted EBITDA margin was 19.2% (versus 16.3%), with adjusted EBITDA of $391 million.
- Operating cash flow was $89 million versus a use of $19 million, and free cash flow was $15 million versus a use of $35 million.
- Applied Water revenue declined 3.8%, with an organic decline of $18 million, while Measurement and Control Solutions organic revenue grew 22.0%.
- The company updated its 2024 outlook to total revenue growth of 15% to 16% and organic revenue growth of 4% to 6%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Xylem kept $0.08.
- Revenue$2.03B100.0%
- Cost of revenue−$1.28B63.0%
- Gross profit$752.0M37.0%
- Operating costs−$543.0M26.7%
- Operating income$209.0M10.3%
- Interest, other & tax−$56.0M2.8%
- Net income$153.0M7.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 2, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $2.03B$1.45B | +40.4% |
| Cost of Revenue | $1.28B$902.00M | +42.0% |
| Gross Profit | $752.00M$546.00M | +37.7% |
| R&D Expenses | $59.00M$53.00M | +11.3% |
| SG&A Expenses | $474.00M$354.00M | +33.9% |
| Operating Income | $209.00M$131.00M | +59.5% |
| Interest Expense | $14.00M$9.00M | +55.6% |
| Net Income | $153.00M$99.00M | +54.5% |
| EPS (Basic) | $0.63$0.55 | +14.5% |
| EPS (Diluted) | $0.63$0.54 | +16.7% |
| Shares Outstanding (Basic) | 241.85M180.40M | +34.1% |
| Shares Outstanding (Diluted) | 243.02M181.32M | +34.0% |
05—Questions
Frequently Asked Questions
How much of the revenue increase came from the Evoqua acquisition versus the underlying business?
Total revenue increased $585 million, or 40.4%. Of that, $480 million came from acquisitions and divestitures, net, and organic revenue increased $103 million, or 7.1%. Foreign currency translation contributed $2 million.
What is the company's liquidity position at the end of the quarter?
Xylem reported cash and cash equivalents of $947 million and total debt of $2,270 million. It stated available liquidity of approximately $1.9 billion, consisting of $947 million of cash and $1 billion of available credit facilities. The 2023 Credit Facility was undrawn at March 31, 2024.
Did the company change its outlook for 2024?
Yes. The company is updating its outlook to total revenue growth of 15% to 16% and organic revenue growth of 4% to 6% for 2024. It said this is largely consistent with the outlook in its 2023 Annual Report.
What is the status of the investigation disclosed in Legal Proceedings?
The U.S. Attorney's Office, initially in the District of Massachusetts and later moved to the District of Rhode Island, is investigating whether financial misstatements were made in Evoqua's public filings and earnings announcements. Xylem is cooperating with the investigation, cannot predict its outcome, and believes it will not have a material adverse effect on the company.
What happened to the term loan and dividends during the quarter?
The term loan facility of €250 million, approximately $270 million, was settled with cash on hand on April 19, 2024, and is reported within current maturities of long-term debt at March 31, 2024. Dividends paid in the quarter totaled $88 million, and the company declared dividends of $0.36 per share.
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