Water tech firm Xylem reports 2022 revenue of $5.5bn

American water technology provider Xylem Inc. has reported fourth-quarter revenue of $1.5 billion, and full-year 2022 revenue of $5.5 billion.

While Q4 2022 orders were down nine per cent on a reported basis and down three per cent organically, the company grew backlog 14 per cent organically on resilient underlying demand.

On 23 January, Xylem announced it had agreed to acquire Evoqua Water Technologies Corp in a $7.5 billion, all-stock deal, aiming to tap into growing global awareness of risks around water scarcity. Xylem’s full-year and first-quarter 2023 guidance does not reflect the acquisition of Evoqua, which is expected to close mid-year 2023.

Fourth-quarter earnings exceeded Xylem’s previous guidance. Net income was $149 million, or $0.82 per share. Net income margin increased 140 basis points to 9.9 per cent. These results included increased restructuring and realignment costs and higher taxes during the quarter. Adjusted net income was $168 million, or $0.92 per share, which excludes the impacts of restructuring, realignment and special charges.

Fourth quarter adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin was 18.7 per cent, reflecting a year-over-year increase of 250 basis points. Strong price realization offset inflation and, coupled with productivity savings and higher volume, drove the margin expansion, exceeding the impact of strategic investments.

For the full year, net income was $355 million, or $1.96 per share. Net income margin decreased 180 basis points to 6.4 per cent. These results were mainly driven by a previously announced, one-time non-cash pension plan settlement. Adjusted net income was $516 million, or $2.85 per share, which excludes the impacts of restructuring, realignment and special charges.

Full-year adjusted EBITDA margin was 17.0 per cent, reflecting a year-over-year decrease of 10 basis points. Inflation, strategic investments and the impact of chip shortages in the first half exceeded the benefits of price realisation and productivity savings. The Company generated $596 million of operating cash flow, representing a 168 per cent conversion, and $388 million of free cash flow, representing an 80 per cent conversion of net income excluding the non-cash impairment charges and non-cash pension plan settlement.

“The team drove fourth-quarter results well above expectations, with very strong performance across all business segments and regions,” says Patrick Decker, Xylem president and CEO. “Resilient demand and strong backlog execution delivered robust double-digit revenue growth with significant margin expansion. That out-performance in the fourth quarter and throughout 2022 has fuelled healthy momentum coming into 2023.

“As trends driving water investment continue to intensify, we are confident about delivering full-year 2023 growth in the mid-single digits, with significant margin expansion, tracking solidly toward Xylem’s longer-term growth milestones.”

Xylem forecasts full-year 2023 revenue in the range of $5.70 to $5.80 billion, up three to five per cent on a reported basis and up four to six per cent on an organic basis.

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