• Reported net income of USD 38 million or USD 0.21 per share; adjusted net income of USD 42 million or USD 0.23 per share
• Organic revenue declined 8% in the first quarter, impacted by COVID-19; declined 9% on a reported basis
• Maintaining a strong balance sheet, USD1.7 billion of available liquidity

USA: Xylem Inc has reported a first-quarter 2020 net income of USD 38 million or USD 0.21 per share. Excluding the impact of restructuring, realignment, and special charges, the company delivered an adjusted net income of USD 42 million or USD 0.23 per share in the quarter. First-quarter revenue was USD 1.1 billion, down 9 percent on a reported basis and 8 percent organically, largely driven by the impact of COVID-19, which we estimate to have been approximately -5 percent. Orders were down 4 percent on a reported basis and 2 percent, organically, and were net positive excluding estimated impacts of COVID-19. Reported operating margin in the quarter was 5.4 percent, down 340 basis points, and adjusted operating margin was 6.2 percent, down 460 basis points compared to the prior year largely due to the pandemic’s impact on demand, and a discrete warranty charge in the Measurement & Control Solutions business.

“From the time COVID-19 emerged, we have been supporting our customers as they deliver essential water and sanitation services at the heart of disease prevention and control,” said Patrick Decker, Xylem’s president & CEO.

“Around the world, our team has done an outstanding job shoring up our supply chain to ensure the continuity of essential services in their communities.” “We are serving utilities’ mission-critical applications from a position of financial strength, and have maintained robust liquidity while also taking early action to reduce spending,” continued Decker. “Now, we are re-shaping our cost profile and re-focusing our investments on the capabilities that will maximize our and our customers’ resilience as we emerge from this pandemic. These actions will enhance our competitiveness, and further differentiate our portfolio of products and solutions, positioning Xylem to out-perform over the medium and long term.”

The Outlook
Xylem withdrew 2020 guidance on March 31, 2020, due to the uncertainties caused by COVID-19. Xylem is not yet reinstating full-year guidance but is providing organic revenue outlook for the second quarter to be down 20 to 30 percent driven by the impact of COVID-19. To mitigate the impact of anticipated COVID-19 related volume declines, Xylem identified approximately USD 100 million in immediate spending reductions for the year. The company plans to take further permanent structural actions to re-shape its cost profile and reprioritize its investments around the capabilities that will enable its customers to be more resilient emerging from the COVID-19 crisis.

First-Quarter Segment Results

Water Infrastructure
Xylem’s Water Infrastructure segment consists of its portfolio of businesses serving wastewater transport and treatment, clean water delivery, and dewatering.

First-quarter 2020 revenue was USD 438 million, down 7 percent organically compared with first-quarter 2019. The double-digit organic decline in the Industrial end-market was affected by COVID-19 impacts and Dewatering sales and rental into construction and oil and gas applications.

First-quarter reported operating income for the segment was USD 39 million. Adjusted operating income for the segment, which excludes USD 5 million of restructuring and realignment costs, was USD 44 million. The reported operating margin for the segment was 8.9 percent, down 170 basis points versus the prior year. Adjusted operating margins of 10.0 percent were down 240 basis points versus a prior year from inflation, unfavorable mix, and volume decline partially offset by strong productivity and modest price realization.

Applied Water
Xylem’s Applied Water segment consists of its portfolio of businesses in industrial, commercial building, and residential applications.

First-quarter 2020 Applied Water revenue was USD 338 million, a 10 percent decline organically year-over-year, driven by market softness. There were declines in all major geographic regions, with double-digit declines in Emerging Markets and Western Europe.

First-quarter reported operating income for the segment was USD 47 million and adjusted operating income, which excludes USD 2 million of restructuring and realignment costs, was USD 49 million. The segment’s reported operating margin was 13.9 percent, down 90 basis points versus prior year, and adjusted operating margin was 14.5 percent, down 110 basis points versus the prior year. Margin contraction was driven by inflation as well as volume decline from COVID-19 partially offset by strong productivity.

Measurement & Control Solutions
Xylem’s Measurement & Control Solutions segment consists of its portfolio of businesses in smart metering, network technologies, advanced infrastructure analytics, and analytic instrumentation.

First-quarter 2020 Measurement & Control Solutions revenue was USD 347 million, down 7 percent organically versus the prior year. The business incurred a warranty charge of USD 15 million, in the quarter, due to a firmware issue limited to a specific set of customers in North America, which is now being quickly resolved.

Reported operating income for the segment was -USD12 million, and adjusted operating income, which excludes USD 2 million of restructuring and realignment costs, was -USD10 million. The segment reported operating margin was -3.5 percent, down 780 basis points versus the prior year. Adjusted operating margin contracted to -2.9 percent driven by a 430 basis point impact from the warranty charge, and unfavorable volume and mix impacts from COVID-19.

Xylem (XYL) is a global water technology company solving critical water and infrastructure challenges with technological innovation. Its more than 16,000 diverse employees delivered revenue of USD 5.25 billion in 2019. It is helping communities in more than 150 countries become water-secure.

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