Xylem Inc. · NYSE:XYL
Xylem — Oppenheimer 9th Annual Industrial Growth Conference (May 2014)
41 slides from Xylem's conference presentation, May 14, 2014
Slide 1: Xylem Inc. Investor Presentation
Exhibit 99.1 XYLEM INC. INVESTOR PRESENTATION OPPENHEIMER 9 TH ANNUAL INDUSTRIAL GROWTH CONFERENCE
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This document contains information that may constitute “forward-looking statements.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,”
Slide 3: Investment Highlights
INVESTMENT HIGHLIGHTS
Slide 4: Why Should You Invest in Xylem?
WHY SHOULD YOU INVEST IN XYLEM? $3.8B • Focused Pure Water Play • Leading Market Positions • Fortress Brands & World Class Distribution • Diverse Geographic & End Market Exposure • Large Installed Base Drives Recurring Revenue • Strong Financial Position & Cash Flow Generation STRONG FOUNDATION & FU
Slide 5: Specialized Breadth in the Water Cycle
SPECIALIZED BREADTH IN THE WATER CYCLE • Global Water Industry: $500B • Public Utilities • Design & Build Firms • Equipment & Service Providers • Industry Consists of Two Sectors • Water & Waste Water Infrastructure • To Serve End Users • Xylem’s SAM: $35B • Technology Intensive & High Value Equipme
Slide 6: Journey from a Portfolio of Businesses to a Solution Portfolio
JOURNEY FROM A PORTFOLIO OF BUSINESSES TO A SOLUTION PORTFOLIO * MULTITRODE EVOLUTION TO A LEADING GLOBAL WATER TECHNOLGY PROVIDER XYLEM PROPRIETARY / CONFIDENTIAL * Zenon is a registered trademark of GE 6
Slide 7: Global Business Overview
GLOBAL BUSINESS OVERVIEW
Slide 8: Global Market Presence
GLOBAL MARKET PRESENCE REVENUE BY GEOGRAPHY (2013 Revenue) United States 38% Europe 36% • 360+ Global Locations Asia Pac 12% • 50 Emerging Market Sales & Service Centers Rest of World 14% • 11 Emerging Market Production Facilities A Growing Emerging Market • Reaching Customers in More Than 150 Count
Slide 9: Diverse Customer Base
DIVERSE CUSTOMER BASE REVENUE BY END MARKET (2013 Revenue) Industrial 45% Public Utility 34% Commercial 11% Residential 7% Agriculture 3% UNDERSTANDING & ANTICIPATING OUR CUSTOMERS NEEDS XYLEM PROPRIETARY / CONFIDENTIAL 9
Slide 10: Focused on Key Growth End Markets
FOCUSED ON KEY GROWTH END MARKETS (2013 Revenue) INDUSTRIAL ($1.7B) PUBLIC UTILITY ($1.3B)COMMERCIAL ($400M) • Strong Brands • Market Leading Positions • Market Leading Positions • Diverse Market Applications• Large Installed Base • Large Installed Base • Light Industrial • LT Growth Opportunities •
Slide 11: Serving Critical Needs
SERVING CRITICAL NEEDS REVENUE BY APPLICATION (2013 Revenue) Transport 47% Treatment 8% Test 8% Water Infrastructure Includes Transport, Treatment and Test Applications …Which Are Integrated into the Most Critical Water Infrastructure Systems for Both Public Utility and Building Svcs 18% Large Indus
Slide 12: Historical Xylem Performance
HISTORICAL XYLEM PERFORMANCE REVENUE GROSS PROFIT & MARGIN $M $M 3,837 1,461 1,502 1,499 3,803 3,791 3,291 3,202 1,214 2,849 1,141 1,037 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Growth: -13% 12% 19% 0% 1% GM%: 34.7% 36.4% 37.9% 38.4% 39.6% 39.1% Organic*: -9% 3% 0% 7% -1% OPERATIN
Slide 13: Historical Xylem Performance
HISTORICAL XYLEM PERFORMANCE EBITDA* CAPEX $M $M 637 649 622 126 126 112 504 94 425 387 67 62 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Margin %: 12.9% 13.6% 15.7% 16.7% 17.1% 16.2%Reinvest %: 1.2x 1.2x 1.5x 1.4x 1.2x 1.3% Ratio R&D Strong Operating Cash Flow Generation $M • EBITDA
Slide 14: Strong Financial Position
STRONG FINANCIAL POSITION CAPITAL SUMMARY CAPITAL DEPLOYMENT STRATEGY March 31, 2014 Invest in Organic Growth Initiatives Cash 466 • Differentiated Product Development Debt 1,243 • Maintenance & Investment Capex Net Debt 777 Return Capital to Shareholders Shareholders’ Equity 2,229 • Dividends Net C
Slide 15: Review of 1Q Earnings Performance & 2014 Outlook
REVIEW OF 1Q EARNINGS PERFORMANCE & 2014 OUTLOOK Note: Forward Looking information presented on slides 17 & 18 were as of April 29, 2014. Please review the Forward Looking Statements on slide 2, and note that the Company undertakes no obligation to publicly update or revise any forward-looking state
Slide 16: Business Update
BUSINESS UPDATE Highlights Strongfinishto the 1st Quarter…Marchperformanceoffsetslowstart Emerging Markets off to fast start, Europe slowly recovering Volume & cost actions drive significant Op Margin expansion & Earnings growth Operating improvements on track to deliver full year savings 1stQuarter
Slide 17: 2014 Growth Profile
2014 GROWTH PROFILE (As of April 29, 2014) Xylem 2014 Organic Growth • Improving global Capex environment Industrial Up Low • Driving market share gains (45% of ’13 Revenue) Single Digit • Mining headwinds continue • Emerging Market infrastructure Public Utility investment; Slow Capex recovery in Up
Slide 18: 2014 Xylem Outlook
2014 XYLEM OUTLOOK (As of April 29, 2014) (Dollars, In Millions, except EPS) REVENUE OPERATING INCOME* EPS* $490 to $525 $3,900 to $3,980 $1.85 to $2.00 451 3,837 1.67 Op 2013 2014 Margin 11.8% 12.6% to 13.2% 2013 2014 2013 2014 DIVIDENDS/SHARE FREE CASH FLOW* REPURCHASES ROIC Higher Income, Working
Slide 19: Closing Summary
CLOSING SUMMARY
Slide 20: How Will Xylem Improve Performance?
HOW WILL XYLEM IMPROVE PERFORMANCE? REIGNITE “XMS” TOP PRIORITIES Accelerate Revenue Growth The Xylem Management System • Optimize Integrated Front End (“XMS”) defines how we create • Invest & Implement Global CRM Tool value. • Rebalance Portfolio & Product Investments • Differentiated Product Innov
Slide 21: XYLEM PROPRIETARY / CONFIDENTIAL
XYLEM PROPRIETARY / CONFIDENTIAL 21
Slide 22: Appendix
APPENDIX
Slide 23: Segment Overview
SEGMENT OVERVIEW Segment Split WATER INFRASTRUCTURE (3 rd Party Revenue) APPLIED WATER Market Size: $20B Market Size: $15B 2013 Revenues: $2.5B 2013 Revenues: $1.4B 2013 Op Margin*: 13.1% 2013 Op Margin*: 12.7% • World’s Largest Waste Water Pump 64% • Leading Global Provider of a Broad & Dewatering
Slide 24: Water Infrastructure
WATER INFRASTRUCTURE SEGMENT OVERVIEW TRANSPORT TREATMENT TEST Market Size: $11B $5B $4B 2013 Revenues: $1,812M $329M $298M Key Products Water & Waste Water Pumps Analytical Instrumentation, Biological Dewatering (Sales & Rentals) Doppler and Level Measurement, & Services: U.V. and Ozone Disinfectio
Slide 25: Water Infrastructure Revenue Highlights
WATER INFRASTRUCTURE REVENUE HIGHLIGHTS $M ‘08-’13 Revenue up 35%; 6% CAGR 2,425 2,457 1,824 1,930 2,416 • Resilient Through the Downturn 1,651 • Growth Driven by Acquisitions, Emerging Markets & Product Launches 2008 2009 2010 2011 2012 2013 Growth: -10% 17% 25% 0% 1% • Public Utility CAPEX Slowdow
Slide 26: Applied Water Systems
APPLIED WATER SYSTEMS SEGMENT OVERVIEW BUILDING SERVICES INDUSTRIAL WATER IRRIGATION Market Size: $9B $4B $2B 2013 Revenues: $696M $600M $102M HVAC Pumps, Valves & Heat Pumps & Pumping Systems Groundwater & Surface Pumps Key Products Exchangers, Drives & Controls, Heat Exchangers, Drives & Controls
Slide 27: Applied Water Revenue Highlights
APPLIED WATER REVENUE HIGHLIGHTS $M 1,527 ‘08-’13 Revenue Down 5% 1,254 1,327 1,444 1,424 1,444 • Residential & Commercial Building Decline • Growth Driven By New Product Launches 2008 2009 2010 2011 2012 2013 Growth: -18% 6% 9% -1% 1% – Energy-Efficient Solutions Organic*: -15% 6% 7% 1% 0% – Emergi
Slide 28: Acquisition Scorecard
ACQUISITION SCORECARD Completed On Track Not Achieved IRR > Gross Risk Adj. Mid- Cash EPS Invested Year Strategic Margin Cost of Teens Return Accretive Acquisition $M Completed Fit Accretive Capital ROIC 7-9 Years After Yr 1 Laing $30 2009 Nova $384 2010 Godwin $585 2010 OI $25 2010 YSI $310 2011 Th
Slide 29: 2014 Financial Guidance Summary
2014 FINANCIAL GUIDANCE SUMMARY 2014 Full Year Growth (Dollars In Millions, Except per Share Data) Financial Outlook 2014E vs. 2013 Revenue Total Growth Organic FX/Acquisition Xylem Consolidated $3,900 to $3,980 2% to 4% 1% to 3% 1% Water Infrastructure $2,500 to $2,540 2% to 4% 2% to 3% 1% Applied
Slide 30: Non-GAAP Measures
NON-GAAP MEASURES Management views key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, free cash flow, working capital, and backlog, among others. In addition, we consider certain measures to be useful to management and investors evaluati
Slide 31: Reported vs. Organic & Constant Currency Revenue
Xylem Inc. Non-GAAP Reconciliation Reported vs. Organic & Constant Currency Revenue ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (F - C) / A Change % Change Acquisitions / Change % Change Revenue Revenue CY v. PY CY v.
Slide 32: Adjusted Operating Income
Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) 2008 2009 2010 2011 2012 2013 Revenue 3,291 2,849 3,202 3,803 3,791 3,837 Operating Income 315 276 388 395 443 363 Operating Margin 9.6% 9.7% 12.1% 10.4% 11.7% 9.5% Restructuring & Realignment 41 31 15 - 24 64 Separation Costs
Slide 33: Adjusted Operating Income by Segment
Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) 2013 2012 2011 2010 2009 2008 Total Revenue • Total Xylem 3,837 3,791 3,803 3,202 2,849 3,291 • Water Infrastructure 2,457 2,425 2,416 1,930 1,651 1,824 • Applied Water 1,444 1,424 1,444 1,327 1,254 1,527 Operating Income • To
Slide 34: Net Cash - Operating Activities vs. Free Cash Flow
Xylem Inc. Non-GAAP Reconciliation Net Cash - Operating Activities vs. Free Cash Flow ($ Millions) Year Ended 2013 2012 2011 2010 2009 2008 Net Cash - Operating Activities 324 396 449 395 370 408 Capital Expenditures (126) (112) (126) (94) (62) (67) Free Cash Flow, including separation costs 198 284
Slide 35: Adjusted Diluted EPS
Xylem Inc. Non-GAAP Reconciliation Adjusted Diluted EPS ($ Millions, except per share amounts) 2008 2009 2010 2011 2012 2013 Net Income 224 263 329 279 297 228 Separation Costs, Net of Tax* - - - 72 16 - Restructuring & Realignment, Net of Tax 28 22 11 - 17 46 Special Charges, Net of Tax - - - - - 2
Slide 36: EBITDA and Adjusted EBITDA
Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA ($ Millions) 2008 2009 2010 2011 2012 2013 Pre-Tax Income 312 277 388 383 388 298 Interest Expense (Income), net - - - 17 51 52 Depreciation and Amortization 72 79 101 137 142 149 Stock Compensation - - - 13 22 27 EBITDA 384 356 489 550 6
Slide 37: Reported vs. Organic & Constant Currency Order Growth
Xylem Inc. Non-GAAP Reconciliation Reported vs. Organic & Constant Currency Order Growth ($ Millions) (As Reported GAAP) - (As AdjustedOrganic) - Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (F C) - /A Change % Change Acquisitions / Change % Change Orders Orders 2014 v. 2013 2
Slide 38: Adjusted Operating Income Q1
Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) Q1 2014 2013 Total Revenue • Total Xylem 906 879 • Water Infrastructure 568 551 • Applied Water 355 345 Operating Income • Total Xylem 76 66 • Water Infrastructure 46 42 • Applied Water 41 40 Operating Margin • Total Xylem 8.4
Slide 39: Adjusted Diluted EPS Q1
******* ******* ******* ******* Xylem Inc. Non-GAAP Reconciliation Adjusted Diluted EPS ($ Millions, except per share amounts) Q1 2013 Q1 2014 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 879 879 906 906 Operating Income 66 12 a 78 76 18 a 94 Operating Margin 7.5%
Slide 40: Free Cash Flow Q1
** ** ** ***************** ** ***************** ** ***************** Xylem Inc. Non-GAAP Reconciliation ***************** Net Cash - Operating Activities vs. Free Cash Flow ***************** ($ Millions) ***************** ***************** Three Months Ended 2014 2013 ***************** *************
Slide 41: Investor Relations Contacts
***************************** ***************************** ***************************** ***************************** NYSE: XYL Phil De Sousa, Investor Relations Officer (914) 323-5930 Dawn Powell, Investor Relations Coordinator (914) 323-5931 http://investors.xyleminc.com XYLEM PROPRIETARY / CONF
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