Xylem Inc. · NYSE:XYL
Xylem — 2013 Robert W. Baird Industrial Conference
39 slides from Xylem's conference presentation, Nov 5, 2013
Slide 1: Xylem Inc. 2013 Robert W. Baird Industrial Conference
Exhibit 99.1 XYLEM INC. 2013 ROBERT W. BAIRD INDUSTRIAL CONFERENCE NOVEMBER 5, 2013
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: What Makes Xylem Unique?
WHAT MAKES XYLEM UNIQUE? GLOBAL LEADER IN WATER APPLICATION SOLUTIONS $3.8B • Pure Water Play • Leading Market Positions • Fortress Brands & World Class Distribution • Diverse Geographic & End Market Exposure • Large Installed Base - Recurring Revenue ~37% • Strong Cash Flow Generation UNIQUELY POSI
Slide 4: Specialized Breadth in the Water Cycle
SPECIALIZED BREADTH IN THE WATER CYCLE TEST TEST WE WORK TO ANTICIPATE OUR CUSTOMERS’ NEEDS WITH OUR BROAD PRODUCT OFFERING & OUR APPLICATIONS EXPERTISE XYLEM PROPRIETARY / CONFIDENTIAL 4
Slide 5: Balanced Portfolio
BALANCED PORTFOLIO (2012 Revenue) GLOBAL SERVING DIVERSE MARKET CRITICAL CUSTOMER BALANCE NEEDS BASE BY GEOGRAPHY BY APPLICATION BY END MARKET United States 37% Transport 46% Industrial 43% Europe 35% Treatment 10% Public Utility 35% Asia Pac 12% Test 8% Commercial 11% Rest of World 16% Building Svc
Slide 6: Evolution to a Leading Global Water Technology Provider
EVOLUTION TO A LEADING GLOBAL WATER TECHNOLOGY PROVIDER * * Zenon is a registered trademark of GE XYLEM PROPRIETARY / CONFIDENTIAL 6
Slide 7: Xylem Operating Model
XYLEM OPERATING MODEL “After” SIMPLIFIED, DELAYERED & SCALABLE “Before” “One”Integrated Front End INDIVIDUAL SALES • Sales XYLEM INTEGRATED • Applications Engineering WATER FRONT END • Customer Service SOLUTIONS Product Focused Growth Centers GROWTH • Transport CENTERS • Dewatering • Treatment • Ana
Slide 8: Segment Overview
SEGMENT OVERVIEW WATER INFRASTRUCTURE Segment Split APPLIED WATER Market Size: $20B Market Size: $15B 2012 Revenues: $2.4B 2012 Revenues: $1.4B 2012 Op Margin*: 15.1% 2012 Op Margin*: 12.4% • World’s Largest Waste Water Pump & 64% • Leading Global Provider of a Broad Dewatering Services Provider Ran
Slide 9: Capital Deployment
CAPITAL DEPLOYMENT $ Millions ACQUISITIONS SINCE 2010 M&A Dividends Repurchases (Dollars, In Billions) Dollars Invested 42 Analytics $0.7 $150 $107M Dewatering $0.6 65 $100 Advanced Services $0.1 2 Total $1.4 $50 56 $58M 81 $0 12 • Acquisitions Performing to Plan Q3'12 YTD Q3'13 YTD • Key Criteria:
Slide 10: Xylem Financial Position
XYLEM FINANCIAL POSITION CAPITAL SUMMARY CASH DRIVERS (Dollars, In Millions) (Dollars, In Millions) September 30, 2013 169 107 Cash 394 172 504 Debt 1,202 394 Net Debt 808 Shareholders’ Equity 2,158 Net Capital 2,966 Cash Operating Dividends Acquisitions Cash Dec. 2012 Activities & Share & Capex Sep
Slide 11: Xylem Financial Performance
XYLEM FINANCIAL PERFORMANCE 1H’12 vs. 1H’13 Q3’12 vs. Q3’13 (Dollars, In Millions except EPS) (Dollars, In Millions except EPS) Revenue Adj. EPS* Revenue Adj. EPS* 1,891 1,839 965 $0.85 931 $0.49 $0.44 $0.62 -3% -27% +4% +11% 1H'12 1H'13 1H'12 1H'13 Q3'12 Q3'13 Q3'12 Q3'13 • Weak Industrial & Public
Slide 12: Key Financial Projections
KEY FINANCIAL PROJECTIONS 2013 FY Guidance 2017 As of Oct. 29 th, 2013 * Long-Term Targets ** Revenues ~$3.8B (mid-point) $4.7B to $5.5B Op. Margin* 11.5% to 11.8% 14% to 15% EPS* $1.60 to $1.65 $2.50 to $3.40 2013 GUIDANCE HIGHLIGHTS* LONG-TERM PERFORMANCE TARGETS** • Revenue Down Slightly Year-Ove
Slide 13: Questions & Answers
CLOSING REMARKS QUESTIONS & ANSWERS XYLEM PROPRIETARY / CONFIDENTIAL 13
Slide 14: Appendix
APPENDIX
Slide 15: Competitive Landscape
COMPETITIVE LANDSCAPE LEADING POSITIONS IN KEY APPLICATIONS TRANSPORT TREATMENT TEST Xylem Danaher Xylem Siemens (Hach) Danaher (Trojan) Others Others KSB Sulzer (ABS) Sulzer (ABS) Ozonia Xylem Pentair Others Tsurumi Thermo E+H Market: $11B Market: $5B Market: $4B Mettler Position: 1st Position: 1st
Slide 16: Water Infrastructure
WATER INFRASTRUCTURE BUSINESS OVERVIEW TRANSPORT TREATMENT Market Size: $11B $5B 2012 Revenues: $1,745M $366M Key Products Waste Water Pumps Biological & Services: Dewatering (Sales & Rentals) U.V. and Ozone Disinfection Aftermarket Parts & Services Filtration Key Brands: Key Facilities: Emmaboda, S
Slide 17: Water Infrastructure: Dewatering
WATER INFRASTRUCTURE BUSINESS OVERVIEW DEWATERING Market Size: $3B • 24/7 Service Capabilities 2012 Revenues: $659M • Leverages Xylem’s Footprint Key Products Sales & Rentals • High ROIC Business When & Services: Dry Prime, Submersible & Slurry Pumps Operating with Scale Advantage Aftermarket Parts
Slide 18: Water Infrastructure: Test
WATER INFRASTRUCTURE BUSINESS OVERVIEW TEST Market Size: $4B 2012 Revenues: $298M Key Products Field, Online, and Laboratory Analytical Instrumentation & Services: Meters, Sensors, Spectrophotometers, and Refractometers Temperature, Data Loggers, Doppler and Level Measurement Water Quality and Envir
Slide 19: Deliver Customer Value
DELIVER CUSTOMER VALUE ENHANCING AFTERMARKET CAPABILITIES INSTALLED BASE DRIVES REPLACEMENT SALES INTRODUCING XYLEM TOTALCARE • Brand Loyalty Driven • Comprehensive Integrated Services Portfolio • Like-for-Like Replacement • Systems Knowledge & Application Expertise • Opportunity for Upgrades • Leve
Slide 20: Applied Water Systems
APPLIED WATER SYSTEMS BUSINESS OVERVIEW BUILDING SERVICES INDUSTRIAL WATER IRRIGATION Market Size: $9B $4B $2B 2012 Revenues: $736M $550M $96M Key Products HVAC Pumps, Valves & Heat Pumps & Pumping Systems Groundwater & Surface Pumps Exchangers, Drives & Controls, Heat Exchangers, Drives & Controls
Slide 21: Key End Markets: Industrial
KEY END MARKETS INDUSTRIAL DIVERSE MARKET DRIVERS Xylem 2012 Revenue: $1.6B MINING Mining 13% • Commodity Demand 10% Oil & Gas OIL & GAS 53% 9% Construction • Natural Gas Fracking Activity 9% CONSTRUCTION 6% Food & Beverage • Commercial & Residential Construction • Weather FOOD & BEVERAGE • Strong B
Slide 22: Key End Markets: Public Utility
KEY END MARKETS PUBLIC UTILITY PUBLIC UTILITY DYNAMICS U.S. CAPEX SPENDING Opex Capex U.S. Water and Sewer Construction Spending - $B Tariffs Bonds $45 Gov’t GeneralGrowthDrivers: Connection ~70% ~30% Financing $40 • Residential & Commercial Fees $35 Real Estate Development Private • Industrial Expa
Slide 23: Key End Markets: Commercial Buildings
KEY END MARKETS COMMERCIAL BUILDINGS INTEGRATED SOLUTIONS ARCHITECTURE BILLING INDEX 56 54.3 54 51.5 51.9 51.6 52 51.2 49.9 50 48 47.3 46 44 42 Mar Jun Sept Dec Mar Jun Sept '12 '12 '12 '12 '13 '13 '13 Source: AIA. Index Value of 50=No change from previous period. • Products for the Heating, Cooling
Slide 24: Water Infrastructure Revenue Highlights
WATER INFRASTRUCTURE REVENUE HIGHLIGHTS $M ‘08-’12 Revenue up 33%; 7% CAGR 2,416 2,425 • Resilient Through the Downturn 1,824 1,651 1,930 • Growth Driven by Acquisitions, Emerging Markets & Product Launches 2008 2009 2010 2011 2012 Growth: -10% 17% 25% 0% • Public Utility CAPEX Slowdown Organic*: -4
Slide 25: Applied Water Revenue Highlights
APPLIED WATER REVENUE HIGHLIGHTS $M ‘08-’12 Revenue Down 7% 1,527 1,254 1,327 1,444 1,424 • Residential & Commercial Building Decline • Growth Driven By New Product Launches 2008 2009 2010 2011 2012 Growth: -18% 6% 9% -1% – Energy-Efficient Solutions Organic*: -15% 6% 7% 1% – Emerging Markets Penetr
Slide 26: Xylem Financial Summary
XYLEM FINANCIAL SUMMARY REVENUE OPERATING MARGIN * $M +210 Bps with Stand-Alone Costs** 12.9% 12.7% 3,803 3,791 3,291 3,202 12.6% 2,849 10.8% 10.8% Revenue Up $500M … +15% 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Growth: -13% 12% 19% 0% Organic*: -9% 3% 7% 0% • Resilient Portfolio … Despite
Slide 27: 2013 Financial Guidance Summary
2013 FINANCIAL GUIDANCE SUMMARY (As of Oct. 29 th 2013) XYLEM PROPRIETARY / CONFIDENTIAL * See Appendix for Non-GAAP Reconciliations 27
Slide 28: Drive Profitable Growth
DRIVE PROFITABLE GROWTH EXECUTING ACQUISITION STRATEGY ANALYTICS DEWATERING Revenue (2012) $298M $659M Capital Deployed* $732M $614M Key Brands Opportunity • Products have Higher Market • High ROIC Business When Growth Rates and Margins Operating With Scale Advantage • Fill Product or Technology Gap
Slide 29: Acquisition Scorecard
Completed Not Achieved ACQUISITION SCORECARD On Track Gross IRR >Risk Cash EPS Invested Year Strategic Margin Adj.Cost Mid-Teens Return Accretive Acquisition $M Completed Fit Accretive of Cap. ROIC 7-9 Years AfterYr1 Laing $30 2009 Nova $384 2010 Godwin $585 2010 OI $25 2010 YSI $310 2011 Added Adde
Slide 30: Non-GAAP Measures
NON-GAAP MEASURES Management views key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, free cash flow, working capital, and backlog, among others. In addition, we consider certain measures to be useful to management and investors evaluati
Slide 31: Non-GAAP Reconciliation: Organic & Constant Currency Revenue Growth
NON-GAAP RECONCILIATION: ORGANIC & CONSTANT CURRENCY REVENUE GROWTH ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (B + D) / A Change % Change Acquisitions / Change % Change Revenue Revenue CY v. PY CY v. PY Divestitures
Slide 32: Non-GAAP Reconciliation: Adjusted Operating Income
NON-GAAP RECONCILIATION: ADJUSTED OPERATING INCOME ($ Millions) Mid Point Guidance 2008 2009 2010 2011 2012 2013E Revenue 3,291 2,849 3,202 3,803 3,791 3,770 Operating Income 315 276 388 395 443 347 Operating Margin 9.6% 9.7% 12.1% 10.4% 11.7% 9.2% Restructuring, Realignment & Special Charges 41 31
Slide 33: Non-GAAP Reconciliation: Adjusted Operating Income by Segment
Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) 2012 2011 2010 2009 2008 Total Revenue • Total Xylem 3,791 3,803 3,202 2,849 3,291 • Water Infrastructure 2,425 2,416 1,930 1,651 1,824 • Applied Water 1,424 1,444 1,327 1,254 1,527 Operating Income • Total Xylem 443 395 388 2
Slide 34: Non-GAAP Reconciliation: EBITDA & Adj. EBITDA
NON-GAAP RECONCILIATION: XYLEM EBITDA & ADJ. EBITDA EBITDA and Adjusted EBITDA by Quarter ($ Millions) 2013 Q1 Q2 Q3 Q4 Total Pre-Tax Income 51 57 83 191 Interest Expense (Income), net 12 13 14 39 Depreciation 25 24 23 72 Amortization 12 13 13 38 Stock Compensation 6 6 9 21 EBITDA 106 113 142 361 Re
Slide 35: Non-GAAP Reconciliation: Adjusted Diluted EPS
NON-GAAP RECONCILIATION: ADJUSTED DILUTED EPS ($ Millions, except per share amounts) Q2 2012 Q2 2013 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 966 966 960 960 Operating Income 129 6 a 135 70 28 c 98 Operating Margin 13.4% 14.0% 7.3% 10.2% Interest Expense (13) (
Slide 36: Non-GAAP Reconciliation: Adjusted Diluted EPS
NON-GAAP RECONCILIATION: ADJUSTED DILUTED EPS ($ Millions, except per share amounts) Q3 2012 Q3 2013 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 931 931 965 965 Operating Income 111 9 a 120 98 32 c 130 Operating Margin 11.9% 12.9% 10.2% 13.5% Interest Expense (14)
Slide 37: Non-GAAP Reconciliation: Guidance
NON-GAAP RECONCILIATION: GUIDANCE Guidance ($ Millions, except per share amounts) Illustration of Mid Point Guidance 2013 Guidance FY '12 FY '13 AsReported Adjustments Adjusted AsProjected Adjustments Adjusted Total Revenue 3,791 3,791 3,770 3,770 Segment Operating Income 512 30 a 542 425 73 c 498 S
Slide 38: Non-GAAP Reconciliation: Free Cash Flow
NON-GAAP RECONCILIATION: FREE CASH FLOW Net Cash - Operating Activities vs. Free Cash Flow ($ Millions) Nine Months Ended 2013 2012 Net Cash - Operating Activities $ 163 $ 230 Capital Expenditures (91) (81) Free Cash Flow, including separation costs 72 149 Cash Paid for Separation Costs (incl. Capex
Slide 39: XYLEM PROPRIETARY / CONFIDENTIAL
XYLEM PROPRIETARY / CONFIDENTIAL 39