Xylem Inc. · NYSE:XYL
Xylem — Investor Day (March 2013)
127 slides from Xylem's investor day presentation, Mar 7, 2013
Slide 1: Xylem Inc. Investor & Analyst Day, March 7, 2013
XYLEM INC. INVESTOR & ANALYST DAY MARCH 7, 2013 Exhibit 99.2
Slide 2: Agenda
AGENDA * For attendees at NYSE 9:00 – 9:05 Welcome & Agenda P. De Sousa 9:05 – 9:45 Xylem Current Update & Overview G. McClain 9:45 – 10:05 Market Update & Driving Growth C. Sabol 10:05 – 10:20 Break 10:20 – 10:40 Water Infrastructure: Transport & Treatment M. Kuchenbrod 10:40 – 10:55 Water Infrastr
Slide 3: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS
Slide 4: Xylem Current Update & Overview
XYLEM CURRENT UPDATE & OVERVIEW
Slide 5: MultiTrode
multrode 1S"EWAI SH + PL STAT ON « TECHNOLOGY xylem Lock Selve Water.
Slide 6: MultiTrode
multtrode EMIAI SI » PLYF? STATON
Slide 7: MultiTrode Acquisition Overview
MULTITRODE - Advanced Monitoring & Control Technologies - Scalable Platform - Enables Smart Products & Cloud–Based Service ACQUISITION OVERVIEW MULTITRODE Overview Strategic Rationale Strategic Rationale • Purchase Price $26M • ‘12 Revenue $13M • 60 Employees • Serving Municipal & Private Water & Wa
Slide 8: Guidance Updated to Reflect MultiTrode Acquisition
GUIDANCE UPDATED TO REFLECT MULTITRODE ACQUISITION 2012 $3.8 B 39.6% 14.3% 12.9% $1.77 Total Revenue: Gross Margin: Segment Margin*: Operating Margin*: Adjusted EPS* 2013E ~$3.9 B ~40% 13.7% - 14.2% 12.2% - 12.7% $1.79 - $1.89 INVESTOR & ANALYST DAY CURRENT UPDATE • Guidance Updated Solely to Reflec
Slide 9: Uniquely Positioned to Solve the World's Growing Water Challenges
UNIQUELY POSITIONED TO SOLVE THE WORLD’S GROWING WATER CHALLENGES WATER IS ONE OF THE MOST COMPLEX, CHALLENGING AND INCREASINGLY VISIBLE ISSUES FACING SOCIETY UNIQUELY POSITIONED TO SOLVE THE WORLD’S GROWING WATER CHALLENGES
Slide 10: We Will Become the World's Trusted Leader in Solving Water Issues
WE WILL BECOME THE WORLD’S TRUSTED LEADER IN SOLVING WATER ISSUES WE WILL BECOME THE WORLD’S TRUSTED LEADER IN SOLVING WATER ISSUES OUR GOAL
Slide 11: Deliver Customer Value, Drive Profitable Growth, Improve Business Sustainability
Deliver Drive Improve Customer Profitable Business Value Growth Sustainability
Slide 12: Ability to Deliver Consistent Financial Performance
ABILITY TO DELIVER CONSISTENT FINANCIAL PERFORMANCE • Leading Market Positions • Fortress Brands • Diverse Geographic & End Market Exposure • Large Installed Base • Recurring Revenue ~37% • World-Class Distribution $3.8B GLOBAL LEADER IN WATER APPLICATION SOLUTIONS ABILITY TO DELIVER CONSISTENT FINA
Slide 13: Evolution to a Leading Global Water Technology Provider
* EVOLUTION TO A LEADING GLOBAL WATER TECHNOLOGY PROVIDER * Zenon is a registered trademark of GE
Slide 14: Specialized Breadth in the Water Cycle
SPECIALIZED BREADTH IN THE WATER CYCLE
Slide 15: Segment Overview
64% UNIQUE PORTFOLIO PROVIDES FOR INNOVATIVE SOLUTIONS BROAD PRODUCT PORTFOLIO BACKED BY APPLICATION EXPERTISE Market Size: $20B 2012 Revenues: $2.4B 2012 Op Margin*: 15.1% • World’s Largest Waste Water Pump & Dewatering Services Provider • Broad Portfolio of Filtration, Biological and Disinfection
Slide 16: Balanced Portfolio
BALANCED PORTFOLIO DIVERSE CUSTOMER BASE SERVING CRITICAL NEEDS GLOBAL MARKET BALANCE BY END MARKET Industrial 43% Public Utility 35% Commercial 11% Residential 8% Agriculture 3% BY APPLICATION Transport 46% Treatment 10% Test 8% Building Svcs 19% Industrial Water 14% Irrigation 3% BY GEOGRAPHY Unit
Slide 17: Global Scale & Local Presence Provide a Competitive Advantage
GLOBAL SCALE & LOCAL PRESENCE PROVIDE A COMPETITIVE ADVANTAGE GLOBAL PORTFOLIO GLOBAL SCALE & LOCAL PRESENCE PROVIDE A COMPETITIVE ADVANTAGE 360+ Global Locations More Than 4,500 Sales Representatives Reaching Customers in More Than 150 Countries
Slide 18: Balanced Strategy & Focused Execution
BALANCED STRATEGY & FOCUSED EXECUTION REVENUE OPERATING MARGIN* * See Appendix for Non-GAAP Reconciliations PROVEN TRACK RECORD BALANCED STRATEGY & FOCUSED EXECUTION REVENUE OPERATING MARGIN* • Revenue Up $500M, +15% • Established Global Platforms in Dewatering & Analytics • Significant Op Margin Im
Slide 19: Our Key Objectives
OUR KEY OBJECTIVES
Slide 20: Leveraging Our Large Installed Base
LEVERAGING OUR LARGE INSTALLED BASE DELIVER CUSTOMER VALUE LEVERAGING OUR LARGE INSTALLED BASE
Slide 21: Increasing Profitable Aftermarket Opportunities
XYLEM PROPRIETARY / CONFIDENTIAL INCREASING PROFITABLE AFTERMARKET OPPORTUNITIES ~37% RECURRING REVENUE BASE GROWING AFTERMARKET PARTS & SERVICES INSTALLED BASE DRIVES REPLACEMENT SALES INCREASING PROFITABLE AFTERMARKET OPPORTUNITIES ENHANCE AFTERMARKET CAPABILITIES INTRODUCING XYLEM TOTALCARE ACCEL
Slide 22: Leveraging Our Application Expertise
LEVERAGING OUR APPLICATION EXPERTISE DRIVE PROFITABLE GROWTH LEVERAGING OUR APPLICATION EXPERTISE
Slide 23: Innovation Drives Vitality Index > 25% by 2017
INNOVATION DRIVES VITALITY INDEX > 25% BY 2017 VITALITY INDEX INNOVATION DRIVES VITALITY INDEX > 25% BY 2017 INCREASE INNOVATIVE OFFERINGS FOCUS AREAS VITALITY INDEX Vitality Index is defined as the % of revenue from new products launched over the past five years • Smart Products • Energy Reduction
Slide 24: Emerging Markets Increase to 25% of Total Revenue by 2017
EMERGING MARKETS INCREASE TO 25% OF TOTAL REVENUE BY 2017 EMERGING MARKETS REVENUE ACCELERATE GEOGRAPHIC GROWTH FOCUSED DEVELOPED & EMERGING MARKETS STRATEGIES EMERGING MARKETS INCREASE TO 25% OF TOTAL REVENUE BY 2017 GEOGRAPHIC STRATEGY • Premium in Mega Cities • Selectively Enter Value Segment • K
Slide 25: Positioned to Benefit from China's Continued Development
POSITIONED TO BENEFIT FROM CHINA’S CONTINUED DEVELOPMENT ACCELERATE GEOGRAPHIC GROWTH EXAMPLE: CHINA STRATEGY POSITIONED TO BENEFIT FROM CHINA’S CONTINUED DEVELOPMENT KEY INVESTMENT AREAS CHINA’S 12 th 5 YEAR PLAN OTHER GROWTH DRIVERS Taiyuan Hefei Changsha Zhengzhou Urumchi Baotou Jinan Tangshan Sh
Slide 26: Fueling Growth with a Competitive Edge
FUELING GROWTH WITH A COMPETITIVE EDGE IMPROVE BUSINESS SUSTAINABILITY FUELING GROWTH WITH A COMPETITIVE EDGE
Slide 27: Driving a Leaner, More Efficient & Competitive Xylem
DRIVING A LEANER, MORE EFFICIENT & COMPETITIVE XYLEM GROSS MARGIN LEAN SIX SIGMA GLOBAL SOURCING DRIVE OPERATIONAL EXCELLENCE DRIVING A LEANER, MORE EFFICIENT & COMPETITIVE XYLEM GROSS MARGIN LEAN SIX SIGMA GLOBAL SOURCING • Implemented Across the Organization • Hundreds of Projects Completed Annual
Slide 28: IT System Consolidations
IT SYSTEM CONSOLIDATIONS STREAMLINED SYSTEMS TO DRIVE PRODUCTIVITY - FOCUS ON BUSINESS SIMPLIFICATION IT SYSTEM CONSOLIDATIONS • Global Inventory/Supply Chain Management • Web-Based Ordering/Tracking • Global Data Warehousing • Automated Product Configurations • Integrated CRM System • Eliminates Re
Slide 29: European Realignment
EUROPEAN REALIGNMENT OPTIMIZE OUR COST STRUCTURE SUMMARY 2013 FINANCIAL IMPACTS EUROPEAN REALIGNMENT ENABLING – Sales Synergies & Future Growth Opportunities – HQ: Schaffhausen, Switzerland – Restructuring Savings of $13M to $15M – Additional Net EPS Impact of $0.03 from Realignment • Sales Office C
Slide 30: Experience, Knowledge & Relentless Drive to Improve
EXPERIENCE, KNOWLEDGE & RELENTLESS DRIVE TO IMPROVE HIGH-PERFORMANCE CULTURE EXPERIENCE, KNOWLEDGE & RELENTLESS DRIVE TO IMPROVE
Slide 31: Powerful Combination of Customer & Industry Experience
POWERFUL COMBINATION OF CUSTOMER & INDUSTRY EXPERIENCE Gretchen McClain President & CEO Operational Leaders Functional Leaders Board of Directors POWERFUL COMBINATION OF CUSTOMER & INDUSTRY EXPERIENCE HIGH-PERFORMANCE CULTURE Gretchen McClain President & CEO Operational Leaders Mike Kuchenbrod Presi
Slide 32: Linked Together Around "Let's Solve Water"
LINKED TOGETHER AROUND “LET’S SOLVE WATER” HIGH-PERFORMANCE CULTURE LINKED TOGETHER AROUND “LET’S SOLVE WATER” HIGH-PERFORMANCE CULTURE HIGH-PERFORMANCE CULTURE
Slide 33: Slide 33
Slide 34: Market Update & Driving Growth
MARKET UPDATE & DRIVING GROWTH COLIN SABOL CHIEF STRATEGY & GROWTH OFFICER
Slide 35: xylem
xylem lem | jada
Slide 36: What You Will Hear About Today
WHAT YOU WILL HEAR ABOUT TODAY MARKET UPDATE & DRIVING GROWTH AGENDA • Served Market Update - Geographic Profile - End Market Profile - Industrial Market Dynamics - Public Utility Dynamics - Market Positions • Driving Growth - Sustainable Water Infrastructure (SWI) Solutions - Customer Journey WHAT
Slide 37: Served Market Update: Geographic Profile
2012 XYLEM REVENUE MIX ’13-’17 SERVED MARKET GROWTH MARKET COMMENTARY SERVED MARKET UPDATE GEOGRAPHIC PROFILE 2012 XYLEM REVENUE MIX U.S . • Slow Recovery • Commercial Building Construction Strengthening EUROPE • Weak Economic Environment • EU Political Uncertainty Continues EMERGING MARKETS • Infra
Slide 38: Served Market Update: End Market Profile
2012 XYLEM REVENUE MIX ’13 - ’17 SERVED MARKET GROWTH MARKET COMMENTARY SERVED MARKET UPDATE END MARKET PROFILE 2012 XYLEM REVENUE MIX INDUSTRIAL • Global Industrial Production to Strengthen Modestly PUBLIC UTILITY • Break and Fix Demand to Rise Steadily • CAPEX Spending Delays to Continue COMMERCIA
Slide 39: Served Market Update: Industrial Market Exposure
XYLEM ADVANTAGES SUB-SEGMENT COMMENTARY SERVED MARKET UPDATE INDUSTRIAL MARKET EXPOSURE • Strong Brands • Deep Application Knowledge • Broad Product Portfolio • Improving Vitality Index XYLEM ADVANTAGES MINING • EM Commodity Demand OIL & GAS • Stabilization of Gas Fracking CONSTRUCTION • Global Cons
Slide 40: Public Utility Dynamics
PUBLIC UTILITY DYNAMICS XYLEM ADVANTAGES SERVED MARKET UPDATE PUBLIC UTILITY • Consistent Tariff Increases • Bid Activity Remains Strong • Focused on Opex Savings (Energy, Services) • Large Installed Base With Loyal Customers • 70-80% of Revenue from Opex • Refreshed Product Portfolio Centered on En
Slide 41: Leading Positions in Key Applications
SERVED MARKET UPDATE LEADING POSITIONS IN KEY APPLICATIONS TRANSPORT TREATMENT TEST BUILDING SERVICES INDUSTRIAL WATER IRRIGATION Xylem KSB Sulzer (ABS) Pentair Tsurumi Others Others Grundfos Xylem Danaher (Hach) Grundfos Xylem Siemens Danaher (Trojan) Sulzer (ABS) Ozonia Others Xylem Thermo E+H Met
Slide 42: Sustainable Water Infrastructure (SWI) Solutions
WATER LEVERAGING BROAD PORTFOLIO & APPLICATIONS EXPERTISE SOLVING WATER CHALLENGES WITH VERTICAL INDUSTRY TEAMS DRIVING GROWTH SUSTAINABLE WATER INFRASTRUCTURE (SWI) SOLUTIONS Industry Industry Industry Industry Treatment Transport Test Services M&C Non-Xylem LABOR CAPITAL FOOD ENER G Y LEVERAGING B
Slide 43: Vertical End-Market Solutions Represent the Leading Edge of Growth
VERTICAL END-MARKET SOLUTIONS REPRESENT THE LEADING EDGE OF OUR GROWTH STRATEGY THE POWER OF XYLEM’S CAPABILITIES... DRIVING GROWTH SUSTAINABLE WATER INFRASTRUCTURE (SWI) SOLUTIONS • $1B Equipment Market; $400M Served • Marine-Tested Disinfection Technologies with Efficacy Assurance Ballast Water Tr
Slide 44: Customer Journey
CUSTOMER JOURNEY Pour’ r | AWARENESS LEARNING ENGAGEMENT APPLICATION Teltatetetatetetatatetatetetate patatete! Key Initiatives --------4------------ 1 H Brand H Management Digital Customer Marketing Excellence eae (aaa Examples Sa ao be ee Leading Brands rr (QBell & Gossett Standard Services - Audit
Slide 45: Customer Journey: Learning – Digital Water Show
KEY STATS CUSTOMER JOURNEY LEARNING – DIGITAL WATER SHOW • 4,000+ Participants • 1,500+ Leads • 90% Lower Cost Per Lead vs. Traditional • Next Steps – More Targeted Events with Channel Partners WINNER: Best International Event Virtual Communication Excellence Award KEY STATS
Slide 46: Customer Journey: Engagement – Customer Excellence
CUSTOMER JOURNEY ENGAGEMENT – CUSTOMER EXCELLENCE • 80% Coverage … Opportunities To Go Deeper • ~20 Dedicated Resources ... Next Commercial Leaders • Focuses Our Commercial Technology Investments • Enables One Xylem Commercial Team
Slide 47: Customer Journey: Engagement – Customer Excellence
CUSTOMER JOURNEY ENGAGEMENT – CUSTOMER EXCELLENCE Price Last 2 Years $110M+ Strong Pilot Results … 2013 Roll-out Value Proposition
Slide 48: Sources of Revenue Growth
SOURCES OF REVENUE GROWTH INCREMENTAL GROWTH CATALYSTS SUMMARY SOURCES OF REVENUE GROWTH SERVED MARKET 2-4% XYLEM OUT-PERFORMANCE 1% ORGANIC GROWTH 3-5% ACQUISITIONS 2-4% TOTAL 5-9% • More Robust Global Economic Recovery • Tighter Regulatory Policy and Enforcement… Driving Capex • Accelerated Demogr
Slide 49: Water Infrastructure: Transport & Treatment
WATER INFRASTRUCTURE TRANSPORT & TREATMENT MICHAEL KUCHENBROD PRESIDENT, WATER SOLUTIONS
Slide 50: What You Will Hear About Today
WHAT YOU WILL HEAR ABOUT TODAY WATER INFRASTRUCTURE AGENDA • Business Overview - Transport & Treatment Capabilities • Select Strategic Initiatives - Industrial Market Adjacencies - Xylem TotalCare - Localized Products • Dewatering Overview - Dewatering History - Dewatering Capabilities - Accelerate
Slide 51: Water Infrastructure Business Overview: Transport & Treatment
TRANSPORT TREATMENT WATER INFRASTRUCTURE BUSINESS OVERVIEW TRANSPORT TREATMENT Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues by Geography: Key Facilities: Key Brands: $11B $1,745M $5B $366M Waste Water Pumps Dewatering (Sales & Rentals) Aftermarket Parts & Services Emmaboda, Swe
Slide 52: Transport & Treatment Capabilities
WATER INFRASTRUCTURE TRANSPORT & TREATMENT CAPABILITIES
Slide 53: Transport & Treatment Capabilities
WATER INFRASTRUCTURE TRANSPORT & TREATMENT CAPABILITIES
Slide 54: Transport & Treatment Capabilities
) TRANSPORT & TREATMENT CAPABILIT,
Slide 55: Slide 55
Slide 56: Transport & Treatment Capabilities
TRANSPORT & TREATMENT CAPABI aes
Slide 57: Industrial Markets Offer New Growth Opportunities
INDUSTRIAL MARKETS OFFER NEW GROWTH OPPORTUNITIES WHY WHERE HOW INDUSTRIAL MARKETS OFFER NEW GROWTH OPPORTUNITIES INCREASE INNOVATIVE OFFERINGS INDUSTRIAL MARKET ADJACENCIES Strategy: Current Product New Market WHY WHERE HOW • Adds $1B To Served Market • Stringent Discharge Regulations • Value Versu
Slide 58: oom
oom BEGE PIMs ‘nour
Slide 59: Xylem TotalCare: Wedeco in New Zealand, Flygt in UK
TOTALCARE WEDECO IN NEW ZEALAND TOTALCARE FLYGT IN UK • Condition Audit • 5 year $4M Contract • 500 Pump Station Audits • 65 Follow-up Refurbishments • Potential Total Revenue of $4M TOTALCARE WEDECO IN NEW ZEALAND TOTALCARE FLYGT IN UK ENHANCE AFTERMARKET CAPABILITIES XYLEM TOTALCARE
Slide 60: Accelerate Geographic Expansion: Localized Products
ACCELERATE GEOGRAPHIC EXPANSION LOCALIZED PRODUCTS Price Value $1.4B market $0.9B market • Value For Money • Limited and Standardized Product Range • High Availability • Highest Quality and Performance • Wide Range of Sizes and Materials • System Engineering Support
Slide 61: Dewatering Overview
XYLEM PROPRIETARY / CONFIDENTIAL DEWATERING Bridgeport, NJ; Emmaboda, Sweden; Quenington, UK Sales & Rentals Dry Prime, Submersible & Slurry Pumps Aftermarket Parts & Services INVEST IN GROWTH PLATFORMS DEWATERING OVERVIEW DEWATERING Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues
Slide 62: Dewatering History
INVEST IN GROWTH PLATFORMS DEWATERING HISTORY Pre-2010 Flygt Electric Submersible U.S. & International Acquired Godwin Added Dri-Prime Diesel Technology Expanded U.S. Footprint/Distribution 24/7 Service Model Organic Expansion in Australia Acquired Heartland Pump Expanded U.S. Footprint/Distribution
Slide 63: Dewatering Capabilities: Industrial
DELIVER CUSTOMER VALUE DEWATERING CAPABILITIES: INDUSTRIAL
Slide 64: Dewatering Capabilities: Municipal Bypass
DELIVER CUSTOMER VALUE DEWATERING CAPABILITIES: MUNICIPAL BYPASS
Slide 65: Dewatering Capabilities: Oil & Gas
DELIVER CUSTOMER VALUE DEWATERING CAPABILITIES: OIL & GAS
Slide 66: Dewatering Capabilities: Mining
DELIVER CUSTOMER VALUE DEWATERING CAPABILITIES: MINING
Slide 67: Dewatering Capabilities: Disaster Relief
DELIVER CUSTOMER VALUE DEWATERING CAPABILITIES: DISASTER RELIEF
Slide 68: Dewatering Growth Led by Rental and Services
DEWATERING GROWTH LED BY RENTAL AND SERVICES ACCELERATE GEOGRAPHIC EXPANSION DEWATERING DEWATERING GROWTH LED BY RENTAL AND SERVICES • Leverage Existing Footprint • Follow Strong Water Solutions Channels • Target Growing Industries (Mining)
Slide 69: Creating a More Efficient and Responsive Enterprise
CREATING A MORE EFFICIENT AND RESPONSIVE ENTERPRISE LEAN SIX SIGMA GLOBAL SOURCING STRATEGIES FOOTPRINT RATIONALIZATION BUSINESS INTEGRATION PRODUCT SIMPLIFICATION CREATING A MORE EFFICIENT AND RESPONSIVE ENTERPRISE IMPROVE BUSINESS SUSTAINABILITY OPERATIONAL EXCELLENCE: “A WAY OF LIFE” LEAN SIX SIG
Slide 70: Water Infrastructure: Transport & Treatment
WATER INFRASTRUCTURE TRANSPORT & TREATMENT
Slide 71: Water Infrastructure: Test
WATER INFRASTRUCTURE TEST CHRIS MCINTIRE PRESIDENT, ANALYTICS
Slide 72: What You Will Hear About Today
WHAT YOU WILL HEAR ABOUT TODAY WATER INFRASTRUCTURE AGENDA • Business Overview - Analytics Capabilities - Analytics Segments & Vertical Markets • Select Strategic Initiatives - Deliver Customer Value - Accelerate Geographic Expansion - Increase Innovative Offerings - Invest in Growth Platforms - Imp
Slide 73: Water Infrastructure Business Overview: Test
TEST Yellow Springs, OH; Weilheim, Germany; Bergen, Norway Field, Online, and Laboratory Analytical Instrumentation Meters, Sensors, Spectrophotometers, and Refractometers Temperature, Data Loggers, Doppler and Level Measurement Water Quality and Environmental Monitoring Systems WATER INFRASTRUCTURE
Slide 74: Test: Analytics Capabilities
WATER INFRASTRUCTURE TEST: ANALYTICS CAPABILITIES
Slide 75: Building a World-Class Analytics Platform
BUILDING A WORLD-CLASS ANALYTICS PLATFORM BUILDING A WORLD-CLASS ANALYTICS PLATFORM Total Served Market - $4B WATER INFRASTRUCTURE TEST: ANALYTICS SEGMENTS AND VERTICAL MARKETS APPLIED MEASUREMENT TECHNOLOGIES WATER Note: Other Revenue ~$60M
Slide 76: Analytics Waste Water Capabilities
DELIVER CUSTOMER VALUE ANALYTICS WASTE WATER CAPABILITIES
Slide 77: Analytics Ocean / Coastal Capabilities
DELIVER CUSTOMER VALUE ANALYTICS OCEAN / COASTAL CAPABILITIES
Slide 78: Developed and Emerging Markets Strategy
DEVELOPED MARKETS STRATEGY Leverage Regional Brands Expand Service and Integration Capabilities EMERGING MARKETS STRATEGY Stage 1 Distribution Management Stage 2 After Sales Services Stage 3 Channel Optimization Stage 4 Systems Integration EMERGING MARKETS REVENUE GROWS FROM 25% TO >30% BY 2017 ACCE
Slide 79: New Technology Drives Market Share Growth
NEW TECHNOLOGY DRIVES MARKET SHARE GROWTH CROSS BRANDING NEW PRODUCTS NEW TECHNOLOGY DRIVES MARKET SHARE GROWTH INCREASE INNOVATIVE OFFERINGS CROSS BRANDING NEW PRODUCTS • Invest in New Products and Advanced Sensor Technology • Leverage Existing Technology Across Operating Companies • Adapt for Loca
Slide 80: Analytics Acquisition Strategy
FOCUSED AND DELIBERATE PROCESS WITH STRONG PIPELINE INVEST IN GROWTH PLATFORMS ANALYTICS ACQUISITION STRATEGY Targets Aligned with Market Focus and Growth Initiatives • Fill Product or Technology Gaps • Strengthen Geographic Capabilities • Drive Sustainable Water Infrastructure Projects FOCUSED AND
Slide 81: Value Creation – Operational Excellence Driving Margin Expansion
GM OpEx GM OpEx VALUE CREATION – OPERATIONAL EXCELLENCE DRIVING MARGIN EXPANSION Pre Acquisition EBITDA OpEx Post Integration • Continued Topline Growth • >10% in 2012 • Lean Initiatives and Global Sourcing Already Delivering • Lean Six Sigma Deployed • Buying Leverage • GM Up More Than 300 bps • Op
Slide 82: Building a World-Class Analytics Platform
INVEST IN GROWTH PLATFORMS BUILDING A WORLD-CLASS ANALYTICS PLATFORM
Slide 83: Unique Global Assets
Deliver Customer Improve Business Sustainability Unique Global Assi
Slide 84: Applied Water Systems
APPLIED WATER SYSTEMS KEN NAPOLITANO PRESIDENT
Slide 85: What You Will Hear About Today
WHAT YOU WILL HEAR ABOUT TODAY • Business Overview - Market Drivers - Aftermarket and Installed Base - Commercial Building Capabilities - Industrial Market Capabilities • Select Strategic Initiatives - High-Efficiency Solutions - Emerging Markets Penetration - Improve Business Sustainability APPLIED
Slide 86: Applied Water Systems Business Overview
BUILDING SERVICES INDUSTRIAL WATER IRRIGATION APPLIED WATER SYSTEMS BUSINESS OVERVIEW BUILDING SERVICES INDUSTRIAL WATER Market Size: 2012 Revenues: Key Products & Services: Key Facilities: Key Brands: $9B $736M $4B $550M HVAC Pumps, Valves & Heat Exchangers, Drives & Controls, Waste Water Pumps, Pr
Slide 87: Market Drivers
REGULATORY ENVIRONMENT FOCUSED ON WATER & ENERGY MACRO DRIVERS APPLIED WATER SYSTEMS MARKET DRIVERS • Population Growth • Urbanization • Increasing Middle Class In Emerging Markets • Water Scarcity • High-Efficiency Legislation • Higher Performance Standards • Consumers’ Interest In Life Cycle Cost
Slide 88: Aftermarket and Installed Base
DRIVES OPPORTUNITIES FOR RETROFIT & AFTERMARKET DIFFERENTIATORS APPLIED WATER SYSTEMS AFTERMARKET AND INSTALLED BASE • More Than 25 Million Products Installed Worldwide • 30% to 40% Average Replacement Sales • Attractive Aftermarket Margins • Strong Brand Loyalty • Broad Leading Channels • Exception
Slide 89: Commercial Building Capabilities: Integrated Solutions
XYLEM PROPRIETARY / CONFIDENTIAL INTEGRATED SOLUTIONS • Products for the Heating, Cooling and Protection of Commercial Buildings • Broadest Offering Allows for Optimizing Interaction of Key Building Components • Application Expertise Makes Xylem a Strong Partner for Specifying Engineers APPLIED WATE
Slide 90: Commercial Building Case Study
• Customer - Monarch Plaza, Atlanta, GA - Building Constructed in 1983 - Lack of Sufficient Cooling - Low Pressure on Upper Floors - High Energy Costs - Integrated, Variable Speed System Retrofit - Ability to Accommodate Highly Variable Heating and Cooling Needs - Substantial Energy Savings - Energy
Slide 91: xylem |
xylem |
Slide 92: Industrial Market Case Study
DELIVER CUSTOMER VALUE INDUSTRIAL MARKET • Customer - Major South American Coal Mine • Problem - Remoteness of Mine and Legislation on Groundwater Withdrawal Required Alternative Sources for Process and Potable Water • Xylem Solution - Designed Efficient RO Treatment System to Desalinate Available S
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xylem |
Slide 94: Slide 94
Slide 95: High-Efficiency Solutions
• Advanced Computational Hydraulic Design • High-Efficiency, Next-Generation Motor Technology • Integration of Variable Speed Drive Technology, Electronics and Motors • Energy-Saving Flow Control • Advanced Systems & Solutions Training INCREASE INNOVATIVE OFFERINGS HIGH-EFFICIENCY SOLUTIONS
Slide 96: Emerging Markets Penetration
EMERGING MARKETS FORMULA Stage 1 Focused Investments in Front End Stage 2 Establish Inventory & Assembly Capability Stage 3 Localize Key Products & Packages Stage 4 Develop Fit for Use Products EMERGING MARKETS REVENUE GROWS FROM 17% TO 25% BY 2017 ACCELERATE GEOGRAPHIC EXPANSION EMERGING MARKETS PE
Slide 97: Improve Business Sustainability
Drive Operational Excellence Optimize Our Cost Structure Focus on Business Simplification IMPROVE CUSTOMER SATISFACTION, WORKING CAPITAL & COST STRUCTURE CURRENT FUTURE Drive Operational Excellence Optimize Our Cost Structure Focus on Business Simplification • Lean Six Sigma • Global Sourcing • Comp
Slide 98: Business Simplification: Global Water Platform
CURRENT FUTURE • Multiple Regional Product Offerings • Complex Supply Chain • Low Economies of Scale • High Inventory Requirement • Single Modular Global Product Lines • Over 30% Reduction in SKUs • Supply Chain & Manufacturing Leverage • Market-Leading Efficiencies BUSINESS SIMPLIFICATION GLOBAL WA
Slide 99: Unique Global Assets
Deliver Customer Improve Business Sustainability Unique Global Assi
Slide 100: Financial Overview
FINANCIAL OVERVIEW MICHAEL SPEETZEN CHIEF FINANCIAL OFFICER
Slide 101: Guidance Updated to Reflect MultiTrode Acquisition
GUIDANCE UPDATED TO REFLECT MULTITRODE ACQUISITION 2012 $3.8 B 39.6% 14.3% 12.9% $1.77 Total Revenue: Gross Margin: Segment Margin*: Operating Margin*: Adjusted EPS* 2013E ~$3.9 B ~40% 13.7% - 14.2% 12.2% - 12.7% $1.79 - $1.89 CURRENT UPDATE • Guidance Updated to Reflect the Acquisition of MultiTrod
Slide 102: Looking Back
LOOKING BACK FINANCIAL OVERVIEW 2008-2012 Revenue CAGR of 4% • Driven by Analytics & Dewatering Growth Platforms • Base Recovering to Pre-Crisis Levels Operating Margin* Expansion +210 Bps • Gross Margin +490 Bps • Investment into Key Strategic Areas Strong Free Cash Flow Deployed $1.4B Into Acquisi
Slide 103: Looking Forward
LOOKING FORWARD FINANCIAL OVERVIEW 2008-2012 Revenue CAGR of 4% • Driven by Analytics & Dewatering Growth Platforms • Base Recovering to Pre-Crisis Levels Operating Margin* Expansion +210 Bps • Gross Margin +490 Bps • Investment into Key Strategic Areas Strong Free Cash Flow Deployed $1.4B Into Acqu
Slide 104: Xylem Financial Summary
REVENUE OP INCOME & MARGIN* HIGHLIGHTS STRONG TRACK RECORD OF FINANCIAL PERFORMANCE ‘08-’12 Revenue up 15%; 4% CAGR Strong Operating Margin Expansion XYLEM FINANCIAL SUMMARY REVENUE OP INCOME & MARGIN* HIGHLIGHTS Growth: -13% 12% 19% 0% 3.5% OM%: 10.8% 10.8% 12.6% 12.7% 12.9% 12.5% STRONG TRACK RECO
Slide 105: 39.6% 2008 2012
39.6% 2008 2012
Slide 106: 2008 2012
2008 2012
Slide 107: Strong Free Cash Flow Generation
STRONG FREE CASH FLOW GENERATION FREE CASH FLOW* WORKING CAPITAL HIGHLIGHTS GENERATING STRONG FREE CASH FLOW STRONG FREE CASH FLOW GENERATION Conversion: 100% 95% FREE CASH FLOW* WORKING CAPITAL 2013 FCF Conversion Impacts Working Capital Improvement Accounts Receivable Accounts Payable Inventory %
Slide 108: Water Infrastructure Financial Results
REVENUE OP INCOME & MARGIN* STRONG TOP LINE GROWTH, OP MARGIN +210 BPS HIGHLIGHTS WATER INFRASTRUCTURE REVENUE Growth: -10% 17% 25% 0% 4.7% Organic*: -4% 2% 7% 0% 0.5% OP INCOME & MARGIN* OM%: 13.0% 14.7% 14.9% 14.9% 15.1% 14.5% STRONG TOP LINE GROWTH, OP MARGIN +210 BPS ‘08-’12 Revenue up 33%; 7% C
Slide 109: Applied Water Financial Results
REVENUE OP INCOME & MARGIN* HIGHLIGHTS STRONG OPERATING PERFORMANCE APPLIED WATER REVENUE Growth: -18% 6% 9% -1% 1.8% Organic*: -15% 6% 7% 1% 0.5% OP INCOME & MARGIN* OM%: 11.8% 9.9% 12.1% 12.0% 12.4% 12.5% HIGHLIGHTS STRONG OPERATING PERFORMANCE ‘08-’12 Revenue Down 7% • Residential & Commercial Bu
Slide 110: Disciplined Capital Deployment
CORE GROWTH THROUGH INNOVATION & EXPANSION ACQUISITION GROWTH FROM A DISCIPLINED STRATEGY INCREASING RETURN OF CAPITAL THROUGH DIVIDENDS SHARE REPURCHASES TO MAINTAIN SHARE COUNT DISCIPLINED CAPITAL DEPLOYMENT • New Product Development • Product Range Revitalization • Faster-Growing Markets • Develo
Slide 111: Acquisition Returns
IRR> Gross Risk Adj. Mid- Cash EPS Invested Year Strategic Mai Costof Teens Return Accretive Acquisition $M —_— Completed Fit e Capital ROIG 7-9 Years After Yr1 Through 2012 MJK Heartland PIMS RECENTLY ACQUIRED MultiTrode xylem |
Slide 112: 2017: What Could It Look Like?
CONTINUED GROWTH, MARGIN EXPANSION & INCREASING RETURNS EARNINGS PER SHARE* REVENUE OP MARGIN* ROIC 2017: WHAT COULD IT LOOK LIKE? CONTINUED GROWTH, MARGIN EXPANSION & INCREASING RETURNS EARNINGS PER SHARE* REVENUE 4.7B - 5.5B $2.50 - $3.40 OP MARGIN* 14% - 15% KEY DRIVERS • Revenue Growth 5-9% - Or
Slide 113: Thank You for Your Interest
THANK YOU FOR YOUR INTEREST THANK YOU FOR YOUR INTEREST CLOSING REMARKS
Slide 114: Appendix
APPENDIX
Slide 115: Xylem Management Team: Michael Speetzen
XYLEM MANAGEMENT TEAM MICHAEL T. SPEETZEN CHIEF FINANCIAL OFFICER Michael T. Speetzen serves as our Senior Vice President and Chief Financial Officer. Mr. Speetzen served as Vice President of Finance for the Fluid and Motion Control business of ITT until October 2011. He joined ITT in as Vice Presid
Slide 116: Xylem Management Team: Robyn Mingle
XYLEM MANAGEMENT TEAM ROBYN MINGLE CHIEF HUMAN RESOURCES OFFICER Robyn T. Mingle serves as our Senior Vice President and Chief Human Resources Officer. Ms. Mingle joined ITT in July and served as Vice President of Human Resources of the ITT Fluid and Motion Control business until October 2011. Ms. M
Slide 117: Xylem Management Team: Angela Buonocore
XYLEM MANAGEMENT TEAM ANGELA BUONOCORE CHIEF COMMUNICATIONS OFFICER Angela A. Buonocore serves as Xylem’s Senior Vice President and Chief Communications Officer, a role she assumed when the company was spun off from ITT Corporation in October 2011. In this role, she is responsible for global brand a
Slide 118: Xylem Management Team: Nicholas Colisto
XYLEM MANAGEMENT TEAM NICHOLAS R. COLISTO CHIEF INFORMATION OFFICER Nicholas R. Colisto is Senior Vice President and Chief Information Officer of Xylem Inc., where he is responsible for all information technology strategy and staffing to support the global business. Prior to joining Xylem, Mr. Colis
Slide 119: Xylem Management Team: Christopher McIntire
XYLEM MANAGEMENT TEAM CHRISTOPHER R. MCINTIRE PRESIDENT, ANALYTICS Christopher R. McIntire serves as our Senior Vice President and President of Analytics. Mr. McIntire served as President of Analytics of the ITT Fluid and Motion Control business until October 2011. He joined ITT in March when ITT ac
Slide 120: 2013 Full Year Financial Outlook
Realignment Costs 2013 Full Year Growth Financial Outlook 2013E vs. 2012 Revenue ((id-Point) Total Growth Organic Acquisition FX Xylem Consolidated ~$3,925M ~3 -4% 0-1% 2% 1% Water Infrastructure ~$2,540M ~4-5% 0-1% 3% 1% Applied Water ~$1,450M ~1-2% 0-1% 0% 1% Segment Margin * 13.7% -14.2% -60 bps
Slide 121: Xylem Inc. Non-GAAP Measures
Xylem Ine. Non-GAAP Measures Management views key performance indicators including revenue, gloss margins, segnent operating income and margins, orders gowth, free cashflow, working capital ‘and backlog, among ethers. In addition, we consider certain measutesto be Usefulto management and investors e
Slide 122: Constant Currency
Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (B + D) / A Change % Change Change % Change Revenue Revenue CY v. PY CY v. PY FX Contribution Eliminations Adj. CY v. PY Adj. CY v. PY Current Year Prior Year Year Ended December 31, 2012 Xylem Inc. 3,791 3,803 (12) -0.3% (94) - 0.1
Slide 123: Adjusted Operating Income Reconciliation
Mid Point Guidance 2013E Revenue 3,291 2,849 3,202 3,803 3,791 3,925 Operating Income Operating Margin 9.6% 9.7% 12.1% 10.4% 11.7% 10.8% Restructuring & Realignment - Separation Costs - - - - Adjusted Operating Income Adjusted Operating Margin 10.8% 10.8% 12.6% 12.7% 12.9% 12.5% Standalone Costs - -
Slide 124: Total Revenue and Operating Margin by Segment
Total Revenue • Total Xylem 3,925 3,791 3,803 3,202 2,849 3,291 • Water Infrastructure 2,540 2,425 2,416 1,930 1,651 1,824 • Applied Water 1,450 1,424 1,444 1,327 1,254 1,527 Operating Income • Total Xylem • Water Infrastructure • Applied Water Operating Margin • Total Xylem 10.8% 11.7% 10.4% 12.1%
Slide 125: Illustration of Mid Point Guidance
Illustration of Mid Point Guidance 2013 Guidance FY '12 FY '13 As Reported Adjustments Adjusted As Projected Adjustments Adjusted Total Revenue 3,791 3,791 3,925 3,925 Segment Operating Income a d Segment Operating Margin 13.5% 14.3% 12.3% 14.0% Corporate Expense (16) b - Operating Income Operating
Slide 126: Net Cash - Operating Activities vs. Free Cash Flow
2013E Net Cash - Operating Activities Capital Expenditures (130) (112) Free Cash Flow, including separation costs Cash Paid for Separation Costs (incl. Capex) - Free Cash Flow, excluding separation costs Net Income Separation Costs, net of tax (incl. tax friction) - Net Income, excluding separation
Slide 127: Let's Solve Water
xylem Let’s Solve Water NYSE: XYL You may sean the OR code for direct - ‘ access to the Xylem IR app for Pade Phil De Sousa, Investor Relations Officer mobile devices. (914) 323-5930 Janice Tedesco, Investor Relations Coordinator (914) 323-5931 ait j Apnie and iPad are regisiered http://investors.xy