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What changed in Xylem Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Xylem Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+501 added−474 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-28)

Top changes in Xylem Inc.'s 2024 10-K

501 paragraphs added · 474 removed · 371 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

78 edited+28 added−34 removed40 unchanged
Biggest changeSee Note 21, “Segment and Geographic Data,” in our consolidated financial statements for financial information about segments and geographic areas. 6 The table and descriptions below provide an overview of our business segments: Market Applications 2023 Revenue (in millions) % Revenue Major Products Primary Brands Water Infrastructure Transport $ 2,172 73 % • Water and wastewater pumps • Filtration, disinfection and biological treatment equipment • Mobile dewatering equipment and rental services • ADI • Flygt • Godwin • Ionpure • Leopold • Magneto • Neptune Benson • Sanitaire • Wallace & Tiernan • Wedeco • Xylem Vue Treatment 795 27 % $ 2,967 100 % Applied Water Building Solutions $ 1,025 55 % • Pumps • Valves • Heat exchangers • Controls • Dispensing equipment systems • A-C Fire Pump • Bell & Gossett • Flojet • Goulds Water Technology • Jabsco • Lowara • Standard Xchange • Xylem Vue Industrial Water 828 45 % $ 1,853 100 % Measurement and Control Solutions Water $ 1,354 78 % • Smart meters • Networked communication devices • Data analytics • Test equipment • Controls • Sensor devices • Software & managed services • Critical infrastructure services • Pure Technologies • Sensus • Smith Blair • WTW • YSI • Xylem Vue Energy 375 22 % $ 1,729 100 % Integrated Solutions and Services $ 815 100 % • Preventative maintenance services • Rapid response mobile services • Digitally enabled/outsourced solutions • Process and wastewater systems • Environmental remediation • Odor and corrosion control • Filtration • Reverse osmosis • Ion exchange • Continuous deionization • AquaPro • WaterOne • Ion Pure 7 Water Infrastructure Our Water Infrastructure segment primarily supports the process that collects water from a source, treats it and distributes it to users, and then treats and returns the wastewater responsibly to the environment through two closely linked applications: Transport and Treatment.
Biggest changeSee Note 21, “Segment and Geographic Data,” in our consolidated financial statements for financial information about segments and geographic areas. 6 The table and descriptions below provide an overview of our business segments: Market Applications 2024 Revenue (in millions) % Revenue Major Products Primary Brands Water Infrastructure Transport $ 1,498 59 % • Water and wastewater pumps • Filtration, disinfection and biological treatment equipment • Flygt • Ionpure • Vortisand • Wallace & Tiernan • Wedeco Treatment 1,057 41 % $ 2,555 100 % Applied Water Building Solutions $ 997 56 % • Pumps • Valves • Heat exchangers • Controls • Dispensing equipment systems • Rule • Bell & Gossett • Flojet • Goulds Water Technology • Jabsco • Lowara • Standard Xchange Industrial Water 796 44 % $ 1,793 100 % Measurement and Control Solutions Smart Metering and Other $ 1,519 81 % • Smart meters • Network communication devices • Data analytics • Test instruments • Controls • Sensor devices • Software & managed services • Critical infrastructure services • Sensus • Smith Blair • WTW • YSI • Xylem Vue Analytics 352 19 % $ 1,871 100 % Water Solutions and Services Capital and other $ 1,355 58 % • Preventative maintenance services • Rapid response mobile services • Digitally enabled/outsourced solutions • Process and wastewater treatment systems • Environmental remediation • Odor and corrosion control • Filtration • Reverse osmosis • Continuous deionization • Mobile dewatering equipment and rental services • AquaPro • WaterOne • Ion Pure • Flygt • Pure Technologies • Godwin Services 988 42 % $ 2,343 100 % 7 Water Infrastructure Through two closely linked applications, transport and treatment, our Water Infrastructure segment primarily supports the process that collects water from a source, treats it and distributes it to users, and then treats and returns the wastewater responsibly to the environment.
Our customers often face all four of these challenges, ranging from inefficient and aging water distribution networks and energy-intensive or unreliable water and wastewater management systems (requiring improvements in water affordability); droughts and pollution which limit the amount of water readily available (causing water scarcity); or exposure to natural disasters such as floods or droughts (requiring improvements in resilience).
Our customers often face all four of these challenges, ranging from inefficient and aging water distribution networks and energy-intensive or unreliable water and wastewater management 4 systems (requiring improvements in water affordability); droughts and pollution which limit the amount of water readily available (causing water scarcity); or exposure to natural disasters such as floods (requiring improvements in resilience).
This seasonality is dependent on factors such as customers' capital spending, as well as the effects of climate change and weather 10 conditions, including heavy flooding, prolonged droughts and fluctuations in temperatures or weather patterns, all of which can positively or negatively impact portions of our business.
This seasonality is dependent on factors such as customers' capital spending, as well as the effects of climate change and weather conditions, including heavy flooding, prolonged droughts and fluctuations in temperatures or weather patterns, all of which can positively or negatively impact portions of our business.
Additionally, we also provide solutions to enhance communications and efficiency, 4 improve safety and conserve resources to customers in the water sector. Delivering value in these areas creates significant opportunity for the Company.
Additionally, we also provide solutions to enhance communications and efficiency, improve safety and conserve resources to customers in the water sector. Delivering value in these areas creates significant opportunity for the Company.
Business Segments, Distribution and Competitive Landscape We have four reportable business segments that are aligned around the critical market applications they provide: Water Infrastructure, Applied Water, Measurement and Control Solutions and Integrated Solutions and Services.
Business Segments, Distribution and Competitive Landscape We have four reportable business segments that are aligned around the critical market applications they provide: Water Infrastructure, Applied Water, Measurement and Control Solutions and Water Solutions and Services.
For many of our products we have existing alternate sources of supply, or such sources may be readily available. We have experienced price volatility or supply constraints when materials have not been available from multiple sources.
For many of our products we have existing alternate sources of supply, or such sources may be readily available. We have experienced price volatility and supply constraints when materials have not been available from multiple sources.
We set ourselves apart in the industry by focusing on our communication network, innovation, new product development and service offerings that deliver tangible savings from efficiency of operating costs in meter reading and billing, as well as reduction of non-revenue water through improved meter accuracy, reduced theft and identification of leaks.
We set ourselves apart in the industry by focusing on our communication network, innovation, new product development and service offerings that deliver tangible savings from efficiency of operating costs in meter reading and billing, and reduction of non-revenue water through improved meter accuracy, reduced theft and identification of leaks.
We estimate the total addressable market size of the global water industry, excluding operational expenditures related to labor, energy, and chemicals, to be approximately $700 billion. Global water needs cannot be met without streamlining the water industry’s cost structure with technologies that fundamentally change the provision and management of water.
We estimate the total addressable market size of the global water industry, excluding operational expenditures related to labor, energy, and chemicals, to be approximately $750 billion. Global water needs cannot be met without streamlining the water industry’s cost structure with technologies that fundamentally change the provision and management of water.
Each Employee Network Group is sponsored and supported by one or more senior leaders and all groups are open to all employees regardless of any diversity attributes with which they may identify. Collectively, approximately 4,400 colleagues participate as members of our network groups.
Each Employee Network Group is sponsored and supported by one or more senior leaders and all groups are open to all employees regardless of any diversity attributes with which they may identify. Collectively, approximately 4,500 colleagues participate as members of our network groups.
Communications networks enable customers to automate and optimize meter reading, bill customers, monitor flow rates and detect and enable rapid response to changing and unsafe conditions. In short, they provide insight into operations and enable our customers to manage the entire scope of their operations remotely through their networks and to optimize their operational costs.
Our communications networks enable customers to automate and optimize meter reading, bill customers, monitor flow rates and detect and enable rapid response to changing and unsafe conditions. In short, our communications offerings provide insight into operations and enable our customers to manage the entire scope of their operations remotely through their networks and to optimize their operational costs.
We believe that our relations with our employees are good, including with our employees that are represented by labor unions and/or works councils. We conduct regular employee engagement surveys and listening sessions to understand our employees’ perspectives, identify areas for additional focus and establish action plans.
We believe that our relations with our employees are good, including with those represented by labor unions and/or works councils. We conduct regular employee surveys and listening sessions to understand our employees’ perspectives, identify areas for additional focus and establish action plans.
Customers Our business is not dependent on any single customer or a few customers, the loss of which would have a material adverse effect on our Company. No individual customer accounted for more than 5% of our consolidated revenues in 2023, 2022 or 2021.
Customers Our business is not dependent on any single customer or a few customers, the loss of which would have a material adverse effect on our Company. No individual customer accounted for more than 5% of our consolidated revenues in 2024, 2023 or 2022.
Diversity, Equity and Inclusion We are committed to a workplace that creates a sense of belonging for everyone: where all our colleagues feel involved, respected, valued, heard, connected, able to bring their authentic selves to the workplace, and empowered to do their best work.
Inclusion and Belonging We are committed to a workplace that creates a sense of belonging for everyone: where all our colleagues feel involved, respected, valued, heard, connected, able to bring their authentic selves to the workplace, and empowered to do their best work.
While we own, control or license a significant number of patents, trade secrets, proprietary information, trademarks, trade names, copyrights and other intellectual property rights which, in the aggregate, are of material importance to our business, management believes that our business, as a whole, as well as each of our business segments, is not materially dependent on any one intellectual property right or related group of such rights.
While we own, control or license a significant number of patents, trade secrets, proprietary information, trademarks, trade names, copyrights and other intellectual property rights which, in the aggregate, are important to our business, management believes that our business, as a whole, as well as each of our business segments, is not materially dependent on any one intellectual property right or related group of such rights.
The Transport application also includes sales and rental of specialty dewatering pumps, scalable products, and related equipment, technology, and services, which provide the safe removal or draining of groundwater and surface water from construction sites or other industrial sites and bypass pumping for the repair of aging utility infrastructure, as well as emergency water transport and removal during severe weather events.
The Water Solutions and Services segment also includes sales and rental of specialty dewatering pumps, scalable products, and related equipment, technology and services, which provide the safe removal or draining of groundwater and surface water from construction sites or other industrial sites, and bypass pumping for the repair of aging utility infrastructure, as well as emergency water transport and removal during severe weather events.
All of our businesses require various parts and raw materials, the availability and prices of which may fluctuate. Parts and raw materials commonly used in our products include motors, fabricated parts, castings, magnets, bearings, seals, batteries, printed circuit boards ("PCBs") and electronic components, including semiconductors, as well as commodities, including steel, brass, nickel, copper, aluminum and plastics.
All of our businesses require various parts and raw materials, the availability and prices of which may fluctuate. Parts and raw materials commonly used in our products include motors, fabricated parts, castings, magnets, bearings, seals, batteries, printed circuit boards ("PCBs") and electronic components, including semiconductors, as well as commodities, including steel, brass, nickel, copper, aluminum, rare earth minerals, and plastics.
Water Industry Supply Chain Business Strategy Our overarching strategy is to help customers solve the world's greatest water challenges with innovative products, services and solutions to deliver sustainable economic, social and environmental benefits. The following strategic pillars guide where and how we focus our efforts and resources to implement this strategy: • Drive Customer Success.
Water Industry Supply Chain Business Strategy Our overarching strategy is to help customers solve the world's greatest water challenges with innovative products, services and solutions to deliver sustainable economic, social and environmental benefits. The following strategic pillars guide where and how we focus our efforts and resources to implement this strategy: • Customer Centricity.
Accordingly, in 2021, the Company expanded its sustainability-linked compensation for all of our senior leaders, as well as a broader group of executives, through a special, one-time grant of performance share units with goals that are based on 5 of our strategically transformative 2025 Sustainability goals.
Accordingly, in 2021, the Company expanded its sustainability-linked compensation for our senior leaders, as well as a broader group of executives, through a special, one-time grant of performance share units with goals that are based on five of our strategically transformative 2025 Sustainability goals.
We anticipate that approximately 55% of the backlog at December 31, 2023 will be recognized as revenue during 2024. Research and Development Research and development (“R&D”) is a key foundation of our growth strategy and we focus on the design and development of products, services, solutions and application know-how that address anticipated customer needs and emerging trends.
We anticipate that approximately 50% of the backlog at December 31, 2024 will be recognized as revenue during 2025. Research and Development Research and development (“R&D”) is a key foundation of our growth strategy and we focus on the design and development of products, services, solutions and application know-how that address anticipated customer needs and emerging trends.
"Resilience" refers to the management of water-related risks, including climate change mitigation, and the resilience of water infrastructure. "Water scarcity" refers to the management of limited supplies of water due to climate change, overpopulation and pollution.
"Resilience" refers to the management of water-related risks, including climate change mitigation, and the resilience of water infrastructure. "Water scarcity" refers to the management of the limited supply of water due to climate change, overpopulation and pollution.
Capitalized Software We offer software as a product or service directly to external customers, which is included within "Other intangible assets, net" on our Consolidated Balance Sheets. As of December 31, 2023 and 2022 we had net capitalized software used in sales and services to external customers of $209 million and $213 million, respectively.
Capitalized Software We offer software as a product or service directly to external customers, which is included within "Other intangible assets, net" on our Consolidated Balance Sheets. As of December 31, 2024 and 2023 we had net capitalized software used in sales and services to external customers of $185 million and $209 million, respectively.
In addition to investments made in software development, which were capitalized, we incurred $232 million, $206 million, and $204 million as a result of R&D investment spending in 2023, 2022 and 2021, respectively. We have R&D and development capabilities around the world.
In addition to investments made in software development, which were capitalized, we incurred $230 million, $232 million, and $206 million as a result of R&D investment spending in 2024, 2023 and 2022, respectively. We have R&D and development capabilities around the world.
This problem of "non-revenue" water is a major financial challenge of many utilities globally, especially in developing markets where non-revenue water can represent 10% to 60% or more of net water produced. These and other challenges create opportunities for growth in the global water industry.
This problem of "non-revenue" water is a major financial challenge of many utilities globally, especially in developing markets where non-revenue water can represent 10% to 60% or more of net water produced and the treatment and energy costs to transport water is substantial. These and other challenges create opportunities for growth in the global water industry.
A direct sales approach, with key account management, is employed for large utilities and government programs. Macro growth drivers include increasing regulation, aging infrastructure and worldwide movement towards smart grid implementation and automated meter infrastructure (“AMI").
A direct sales approach, with key account management, is employed for large utilities and government programs. Macro growth drivers include increasing regulation, aging infrastructure and worldwide movement towards smart grid implementation and advanced metering infrastructure (“AMI").
In setting our 2025 Sustainability goals, we also aligned them with the United Nations Sustainable Development Goals ("UNSDGs"), not only to substantiate our contribution to achieving global objectives, but also to be transparent in our communication to stakeholders by providing details on our responsibility to build a sustainable future.
In setting our sustainability strategy and goals, we are aligned with the United Nations Sustainable Development Goals ("UNSDGs"), not only to substantiate our contribution to achieving global objectives, but also to be transparent in our communication to stakeholders by providing details on our responsibility to build a sustainable future.
We also provide analytical instrumentation used to measure and analyze water quality, flow and level in clean water, wastewater, outdoor water environments. Additionally, we offer software and services including cloud-based analytics, remote monitoring and data management, leak detection, condition assessment, asset management and pressure monitoring solutions. At the heart of our leading technologies are automation, data management and decision support.
We also provide analytical instrumentation used to measure and analyze water quality, flow and level in clean water, wastewater and outdoor water environments. Additionally, we offer software and services including cloud-based analytics, and remote monitoring and data management. At the heart of our leading technologies are automation, data management and decision support.
We seek to foster a high-impact culture - that is, one in which our colleagues are inspired to innovate, empowered to lead, and accountable to deliver – creating an environment that is mission-driven, people-centered, diverse, equitable and inclusive.
We seek to foster a high-impact culture – that is, one in which our colleagues are inspired to innovate, empowered to lead, and accountable to deliver – creating an environment that is purpose-driven, people-centered, respectful and inclusive.
Health and Safety Protecting the safety, health and well-being of our colleagues is one of our highest priorities. We have a strong Environmental, Health and Safety program that focuses on governance, risk reduction, training and education, and leadership accountability to provide our colleagues with safe and healthy workplaces.
Health and Safety Protecting the safety, health and well-being of our colleagues is one of our highest priorities and also regularly assessed in our business reviews. We have a strong Environmental, Health and Safety program that focuses on governance, risk reduction, training and education, and leadership accountability to provide our colleagues with safe and healthy workplaces.
We differentiate ourselves in the market by focusing on product and service performance, quality and reliability, innovation, speed to market with new or disruptive technologies and business models, application expertise, brand reputation, energy efficiency, product security, product life-cycle cost, timeliness of delivery, proximity of service centers, effectiveness of our distribution channels, price and customers' experience in doing business with us.
We differentiate ourselves in the market by focusing on product and service performance, quality and reliability, innovation, speed to market with new or disruptive technologies and business models, application expertise, brand reputation, energy efficiency, product security, product life-cycle cost, timeliness of delivery, effectiveness of our distribution channels, customers' experience and our global installed base.
As such, beginning total backlog, plus orders, minus revenues, will not equal ending total backlog due to contract adjustments, foreign currency fluctuations, and other factors. Typically, large projects require longer lead production cycles and deployment schedules, and delays occur from time to time. Total backlog was $5,088 million at December 31, 2023 and $3,605 million at December 31, 2022.
As such, beginning total backlog, plus orders, minus revenues, will not equal ending total backlog due to contract adjustments, foreign 10 currency fluctuations, and other factors. Typically, capital projects require longer lead production cycles and deployment schedules, and delays occur from time to time. Total backlog was $5,070 million at December 31, 2024 and $5,088 million at December 31, 2023.
ITEM 1. BUSINESS Business Overview Xylem is a leading global water technology company with 2023 revenues of $7.4 billion and approximately 23,000 employees worldwide. We design, manufacture and service highly engineered products and solutions across a wide variety of critical applications primarily in the water sector.
ITEM 1. BUSINESS Business Overview Xylem is a leading global water technology company with 2024 revenues of $8.6 billion and approximately 23,000 employees worldwide. We design, manufacture and service engineered products and solutions across a wide variety of critical applications primarily in the water sector.
We believe that our overall success and long-term growth depend, in part, on our continued ability to attract and retain diverse and highly skilled colleagues, including senior leaders and individuals with skills in our strategic competencies, such as engineering, innovation, digital technologies, sales excellence, sustainability and product and project management, as well as production, field service and technical services talent.
We believe that our overall success and long-term growth depend, in part, on our continued ability to attract and retain highly skilled colleagues, with a diverse variety of backgrounds, experiences, and perspectives, the reflect our customers and communities, including senior leaders and individuals with skills in our strategic competencies, such as engineering, innovation, digital technologies, sales excellence, sustainability and product and project management, as well as production, field service and technical services talent.
We believe that Xylem is strongest when we embrace the power of diversity, equity and inclusion to drive innovation, make us more competitive, positively impact employee and customer 13 satisfaction and the Company’s performance, better serve the communities in which we operate, create value for our shareholders and other stakeholders, and advance social equity.
We believe that Xylem is strongest when we embrace the power of belonging and inclusion to drive innovation, to make us more competitive, to positively impact employee and customer satisfaction and the Company’s performance, and to better serve the communities in which we operate, creating value for our shareholders and other stakeholders.
The industrial market includes original equipment manufacturers ("OEMs"), exploration and production firms, agricultural customers, and developers and managers of industrial facilities, such as electrical power generators, chemical manufacturers, machine shops, clothing manufacturers, marine, food and beverage companies and car washes. In the Applied Water segment, end markets vary widely and, as a result, specialized distribution partners are often preferred.
The industrial market includes original equipment manufacturers, exploration and production firms, agricultural customers, and developers and managers of industrial facilities, such as chemical manufacturers, marine, food and beverage companies, data centers and car washes. In the Applied Water segment, end markets vary widely and, as a result, specialized distribution partners are often preferred.
Water Infrastructure sells primarily through direct channels with remaining sales through indirect channels and service capabilities. Both utility and industrial facility customers increasingly require our teams’ global but locally proficient expertise to use our equipment in their specific applications.
Water Infrastructure sells through a combination of direct channels, indirect channels and service capabilities. Both utility and industrial facility customers increasingly require our teams’ global but locally proficient expertise to use our equipment in their specific applications.
Accordingly, in 2019, we evolved our approach to leverage sustainability in our decision-making toward long-term value creation for our shareholders, customers, employees and communities in which we operate and we announced an ambitious slate of 2025 Sustainability goals.
Accordingly, in 2019, we evolved our approach to leverage sustainability in our decision making toward long-term value creation for our shareholders, customers, employees and communities in which we operate and we announced a comprehensive slate of 2025 sustainability goals. Additionally, in 2024, we announced several new ambitious 2030 commitments.
Revenue (in millions) 2023 2022 2021 $ Amount % of Total $ Amount % of Total $ Amount % of Total United States $ 3,956 54 % $ 2,573 47 % $ 2,280 44 % Western Europe 1,655 22 % 1,411 26 % 1,414 27 % Emerging Markets (a) 1,182 16 % 1,074 19 % 1,066 21 % Other 571 8 % 464 8 % 435 8 % Total $ 7,364 $ 5,522 $ 5,195 (a) Emerging Markets includes results from the following regions: Eastern Europe, the Middle East and Africa, Latin America and Asia Pacific (excluding Japan, Australia and New Zealand, which are presented in "Other") Supply and Seasonality We have a global manufacturing and assembly footprint, with production facilities in Europe, North America, Latin America, Asia and the Middle East.
Revenue (in millions) 2024 2023 2022 $ Amount % of Total $ Amount % of Total $ Amount % of Total United States $ 4,862 57 % $ 3,956 54 % $ 2,573 47 % Western Europe 1,745 20 % 1,655 22 % 1,411 26 % Emerging Markets (a) 1,274 15 % 1,182 16 % 1,074 19 % Other 681 8 % 571 8 % 464 8 % Total $ 8,562 $ 7,364 $ 5,522 (a) Emerging Markets includes results from the following regions: Eastern Europe, the Middle East and Africa, Latin America and Asia Pacific (excluding Japan, Australia and New Zealand, which are included in "Other") Supply and Seasonality We have a global manufacturing and assembly footprint, with production facilities in Europe, North America, Latin America, Asia and the Middle East.
We prioritize employee engagement through regular, year-round discussions focused on performance feedback and development, opportunities to work on special projects, and volunteer activities involving Watermark, our corporate responsibility program, as well as Xylem Ignite, our youth engagement program.
We also provide on-demand/self-paced learning through our recently enhanced learning management system. We prioritize employee engagement through regular, year-round discussions focused on performance feedback and development, opportunities to work on special projects, and volunteer activities involving Watermark, our corporate responsibility program, as well as Xylem Ignite, our youth engagement program.
In 2023, we changed our approach in order to gather more frequent and specific feedback from our wired colleagues through shorter, pulse surveys that provide insights into employee engagement, customer focus, company culture and organizational effectiveness. In addition, we periodically conduct ad hoc surveys to gain insights into other relevant topics, including well-being, safety and professional development.
This includes specific feedback from our colleagues through short pulse surveys that provide insights into employee engagement, customer focus, company culture and organizational effectiveness. In addition, we periodically conduct ad hoc surveys to gain insights into other relevant topics, including well-being, safety and professional development.
Our commitment to fostering a global, diverse, equitable and inclusive environment starts with our Board of Directors and senior leadership team members, who represent a broad spectrum of backgrounds, identities and perspectives.
Our commitment to fostering this environment starts with our Board of Directors (“Board”) and senior leadership team, who represent a broad spectrum of backgrounds, identities and perspectives.
We offer Employee Network Groups, which are voluntary, employee-led groups formed by people with a common affinity, such as gender, race, sexual orientation and gender identity, military status or other attributes.
All of our hiring, retention and promotion decisions are merit-based. We offer Employee Network Groups, which are voluntary, employee-led groups formed by colleagues with a common affinity, such as gender, race, sexual orientation and gender identity, military status or other attributes.
Additional information about the impact of government regulations on Xylem’s business is included in Item 1A. “Risk Factors” under the headings Risks Related to Our Business and Operations, Risks Related to Financial and Tax, and Risks Related to Legal and Regulatory. Sustainability At Xylem, sustainability is at the center of who we are and what we do.
Additional information about the impact of government regulations on Xylem’s business is included in Item 1A. “Risk Factors” under the headings Risks Related to Geopolitical, Macroeconomic and Industry Factors, Risks Related to Our Business and Operations, Risks Related to Financial and Tax, and Risks Related to Legal and Regulatory.
Setting us apart is a unique set of global assets that include: • Market-leading brands, some of which have been in use for more than 100 years • Global distribution networks consisting of direct sales forces and independent channel partners serving a diverse customer base in approximately 150 countries • A substantial global installed base across the water cycle that provides for steady recurring and replacement revenue • A strong history of bringing innovative products, solutions, and business models to customers • A dedicated, experienced, qualified and technologically advanced group of employees focused on safely satisfying our customers' requirements in the water and energy spaces • A strong financial position and cash generation profile that enables us to fund strategic organic and inorganic growth initiatives, and consistently return capital to shareholders • A demonstrated commitment to corporate governance, social and environmental sustainability and delivering a positive impact to our customers, communities and employees Our Industry Our vision is to create a world in which water issues are no longer a constraint to health, prosperity and sustainable development.
Setting us apart is a unique set of global assets that include: • Market-leading brands, some of which have been in use for more than 100 years • Global distribution networks consisting of direct sales forces and independent channel partners serving a diverse customer base in approximately 150 countries • A substantial global installed base of products and solutions across the water cycle that provides for steady parts, replacement and service revenue • A strong history of providing innovative products, solutions, services and business models to customers • A dedicated, experienced, qualified and technologically advanced group of employees focused on safely satisfying our customers' requirements to transport, treat or measure clean water or wastewater and measure energy usage • A strong financial position and cash generation profile that enables us to fund strategic organic and inorganic growth initiatives, and consistently return capital to shareholders • A demonstrated commitment to corporate governance, social and environmental sustainability and delivering a positive impact to our customers, communities and employees Except as otherwise indicated or unless the context otherwise requires, “Xylem,” “we,” “us,” “our” and “the Company” refer to Xylem Inc. and its subsidiaries.
Labor Relations Xylem recognizes the work of labor organizations, works councils and trade unions to better the lives of working people. Accordingly, Xylem respects the legal rights of its employees to join or to refrain from joining such organizations.
Our Employee Network Groups support the development of our colleagues by offering formal and informal leadership opportunities. 14 Labor Relations Xylem recognizes the work of labor organizations, works councils and trade unions to better the lives of working people. Accordingly, Xylem respects the legal rights of its employees to join or to refrain from joining such organizations.
Even in developed countries with sufficient clean water supply, existing water supply infrastructure is aging and often inefficient. In the U.S., deteriorating pipe systems, theft or inaccurate meters result in approximately one out of every six gallons of treated water being lost prior to reaching the end customer.
In the U.S., deteriorating pipe systems, theft or inaccurate meters result in approximately one out of every six gallons of treated and transported water being lost prior to reaching the end customer.
Population growth and urbanization, climate and regulation on energy efficiency, and digitalization enabling self-service and preventive maintenance are macro growth drivers of these markets, driving the need for housing, food, community services and retail goods within growing city centers. 8 Competition in the Applied Water segment focuses on brand reputation, application expertise, product delivery, performance and energy efficiency, quality and reliability, and price.
Population growth and urbanization, climate and regulation on energy efficiency, and digitalization enabling self-service and preventive maintenance are macro growth drivers of these markets, driving the need for housing, food, community services and retail goods within growing city centers.
We have approximately 9,300 employees in the U.S., 7,800 in Western Europe, and 4,700 in the Emerging Markets, with the remaining 1,000 in other geographies in which we operate. Approximately 11% of our U.S. colleagues are represented by labor unions. In certain foreign countries, our colleagues are represented by work councils.
We have approximately 9,200 employees in the U.S., 7,900 in western Europe, and 5,200 in the emerging markets, with the remaining 900 in other geographies in which we operate. Approximately 12% of our U.S. colleagues are represented by labor unions. Outside the United States, certain of our colleagues are represented by work councils.
As the portfolio of our patents, patent applications and license agreements has evolved over time, we do not expect the expiration of any specific patent to have a material adverse effect on our financial position or results of operations. 11 Governmental Regulations Environmental Regulations Our global operations are subject to various laws and regulations governing the environment and climate change, such as those promulgated by the U.S.
As the portfolio of our patents, patent applications and license agreements has evolved over time, we do not expect the expiration of any specific patent to have a material adverse effect on our financial position or results of operations.
We have a long history of innovation and we are focusing on the powerful capabilities of smart technology, integrated management and data analytics. We believe our financial performance and commitment to sustainability go hand in hand. Xylem approaches business sustainability as a way to generate economic value while also creating value for society, thus meeting the needs of both.
We have a long history of innovation, and we are focusing on the powerful capabilities of smart technology, integrated management and data analytics. We believe our financial performance and commitment to sustainability go hand in hand.
Based on historical employee engagement survey feedback, we have augmented our holistic well-being strategies, including the expansion of our Employee Assistance Program support across the globe and mental health awareness training to our people leaders.
Based on employee survey feedback, we regularly augment our holistic well-being strategies, including the expansion of our Employee Assistance Program support across the globe, mental health awareness training and additional mental health resources as well as student loan repayment support.
In 2023, approximately 89% of our colleagues participated in employee-led volunteerism, including through Watermark, enhancing the Company’s commitment to employee development, retention, recruiting and collaboration in the communities where we live and work. Our Employee Network Groups foster inclusion and support the development of our colleagues by offering formal and informal leadership opportunities and creating visibility for colleagues.
In 2024, approximately 79% of our colleagues participated in employee-led volunteerism, including through Watermark, enhancing the Company’s commitment to employee development, retention, recruiting and collaboration in the communities where we live and work.
Our ability to deliver innovative product offerings has enabled us to compete effectively, to cultivate and maintain customer relationships and to serve and expand into many niche and new markets. Our key competitors in the Applied Water segment include Grundfos, Wilo SE, Pentair plc and Franklin Electric Co., Inc.
Our ability to deliver innovative product offerings has enabled us to compete effectively, to cultivate and maintain customer relationships and to serve and expand into many niche and new markets.
We compete by offering a wide variety of innovative and high-quality products, coupled with world-class application expertise. We believe our distribution through well-established channels and our reputation for quality significantly enhance our market position.
Competition in the Applied Water segment focuses on brand reputation, application expertise, product delivery, performance and energy efficiency, quality and reliability, and price. We compete by offering innovative and high-quality products, coupled with world-class application expertise. We believe our distribution through well-established channels and our reputation for quality significantly enhance our market position.
Compensation and Benefits Xylem strives to provide our colleagues with competitive compensation and benefits and takes a total rewards approach that integrates programs for compensation, benefits, recognition and work-life balance.
Compensation and Benefits Xylem strives to provide our colleagues with competitive compensation and benefits offerings and takes a total rewards approach that integrates programs for compensation, benefits, recognition and well-being. Individual program components may differ by country, role or level.
The progress towards these goals can be found in our 2022 Sustainability Report, which is aligned to the Global Reporting Initiative and the Sustainability Accounting Standards Board frameworks.
Our sustainability strategy and an update on our progress towards achieving our goals are outlined in our annual Sustainability Report, which is aligned with the Global Reporting Initiative and the Sustainability Accounting Standards Board frameworks.
The market for individuals with these competencies is increasingly competitive, but we believe our culture is a differentiator and therefore important to our ability to attract and retain employees. As of December 31, 2023, Xylem employed approximately 23,000 employees worldwide.
The market for individuals with these competencies remains competitive, but we believe our culture and purpose are differentiators in attracting and retaining talent. As of December 31, 2024, Xylem employed approximately 23,000 employees worldwide.
Additionally, during the first quarter of 2021, we issued a special grant to certain employees of less than 0.1 million ESG performance share units. Human Capital Our colleagues around the globe are united in a shared purpose – to solve water – and, as such, are key to the Company’s success and execution of our strategy.
Additionally, during the first quarter of 2021, we issued a special grant to certain employees of less than 0.1 million ESG performance share units.
Management does not believe, based on current circumstances, that compliance costs pursuant to such regulations will have a material adverse effect on our financial position or results of operations. However, the effect of future legislative or regulatory changes could be material to our financial condition or results of operations.
While environmental and climate change laws and regulations are subject to change, such changes can be difficult to predict reliably and the timing of potential changes is uncertain. We do not believe, based on current circumstances, that compliance costs pursuant to such regulations will have a material adverse effect on our financial position or results of operations.
Key strategies for becoming a more diverse organization—and incorporating broader experiences, skill sets, and perspectives into our work— include expanding sourcing channels for diverse talent through external diversity partnerships and affiliations, and prioritizing diverse candidate slates when filling professional roles to increase the pool of qualified candidates considered.
We believe that the diversity of backgrounds, experiences and perspectives of our Board and senior leadership team enhances our ability to evolve and execute our business strategy and to attract and retain the best talent. 13 Key strategies anchoring our efforts to become a more innovative and inclusive organization – and incorporate broader experiences, backgrounds, skill sets, and perspectives into our work – include expanding sourcing channels and prioritizing candidate slates that include a diversity of backgrounds, experiences, and perspectives, when filling professional roles to increase the pool of qualified candidates considered.
Environmental Protection Agency and similar state and foreign environmental agencies, including related to the discharge of pollutants and the management and disposal of hazardous substances. While environmental and climate change laws and regulations are subject to change, such changes can be difficult to predict reliably and the timing of potential changes is uncertain.
Governmental Regulations Environmental Regulations Our global operations are subject to various laws and regulations governing the environment and climate change, such as those promulgated by the U.S. Environmental Protection Agency and similar state and foreign environmental agencies, including related to the discharge of pollutants and the management and disposal of hazardous substances.
We continue to expand our long-term incentive program to reach deeper in the organization to recognize key talent and top performers and attract and retain digital talent. We have heard from many of our office-based colleagues that they greatly value the increased flexibility and autonomy that come with remote working.
We continue to expand our long-term incentive program to reach deeper in the organization to recognize key talent and top performers, and to attract and retain digital talent. We continue to balance in-person, remote and hybrid work based on business needs to attract top talent.
Our Pure Technologies equipment and services are also well positioned in the leak detection sector, which is attracting considerable attention as aging infrastructure and increased regulatory scrutiny exert pressure on operating budgets. Our key competitors in the Measurement and Control Solutions segment include Itron, Badger Meter, Landis+Gyr, Neptune (Roper), Kamstrup, Echologics (Mueller Water Products), Hach (Veralto Corporation) and Teledyne.
Our key competitors in the Measurement and Control Solutions segment include Badger Meter, Echologics (Mueller Water Products), Hach (Veralto Corporation), Itron, Kamstrup, Landis+Gyr, Neptune (Roper), and Teledyne.
These programs span across all levels, businesses and functions, including entry-level talent recruitment programs, development programs for emerging leaders, people leader training and executive leadership development. We also provide on-demand/self-paced learning through our learning management systems.
We have a broad range of talent development programs and experiences to facilitate the continued professional growth and leadership development of our colleagues and to strengthen our succession plans. These programs span across all levels, businesses and functions, including entry-level talent recruitment programs, development programs for emerging leaders, people leader training and executive leadership development.
Available Information We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC.
We work to establish favorable employment conditions that promote positive relationships between our colleagues and their managers, facilitate communication among our colleagues and support their development. Available Information We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC.
We continue to be dedicated to environmental and sustainability programs to minimize the use of natural resources, reduce the utilization and generation of hazardous materials from our processes and remediate identified environmental concerns. We are currently engaged in site investigations and remediation activities to address environmental cleanup from past operations at a number of current and former manufacturing facilities.
However, the effect of future legislative or regulatory changes could be material to our financial condition or results of operations. We continue to be dedicated to environmental and sustainability programs to minimize the use of natural resources, reduce the utilization and generation of hazardous materials from our processes, and remediate identified environmental concerns.
Measurement and Control Solutions Measurement and Control Solutions develops advanced technology solutions that enable intelligent use and conservation of critical water and energy resources.
Our key competitors in the Applied Water segment include Franklin Electric Co., Inc, Grundfos, Pentair plc, and Wilo SE. 8 Measurement and Control Solutions Measurement and Control Solutions develops advanced technology solutions that enable intelligent use, optimization and conservation of critical water and energy resources.
Our planet faces serious water challenges. Less than 1% of the total water available on earth is fresh water, and these supplies are threatened by factors such as the draining of aquifers, increased pollution and the effects of climate change.
Less than 1% of the total water available on earth is fresh water, and the supply is threatened by factors such as the draining of aquifers, increased pollution and the effects of climate change. Demand for fresh water is rising rapidly due to population growth, industrial expansion, and increased agricultural development, with consumption estimated to double every 20 years.
We do not anticipate these liabilities will have a material adverse effect on our consolidated financial position or results of operations. At December 31, 2023, we had estimated and accrued $4 million related to environmental matters.
We are currently engaged in site investigations and remediation activities to address environmental cleanup from past operations at a number of current and former manufacturing facilities. We do not 11 anticipate these liabilities will have a material adverse effect on our consolidated financial position or results of operations.
Several trends are increasing demand for this application expertise: (i) the increase in both the type and amount of contaminants found in the water supply, (ii) increasing environmental regulations, (iii) the need to increase system resilience and efficiencies to optimize energy and other operational costs, (iv) the retirement of an aging water industry workforce that has not been systematically renewed at utilities and other end-user customers, and (v) the build-out of water infrastructure in the emerging markets.
Several trends are increasing demand for this application expertise: (i) the need for efficient transport and treatment solutions due to the increase in water scarcity, (ii) the increase in both the type and amount of contaminants found in the water supply, (iii) the need to increase system resilience and efficiencies due to aged infrastructure and affordability, (iv) increasing environmental regulations, and (v) the need to reduce carbon emissions generated from transporting and treating water.
To better support our colleagues in a more flexible workplace, we also provide high-touch global onboarding and leverage collaboration technologies. 14 Career Development We are committed to enhancing colleagues’ capabilities needed for the Company to win in the marketplace. We also are focused on internal talent mobility across functions, geographies and businesses.
While the approaches differ by country and role, for office-based colleagues, we generally have a hybrid working approach. To support our colleagues with this working approach, we provide high-touch global onboarding and continue to enhance collaboration technologies. Career Development We are committed to enhancing colleagues’ capabilities needed for the Company to win in the marketplace.
We are currently conducting a pay equity assessment based on gender and U.S. minority classifications and will use the results of this assessment to continue to support our commitment to equitable pay by role.
Our compensation programs are driven by our commitment to fair and equitable compensation as well as alignment to a pay-for-performance culture. We conduct an annual pay equity assessment based on gender and U.S. minority classifications and make pay adjustments as appropriate based on the results.
We have differentiated market positions in core application areas including transport, treatment, dewatering, analytic instrumentation and measurement, smart metering, infrastructure assessment services, digital software solutions for utilities, industrial processes, outsourced water services, filtration and separation, applied water systems for commercial and residential business services, disinfection, wastewater treatment, and anodes.
We have differentiated market positions in core applications including transport and dewatering, process water and wastewater treatment, analytics, smart metering, digital software solutions and comprehensive services.
Applied Water Applied Water encompasses the uses of water to serve a diverse set of customers in the commercial, residential and industrial end markets.
Our key competitors in the Water Infrastructure segment include De Nora, Grundfos, KSB Inc., ProMinent, Sulzer Ltd., Trojan (Veralto Corporation), and Veolia. Applied Water Applied Water encompasses the uses of water to serve a diverse set of customers in the building solutions and industrial water end markets.
Our Vision and Values Our vision and values provide the foundation for how we want to grow as a company, as well as the inspiration for how we want to behave as industry leaders and ethical corporate citizens. Our vision is to create a world in which water issues are no longer a constraint to health, prosperity, and sustainable development.
Our Purpose and Values Our purpose is to empower our customers and communities to build a more water-secure world and, together with our values, provides the foundation for how we want to grow as a company and behave as an industry leader and as ethical corporate citizens.
Demand for fresh water is rising rapidly due to population growth, industrial expansion, and increased agricultural development, with consumption estimated to double every 20 years. It is expected that there will be a 40% gap between global water supply and demand by 2030.
It is expected that there will be a 40% gap between global water supply and demand by 2030. Even in developed countries with sufficient clean water supply, existing water supply infrastructure is aging and often inefficient.
We devote our technology, time and talent to advance the smarter use of water and our colleagues are guided by our core values: • Respect for each other, for diversity of people and opinions, for the environment; • Responsibility for our words and actions, for customer satisfaction, for giving back to our communities; • Integrity for acting ethically, for doing what we say we’ll do, for having the courage to communicate with candor; and • Creativity for thinking beyond boundaries, for anticipating tomorrow’s challenges, for unlocking growth potential.
We devote our technology, time and talent to advance the smarter use of water in service of our purpose and our colleagues are guided by our core values, respect, responsibility, integrity and creativity.
Through our continuous improvement program, we nurture and grow a continuous improvement mindset throughout all areas of the Company. We have a broad range of talent development programs and experiences to facilitate the continued professional growth and leadership development of our colleagues and to support our succession plans.
We also are focused on internal talent movement across functions, geographies and businesses. Through our high-impact culture and continuous improvement program, we nurture and grow a continuous improvement and learning mindset throughout all areas of the Company.
("Evoqua") acquisition on these targets. 12 In 2023, we entered into a five-year revolving credit facility (the "2023 Credit Facility") with Citibank, N.A., as Administrative Agent, and a syndicate of lenders.
To further enhance our understanding and management of risks and opportunities related to sustainability, we are committed to continuous progress aligned with the core principles of the United Nations Global Compact, CEO Water Mandate, Race to Zero, Women’s Empowerment Principles, and the Human Rights Campaign Foundation’s Global Business Coalition, among others. 12 In 2023, we entered into a five-year revolving credit facility (the "2023 Credit Facility") with Citibank, N.A., as Administrative Agent, and a syndicate of lenders.
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We seek to partner with customers to meet their stakeholders’ needs through our broad portfolio of products, services and solutions. We are focused on several key areas, beginning with making it easier for customers to do business with Xylem and access the full range of our capabilities.
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Our Industry Our vision is to create a world in which water issues are no longer a constraint to health, prosperity and sustainable development. Our purpose is to empower our customers and communities to build a more water secure world. Our planet faces serious water challenges.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur operations, supply chain and sales both within the U.S. and internationally are subject, in varying degrees, to risks and uncertainties inherent in doing business globally, including: • economic nationalism, populism, protectionism, anti-global sentiment and changes in trade protection measures, including embargoes, tariffs and other trade barriers, import and export regulations, licensing requirements, and new and existing domestic content requirements for projects receiving governmental funding; • instability of and impacts from the evolving global geopolitical environment, including concerning the relationships among the U.S., European Union, Middle East, Russia, China, Taiwan, or other foreign countries, and the international community at large; • threat, outbreak, uncertainty or escalation of terrorism, political instability, insurrection, war or other armed conflict, including between Russia and Ukraine and the Middle East, and the potential for regional escalation; • threat or outbreak of epidemics, global health crises or pandemics, and related uncertainties; • changes in tax laws and potential negative consequences from the interpretation, application and enforcement by governmental tax authorities of tax laws and policies, as well as changes in other laws and regulations or how such provisions are interpreted or administered; 16 • disruptions in global or regional supply chains, our operations, or those of third parties upon which we rely, including due to labor disruptions, supply shortages, and freight and logistics challenges; • unanticipated regulatory changes or unfavorable circumstances arising from host country laws or regulations, including those related to infrastructure and data transmission, security and privacy; • theft, compromise or misappropriation of our technology, intellectual property or data; • shocks to the global financial system, including due to the outbreak or threat of war, armed conflict, other geopolitical conflicts, terrorism or global health crises, the effects of climate change, or other idiosyncratic events; • foreign currency exchange rate fluctuations, restrictions on repatriation of earnings or payment of distributions, dividends, loans or advances to us by foreign subsidiaries; • global or regional safety and security considerations; and • increased costs and risks in developing, staffing and simultaneously managing our many global operations as a result of distance, remote work arrangements, language and cultural differences.
Biggest changeOur operations, supply chain and sales both within the U.S. and internationally are subject, in varying degrees, to risks and uncertainties inherent in doing business globally, including: • nationalism, populism, protectionism, anti-global sentiment and changes in trade protection measures, including the imposition of increased or new embargoes, tariffs and other trade barriers, import and export regulations or restrictions, licensing requirements, domestic content requirements, and governments’ countermeasures in response; • uncertainty, volatility and impacts from the evolving global geopolitical environment involving the U.S. federal government and other countries’ governments, including the relationships among the U.S., European Union, Middle East, Russia, China, Taiwan, or other foreign countries, and the international community at large; • threat, outbreak, uncertainty or escalation of terrorism, political instability, insurrection, war, other armed conflict, including between Russia and Ukraine, and in the Middle East, with the potential for regional escalation, and other global safety and security concerns; • threat or outbreak of epidemics, global health crises or pandemics, and related uncertainties; • impacts from significant shifts in U.S. immigration policy, such as a tightened labor market and inflation; 16 • changes in tax laws and potential negative consequences from the interpretation, application and enforcement by governmental authorities of tax laws and policies, as well as changes in other laws, regulations and policies or how they are interpreted or administered; • disruptions in global or regional supply chains, our operations, or those of third parties upon which we rely, including due to labor disruptions, supply shortages, increased or new tariffs and freight and logistics challenges; • unanticipated regulatory changes or unfavorable circumstances arising from U.S. or host country laws, regulations or policies, including those related to water quality, the environment and energy efficiency, infrastructure and data transmission, security, privacy, and artificial intelligence; • theft, compromise, misappropriation or challenges in protecting our technology, intellectual property or data; and • shocks to the global financial system, including due to the outbreak or threat of war, armed conflict, other geopolitical conflicts, terrorism or global health crises, the effects of climate change, or other idiosyncratic events.
A cybersecurity Incident or other damage or disruption to information technology and communications networks or involving our connected products and services may have adverse effects on us, our customers or third parties on which we rely, including: interference with operations and services, potentially with public health and safety risks involving certain of our customers; disruption of production, supply chain, shipments, billing, collections and customer service; disruption to data analytics; disruption to remote monitoring and control of operational systems; unauthorized access, disclosure, misappropriation, misuse, destruction, compromise or theft of our financial, operational or other proprietary information, including intellectual property and trade secrets, or data pertaining to our employees, customers or suppliers; damage to employee, customer and business partner relationships; recall of our products; legal claims, proceedings or regulatory enforcement actions, and fines or penalties; increased costs to prevent, respond to or mitigate cybersecurity incidents; and damage our brands and reputation.
A cybersecurity incident or other damage or disruption to information technology and communications networks, or involving our connected products and services, may have adverse effects on us, our customers or third parties on which we rely, including: interference with operations and services, potentially with public health and safety risks involving certain of our customers; disruption of production, supply chain, shipments, billing, collections and customer service; disruption to data analytics; disruption to remote monitoring and control of operational systems; unauthorized access, disclosure, misappropriation, misuse, destruction, compromise or theft of our financial, operational or other proprietary information, including intellectual property and trade secrets, or data pertaining to our employees, customers or suppliers; damage to employee, customer and business partner relationships; recall of our products; legal claims, proceedings or regulatory enforcement actions, and fines or penalties; increased costs to prevent, respond to or mitigate cybersecurity incidents; and damage to our brands and reputation.
Failure of our products and services to meet performance guarantees may require additional engineering, replacement of parts and equipment and frequent replacement of consumables, monetary reimbursement to a customer, or could otherwise increase our costs or result in liability to our customers.
Failure of our products and services to meet performance guarantees may require additional engineering, replacement of parts and equipment, frequent replacement of consumables or monetary reimbursement to a customer, or could otherwise increase our costs or result in liability to our customers.
Defects, inadequacies or quality issues in the manufacture, design, software, security or service of our products (including finished goods, parts or components that we source from third parties), unanticipated or improper use, or inadequate disclosure of risks relating to the use of our products, could result in product safety, product security, regulatory or environmental risks, including personal injury, death, and property or environmental damage.
Defects, inadequacies or quality issues in the manufacture, design, software, security or service of our products (including finished goods, parts or components that we source from third parties), unanticipated or improper use, or inadequate disclosure of risks relating to the use of our products, could result in product safety, product security, regulatory or environmental risks, personal injury, death, and property or environmental damage.
The unpredictable nature, frequency, severity and changes in weather events, patterns and related conditions, such as heavy flooding, prolonged droughts, wildfires, rainfall amounts and intensity, sea levels, and fluctuations in temperatures, including as a result of climate change, can positively or negatively impact portions of our business and therefore result in volatility in our financial results.
The unpredictable nature, frequency, and severity of, and changes in weather events, patterns and related conditions, such as heavy flooding, prolonged droughts, wildfires, rainfall amounts and intensity, sea levels, and fluctuations in temperatures, including as a result of climate change, can positively or negatively impact portions of our business and therefore result in volatility in our financial results.
Additionally, we are subject to foreign exchange translation risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. Dollar. The translation risk is primarily concentrated in the exchange rate between the U.S. Dollar and the Euro, British Pound, Canadian Dollar, Chinese Yuan, Australian Dollar, Indian Rupee, and Swedish Krona. As the U.S.
Additionally, we are subject to foreign exchange translation risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. Dollar. The translation risk is primarily concentrated in the exchange rate between the U.S. Dollar and the Euro, British Pound, Chinese Yuan, Canadian Dollar, Australian Dollar, Swedish Krona, and Indian Rupee. As the U.S.
For example, following an examination regarding aspects of the reorganization of our European business that occurred in 2013, the Swedish tax authority issued a tax assessment to Xylem’s Swedish subsidiary in 2019, which we are appealing as further described in Note 7, “Income Taxes.” This examination as well as other examinations 26 can result in increased tax assessments, and settlement or litigation about the assessments and final resolution could be unfavorable to Xylem.
For example, following an examination regarding aspects of the reorganization of our European business that occurred in 2013, the Swedish tax authority issued a tax assessment to Xylem’s Swedish subsidiary in 2019, which we are appealing as further described in Note 7, “Income Taxes.” This examination as well as other examinations can result in increased tax assessments, and settlement or litigation about the assessments and final resolution could be unfavorable to Xylem.
To mitigate reliability and cybersecurity risks related to our enterprise and connected products and services, we maintain relevant policies, standards, procedures and technologies that are applicable to all Xylem employees and contractors, including: patching; passwords; network and data access, including requirements and rights; business continuity and disaster recovery; monitoring for external and insider risks; obsolescence or end-of-life of operating technologies or applications’ operating systems; IT general computing controls; secure software development.
To mitigate reliability and cybersecurity risks related to our enterprise and connected products and services, we maintain relevant policies, standards, procedures and technologies that are applicable to all Xylem employees and contractors, including: patching; passwords; network and data access, including requirements and rights; business continuity and disaster recovery plans; monitoring for external and insider risks; obsolescence or end-of-life of operating technologies or applications’ operating systems; IT general computing controls; and secure software development.
Developments such as the adoption of new environmental or climate change laws and regulations, enforcement actions or litigation, discovery of previously unknown or more extensive contamination conditions, obsolescence of our products, interruption or suspension of our operations, an inability to recover costs associated with any such developments, or the financial insolvency of other responsible parties, could have material adverse effects on our business, financial condition, cash flows, results of operations, and reputation.
Developments such as the adoption of new environmental or 27 climate change laws and regulations, enforcement actions or litigation, discovery of previously unknown or more extensive contamination conditions, obsolescence of our products, interruption or suspension of our operations, an inability to recover costs associated with any such developments, or the financial insolvency of other responsible parties, could have material adverse effects on our business, financial condition, cash flows, results of operations, and reputation.
Geopolitical changes in China-Taiwan relations could disrupt the operations of several companies in Taiwan that are critical to our complex global supply chain for semiconductors (“chips”) and other electronic components. Such changes could have significant negative effects on the global semiconductor industry and could adversely affect our ability to manufacture our digitally-enabled products, such as pumps, controllers and smart meters.
Geopolitical changes in China-Taiwan relations could disrupt the operations of several companies in Taiwan that are critical to the global supply chain for semiconductors (“chips”) and other electronic components. Such changes could have significant negative effects on the global semiconductor industry and could adversely affect our ability to manufacture our digitally-enabled products, such as pumps, controllers and smart meters.
Workplace accidents or near-accidents, product-related accidents, or the failure to follow our own or our customers’ safety policies could also damage our reputation or our customers’ perception of our safety record, which could have a material adverse impact on demand for our products and services, result in additional costs to our business, the loss of customers or litigation against us, or increase government or regulatory oversight over us.
Workplace or product-related accidents or near-accidents, or the failure to follow our own or our customers’ safety policies could also damage our reputation or our customers’ perception of our safety record, which could have a material adverse impact on demand for our products and services, result in additional costs to our business, the loss of customers or litigation against us, or increase government or regulatory oversight.
Significant negative industry or economic trends, disruptions to our business or our customers’ business, inability to effectively integrate or scale acquired businesses, increases in cost of capital, unexpected significant changes or planned changes in use of the assets, failure of the FCC to renew radio spectrum licenses, and divestitures and market capitalization declines may cause impairment of our goodwill and other indefinite-lived intangible assets.
Significant negative industry or economic trends, disruptions to our business or our customers’ business, inability to effectively integrate or scale acquired businesses, increases in cost of capital, unexpected significant changes or planned changes in use of the assets, failure of the FCC to renew radio spectrum licenses, and divestitures and market capitalization declines may cause 25 impairment of our goodwill and other indefinite-lived intangible assets.
Our ability to achieve any stated commitment, goal, target, or objective is subject to factors and conditions, many of which are outside of our control, including the extent to which energy generated from renewable resources is available from the grid, the pace of changes in technology, the availability of requisite financing, and the availability of suppliers that can meet our sustainability and other standards.
Our ability to achieve any stated commitment, goal, target, or objective is subject to varied factors and conditions, many of which are outside of our control, including the extent to which energy generated from renewable resources is available from the grid, the pace of changes in technology, the availability of requisite financing, and the availability of suppliers that can meet our sustainability and other standards.
Many of our customers also have safety performance requirements that we must meet to be allowed access to their sites to perform our services, install our products and execute projects. Risks arising from unsafe products or performance by our employees include, among other things, delays in or suspension of site access to service or timely deliver our products.
Many of our customers also have safety performance requirements that we must meet to be allowed access to their sites to perform our services, install our products and execute projects. Risks arising from unsafe products or 21 performance by our employees include, among other things, delays in or suspension of site access to service or timely deliver our products.
While we attempt to provide our customers with measures to safeguard our products and services from cybersecurity threats, the potential for a cybersecurity incident remains. In addition, certain of our customers continue to use digitally enabled products that we designed, manufactured and sold at a time when current security features were not available.
While we attempt to provide our customers with reasonable measures to safeguard our products and services from cybersecurity threats, the potential for a cybersecurity incident remains. In addition, certain of our customers continue to use digitally enabled products that we designed, manufactured and sold at a time when current security features were not available.
The regulations that govern our use of radio spectrum may change or new products may be allowed under the regulations that cause interference with our products, which may require us to modify our products or seek new partnerships. In addition, we may not be able to secure suitable partners for co-development of products.
The regulations that govern our use of radio spectrum may change or new products may be allowed under the regulations that cause interference with our products, which may require us to modify our products or seek new partnerships. In addition, we may not be able to secure suitable partners for co-development 23 of products.
We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes, including unrecognized tax benefits; however, developments in an audit or litigation could materially and adversely affect us.
We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes, including unrecognized tax benefits; however, unanticipated developments in an audit or litigation could materially and adversely affect us.
Bribery Act of 2010 and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other persons for the purpose of obtaining or retaining business.
Bribery Act of 2010 and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper 26 payments to government officials or other persons for the purpose of obtaining or retaining business.
A significant portion of our products and offerings in our Measurement and Control Solutions segment are affected by the availability, regulation of and interference with radio spectrum that we use. A significant portion of the offerings in our Measurement and Control Solutions segment use radio spectrum, which is subject to government regulation.
A significant portion of our products and offerings in our Measurement and Control Solutions segment are affected by the availability, regulation of and interference with radio spectrum that we use. A significant portion of the offerings in our Measurement and Control Solutions segment use radio spectrum that is subject to government regulation.
We could also be liable or incur reputational damage if we transport such materials, generate hazardous materials or wastes, or merely arrange for their transportation, disposal, or treatment, and they are subsequently released or cause harm.
We could also be liable or incur reputational damage if we transport such materials, generate hazardous materials or wastes, or merely arrange for their transportation, disposal, or treatment if they are subsequently released or cause harm.
Any recovery under our insurance policies may not offset the lost sales, increased costs, or longer term loss of suppliers, sales or customers that we may experience as a result of a disruption.
Any recovery under our insurance policies may not fully offset the lost sales, increased costs, or longer-term loss of suppliers or customers that we may experience as a result of a disruption.
As of December 31, 2023, the net carrying value of our goodwill and other indefinite-lived intangible assets totaled approximately $8 billion. In accordance with generally accepted accounting principles, we evaluate these assets for impairment at least annually, or more frequently if changes in events or circumstances indicate it is more likely than not that a potential impairment could exist.
As of December 31, 2024, the net carrying value of our goodwill and other indefinite-lived intangible assets totaled approximately $8 billion. In accordance with generally accepted accounting principles, we evaluate these assets for impairment at least annually, or more frequently if changes in events or circumstances indicate it is more likely than not that a potential impairment could exist.
In addition, any violation could result in 27 substantial fines, sanctions and/or civil penalties, damage to our reputation and could materially and adversely affect our business, results of operations or financial condition.
In addition, any violation could result in substantial fines, sanctions and/or civil penalties, damage to our reputation and could materially and adversely affect our business, results of operations or financial condition.
We also need to continue to develop qualified talent to support business growth and robust succession plans, both of which are 22 critical to our long-term success.
We also need to continue to develop qualified talent to support business growth and robust succession plans, both of which are critical to our long-term success.
We incur, and expect to continue to incur, costs to comply with applicable requirements, including: i) increased operating and capital expenditures related to our facilities and equipment; ii) increased research and development costs, including with respect to the design or re-design of our products in order to conform to changing emissions and efficiency standards and regulations, and iii) costs for tools, talent and resources to meeting the increasing disclosures requirements (discussed above).
We incur, and expect to continue to incur, increased costs to comply with applicable requirements, including: i) operating and capital expenditures related to our facilities and equipment; ii) research and development costs, including with respect to the design or re-design of our products in order to conform to changing emissions and efficiency standards and regulations, and iii) costs for tools, talent and resources to meet the increasing disclosures requirements (discussed above).
Maintaining and improving our competitive position will require successful management of these factors in a business environment with increasingly rapid rates of change and disruption.
Maintaining and improving our competitive position will require successful management of these factors in a volatile business environment with increasingly rapid rates of change and disruption.
A significant disruption to any of our facilities or operations, or that of customers or third parties on which we rely, could cause material adverse impacts on our operations and business, including an inability to meet customer demand or contractual commitments, increased costs and reduced sales, and could also impact our business processes and activities, including our ability to timely report financial results.
A significant disruption to any of our facilities or operations, or that of customers or third parties on which we rely, could cause material adverse impacts on our operations and business, including an inability to meet customer demand or contractual commitments, increased costs, and reduced market share or sales, and could also impact our business processes and activities, including our ability to timely report financial results.
Changes in environmental requirements, laws and regulations, or increased public awareness around the presence and health impacts of human-made chemicals and naturally occurring contaminants in drinking water, could increase or decrease demand for our products and services, increase our cost of operations, result in the obsolescence of our products, or lead to an interruption of suspension of our operations.
Changes in environmental requirements, laws and regulations, or increased public awareness around the presence and health impacts of human-made chemicals and naturally occurring contaminants in drinking water, could increase or decrease demand for our products and services, increase our costs, result in the obsolescence of our products, or lead to an interruption of suspension of our operations.
In addition, our results of operations may be adversely impacted by: (i) the failure to efficiently, effectively and timely integrate acquired businesses into our operations, technology, financial and other systems, (ii) the failure of acquired businesses to meet or exceed expected returns, which in the past has led to, and in the future may lead to, accounting impairments, (iii) the discovery of unanticipated liabilities, labor relations difficulties, cybersecurity concerns, control or compliance issues, or other issues for which we lack contractual protections, insurance or indemnities.
In addition, we may be adversely impacted by: (i) the failure to efficiently, effectively and timely integrate acquired businesses into our operations, technology, financial and other systems, (ii) the failure of acquired businesses to meet or exceed expected returns, which in the past has led to, and in the future may lead to, accounting impairments, or (iii) the discovery of unanticipated liabilities, cybersecurity concerns, control or compliance issues, environmental matters, labor relations difficulties, or other issues for which we lack contractual protections, insurance or indemnities.
If we are unable to manage these risks, we may incur higher costs, liquidated damages, and other liabilities to our customers, which may decrease our profitability and harm our reputation. Furthermore, our project-based customers typically require performance guarantees around the effluent produced by our water treatment equipment and services.
If we are unable to manage these risks, we may incur higher costs, liquidated damages, and other liabilities to our customers, which may decrease our profitability and harm our reputation. Furthermore, our project-based customers typically require performance guarantees for the effluent produced by our water treatment equipment and services.
A failure to attract or retain highly engaged and skilled talent and labor could adversely affect our ability to meet and exceed the needs of our customers, operate and grow our business and execute our strategy. Defects, unanticipated or improper use or inadequate disclosures concerning our products could adversely affect our business, reputation and financial condition and results of operations.
A failure to attract or retain highly engaged and skilled talent and labor could adversely affect our ability to meet and exceed the needs of our customers, operate and grow our business and execute our strategy. Defects, unanticipated or improper use or inadequate disclosures concerning our products could adversely affect our business, reputation and financial condition.
Any interruption may be lengthy, have lasting effects, require a significant amount of management and other employees' time and focus, and require us to make substantial expenditures to mitigate the situation, which could negatively affect our operations, business processes and activities, profitability, financial condition and reputation.
Any interruption may be lengthy, have lasting effects, require a significant amount of management and other employees' time and focus, and require substantial expenditures to mitigate the situation, which could negatively affect our operations, business processes and activities, profitability, financial condition and reputation.
A portion of our revenue is derived from large projects that are technically complex and may occur over multiple years.
A portion of our revenue is derived from large projects that are complex and may occur over multiple years.
Our facilities and operations and certain customers, contract manufacturers, subcontractors or other third parties on which we rely, have experienced, and may in the future experience, disruptions or delays resulting from an actual or threatened event or circumstance, including due to: a significant equipment, technological or system failure; natural disaster; weather event or effects of climate change; power or energy curtailment or outage; water or communications outage; fire; explosion; critical supply chain failure; terrorism; cybersecurity attack; political disruption; outbreak of a pandemic or other public health crisis; insurrection; armed conflict or war, including the ongoing conflicts involving Russia and Ukraine, the Middle East, and rebel attacks on vessels in the Red Sea; labor dispute, stoppage or slowdown; technology failure; lack of financial viability or other reason.
Our facilities, operations, customers, contract manufacturers, subcontractors or other third parties on which we rely, have experienced, or may in the future experience, disruptions or delays resulting from an actual or threatened event or circumstance, including due to: equipment, technological or system failure; natural disaster; weather event or effects of climate change; water, communications, power or energy curtailment or outage; fire; explosion; critical supply chain failure; terrorism; cybersecurity incident; political disruption; outbreak of a pandemic or other public health crisis; insurrection; armed conflict or war, including the ongoing conflicts involving Russia and Ukraine, the Middle East, and rebel attacks on vessels in the Red Sea; labor dispute, stoppage or slowdown; lack of financial viability or other reason.
The U.S.’s imposition of tariffs on goods imported from China or deemed to be of Chinese origin, as well as the potential for new tariffs, other governmental actions, trade embargoes or sanctions by the U.S., or countermeasures imposed by China in response, has in the past and could in the future have an adverse direct or indirect impact our global supply chain, manufacturing costs, business and operating results.
The U.S.’s imposition of tariffs on goods imported from China or deemed to be of Chinese origin, as well as the potential for new or increased tariffs, other governmental actions, trade embargoes or sanctions by the U.S., or similar measures or countermeasures imposed by China in response, has in the past and could in the future have an adverse direct or indirect impact our global supply chain, manufacturing costs, business and operating results.
Our facilities, operations and business rely on a complex and highly reactive global supply chain, including suppliers (and their suppliers), some of which are a single- or sole-source, distributors, contract manufacturers, subcontractors, joint venture partners, utilities providers, and freight and logistics providers.
Our operations and businesses rely on our facilities and a complex and highly reactive global supply chain, including suppliers (and their suppliers), some of which are a single- or sole-source, distributors, contract manufacturers, subcontractors, joint venture partners, utilities providers, and freight and logistics providers.
In addition, we 20 outsource to vendors certain critical business processes and activities, including in the areas of Finance, Human Resources, Procurement, Travel and Information Technology. Certain of our businesses require that we or our subcontractors have access to customer sites to provide our products and services.
In addition, we outsource certain critical business processes and activities, including in the areas of Finance, Human Resources, Procurement, Travel and Information Technology. Certain of our businesses require that we or our subcontractors have access to customer sites to provide our products and services.
Although we have insurance related to business continuity and supply chain, we cannot be certain that this insurance coverage will continue to be available to us at a reasonable cost or will be adequate to cover any or all aspects of supply chain disruptions.
Although we have insurance related to business continuity and supply chain, we cannot be certain that this coverage will continue to be available at a reasonable cost or will be adequate to cover any or all aspects of our supply chain disruptions.
In addition, our facilities or those of third parties upon which we rely operate in certain circumstances with equipment and manufacturing technology that may be unique and difficult to replace or involve long lead times for replacement.
In addition, our facilities or those of third parties upon which we rely operate certain equipment and manufacturing technology that may be unique and difficult to replace or involve long lead times for replacement.
We may face increased scrutiny from the investment community, regulators, media and other stakeholders related to our sustainability activities, commitments, goals, targets and objectives, and our methodologies and timelines for pursuing them.
We may face increased scrutiny from the investment community, regulators, media (including social media) and other stakeholders related to our sustainability activities, commitments, goals, targets and objectives, and our methodologies and timelines for pursuing them.
These projects are subject to a number of significant risks, including project delays, cost overruns, changes in scope, unanticipated site conditions, design and engineering issues, incorrect cost assumptions, increases in the cost of materials and labor, health and safety hazards, subcontractor performance issues, weather issues and changes in laws or permitting requirements.
These projects are subject to a number of risks, including delays; cost overruns; changes in scope; unanticipated site conditions; design and engineering issues; incorrect cost assumptions; increases in the cost of materials and labor; health and safety hazards; subcontractor performance issues; weather issues; and changes in laws, regulations or permitting requirements.
The global and diverse nature of our operations, coupled with the increase in regulation and enforcement in many regions of the globe, means that we will continue to face legal and compliance risks.
The global and diverse nature of our operations, coupled with the increase in regulation and enforcement in many regions globally, means that we will continue to face legal and compliance risks.
In addition, as discussed above, we expect to be subject to increasing regulatory requirements around disclosures related to our business’ impact on climate change. Compliance with all of these requirements is complex. Applicable requirements change frequently and the timing and substance of future changes is uncertain and difficult to predict.
In addition, as discussed above, we are subject to increasing regulatory requirements around disclosures related to our business’ impact on climate change. Compliance with all of these requirements is complex. Applicable requirements change frequently and the timing and substance of future changes is uncertain and difficult to predict.
Acquisitions involve a number of risks and present financial, managerial and operational challenges, including: diversion of management’s time and attention from existing businesses and operations; insufficient internal controls over financial or compliance activities or financial reporting; the failure to realize expected synergies; impact our 23 ability to achieve our sustainability commitments; the assumption of new material risks associated with the acquired businesses; and the loss of key employees of the acquired businesses.
Acquisitions involve a number of risks and present financial, managerial and operational challenges, including: diversion of management’s time and attention from existing businesses and operations; insufficient internal controls over financial or compliance activities or financial reporting of acquired businesses; failure to realize expected synergies; impact on our ability to achieve some or all of our sustainability commitments; assumption of new material risks associated with the acquired businesses; and loss of key employees of the acquired businesses.
We cannot guarantee that our internal controls, policies and procedures will always prevent and protect us from improper conduct by our employees or business partners, including distributors.
We cannot guarantee that our internal controls, policies and procedures will always prevent and protect us from improper conduct by our employees or business partners, including distributors and sales agents.
Economic and industry factors that have had, or could in the future have, a material impacted on our businesses and demand for our products and services include: (i) the overall strength of, and our customers’ confidence in, local and global macroeconomic conditions; (ii) inflation and related monetary policy actions by governments in response to inflation, (iii) overall strength of industrial, governmental, public and private sector spending; (iv) overall strength of the industrial, residential and commercial real estate markets; (v) federal, state, local and municipal governmental fiscal, trade and procurement laws, regulations and policies, including as respects domestic content; (vi) the availability of commercial financing for our customers and end-users; and (vii) the degree of funding for our public sector customers, including for water infrastructure investments.
Economic and industry factors that have had, or could in the future have, a material impact on our businesses and demand for our products and services include: (i) the overall strength of, and our customers’ confidence in, local and global macroeconomic conditions; (ii) inflation and related monetary policy actions by governments in response, (iii) overall strength of industrial, governmental, public and private sector spending; (iv) overall strength of the industrial, residential and commercial real estate markets; (v) federal, state, local and municipal governments’ environmental, energy efficiency, fiscal, trade and procurement laws, regulations and policies, including as respects domestic content; (vi) the availability of commercial financing for our customers and end-users; and (vii) the degree of funding for our public sector customers, including for water infrastructure investments.
We cannot predict the impact that such factors might have on our business, financial condition, cash flows, results of operations and stock price.
We cannot predict the impact that such factors might have on our business, financial condition, cash flows, results of operations and share price.
Our future growth is dependent in part on the impact and timing of potential new laws and regulations, as well as potential changes to 24 existing laws and regulations.
Our future growth is dependent in part on the impact and timing of such potential new laws and regulations, as well as potential changes to existing laws and regulations.
We face risks related to legal and regulatory proceedings. We are subject to various laws, regulations and other requirements of governmental authorities in the U.S. and foreign countries, any violation of which could potentially create substantial liability and damage our reputation.
We face risks related to legal and regulatory proceedings. We are subject to various laws, regulations and other requirements of U.S. and foreign governmental authorities, any violation of which could potentially create substantial liability and damage our reputation.
Our business relies on a large and complex network of suppliers (and their suppliers), including contract manufacturers and subcontractors to perform manufacturing and customer-related services for us, as well as commodity markets and freight and logistics providers to secure and ship finished goods and raw materials, parts, electronic components and other components used in our products.
Our business relies on a large and complex network of suppliers (and their suppliers), contract manufacturers and subcontractors that perform manufacturing and customer-related services for us, commodity markets, and freight and logistics providers to secure and ship finished goods and raw materials, parts, and electronic and other components used in our products.
Furthermore, if our sustainability reporting and practices do not meet investors, regulators or other stakeholders’ expectations, standards and requirements, or if we are unable to satisfy all stakeholders, our reputation, ability to attract or retain employees, and attractiveness as an investment, business partner or acquiror could be negatively impacted.
Furthermore, if our sustainability reporting and practices do not meet investors, regulators or other stakeholders’ expectations, standards and requirements, or if we are unable to satisfy all stakeholders (who reflect varied and evolving expectations), our reputation, ability to attract or retain employees, and attractiveness as an investment, business partner or acquiror could be negatively impacted.
We have significant sales, operations and direct or indirect suppliers located in China, which have been in the past, or could in the future be, adversely affected by: i) China’s evolving laws, regulations and policies, including as respects public health crises, import and export tariffs and restrictions, and information security and privacy, and ii) changes in the political and geopolitical environment involving China, including U.S.-China or China-Taiwan relations.
We have significant operations and direct and indirect suppliers located in China, which have been in the past, or could in the future be, adversely affected by: i) China’s evolving laws, regulations and policies, including as respects public health crises, import and export tariffs and restrictions, and information security and privacy, and ii) changes in the political and geopolitical environment, including China's relations with the U.S., European Union and Taiwan.
We may not be able to complete acquisitions or divestitures with favorable terms or timing or at all, or obtain financing that may be needed to consummate acquisitions.
We may not be able to complete acquisitions or divestitures on favorable terms, timing or at all, or obtain financing that may be needed to consummate acquisitions.
Our global supply chain includes shipping routes through the Red Sea, where vessels have been and may continue to be impacted by armed conflicts involving rebel groups; and continued conflicts or escalation of conflict in the Middle East could adversely impact our logistics costs and could also result in an increase in our costs for energy and supplies, and potentially delay shipments to customers.
For example, our global supply chain includes shipping routes through the Red Sea, where vessels have been and may continue to be impacted by armed conflicts involving rebel groups; and continued conflicts or escalation of ongoing conflicts in Ukraine or the Middle East could adversely impact our logistics costs and result in an increase in our costs for energy and supplies, and potentially delay shipments to customers.
To execute our growth strategy, we plan to continue to realign and enhance our portfolio by pursuing the acquisition of companies, assets, technologies, product lines and customer channels that complement or expand our existing business or improve our competitive position, and divesting non-core or less strategic businesses.
In support of our growth strategy, we continue to realign and enhance our portfolio by pursuing the acquisition of companies, assets, technologies, product lines and customer channels that complement or expand our existing business or improve our competitive position, and divesting non-core or less strategic businesses.
For example, certain events may disrupt the operations of our customers, creating customer shutdowns that prevent site access or defer our performance of services or sale of equipment. Heavy flooding and rain events may increase demand for our solutions that help manage water and stormwater overflows or remove and transfer excess or unwanted water.
For example, certain events may disrupt customers’ operations, creating shutdowns that prevent our site access or defer our performance of services or sale of equipment. Heavy flooding and rain events may increase demand for our solutions that help manage water and stormwater overflows or remove and transfer excess or unwanted water.
Risks Related to Financial and Tax Our business is subject to foreign currency exchange rate fluctuations. Sales outside of the U.S. for the year ended December 31, 2023 accounted for approximately 46% of our net sales. We also have significant operations in various locations outside of the U.S.
Risks Related to Financial and Tax Our business is subject to foreign currency exchange rate fluctuations. Sales outside the U.S. for the year ended December 31, 2024 accounted for approximately 43% of our net sales. We also have significant operations in various locations outside the U.S.
Dollar fluctuates against other currencies in which we transact business, revenue and income may be impacted. Strengthening of the U.S. Dollar relative to the Euro and the currencies of the other countries in which we do business, has materially and adversely affected, and could in the future materially and adversely affect, our sales growth and profitability in future periods.
Dollar fluctuates against other currencies in which we transact business, revenue and income may be impacted. Strengthening of the U.S. Dollar relative to the Euro and the currencies of the other countries in which we do business, has materially and adversely affected, and could in the future materially and adversely affect, our sales growth and profitability. Refer to Item 7A.
These events could also lead to product recalls, safety or security alerts, or result in the removal of a product from the market, issuance of credits, warranty or liability claims or contractual damages against us.
These events could also lead to product recalls, safety or security alerts, or removal of a product from the market, issuance of credits, or warranty, liability or contractual claims and damages against us.
We cannot provide assurance that our operations, products or services will at all times be in compliance with all applicable laws, regulations and permits or that we will be able to obtain or renew all required permits.
We cannot guarantee that our operations, products or services will at all times be in compliance with all applicable laws, regulations and permits or that we will be able to obtain or renew all required permits.
As a result, the anticipated benefits of acquisitions may not be realized fully within the expected timeframe or at all, may take longer to realize, or may cost more than expected, which could materially and adversely affect our business, results of operations or financial condition.
As a result, the anticipated benefits of acquisitions may take longer to realize or not be fully realized, or may cost more than expected, which could materially and adversely affect our business, results of operations or financial condition.
In addition, certain of our products, services and solutions assist our customers in meeting increasingly stringent scarcity, efficiency, environmental and safety requirements, including via laws or regulations enacted for the purpose of limiting greenhouse gas emissions or making water supplies more resilient, cleaner and safer.
In addition, certain of our products, services and solutions assist our customers in meeting increasingly stringent scarcity, efficiency, environmental and safety requirements, including via U.S. and other countries’ laws or regulations enacted for the purpose of limiting greenhouse gas (“GHG”) emissions or making water supplies more resilient, cleaner and safer.
Increasing public and governmental concern regarding the environment and the effects of climate change has, and may continue to, result in new or increased legal and regulatory requirements, policies and taxes intended to limit environmental damage and GHG emissions, including as respects pollution and discharges, emissions trading schemes, carbon, fuel or other taxes.
Increasing public and governmental concern regarding the environment and the effects of climate change has, and may continue to, result in new or increased legal and regulatory requirements, policies and taxes intended to limit environmental damage and GHG emissions. These may encompass pollution and discharges, emissions trading schemes, carbon, fuel or other taxes.
Water and wastewater treatment involve various unique risks and require compliance with a variety of laws or regulations, including the Clean Water Act and the Safe Drinking Water Act.
Our water and wastewater treatment offerings involve unique risks and require compliance with a variety of laws or regulations, including the Clean Water Act and the Safe Drinking Water Act.
There are significant uncertainties and judgments involved in estimating performance guarantee obligations, including changing product designs, differences in customer installation processes and failure to identify or disclaim certain variables in a customer’s influent. To the extent that we incur substantial performance guarantee claims in any period, our reputation, earnings, and ability to obtain future business could be materially adversely affected.
There are significant uncertainties and judgments involved in estimating performance guarantee obligations, including changing product designs, differences in customer installation processes and failure to identify or disclaim certain variables in a customer’s influent. If we incur substantial performance guarantee claims in any period, our reputation, earnings and future business prospects could be materially adversely affected.
Refer to Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" for additional information on foreign exchange risk. 25 Our financial results may fluctuate from period to period and can be difficult to predict.
"Quantitative and Qualitative Disclosures about Market Risk" for additional information on foreign exchange risk. Our financial results may fluctuate from period to period and can be difficult to predict.
From time to time, we have and may continue to initiate restructuring and realignment actions for various reasons, including to optimize our cost structure, improve our operational efficiency and effectiveness, and enable us to better serve our customers, or in response to impacts from business and economic conditions.
From time to time, we have and may continue to initiate simplification, productivity, restructuring and realignment actions for various reasons, including to optimize our cost structure, increase profitability, drive growth, improve our operational efficiency and effectiveness, and enable us to better serve our customers, or in response to impacts from business and economic conditions.
In addition, our businesses, including our Measurement and Control Solutions segment, and our legacy Integrated Services and Solutions segment and the new Water Solutions and Services segment, are impacted by long-cycle business including large projects, which could be unexpectedly canceled, or whose timing can change based upon customer requirements due to a number of factors affecting the project that are beyond our knowledge or control, such as funding, readiness of the project and regulatory approvals.
In addition, our businesses are impacted by long-cycle business including large projects, which could be unexpectedly canceled, or whose timing can change based upon customer requirements due to a number of factors affecting the projects that are beyond our knowledge or control, such as funding, readiness of the project and regulatory approvals.
We may not be able to obtain all of the cost savings and benefits that were initially anticipated in connection with our restructuring and realignment plans. Additionally, as a result of these plans, we may experience a loss of continuity or accumulated knowledge or inefficiencies during transitional periods and ongoing operations.
We may not be able to obtain some of the cost savings and benefits that were initially anticipated in connection with our transformation, restructuring and realignment plans. Additionally, as a result of these plans, we may experience a loss of talent or continuity of accumulated knowledge, 22 or inefficiencies during transitional periods.
We sell our products in approximately 150 countries and 46% of our revenue was generated outside the U.S. for the year ended December 31, 2023.
We sell our products in approximately 150 countries and 43% of our revenue was generated outside the U.S. for the year ended December 31, 2024.
Failure to comply with, and the cost of complying with, laws, regulations, policies and taxes applicable to our operations, products and services, including those involving the environment, climate change, and health and safety, could have a material adverse impact on our business, results of operations, financial condition and reputation.
Failure to comply with, and the cost of complying with, laws, regulations, policies and taxes applicable to our operations, products and services, including those involving the environment, climate change, and health and safety, could have a material adverse impact on us.
Risks Related to Legal and Regulatory Failure to comply with laws, regulations and policies related to our business conduct, including the U.S. Foreign Corrupt Practices Act, other applicable anti-corruption laws, trade regulations, and data privacy and security laws, could have a material adverse impact on our business, results of operations, financial condition and reputation.
Risks Related to Legal and Regulatory Failure to comply with laws, regulations and policies related to our business conduct, including the U.S. Foreign Corrupt Practices Act, other applicable anti-corruption laws, trade regulations, and data privacy and security laws, could have a material adverse impact on us.
Certain of our operations, products and services are governed by various federal, state, and local or foreign environmental, health and safety laws and regulations for the protection of the public, our employees and the environment, including as respects: emissions; potable and non-potable water; wastewater treatment and discharge; the generation, handling, storage, use, transport, treatment and disposal of non-hazardous and hazardous materials and wastes; the use of U.S.
Certain of our operations, products and services are governed by various federal, state, and local or foreign laws and regulations for the protection of the public, our employees and the environment, including those related to: emissions; potable and non-potable water; wastewater treatment and discharge; the generation, handling, storage, use, transport, treatment and disposal of non-hazardous and hazardous materials and wastes; the use of U.S.
Such laws and regulations include the Occupational Health and Safety Act, the federal Safe Drinking Water Act, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, the EU’s Restriction of Hazardous Substance Directive, and the EU’s Registration, Evaluation and Authorization of Chemicals Directive, as well as others enacted in response to environmental and climate change concerns.
Such laws and regulations include the Occupational Health and Safety Act, the federal Safe Drinking Water Act, the Clean Water Act, the Clean Air Act, RCRA, CERCLA, the Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, the EU’s Restriction of Hazardous Substance Directive, and the EU’s Registration, Evaluation and Authorization of Chemicals Directive, as well as others enacted in response to environmental and climate change concerns.
In addition, subsequent developments in legal and regulatory proceedings may affect our assessments and estimates of loss contingencies recorded as a reserve and require us to make payments in excess of our reserves, which could have an adverse effect on our results of operations and financial condition.
In addition, subsequent developments in legal and regulatory proceedings may affect our assessments and estimates of loss contingencies recorded as a reserve and require us to make payments in excess of our reserves. Any of the foregoing impacts could have an adverse effect on our business, results of operations, financial condition and reputation.
Our competitive position and future growth depend upon a number of factors, including our ability to successfully: (i) innovate, develop, bring to market and maintain competitive, compelling, secure and efficient technologies, products and services, business models and customer experience, to address emerging regulations and trends and meet customers’ needs (including those related to digitization of water, social, environmental and sustainability matters), (ii) defend our market share against an ever-expanding number of competitors, many of which are new and non-traditional from outside our industry, such as large technology firms, or those in the emerging markets, (iii) enhance our product and service offerings by adding innovative features, increased efficiency or disruptive or emerging technologies, such as artificial intelligence, that differentiate them from those of our competitors and prevent commoditization, (iv) continue to invest in, cultivate, develop and maintain our distribution network of channel partners, (v) attract, develop and retain individuals with the requisite innovation, digital and technical capabilities, expertise and understanding of customers’ needs to develop and commercialize new technologies, products and services, (vi) continue to leverage and expand our external ecosystem of innovation partners with joint venture partners, universities, venture capital, the start-up of community and other technology firms, (vii) continue to invest in our manufacturing, research and development, engineering, sales and marketing, and digitization of customer service and support tools, (viii) win large contracts and execute them on schedule and on budget, (ix) optimize our supply chain and manufacturing to enable predictable and efficient delivery to customers, and (x) compete for business subject to applicable governmental procurement laws, regulations and policies, including new and existing sustainability and domestic content requirements in the U.S. and globally, as they may evolve over time.
Our competitive position and future growth depend upon a number of factors, including our ability to successfully: (i) enhance and differentiate our product and service offerings, business models and customer experience by increasing efficiency or security, or adding innovative features or disruptive or emerging technologies, such as artificial intelligence, that address emerging regulations and trends, meet customers’ needs, and prevent commoditization, (ii) defend our market share against an ever-expanding number of competitors, including new or non-traditional competitors from outside our industry, such as large technology firms,(iii) continue to invest in and maintain our distribution network of channel partners, (iv) attract, develop, retain and train individuals with the requisite innovation, digital and technical capabilities, expertise and understanding of customers’ needs to develop, commercialize and sell new technologies, products, services and solutions, (v) continue to leverage and expand our external ecosystem of innovation partners with joint venture partners, universities, venture capital, the start-up community and other technology innovators, (vi) continue to invest in our manufacturing, research and development, engineering, sales and marketing, modernization of our systems, and digitization of customer solutions, service and support tools, (vii) win and execute large contracts on schedule and on budget, and (viii) optimize our supply chain and manufacturing to enable predictable and efficient delivery to customers, and compete for business subject to governmental procurement laws, regulations and policies, including sustainability and domestic content requirements in the U.S. and globally, as they may evolve over time.
We have and will continue to establish goals, targets, and other objectives related to sustainability matters, including our sustainability goals and commitments to Science-Based Targets aligned to limiting global temperature increase to 1.5°C above pre-industrial level, in line with the Paris Agreement, by 2030 and net zero greenhouse gas (“GHG”) emissions (Scope 1, 2 and 3) before 2050.
In support of our strategy, we have and will continue to establish goals, targets, and other objectives related to sustainability matters, including science-based targets aligned to limiting global temperature increase to 1.5°C above pre-industrial level by 2030, in line with the Paris Agreement, and commitment to net-zero GHG emissions (Scope 1, 2 and 3) before 2050.
The events and consequences discussed below could, in circumstances that we may not be able to accurately predict, recognize or control, have a material adverse effect on our business, financial condition, cash flows, results of operations and/or market price of our common stock. These risk factors do not identify all of the risks we face.
The events and consequences discussed below could, in circumstances that we may not be able to accurately predict, recognize or control, have a material adverse effect on our business, financial condition, cash flows, results of operations and/or market price of our common stock.
In addition to damage or disruption, these cybersecurity incidents may lead to security and data breaches. We provide certain digitally-enabled or internet-connected products, such as pumps, controllers, meters and other equipment, and services, such as Water One® and other remote monitoring capabilities, condition assessment, and an interoperability platform via a strategic joint venture partner.
In addition to damage or disruption, these cybersecurity incidents may lead to security and data breaches. We provide certain digitally enabled or internet-connected products, such as pumps, controllers, meters and other equipment, digital (or intelligent) solutions, and other remote monitoring and condition assessment capabilities, and an interoperability platform via Idrica, our strategic joint venture partner.
Factors that may impede a successful implementation and execution include the retention of key employees, the impact of regulatory matters including tax, matters involving certain third-party service providers selected to assist us, including staffing, technology, and compliance of service providers with our internal controls over financial reporting, and adverse economic market conditions.
Factors that may impede the successful implementation, execution or realization of the benefits of these actions include a failure to retain key customers or employees; the impact of regulatory matters including tax; matters involving certain third-party service providers selected to assist us, including staffing, technology, and compliance of service providers with our internal controls over financial reporting; and adverse economic market conditions.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs such, the ERC periodically receives reports from the CISO on cybersecurity risk. The Cyber Risk Committee (“CRC”), comprised of a cross-functional group of senior executives including the CIO, CISO, Chief Financial Officer and General Counsel, provides advice and governance regarding the Company’s strategic management of cybersecurity across the Company, including cybersecurity risk posture, projects, issues, threat intelligence and escalations.
Biggest changeThe Board also receives a report from management on the results of the Company’s annual ERM Program risk assessment, as well periodic updates on the ERM Program and ongoing monitoring of the Company’s risks, including cybersecurity risk, as appropriate. 29 The Company’s Cyber Risk Committee (“CRC”), comprised of a cross-functional group of senior executives, provides advice and governance regarding the Company’s strategic management of cybersecurity across the Company, including cybersecurity risk posture, projects, issues, threat intelligence and escalations.
Both the enterprise and connected products and services programs are designed to assess, identify and manage risks from cybersecurity threats in order to protect and preserve the security, integrity and continued availability of the Company’s information technology systems and connected products and services, and also to protect the confidentiality and integrity of information owned by, or in the custody and care of, the Company.
Both the enterprise and connected products and services programs are designed to assess, identify and manage risks from cybersecurity threats in order to protect and preserve the security, resiliency, integrity and continued availability of the Company’s information technology systems and connected products and services, and also to protect the confidentiality and integrity of information owned by, or in the custody and care of, the Company.
Such reports include updates on the Company’s cybersecurity risk profile, assessments of the Company’s enterprise and product security programs, management’s strategy for managing risks, measures implemented to identify and mitigate cybersecurity risks, the status of projects to strengthen the Company’s cybersecurity posture, the emerging cybersecurity threat landscape, and other relevant topics.
Reports include topics such as updates on the Company’s cybersecurity risk profile, assessments of the Company’s enterprise and product security programs, management’s strategy for managing risks, measures implemented to identify and mitigate cybersecurity risks, the status of projects to strengthen the Company’s cybersecurity posture, the emerging cybersecurity threat landscape and other relevant topics.
The CRC meets at least quarterly and receives reports and presentations from the CISO or third parties on internal and external cybersecurity matters; and, as appropriate, briefings from the CISO on cybersecurity incidents, the Company’s incident response, recovery and remediation, and actual or potential impacts.
At its periodic meetings, the CRC receives reports and presentations from the CISO or third parties on internal and external cybersecurity matters, and, as appropriate, briefings from the CISO on cybersecurity incidents, the Company’s incident response, recovery and remediation and actual or potential impacts.
Elements of the programs include policies, standards, architecture, processes, tools, technology, employee education and training, and incident response. Our risk management processes undergo at least quarterly review to identify potential gaps and areas for additional investment, resources and focus. Our enterprise and product security programs undergo regular testing, including periodic vulnerability scanning and penetration testing.
Elements of the programs include policies, standards, architecture, processes, tools, technology, employee education and training, and incident response. Our enterprise and product security programs undergo regular testing, including periodic vulnerability scanning and penetration testing.
The CISO is responsible for assessing, monitoring and advising the Company’s businesses, management and the Board of Directors (“Board”) on the Company’s risks from cybersecurity threats; implementing cybersecurity strategy, programs and processes across our enterprise and connected products and services; reviewing the risk management measures implemented by the Company to identify and mitigate cybersecurity risks; and overseeing the maintenance and deployment of the Cybersecurity Incident Response Plan.
Our CISO, who has extensive cybersecurity knowledge and skills gained from over 25 years of relevant work experience, and is a Certified Information Systems Security Professional, is responsible for assessing, monitoring and advising the Company’s various business units, management and the Board on risks from cybersecurity threats; implementing cybersecurity strategy, programs and processes across our enterprise and connected products and services; reviewing the risk management measures implemented by the Company to identify and mitigate cybersecurity risks; and overseeing the maintenance and deployment of the Cybersecurity Incident Response Plan.
These policies specify roles and responsibilities, fundamental principles and proper controls required for Xylem’s protection. Our policies are reviewed annually to identify potential gaps or areas for improvement, considering changes in the Company, and its connected products and services, as appropriate.
These policies specify roles and responsibilities, fundamental principles and proper controls required for Xylem’s protection, and also require the use of certain cyber risk management processes to onboard new suppliers and other third parties. We periodically review our policies to identify potential gaps or areas for improvement, considering changes in the Company, and its connected products and services, as appropriate.
Key areas of responsibility in the program include governance, risk and compliance, threat analysis and response, security architecture and engineering, security operations, and secure manufacturing operations. The CISO and Team also manage a program for connected products and services cybersecurity risk management that is guided by the ISA/IEC 62443 standard to enable protection and resiliency across products and services.
Our enterprise cybersecurity program is guided by the National Institute of Standards and Technology’s (“NIST”) Cybersecurity Framework. Key areas of responsibility in the program include governance, risk and compliance, threat analysis and response, security architecture and engineering, security operations and secure manufacturing operations. Our connected products and services cybersecurity program is guided by the ISA/IEC 62443 standard.
Our cybersecurity program encompasses our enterprise information technology, including operational technology and technology of third parties on which we rely, and connected products and services.
Our ERM Program assesses risks, including those related to cybersecurity, annually, and monitors such risks on an ongoing basis. We maintain a comprehensive cybersecurity program that encompasses our enterprise information technology, including operational technology and technology of third parties on which we rely, and connected products and services.
The Company’s Cybersecurity Team (“Team”), comprised of individuals with a broad range of cybersecurity skills, experiences and certifications, is led by the CISO.
The CISO leads the Company’s Cybersecurity Team (“Team”), comprised of individuals with a broad range of cybersecurity skills, experiences and certifications. The Team is responsible for the implementation, monitoring and maintenance of the Company’s cybersecurity practices in coordination with its businesses, operations and functions, and oversees the Company’s cybersecurity program.
The IRP undergoes at least annual tabletop exercises, where the Incident Response Team and relevant business and functions drill our response to a simulated cyber incident. The results of these drills are used to identify areas for improvement in our processes and technologies.
The IRP also specifies the use of third-party experts for legal advice, consulting and incident response, as appropriate. The IRP undergoes at least annual tabletop exercises, the results of which are used to identify areas for improvement in our processes and technologies.
Incident Response Our Cybersecurity Incident Response Plan (“IRP”), which generally aligns with NIST's guidance, provides management with a standardized framework for responding to an actual or potential cybersecurity threat or incident.
Our Cybersecurity Incident Response Plan (“IRP”), which generally aligns with NIST's guidance, provides management with a standardized framework for responding to an actual or potential cybersecurity threat or incident. The IRP sets out a coordinated approach to investigating, containing, documenting and mitigating incidents, including reporting findings and keeping senior management and other key stakeholders informed and involved as appropriate.
In line with its broader strategic oversight, the Board oversees cybersecurity, including strategy and processes. To assist with oversight of cybersecurity, the Board has delegated to the Audit Committee responsibility to oversee certain aspects of cybersecurity, including controls and reporting.
To assist with oversight of cybersecurity, the Board has delegated to its Audit Committee responsibility to oversee certain aspects of cybersecurity, including controls and reporting. At least semi-annually, the Audit Committee or full Board receive reports from the Chief Information Officer (“CIO”) and Chief Information Security Officer (“CISO”).
We maintain a suite of policies – the Cybersecurity Policy, the Product Cybersecurity Policy and the Acceptable Use of Information Technology Resources Policy – that apply globally to all of our employees, businesses and functions, as well as third-party vendors and contractors as required by our legal agreements with them.
In addition, we also periodically engage third parties to assess our enterprise and product security programs and provide consultation and advice to assist with assessing, identifying and managing cybersecurity risks. We maintain cybersecurity policies that apply to all employees, businesses and functions, as well as third-party vendors and contractors as required by our legal agreements with them.
Our Code of Conduct, implemented by the Board, requires our employees’ adherence with our policies and practices, including with respect to cybersecurity risk management. Employees receive ongoing annual education and training regarding relevant cybersecurity risks and practices, including how to protect information and systems from cyber threats.
We have protocols and processes by which certain cybersecurity incidents, as specified by our IRP, are escalated within the Company and, as appropriate, to the Audit Committee of the Board of Directors. Employees receive annual and ongoing education and training regarding relevant cybersecurity risks and practices, including how to protect information and systems from cyber threats.
For a more detailed discussion of these risks see the discussion set forth under “Item 1A. Risk Factors” in this Report. 31
However, due to evolving cybersecurity threats, it has and will continue to be difficult to prevent, detect, mitigate, and remediate cybersecurity incidents. For a more detailed discussion of the risks we face see the discussion set forth under “Item 1A. Risk Factors” in this Report. 30
Removed
ITEM 1C. CYBER SECURITY. We have implemented a comprehensive cybersecurity program guided by recognized industry practices and frameworks and we continue to evolve the program in order to be able to assess, identify and manage risks from the continually evolving cybersecurity threat landscape.
Added
ITEM 1C. CYBER SECURITY. Cybersecurity Risk Management and Strategy Cybersecurity risk management is integrated into our Enterprise Risk Management (“ERM”) Program, which is our approach to identifying, assessing, prioritizing and mitigating risks to the Company, with mitigation efforts focused on the highest risks.
Removed
Although we maintain a cybersecurity program that we believe is reasonably designed to protect the Company, cybersecurity threats may result in adverse effects on the confidentiality, integrity, and availability of our information systems or those of third parties on which we rely, and our connected products and services.
Added
We also conduct monthly phishing simulations to increase employees’ ability to detect and prevent such threats. The Company maintains insurance as part of its cybersecurity risk mitigation strategy to provide protection against certain potential losses arising from certain cybersecurity incidents. Cybersecurity Governance In line with its broader strategic oversight, the Board oversees cybersecurity, including strategy and processes.
Removed
Management and Internal Cybersecurity Team Our Chief Information Officer (“CIO”), who has over 30 years of relevant work experience in information technology, including cybersecurity, is responsible for the Company’s information technology systems and cybersecurity and is an integral part of the Company’s management of cybersecurity and related risks.
Added
Material Cybersecurity Risks, Threats & Incidents Although we have experienced actual and attempted cybersecurity threats and incidents in the past, we do not believe that the risks from any of these events or incidents, individually or in the aggregate, have materially affected our business, operations or financial condition, or are reasonably likely to have such an effect.
Removed
The CIO reports to the Senior Vice President, Operations and Supply Chain, who reports directly to the Chief Executive Officer. 29 Our Chief Information Security Officer ("CISO"), who has extensive cybersecurity knowledge and skills gained from over 25 years of relevant work experience and holds the Certified Information Systems Security Professional certification, reports to the CIO.
Removed
The Team is responsible for the implementation, monitoring and maintenance of the Company’s cybersecurity practices in coordination with its businesses, operations and functions, and oversees the Company’s cybersecurity program, including infrastructure, governance and incident response as detailed below. On a regular basis, the CISO receives reports from the Team on these cybersecurity program matters.
Removed
In addition, the CISO also receives reports and updates on incident response and cybersecurity threats. Risk Management and Strategy The CISO and Team manage a program for enterprise cybersecurity that is guided by the National Institute of Standards and Technology’s (“NIST”) Cybersecurity Framework.
Removed
In addition, we also periodically engage third parties to assess our enterprise and product security programs and provide consultation and advice to assist with assessing, identifying, and managing cybersecurity risks. Our Enterprise Risk Management (“ERM”) Program annually assesses and, on an ongoing basis, monitors the Company’s key risks, including cybersecurity risk.
Removed
We also conduct monthly phishing simulations to increase employees’ ability to detect and prevent such threats. Through our internal social media channel, we provide cybersecurity alerts and education. In addition, our policies require the use of a cyber risk management process to onboard new suppliers and other third parties.
Removed
The Company’s cybersecurity risk mitigation strategy includes the use of risk transfer via insurance that provides protection against certain potential losses arising from certain cybersecurity incidents. 30 Board of Directors Our Board recognizes the importance of maintaining the trust and confidence of our customers, suppliers, employees and shareholders.
Removed
As part of its independent oversight of the key risks facing the Company, the Board and Audit Committee devote considerable time and attention to the oversight of management’s approach to cybersecurity and related risk mitigation, including strategy, controls. resources, policies, standards, processes and practices. At least semi-annually, the Audit Committee or full Board receive reports from the CIO and CISO.
Removed
We have protocols and processes by which certain cybersecurity incidents, as specified by our Cybersecurity Incident Response Plan, are escalated within the Company and, as appropriate, to the Audit Committee. These escalation protocols are periodically reviewed and updated, as needed.
Removed
The Board receives a report on the results of the Company’s annual ERM Program risk assessment, as well periodic updates on the ERM Program, including ongoing monitoring of the Company’s risks, as appropriate. The ERM Program has identified cybersecurity as one of the Company’s primary risks.
Removed
Key Internal Governance Bodies Xylem has a number of committees to bolster business resilience, protect shareholder value and enable compliance with regulatory requirements.
Removed
The Enterprise Risk Committee (“ERC”), a key component of the Company’s ERM Program, is comprised of senior executives and is responsible for reviewing the Company’s key risks as identified by the ERM Program, including cybersecurity, and overseeing the Company’s identification, assessment, management, mitigation and ongoing monitoring of these risks.
Removed
The IRP sets out a coordinated approach to investigating, containing, documenting and mitigating incidents, including reporting findings and keeping senior management and other key stakeholders informed and involved as appropriate. The IRP also specifies the use of third-party experts for legal advice, consulting and incident response, as appropriate.
Removed
Material Cybersecurity Risks, Threats & Incidents Due to evolving cybersecurity threats, it has and will continue to be difficult to prevent, detect, mitigate, and remediate cybersecurity incidents.
Removed
While we have not experienced any material cybersecurity threats or incidents as of the date of this Report, our cybersecurity program might not be able to prevent or mitigate future successful attacks, threats or incidents.
Removed
As detailed elsewhere in this Report, we also rely on information technology and other third-party vendors and strategic joint venture partners to support our business and operations, including our secure processing of personal, confidential, financial, sensitive, proprietary and other types of information, and to enable our connected product and service offerings.
Removed
Despite ongoing efforts to improve our and third parties’ ability to protect against cyber threats, we may not be able to protect all information systems or connected products and services. Cybersecurity incidents may lead to reputational harm, revenue and client loss, legal actions, statutory penalties, among other consequences.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeSquare Feet Owned or Leased Water Infrastructure Emmaboda Sweden Administration and Manufacturing 1,197,000 Owned Shenyang China Manufacturing 271,000 Owned Vadodara India Manufacturing and Research & Development 240,000 Leased Stockholm Sweden Administration and Research & Development 182,000 Leased Bridgeport NJ Administration and Manufacturing 136,000 Leased Applied Water Morton Grove IL Administration and Manufacturing 530,000 Owned Montecchio Italy Administration and Manufacturing 379,000 Owned Nanjing China Manufacturing 363,000 Owned Auburn NY Manufacturing 273,000 Owned Abony Hungary Manufacturing 250,000 Leased Stockerau Austria Sales & Service Office 234,000 Owned Strzelin Poland Manufacturing 185,000 Owned Cheektowaga NY Manufacturing 147,000 Owned Measurement and Control Solutions Ludwigshafen Germany Manufacturing 318,000 Owned Texarkana AR Manufacturing 254,000 Owned Uniontown PA Manufacturing 240,000 Leased DuBois PA Manufacturing 197,000 Owned Durham NC Administration and Research & Development 172,000 Leased Weilheim Germany Manufacturing 160,000 Leased Dubois PA Manufacturing 137,000 Leased Integrated Solutions and Services Thomasville GA Manufacturing 211,000 Owned Rockford IL Manufacturing 165,000 Owned Holland MI Manufacturing 132,000 Owned Houston TX Service 107,000 Leased Regional Locations Dubai United Arab Emirates Manufacturing 144,000 Owned Nottinghamshire United Kingdom Administration 139,000 Leased Nanterre France Sales & Service Office 139,000 Leased Langenhagen Germany Sales & Service Office 134,000 Owned Schaffhausen Switzerland Administration 26,000 Leased Corporate Headquarters Washington DC Administration 18,000 Leased 32
Biggest changeSquare Feet Owned or Leased Water Infrastructure Emmaboda Sweden Administration and Manufacturing 1,197,000 Owned Shenyang China Manufacturing 271,000 Owned Vadodara India Manufacturing and Research & Development 240,000 Leased Stockholm Sweden Administration and Research & Development 182,000 Leased Applied Water Morton Grove IL Administration and Manufacturing 530,000 Owned Montecchio Italy Administration and Manufacturing 379,000 Owned Nanjing China Manufacturing 363,000 Owned Auburn NY Manufacturing 273,000 Owned Abony Hungary Manufacturing 250,000 Leased Stockerau Austria Sales & Service Office 234,000 Owned Strzelin Poland Manufacturing 185,000 Owned Cheektowaga NY Manufacturing 147,000 Owned Measurement and Control Solutions Ludwigshafen Germany Manufacturing 318,000 Owned Texarkana AR Manufacturing 254,000 Owned Uniontown PA Manufacturing 240,000 Leased DuBois PA Manufacturing 197,000 Owned Durham NC Administration and Research & Development 172,000 Leased Weilheim Germany Manufacturing 160,000 Leased Dubois PA Manufacturing 137,000 Leased Water Solutions and Services Thomasville GA Manufacturing 211,000 Owned Rockford IL Manufacturing 165,000 Owned Bridgeport NJ Administration and Manufacturing 136,000 Leased Holland MI Manufacturing 132,000 Owned Houston TX Service 107,000 Leased Regional Locations Dubai United Arab Emirates Manufacturing 144,000 Owned Nottinghamshire United Kingdom Administration 139,000 Leased Nanterre France Sales & Service Office 139,000 Leased Langenhagen Germany Sales & Service Office 134,000 Owned Schaffhausen Switzerland Administration 26,000 Leased Corporate Headquarters Washington DC Administration 18,000 Leased 31

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+1 added−0 removed2 unchanged
Biggest changeWe currently believe that it will not have a material adverse effect on our business, financial condition, results of operations, or prospects. See Note 20, "Commitments and Contingencies", of the consolidated financial statements included in Item 8 of Part II of this 10-K for information regarding certain legal and regulatory proceedings we are involved in.
Biggest changeThe Agreement does not include a compliance monitorship, and Evoqua agreed to certain ongoing monitoring, reporting and compliance obligations for a period of two years. See Note 20, "Commitments and Contingencies", of the consolidated financial statements included in Item 8 of Part II of this 10-K for information regarding certain legal and regulatory proceedings we are involved in.
Evoqua previously disclosed in its public filings that the United States Attorney’s Office for the District of Massachusetts was investigating whether financial misstatements were made in Evoqua’s public filings and earnings announcements. That investigation has been moved to the United States Attorney’s Office for the District of Rhode Island. The Company is cooperating with the investigation.
Evoqua previously disclosed in its public filings that the United States Attorney’s Office for the District of Massachusetts was investigating whether financial misstatements were made in Evoqua’s public filings and earnings announcements from 2016 to 2018 and prior to Xylem’s purchase of Evoqua.
Added
Xylem previously disclosed in our 2023 Annual Report that the investigation was moved to the United States Attorney’s Office for the District of Rhode Island (the “USAO”). On May 13, 2024, Evoqua and the USAO entered into a non-prosecution agreement (the “Agreement”) to resolve the matter. Under the Agreement, Evoqua paid a criminal monetary penalty of $8.5 million.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

8 edited+0 added−1 removed1 unchanged
Biggest changeCapers 62 Senior VP, General Counsel (2022) • Executive Vice President, Global General Counsel and Corporate Secretary, National Express Group, a leading transport provider (2015) Franz W.
Biggest changeCapers 63 Senior VP, General Counsel (2022) • Executive Vice President, Global General Counsel and Corporate Secretary, National Express Group, a leading transport provider (2015) Albert Cho 44 Senior VP, Chief Strategy and External Affairs Officer (2022) • Senior VP, Chief Strategy and Digital Officer (2020) • VP and General Manager, Advanced Infrastructure Analytics (2018) Meredith Emmerich 49 Senior VP and President, Applied Water Systems (2024) • VP and General Manager, Americas Commercial HVAC, Carrier Global Corporate, a climate and energy solutions provider (2020) Michael J.
Pine 52 President and Chief Executive Officer (2024) • Chief Operating Officer (2023) • Senior VP and President, Americas, Applied Water Systems and Measurement and Control Systems (2022) • Senior VP and President, Americas and Applied Water Systems (2020) • President, Carrier Residential, United Technologies Corporations (2018), a multinational industrial conglomerate William K.
Pine 53 President and Chief Executive Officer (2024) • Chief Operating Officer (2023) • Senior VP and President, Americas, Applied Water Systems and Measurement and Control Systems (2022) • Senior VP and President, Americas and Applied Water Systems (2020) • President, Carrier Residential, United Technologies Corporations (2018), a multinational industrial conglomerate William K.
McGann 53 Senior VP and President, Americas and Measurement and Control Solutions (2023) • VP, North America Utilities Commercial Team (2022) • VP, Sensus Americas, Global Engineering and Assessment Services (2017) Geri-Michelle McShane 50 VP, Controller and Chief Accounting Officer (2019) • Controller, Accounting and Reporting (2016) Claudia S.
McGann 54 Senior VP and President, Americas and Measurement and Control Solutions (2023) • VP, North America Utilities Commercial Team (2022) • VP, Sensus Americas, Global Engineering and Assessment Services (2017) Geri-Michelle McShane 51 VP, Controller and Chief Accounting Officer (2019) • Controller, Accounting and Reporting (2016) Claudia S.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 33 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following information is provided regarding the executive officers of Xylem as of February 7, 2024: NAME AGE CURRENT TITLE OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS Matthew F.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 32 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following information is provided regarding the executive officers of Xylem as of February 4, 2025: NAME AGE CURRENT TITLE OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS Matthew F.
Grogan 45 Senior VP and Chief Financial Officer (2023) • Senior VP and Chief Financial Officer, IDEX Corporation, a diversified manufacturer of highly engineered products (2017) Rodney O. Aulick 56 Senior VP and President, Water Solutions and Services (2023) • Executive Vice President Integrated Solutions and Services, Evoqua Water Technologies Corp. (2018) Dorothy G.
Grogan 46 Senior VP, Chief Financial Officer (2023) • Senior VP and Chief Financial Officer, IDEX Corporation, a diversified manufacturer of highly engineered products (2017) Rodney O. Aulick 57 Senior VP and President, Water Solutions and Services (2023) • Executive Vice President Water Solutions and Services, Evoqua Water Technologies Corp. (2018) Dorothy G.
Toussaint 60 Senior VP, Chief People and Sustainability Officer (2021) • Senior VP, General Counsel and Corporate Secretary (2014) Hayati Yarkadas 55 Senior VP and President, Europe, Water Infrastructure and Global Services (2020) • Senior VP and President, Performance Materials, Trinseo S.A., a specialty material solutions provider (2015) Note: Date in parentheses indicates the year in which the position was assumed. 34 BOARD OF DIRECTORS The following information is provided regarding the Board of Directors of Xylem as of February 7, 2024: NAME TITLE Robert F.
Toussaint 61 Senior VP, Chief People and Sustainability Officer (2021) • Senior VP, General Counsel and Corporate Secretary (2014) Hayati Yarkadas 56 Senior VP and President, Europe, Water Infrastructure (2020) • Senior VP and President, Performance Materials, Trinseo S.A., a specialty material solutions provider (2015) Note: Date in parentheses indicates the year in which the position was assumed. 33 BOARD OF DIRECTORS The following information is provided regarding the Board of Directors of Xylem as of February 4, 2025: NAME TITLE Robert F.
Ellis Executive Vice President and Chief Financial Officer, ABM Industries Incorporated Lisa Glatch Former President, LNG and Net-Zero Solutions and Chief Sustainability Officer, Sempra Infrastructure Victoria D. Harker Executive Vice President and Chief Financial Officer, TEGNA, Inc. Steven R. Loranger Former Chairman, President and Chief Executive Officer, ITT Corporation Mark D.
Ellis Executive Vice President and Chief Financial Officer, ABM Industries Incorporated Lisa Glatch Former President, LNG and Net-Zero Solutions and Chief Sustainability Officer, Sempra Infrastructure Victoria D. Harker Former Executive Vice President and Chief Financial Officer, TEGNA, Inc. Mark D. Morelli President and Chief Executive Officer, Vontier Corporation Jerome A.
Morelli President and Chief Executive Officer, Vontier Corporation Jerome A. Peribere Former President and Chief Executive Officer, Sealed Air Corporation Lynn C. Swann President, Swann Inc. Lila Tretikov Corporate Vice President & Deputy Chief Technology Officer, Microsoft Corporation Uday Yadav Chief Executive Officer, TK Elevator 35 PART II
Peribere Former President and Chief Executive Officer, Sealed Air Corporation Lila Tretikov Partner, Head of Artificial Intelligence Strategy, New Enterprise Associates, Inc. Uday Yadav Chief Executive Officer, TK Elevator 34 PART II
Removed
Cerwinka 53 Senior VP and President, Applied Water Systems and Xylem Business Transformation (2023) • Senior VP and President, Emerging Markets (2020) • Chief Executive Officer, Johnson Controls Hitachi Air Conditioning, a multinational air conditioning manufacturing company (2015) Michael J.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+0 added−0 removed0 unchanged
Biggest changeXYL S&P 500 S&P 500 Industrials Index December 31, 2019 120 131 129 December 31, 2020 157 156 144 December 31, 2021 186 200 174 December 31, 2022 174 164 164 December 31, 2023 182 207 194 The graph is not, and is not intended to be, indicative of future performance of our common stock.
Biggest changeXYL S&P 500 S&P 500 Industrials Index December 31, 2020 131 118 111 December 31, 2021 156 152 134 December 31, 2022 145 125 127 December 31, 2023 152 157 150 December 31, 2024 156 197 176 The graph is not, and is not intended to be, indicative of future performance of our common stock.
Dividends are declared and paid on the common stock at the discretion of our Board of Directors and depend on our profitability, financial condition, capital needs, future prospects and other factors deemed relevant by our Board. Therefore, there can be no assurance as to what level of dividends, if any, will be paid in the future.
Dividends are declared and paid on the common stock at the discretion of our Board and depend on our profitability, financial condition, capital needs, future prospects and other factors deemed relevant by our Board. Therefore, there can be no assurance as to what level of dividends, if any, will be paid in the future.
This performance graph shall not be deemed “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, and should not be deemed incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing. 37
This performance graph shall not be deemed “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, and should not be deemed incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing. 36
(b) On August 24, 2015, our Board of Directors authorized the repurchase of up to $500 million in shares with no expiration date. The program's objective is to deploy our capital in a manner that benefits our shareholders and maintains our focus on growth. There were no shares repurchased under this program during the three months ended December 31, 2023.
(b) On August 24, 2015, our Board authorized the repurchase of up to $500 million in shares with no expiration date. The program's objective is to deploy our capital in a manner that benefits our shareholders and maintains our focus on growth. There were no shares repurchased under this program during the three months ended December 31, 2024.
Fourth Quarter 2023 Share Repurchase Activity The following table summarizes our repurchases of our common stock for the quarter ended December 31, 2023: (in millions, except per share amounts) Period Total Number of Shares Purchased Average Price Paid per Share (a) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (b) 10/1/23 - 10/31/23 — — — $182 11/1/23 - 11/30/23 — — — $182 12/1/23 - 12/31/23 — — — $182 (a) Average price paid per share is calculated on a settlement basis.
Fourth Quarter 2024 Share Repurchase Activity The following table summarizes our repurchases of our common stock for the quarter ended December 31, 2024: (in millions, except per share amounts) Period Total Number of Shares Purchased Average Price Paid per Share (a) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (b) 10/1/24 - 10/31/24 — — — $182 11/1/24 - 11/30/24 — — — $182 12/1/24 - 12/31/24 — — — $182 (a) Average price paid per share is calculated on a settlement basis.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Price and Dividends Our common stock trades publicly on the New York Stock Exchange under the trading symbol “XYL”. As of January 31, 2024, there were 7,833 holders of record of our common stock.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Price and Dividends Our common stock trades publicly on the New York Stock Exchange under the trading symbol “XYL”. As of January 31, 2025, there were 7,365 holders of record of our common stock.
There are up to $182 million in shares that may still be purchased under this plan as of December 31, 2023. 36 PERFORMANCE GRAPH CUMULATIVE TOTAL RETURN The following graph compares the relative performance of our common stock, the S&P 500 Index and the S&P 500 Industrials Index.
There are up to $182 million in shares that may still be purchased under this plan as of December 31, 2024. 35 PERFORMANCE GRAPH CUMULATIVE TOTAL RETURN The following graph compares the relative performance of our common stock, the S&P 500 Index and the S&P 500 Industrials Index.
This graph covers the period from December 31, 2018 through December 31, 2023 and assumes that $100 was invested on December 31, 2018 in our common stock, the S&P 500 and the S&P 500 Industrials with the reinvestment of any dividends.
This graph covers the period from December 31, 2019 through December 31, 2024 and assumes that $100 was invested on December 31, 2019 in our common stock, the S&P 500 and the S&P 500 Industrials with the reinvestment of any dividends.
In the first quarter of 2024, we declared a dividend of $0.36 per share to be paid on March 20, 2024 to shareholders of record on February 21, 2024. There were no unregistered offerings of our common stock during 2023.
In the first quarter of 2025, we declared a dividend of $0.40 per share to be paid on March 19, 2025 to shareholders of record on February 18, 2025. There were no unregistered offerings of our common stock during 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

102 edited+84 added−30 removed74 unchanged
Biggest changeThe charges included the reduction of headcount across the Water Infrastructure, Applied Water and Measurement and Control Solutions segments The following is a roll-forward of employee position eliminations associated with restructuring activities for the years ended December 31, 2023 and 2022: 2023 2022 Planned reductions - January 1 102 60 Additional planned reductions 454 203 Actual reductions and reversals (443) (161) Planned reductions - December 31 113 102 46 The following table presents the total costs expected to be incurred, the amount incurred in the period, and the cumulative costs incurred to date for our 2023, 2022 and 2021 restructuring actions: (in millions) Water Infrastructure Applied Water Measurement and Control Solutions Integrated Solutions and Services Corporate Total Actions Commenced in 2023: Total expected costs $ 18 $ 16 $ 12 $ 7 $ 34 $ 87 Costs incurred during 2023 15 6 11 4 35 71 Total expected costs remaining $ 3 $ 10 $ 1 $ 3 $ (1) $ 16 Actions Commenced in 2022: Total expected costs $ 6 $ 5 $ 4 $ — $ — $ 15 Costs incurred during 2022 6 4 4 — — 14 Costs incurred during 2023 — 1 — — — 1 Total expected costs remaining $ — $ — $ — $ — $ — $ — Actions Commenced in 2021: Total expected costs $ 3 $ — $ — $ — $ — $ 3 Costs incurred during 2021 3 — — — — 3 Costs incurred during 2022 — — — — — — Costs incurred during 2023 — — — — — — Total expected costs remaining $ — $ — $ — $ — $ — $ — The Water Infrastructure, Applied Water, Measurement and Control Solutions, Integrated Solutions and Services and Corporate actions commenced in 2023 consist primarily of severance charges.
Biggest changeThe following is a roll-forward of employee position eliminations associated with restructuring activities for the years ended December 31, 2023 and 2022: 2023 2022 Planned reductions - January 1 102 60 Additional planned reductions 454 203 Actual reductions and reversals (443) (161) Planned reductions - December 31 113 102 Asset Impairment Refer to Note 12, "Goodwill and Other Intangible Assets," for more information on intangible asset impairment charges incurred during the years ended December 31, 2023 and 2022.
Currently, we have available liquidity of approximately $2 billion, consisting of $1 billion of cash and $1 billion of available credit facilities as disclosed in Note 15, "Credit Facilities and Debt", of our consolidated financial statements.
Currently, we have available liquidity of approximately $2.1 billion, consisting of $1.1 billion of cash and $1 billion of available credit facilities as disclosed in Note 15, "Credit Facilities and Debt", of our consolidated financial statements.
In the Applied Water segment, we provide the majority of our sales through long-standing relationships with many of the leading independent distributors in the markets we serve, with the remainder going directly to customers. • Measurement and Control Solutions primarily serves the utility infrastructure solutions and services sector by delivering communications, smart metering, measurement and control technologies and critical infrastructure technologies that allow customers to more effectively use their distribution networks for the delivery, monitoring and control of critical resources such as water, electricity and natural gas.
In the Applied Water segment, we provide the majority of our sales through long-standing relationships with many of the leading independent distributors in the markets we serve, with the remainder going directly to customers. • Measurement and Control Solutions primarily serves the utility infrastructure solutions and services sector by delivering communications, smart metering, measurement and control capabilities and critical infrastructure technologies that allow customers to more effectively use their distribution networks for the delivery, monitoring and control of critical resources such as water, electricity and natural gas.
Our product and service offerings are organized into four reportable segments that are aligned around the critical market applications they provide: Water Infrastructure, Applied Water, Measurement and Control Solutions and Integrated Solutions and Services. • Water Infrastructure serves the water infrastructure sector with pump systems that transport water from aquifers, lakes, rivers and seas; with filtration, ultraviolet and ozone systems that provide treatment, making the water fit to use; and pumping solutions that move the wastewater and storm water to treatment facilities where our mixers, biological treatment, monitoring and control systems provide the primary functions in the treatment process.
Our product and service offerings are organized into four reportable segments that are aligned around the critical market applications they provide: Water Infrastructure, Applied Water, Measurement and Control Solutions and Water Solutions and Services. • Water Infrastructure serves the water infrastructure sector with pump systems that transport water from aquifers, lakes, rivers and seas; with filtration, ultraviolet and ozone systems that provide treatment, making the water fit to use; and pumping solutions that move the wastewater and storm water to treatment facilities where our mixers, biological treatment, monitoring and control systems provide the primary functions in the treatment process.
Accounting estimates and assumptions discussed in this section are those that we consider most critical to an understanding of our financial statements because they are inherently uncertain, involve significant judgments, include areas where different estimates reasonably could have been used, and changes in the estimates that are reasonably possible could materially impact the financial statements.
Accounting estimates and assumptions discussed in this section are those that we consider most critical to an understanding of our financial statements because they are inherently uncertain, involve significant judgments and include areas where different estimates reasonably could have been used, and because changes in such estimates that are reasonably possible could materially impact the financial statements.
Judgment is required to determine the appropriate unit of account, and we separate out the performance obligations if they are capable of being distinct and are distinct within the context of the contract. The transaction price is adjusted for our estimate of variable consideration, which may include a right of return, discounts, rebates, penalties and retainage.
Judgment is required to determine the appropriate unit of account, and we separate out the performance obligations if they are capable of being distinct and are distinct within the context of the contract. The transaction price is adjusted for our estimate of variable consideration, 61 which may include a right of return, discounts, rebates, penalties and retainage.
These impacts were partially offset by favorable impacts of 510 basis points, driven by 270 basis points of price realization and 210 basis points of productivity savings. 45 Operating Expenses (in millions) 2023 2022 Change Selling, general and administrative expenses $ 1,757 $ 1,227 43.2 % SG&A as a % of revenue 23.9 % 22.2 % 170 bp Research and development expenses 232 206 12.6 % R&D as a % of revenue 3.2 % 3.7 % (50) bp Restructuring and asset impairment charges 76 29 162.1 % Operating expenses $ 2,065 $ 1,462 41.2 % Expense to revenue ratio 28.0 % 26.5 % 150 bp Selling, General and Administrative ("SG&A") Expenses SG&A expenses increased by $530 million (increase of 43.2%) to 23.9% of revenue in 2023, as compared to 22.2% of revenue in 2022.
These impacts were partially offset by favorable impacts of 510 basis points, driven by 270 basis points of price realization and 210 basis points of productivity savings. 52 Operating Expenses (in millions) 2023 2022 Change Selling, general and administrative expenses $ 1,757 $ 1,227 43.2 % SG&A as a % of revenue 23.9 % 22.2 % 170 bp Research and development expenses 232 206 12.6 % R&D as a % of revenue 3.2 % 3.7 % (50) bp Restructuring and asset impairment charges 76 29 162.1 % Operating expenses $ 2,065 $ 1,462 41.2 % Expense to revenue ratio 28.0 % 26.5 % 150 bp Selling, General and Administrative ("SG&A") Expenses SG&A expenses increased by $530 million (increase of 43.2%) to 23.9% of revenue in 2023, as compared to 22.2% of revenue in 2022.
For discussion of these arrangements, see Note 20, “Commitments and Contingencies” of the consolidated financial statements. 54 Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent liabilities.
For discussion of these arrangements, see Note 20, “Commitments and Contingencies” of the consolidated financial statements. Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent liabilities.
If the estimated fair value of the reporting unit exceeds its carrying value, goodwill is not impaired. If the carrying value of the reporting unit exceeds its estimated fair value, then an impairment charge is recognized for that excess up to the amount of recorded goodwill.
If the estimated fair value of the reporting unit exceeds its carrying value, goodwill is not impaired. If 62 the carrying value of the reporting unit exceeds its estimated fair value, then an impairment charge is recognized for that excess up to the amount of recorded goodwill.
Credit Facilities and Long-Term Contractual Commitments See Note 15, "Credit Facilities and Debt" of our consolidated financial statements for a description of our credit facilities and long-term debt. Non-U.S.
Credit Facilities and Long-Term Contractual Commitments See Note 15, "Credit Facilities and Debt" of our consolidated financial statements for a description of our credit facilities and long-term debt. 60 Non-U.S.
The 2023 effective tax rate differs from that of 2022 primarily due to the impact of audit settlements and tax rate changes in the current period. See Note 7, "Income Taxes", of our consolidated financial statements for a description of our credit facilities and long-term debt and related interest.
The 2023 effective tax rate differs from that of 2022 primarily due to the impact of audit settlements and tax rate changes in 2023. See Note 7, "Income Taxes", of our consolidated financial statements for a description of our credit facilities and long-term debt and related interest.
The Company has future unconditional purchase commitments which are legally binding and that specify all significant terms including price and/or quantity. Total future commitments within the next twelve months for these obligations is $438 million, excluding contracts that can be canceled without penalty.
The Company has future unconditional purchase commitments which are legally binding and that specify all significant terms including price and/or quantity. Total future commitments within the next twelve months for these obligations is $664 million, excluding contracts that can be canceled without penalty.
Except as otherwise indicated or unless the context otherwise requires, “Xylem,” “we,” “us,” “our” and “the Company” refer to Xylem Inc. and its subsidiaries. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Except as otherwise indicated or unless the context otherwise requires, “Xylem,” “we,” “us,” “our” and “the Company” refer to Xylem Inc. and its subsidiaries. This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Funded Status Funded status is derived by subtracting the respective year-end values of the projected benefit obligations from the fair value of plan assets. We estimate that every 25 basis point change in the discount rate impacts the funded status by approximately $9 million.
Funded Status Funded status is derived by subtracting the respective year-end values of the projected benefit obligations from the fair value of plan assets. We estimate that every 25 basis point change in the discount rate impacts the funded status by approximately $11 million.
The adjustment recorded at December 31, 2023 and 2022 for these assets represented less than 1% of total plan assets in each respective year. Asset values for other positions were generally measured using market observable prices. We estimate that a 5.00% change in asset values will impact funded status by approximately $11 million.
The adjustment recorded at December 31, 2024 and 2023 for these assets represented less than 1% of total plan assets in each respective 64 year. Asset values for other positions were generally measured using market observable prices. We estimate that a 5.00% change in asset values will impact funded status by approximately $11 million.
Operating margin increases included favorable impacts of 150 basis points from a decrease in special charges, acquired intangible asset amortization, and restructuring and realignment costs as compared to the prior year.
Operating margin included favorable impacts of 150 basis points from a net decrease in special charges, restructuring and realignment costs, and acquired intangible asset amortization as compared to the prior year.
Effective January 1, 2024, our expected rate of future compensation increase is 2.99% for all pension plans. The estimated impact of a 25 basis point change in the expected rate of future compensation is less than $1 million.
Effective January 1, 2025, our expected rate of future compensation increase is 2.99% for all pension plans. The estimated impact of a 25 basis point change in the expected rate of future compensation is less than $1 million.
Approximately $27 million of the charges related to stock-based compensation expense due to acceleration clauses in Evoqua's equity compensation agreements. Approximately $15 million of the charges represented the reduction of headcount related to the integration of Evoqua.
Approximately $27 million of the charges related to share-based compensation expense due to acceleration clauses in Evoqua's equity compensation agreements. Approximately $15 million of the charges represented the reduction of headcount related to the integration of Evoqua.
Our weighted average discount rate for all pension plans effective January 1, 2024, is 3.79%. We estimate that every 25 basis point change in the discount rate impacts the expense by less than $1 million. The rate of future compensation increase assumption reflects our long-term actual experience and future and near-term outlook.
Our weighted average discount rate for all pension plans effective January 1, 2025, is 3.97%. We estimate that every 25 basis point change in the discount rate impacts the expense by less than $1 million. The rate of future compensation increase assumption reflects our long-term actual experience and future and near-term outlook.
The table below provides the weighted average assumptions used to estimate our defined benefit pension obligations and costs as of and for the years ended 2023 and 2022. 2023 2022 U.S. Int’l U.S.
The table below provides the weighted average assumptions used to estimate our defined benefit pension obligations and costs as of and for the years ended 2024 and 2023. 63 2024 2023 U.S. Int’l U.S.
Applied Water Operating income was $310 million for our Applied Water segment (operating margin of 16.7%) during 2023, an increase of $52 million, or 20.2%, when compared to operating income of $258 million (operating margin of 14.6%) during the prior year, or a total increase of 210 basis points of operating margin.
Applied Water Operating income was $310 million for our Applied Water segment (operating margin of 16.7%) during 2023, an increase of $52 million, or 20.2%, when compared to operating income of $258 million (operating margin of 14.6%) during 2022, or a total increase of 210 basis points of operating margin.
Operating margin expansion was partially offset by unfavorable impacts of 10 basis points from increases in restructuring and realignment costs as compared to the prior year. Operating margin increases included 820 basis points of favorable operating impacts, consisting of 470 basis points of price realization and 350 basis points from productivity savings.
Operating margin expansion was partially offset by unfavorable impacts of 10 basis points from increases in restructuring and realignment costs as compared to 2022. Operating margin increases included 820 basis points of favorable operating impacts, consisting of 470 basis points of price realization and 350 basis points from productivity savings.
Excluding special charges, acquired intangible asset amortization, and restructuring and realignment costs, adjusted operating income was $1,072 million (adjusted operating margin of 14.6%) for 2023 as compared to adjusted operating income of $744 million (adjusted operating margin of 13.5%) during the prior year.
Excluding special charges, acquired intangible asset amortization, and restructuring and realignment costs, adjusted operating income was $1,072 million (adjusted operating margin of 14.6%) for 2023 as compared to adjusted operating income of $744 million (adjusted operating margin of 13.5%) during 2022.
Interest Expense Interest expense was $49 million and $50 million for 2023 and 2022, respectively. The decrease in interest expense was primarily driven by a reduction of interest expense incurred during 2022 related to our 2.250% Senior Notes due 2023 that were paid off in December 2022, and reduced expense generated by cross currency swaps.
The decrease in interest expense was primarily driven by a reduction of interest expense incurred during 2023 related to our 2.250% Senior Notes due 2023 that were paid off in December 2022, and reduced expense generated by cross currency swaps.
This approach is used for countries whose functional currency is not the U.S. Dollar. • "adjusted net income" and "adjusted earnings per share" defined as net income and earnings per share, respectively, adjusted to exclude restructuring and realignment costs, amortization of acquired intangible assets, gain or loss from sale of businesses, special charges and tax-related special items, as applicable.
This approach is used for countries whose functional currency is not the U.S. dollar. • "adjusted net income" and "adjusted earnings per share" defined as net income and earnings per share, respectively, adjusted to exclude restructuring and realignment costs, amortization of acquired intangible assets, gain or loss from sale of businesses, gain on remeasurement of previously held equity interest, 39 special charges and tax-related special items, as applicable.
Int’l Benefit Obligation Assumptions Discount rate 5.00 % 3.55 % 5.25 % 4.13 % Rate of future compensation increase NM 2.87 % NM 2.79 % Net Periodic Benefit Cost Assumptions Discount rate 5.25 % 4.13 % 3.00 % 1.55 % Expected long-term return on plan assets 6.00 % 5.85 % 5.50 % 2.79 % Rate of future compensation increase NM 2.79 % NM 2.84 % NM Not meaningful.
Int’l Benefit Obligation Assumptions Discount rate 5.65 % 3.62 % 5.00 % 3.55 % Rate of future compensation increase NM 2.85 % NM 2.87 % Net Periodic Benefit Cost Assumptions Discount rate 5.00 % 3.55 % 5.25 % 4.13 % Expected long-term return on plan assets 6.00 % 5.78 % 6.00 % 5.85 % Rate of future compensation increase NM 2.87 % NM 2.79 % NM Not meaningful.
Adjusted EBITDA was $1,392 million (adjusted EBITDA margin of 18.9%) during 2023, an increase of $452 million, or 48.1%, when compared to adjusted EBITDA of $940 million (adjusted EBITDA margin of 17.0%) during the prior year.
Adjusted EBITDA was $1,392 million (adjusted EBITDA margin of 18.9%) during 2023, an increase of $452 million, or 48.1%, when compared to adjusted EBITDA of $940 million (adjusted EBITDA margin of 17.0%) during 2022.
Excluding restructuring and realignment costs, adjusted operating income was $324 million (adjusted operating margin of 17.5%) during 2023 as compared to adjusted operating income of $271 million (adjusted operating margin of 15.3%) during the prior year.
Excluding restructuring and realignment costs, adjusted operating income was $324 million (adjusted operating margin of 17.5%) during 2023 as compared to adjusted operating income of $271 million (adjusted operating margin of 15.3%) during 2022.
The slight decrease in adjusted EBITDA margin was primarily due to the same factors impacting the decrease in adjusted operating margin; however, adjusted EBITDA was not negatively impacted by the relative impact of the increase in stock based compensation expense.
The slight increase in adjusted EBITDA margin was primarily due to the same factors impacting the decrease in adjusted operating margin; however, adjusted EBITDA was not negatively impacted by the relative impact of the increase in depreciation and amortization and share-based compensation expense.
Operating margin included unfavorable impacts of 350 basis points from increases in special charges, acquired intangible asset amortization, and restructuring and realignment costs as compared to the prior year.
Operating margin included unfavorable impacts of 350 basis points from increases in special charges, acquired intangible asset 53 amortization, and restructuring and realignment costs as compared to 2022.
Delivery schedules vary from customer to customer based on their requirements. Annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the long-term nature of the contracts. As such, beginning total backlog, plus orders, minus revenues, will not equal ending total backlog due to contract adjustments, foreign currency fluctuations, and other factors.
Annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the long-term nature of the contracts. As such, beginning total backlog, plus orders, minus revenues, will not equal ending total backlog due to contract adjustments, foreign currency fluctuations, and other factors.
Operating margin declines included unfavorable impacts of 280 basis points from an increase in acquired intangible asset amortization, special charges and restructuring and realignment costs as compared to the prior year.
Operating margin declines included unfavorable impacts of 340 basis points from an increase in acquired intangible asset amortization, special charges and restructuring and realignment costs as compared to 2022.
New Accounting Pronouncements See Note 2, “Recently Issued Accounting Pronouncements,” of the consolidated financial statements for a complete discussion of recent accounting pronouncements. 58 2024 Business Outlook We anticipate total revenue growth in the range of 14% to 15% in 2024, with organic revenue growth anticipated to be in the range of 3% to 5%.
New Accounting Pronouncements See Note 2, “Recently Issued Accounting Pronouncements,” of the consolidated financial statements for a complete discussion of recent accounting pronouncements. 2025 Business Outlook We anticipate total revenue growth of up to 2% in 2025, with organic revenue growth anticipated to be in the range of 3% to 4%.
Additionally, the operating margin increase included 1,310 basis points from favorable operating impacts consisting of 630 basis points from favorable volume, 350 basis points from productivity savings and 330 basis points of price realization.
Additionally, the operating margin increase included 1,360 basis points from favorable operating impacts consisting of 650 basis points from favorable volume, 360 basis points from productivity savings and 350 basis points of price realization.
(c) The tax effects of adjustments are calculated using the statutory tax rate, taking into consideration the nature of the item and the relevant taxing jurisdiction. ▪ "adjusted operating expenses" defined as operating expenses adjusted to exclude amortization of acquired intangible assets, restructuring and realignment costs and special charges. ▪ "adjusted operating income" defined as operating income, adjusted to exclude restructuring and realignment costs and special charges, and "adjusted operating margin" defined as adjusted operating income divided by total revenue. ▪ “EBITDA” defined as earnings before interest, taxes, depreciation and amortization expense, "EBITDA margin" defined as EBITDA divided by total revenue, "adjusted EBITDA" reflects the adjustment to EBITDA to exclude share-based compensation charges, restructuring and realignment costs, gain or loss from sale of businesses and special charges, and "adjusted EBITDA margin" defined as adjusted EBITDA divided by total revenue. ▪ “realignment costs” defined as costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, severance, relocation, travel, facility set-up and other costs. ▪ “special charges" defined as costs incurred by the Company, such as acquisition and integration related costs, non-cash impairment charges, and both operating and non-operating adjustments for costs related to the U.K. pension plan buy-out. ▪ "tax-related special items" defined as tax items, such as tax return versus tax provision adjustments, tax exam impacts, tax law change impacts, excess tax benefits/losses and other discrete tax adjustments. ▪ "free cash flow" defined as net cash from operating activities, as reported in the Statement of Cash Flows, less capital expenditures.
(c) The tax-related special items in 2023 primarily relate to $70 million of tax benefits from tax exam impacts and $27 million of tax benefits relating to tax law changes. ▪ "adjusted operating expenses" defined as operating expenses adjusted to exclude amortization of acquired intangible assets, restructuring and realignment costs and special charges, as applicable. ▪ "adjusted operating income" defined as operating income, adjusted to exclude restructuring and realignment costs, amortization of acquired intangible assets, gain or loss from sale of businesses, gain on remeasurement of previously held equity interest, special charges and tax-related special items, as applicable, and "adjusted operating margin" defined as adjusted operating income divided by total revenue. ▪ “EBITDA” defined as earnings before interest, taxes, depreciation and amortization expense, "EBITDA margin" defined as EBITDA divided by total revenue, "adjusted EBITDA" reflects the adjustment to EBITDA to exclude share-based compensation charges, restructuring and realignment costs, gain or loss from sale of businesses, gain on remeasurement of previously held equity interest and special charges, and "adjusted EBITDA margin" defined as adjusted EBITDA divided by total revenue. ▪ “realignment costs” defined as costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, severance, relocation, travel, facility set-up and other costs. ▪ “special charges" defined as costs incurred by the Company, such as acquisition and integration related costs, non-cash impairment charges and both operating and non-operating adjustments for costs related to the U.K. pension plan buy-out. ▪ "tax-related special items" defined as tax items, such as tax return versus tax provision adjustments, tax exam impacts, tax law change impacts, excess tax benefits/losses and other discrete tax adjustments. ▪ "free cash flow" defined as net cash from operating activities, as reported in the Statement of Cash Flows, less capital expenditures.
During 2022, we incurred restructuring charges primarily as a continuation of our efforts to reposition our European and North American businesses to optimize our cost structure and improve our operational efficiency and effectiveness.
During 2022, we incurred restructuring charges primarily as a continuation of our efforts to reposition our European and North American businesses to optimize our cost structure and improve our operational efficiency and effectiveness. The charges included the reduction of headcount across all of our segments.
We will continue to evaluate goodwill on an annual basis as of the beginning of our fourth quarter and whenever events and changes in circumstances require us to do so. We determined that no material impairment of the indefinite-lived intangibles existed as of the measurement date in 2023.
However, future goodwill impairment tests could result in a charge to earnings. We will continue to evaluate goodwill on an annual basis as of the beginning of our fourth quarter and whenever events and changes in circumstances require us to do so. We determined that no material impairment of the indefinite-lived intangibles existed as of the measurement date in 2024.
In the Measurement and Control Solutions segment, we generate our sales through a combination of long-standing relationships with leading distributors and dedicated channel partners as well as direct sales depending on the regional availability of distribution channels and the type of product. • Integrated Solutions and Services serves the industrial and municipal sectors with tailored services and solutions in collaboration with the customers backed by life‑cycle services including on‑demand water, outsourced water, recycle / reuse, and emergency response service alternatives to improve operational reliability, performance, and environmental compliance.
In the Measurement and Control Solutions segment, we generate our sales through a combination of long-standing relationships with leading distributors and dedicated channel partners, as well as direct sales depending on the regional availability of distribution channels and the type of product. 38 • Water Solutions and Services provides tailored services and solutions, in collaboration with customers, including on‑demand water, outsourced water, recycle/reuse, pipeline assessment services, specialty dewatering and emergency response service alternatives to improve operational reliability, performance and environmental compliance.
Historically, we have generated operating cash flow sufficient to fund our primary cash needs . If our cash flows from operations are less than we expect, we may need to incur debt or issue equity. From time to time, we may need to access the long-term and short-term capital markets to obtain financing.
If our cash flows from operations are less than we expect, we may need to incur debt or issue equity. From time to time, we may need to access the long-term and short-term capital markets to obtain financing.
We currently anticipate making contributions to our pension and post-retirement benefit plans in the range of $31 million to $37 million during 2024. Approximately $8 million of contributions are expected to be made in the first quarter.
We currently anticipate making contributions to our pension and post-retirement benefit plans in the range of $17 million to $23 million during 2025. Approximately $5 million of contributions are expected to be made in the first quarter.
Overview Xylem is a leading global water technology company. We design, manufacture and service highly engineered products and solutions ranging across a wide variety of critical applications in utility, industrial, residential and commercial building services settings.
We design, manufacture and service highly engineered products and solutions ranging across a wide variety of critical applications in utility, industrial, residential and commercial building services settings.
Favorable impacts were partially offset by 820 basis points of unfavorable impacts driven by 370 basis points of inflation, 130 basis points of increased inventory management costs, 70 basis points of unfavorable mix, 70 basis points of increased spending on strategic investments, 40 basis points of increased employee related costs.
Favorable impacts were partially offset by 820 basis points of unfavorable impacts driven by 400 basis points of inflation, 160 basis points of increased inventory management costs, 70 basis points of increased spending on strategic investments, 50 basis points of unfavorable mix, and 30 basis points of increased employee related costs.
From an application perspective, organic revenue growth during the year was led by growth in the water application of $229 million led by the U.S., where we saw increased sales volume, enabled by recovery on prior year component constraints, and western Europe, due to strong backlog execution.
Organic revenue growth during the year was led by growth in the smart metering and other applications of $312 million led by the U.S., where we saw increased sales volume enabled by recovery on prior year component constraints, and western Europe due to strong backlog execution.
Key offerings within this segment also include 39 equipment systems for industrial needs (influent water, boiler feed water, ultrahigh purity, process water, wastewater treatment, and recycle / reuse), full-scale outsourcing of operations and maintenance, and municipal services, including odor and corrosion control services.
Key offerings within this segment also include equipment systems for industrial needs (influent water, boiler feed water, ultrahigh purity, process water, wastewater treatment, and recycle/reuse), full-scale outsourcing of operations and maintenance, and municipal services, including odor and corrosion control services, as well as leak detection, condition assessment and asset management and pressure monitoring solutions.
The discount rate reflects our expectation of the present value of expected future cash payments for benefits at the measurement date. A decrease in the discount rate increases the present value of benefit obligations and increases pension expense. We base the discount rate assumption on current investment yields of high-quality fixed income investments during the retirement benefits maturity period.
A decrease in the discount rate increases the present value of benefit obligations and increases pension expense. We base the discount rate assumption on current investment yields of high-quality fixed income investments during the retirement benefits maturity period.
We also provide sales and rental of specialty dewatering pumps and related equipment and services. Additionally, our offerings use monitoring and control, smart and connected technologies to allow for remote monitoring of performance and enable products to self-optimize pump operations maximizing energy efficiency and minimizing unplanned downtime and maintenance for our customers.
Additionally, our offerings use monitoring and control, smart and connected technologies to allow for remote monitoring of performance and enable products to self-optimize pump operations maximizing energy efficiency and minimizing unplanned downtime and maintenance for our customers.
Excluding acquired intangible asset amortization, special charges and restructuring and realignment costs, adjusted operating income was $519 million (adjusted operating margin of 17.5%) during 2023 as compared to adjusted operating income of $433 million (adjusted operating margin of 18.3%) during the prior year.
Excluding restructuring and realignment costs, acquired intangible asset amortization, and special charges, adjusted operating income was $327 million (adjusted operating margin of 17.5%) during 2024 as compared to adjusted operating income of $213 million (adjusted operating margin of 13.2%) during the prior year.
Excluding special charges, acquired intangible asset amortization, and restructuring and realignment costs, adjusted operating income was $203 million (adjusted operating margin of 11.7%) during 2023 as compared to adjusted operating income of $94 million (adjusted operating margin of 6.8%) during the prior year.
Excluding acquired intangible asset amortization, special charges and restructuring and realignment costs, adjusted operating income was $455 million (adjusted operating margin of 17.8%) during 2024 as compared to adjusted operating income of $368 million (adjusted operating margin of 16.6%) during the prior year.
Excluding the impact of these items, adjusted operating income was $1,072 million, with an adjusted operating margin of 14.6% in 2023 as compared to adjusted operating income of $744 million with an adjusted operating margin of 13.5% in 2022, an increase of 110 basis points.
Excluding the impact of these items, adjusted operating income was $1,373 million, with an adjusted operating margin of 16.0% in 2024 as compared to adjusted operating income of $1,072 million with an adjusted operating margin of 14.6% in 2023, an increase of 140 basis points.
Transport experienced $240 million of revenue growth. All three of our major geographic regions contributed to the organic revenue growth in transport, led by the U.S. due to strong backlog execution and price realization and higher volume in the dewatering business. Western Europe also experienced increases driven by strong price realization and delivery on capital projects.
Transport experienced $160 million of revenue growth. All three of our major geographic regions contributed to the organic revenue growth in transport. Western Europe also experienced increases driven by strong price realization and delivery on capital projects.
Dollar, the largest being the Chinese Yuan, the Canadian Dollar and the Norwegian Krone Water Infrastructure Water Infrastructure revenue increased $603 million, or 25.5%, to $2,967 million in 2023 (26.1% increase on a constant currency basis) compared to 2022.
Dollar, the largest being the Chinese Yuan, the Canadian Dollar and the Norwegian Krone Water Infrastructure Water Infrastructure revenue increased $529 million, or 31.4%, to $2,215 million in 2023 (31.9% increase on a constant currency basis) compared to 2022.
We periodically assess the likelihood that we will be able to recover our deferred tax assets and reflect any changes to our estimate of the amount we are more likely than not to realize in the valuation allowance, with a corresponding adjustment to earnings or other comprehensive income, as appropriate. 55 In assessing the need for a valuation allowance, we look to the future reversal of existing taxable temporary differences, taxable income in carryback years and the feasibility of tax planning strategies and estimated future taxable income.
We periodically assess the likelihood that we will be able to recover our deferred tax assets and reflect any changes to our estimate of the amount we are more likely than not to realize in the valuation allowance, with a corresponding adjustment to earnings or other comprehensive income, as appropriate.
Additionally, operating margin declines included 840 basis points from unfavorable operating impacts, driven by 330 basis points of inflation, 160 basis points of unfavorable mix, 150 basis points of increased spending on strategic investments, 40 basis points of employee-related expenses and 40 basis points of negative operating impact from the impact of the Evoqua acquisition.
Additionally, operating margin declines included 580 basis points from unfavorable operating impacts, driven by 210 basis points of negative operating impact from the Evoqua acquisition, 160 basis points of inflation, 60 basis points of increased spending on strategic investments, and 30 basis points of unfavorable mix.
Operating income for 2023 was $652 million, reflecting an increase of $30 million, or 4.8%, compared to $622 million in 2022. Operating margin was 8.9% and 11.3% for 2023 and 2022, respectively.
Operating Income, Net Income, and Adjusted EBITDA Operating income was $652 million (operating margin of 8.9%) during 2023, an increase of $30 million, or 4.8%, when compared to operating income of $622 million (operating margin of 11.3%) during 2022.
The following table illustrates the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to orders during 2023: Water Infrastructure Applied Water Measurement and Control Solutions Integrated Solutions and Services Total Xylem (in millions) $ Change % Change $ Change % Change $ Change % Change $ Change % Change $ Change % Change 2022 Orders $ 2,607 $ 1,794 $ 1,856 $ — $ 6,257 Organic Impact 124 4.8 % (6) (0.3) % (53) (2.9) % — NM 65 1.0 % Acquisitions/(Divestitures) 352 13.5 % — — % — — % 868 NM 1,220 19.5 % Constant Currency 476 18.3 % (6) (0.3) % (53) (2.9) % 868 NM 1,285 20.5 % Foreign currency translation (a) (23) (0.9) % (18) (1.0) % — — % — NM (41) (0.7) % Total change in orders 453 17.4 % (24) (1.3) % (53) (2.9) % 868 NM 1,244 19.9 % 2023 Orders $ 3,060 $ 1,770 $ 1,803 $ 868 $ 7,501 (a) Foreign currency translation impact for the year primarily due to the weakening in value of various currencies against the U.S.
The following table illustrates the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to orders during 2023: Water Infrastructure Applied Water Measurement and Control Solutions Water Solutions and Services Total Xylem (in millions) $ Change % Change $ Change % Change $ Change % Change $ Change % Change $ Change % Change 2022 Orders $ 1,916 $ 1,794 $ 1,736 $ 811 $ 6,257 Organic Impact 62 3.2 % (6) (0.3) % (67) (3.9) % 76 9.4 % 65 1.0 % Acquisitions/(Divestitures) 352 18.4 % — — % — — % 868 107.0 % 1,220 19.5 % Constant Currency 414 21.6 % (6) (0.3) % (67) (3.9) % 944 116.4 % 1,285 20.5 % Foreign currency translation (a) (17) (0.9) % (18) (1.0) % 1 0.1 % (7) (0.9) % (41) (0.7) % Total change in orders 397 20.7 % (24) (1.3) % (66) (3.8) % 937 115.5 % 1,244 19.9 % 2023 Orders $ 2,313 $ 1,770 $ 1,670 $ 1,748 $ 7,501 (a) Foreign currency translation impact for the year primarily due to the weakening in value of various currencies against the U.S.
Revenue growth was partially made up of the revenue contributed by acquisitions from APT of $362 million, with the remainder of the increase coming from organic revenue growth of $255 million, or 10.8%. Revenue was negatively impacted by $14 million of foreign currency translation.
Revenue growth was partially made up of the revenue contributed by acquisitions of $221 million, with the remainder of the increase coming from organic revenue growth of $123 million, or 5.5%. Revenue was negatively impacted by $4 million of foreign currency translation.
Operating margin declines were offset by 760 basis points of favorable impacts, consisting of 420 basis points of price realization, 230 basis points from productivity savings and 110 basis points of favorable volume.
Operating margin declines were offset by 840 basis points of favorable impacts, consisting of 440 basis points of price realization, 280 basis points from productivity savings and 120 basis points of favorable volume.
Higher dividend payments partially offset these items. Funding and Liquidity Strategy Our ability to fund our capital needs depends on our ongoing ability to generate cash from operations and access to bank financing and the capital markets. We continually evaluate aspects of our spending, including capital expenditures, strategic investments and dividends.
Funding and Liquidity Strategy Our ability to fund our capital needs depends on our ongoing ability to generate cash from operations and access to bank financing and the capital markets. We continually evaluate aspects of our spending, including capital expenditures, strategic investments and dividends. Historically, we have generated operating cash flow sufficient to fund our primary cash needs .
The industrial water application had organic growth of $32 million, led by the emerging markets due to increased sales volume, and western Europe where we benefited from strong price realization. 43 Measurement and Control Solutions Measurement and Control Solutions revenue increased $338 million, or 24.3%, in 2023 (24.4% increase on a constant currency basis) compared to 2022.
The industrial water application had organic growth of $32 million, led by the emerging markets due to increased sales volume, and western Europe where we benefited from strong price realization. Measurement and Control Solutions Measurement and Control Solutions revenue increased $337 million, or 26.4%, in 2023, consisting entirely of organic growth.
The increase at constant currency consists of revenue from acquisitions of $1,177 million and an increase in organic revenue of $690 million, reflecting strong organic growth in all segments as well as across all major geographic regions. 42 The following table illustrates the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to revenue during 2023: Water Infrastructure Applied Water Measurement and Control Solutions Integrated Solutions and Services Total Xylem (in millions) $ Change % Change $ Change % Change $ Change % Change $ Change % Change $ Change % Change 2022 Revenue $ 2,364 $ 1,767 $ 1,391 $ — $ 5,522 Organic Growth 255 10.8 % 96 5.4 % 339 24.4 % — NM 690 12.5 % Acquisitions/(Divestitures) 362 15.3 % — — % — — % 815 NM 1,177 21.3 % Constant Currency 617 26.1 % 96 5.4 % 339 24.4 % 815 NM 1,867 33.8 % Foreign currency translation (a) (14) (0.6) % (10) (0.5) % (1) (0.1) % — NM (25) (0.4) % Total change in revenue 603 25.5 % 86 4.9 % 338 24.3 % 815 NM 1,842 33.4 % 2023 Revenue $ 2,967 $ 1,853 $ 1,729 $ 815 $ 7,364 (a) Foreign currency translation impact for the year primarily due to the weakening in value of various currencies against the U.S.
The increase at constant currency consists of revenue from acquisitions of $1,177 million and an increase in organic revenue of $690 million, reflecting strong organic growth in all segments as well as across all major geographic regions. 50 The following table illustrates the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to revenue during 2023 as recast by segment structure change effective on January 1, 2024: Water Infrastructure Applied Water Measurement and Control Solutions Water Solutions and Services Total Xylem (in millions) $ Change % Change $ Change % Change $ Change % Change $ Change % Change $ Change % Change 2022 Revenue $ 1,686 $ 1,767 $ 1,275 $ 794 $ 5,522 Organic Growth 175 10.4 % 96 5.4 % 337 26.4 % 82 10.3 % 690 12.5 % Acquisitions/(Divestitures) 362 21.5 % — — % — — % 815 102.6 % 1,177 21.3 % Constant Currency 537 31.9 % 96 5.4 % 337 26.4 % 897 112.9 % 1,867 33.8 % Foreign currency translation (a) (8) (0.5) % (10) (0.5) % — — % (7) (0.8) % (25) (0.4) % Total change in revenue 529 31.4 % 86 4.9 % 337 26.4 % 890 112.1 % 1,842 33.4 % 2023 Revenue $ 2,215 $ 1,853 $ 1,612 $ 1,684 $ 7,364 (a) Foreign currency translation impact for the year primarily due to the weakening in value of various currencies against the U.S.
The increase in adjusted EBITDA margin was primarily due to the same factors impacting adjusted operating margin noted above; however, adjusted EBITDA was not negatively impacted by the relative impact of depreciation and software amortization expense. 48 The table below provides a reconciliation of total and each segment's operating income to adjusted operating income, and a calculation of the corresponding adjusted operating margin: (In millions) 2023 2022 Change Water Infrastructure Operating income $ 419 $ 418 0.2 % Operating margin 14.1 % 17.7 % (360) bp Restructuring and realignment costs 22 11 100.0 % Purchase accounting intangible amortization 49 4 1,125.0 % Special charges 29 — NM % Adjusted operating income $ 519 $ 433 19.9 % Adjusted operating margin 17.5 % 18.3 % (80) bp Applied Water Operating income $ 310 $ 258 20.2 % Operating margin 16.7 % 14.6 % 210 bp Restructuring and realignment costs 14 13 7.7 % Purchase accounting intangible amortization — — NM % Special charges — — NM % Adjusted operating income $ 324 $ 271 19.6 % Adjusted operating margin 17.5 % 15.3 % 220 bp Measurement and Control Solutions Operating income $ 113 $ 2 5,550.0 % Operating margin 6.5 % 0.1 % 640 bp Restructuring and realignment costs 20 10 100.0 % Purchase accounting intangible amortization 66 68 (2.9) % Special charges 4 14 (71.4) % Adjusted operating income $ 203 $ 94 116.0 % Adjusted operating margin 11.7 % 6.8 % 490 bp Integrated Solutions and Services Operating income $ 8 $ — NM % Operating margin 1.0 % — % 100 bp Restructuring and realignment costs 15 — NM % Purchase accounting intangible amortization 61 — NM % Special charges 21 — NM % Adjusted operating income $ 105 $ — NM % Adjusted operating margin 12.9 % — % NM Corporate and other Operating loss $ (198) $ (56) 253.6 % Restructuring and realignment costs 35 — NM % Special charges 84 2 4,100.0 Adjusted operating loss $ (79) $ (54) 46.3 % Total Xylem Operating income $ 652 $ 622 4.8 % Operating margin 8.9 % 11.3 % (240) bp Restructuring and realignment costs 106 34 211.8 % Purchase accounting intangible amortization 176 72 144.4 % Special charges 138 16 762.5 % Adjusted operating income $ 1,072 $ 744 44.1 % Adjusted operating margin 14.6 % 13.5 % 110 bp NM Not Meaningful 49 The table below provides a reconciliation of net income to consolidated EBITDA and adjusted EBITDA: (in millions) Year Ended December 31, 2023 2022 Change Net Income $ 609 $ 355 72 % Net Income margin 8.3 % 6.4 % 190 bp Depreciation 193 111 74 % Amortization 243 125 94 % Interest expense, net 21 34 (38) % Income tax expense 26 85 (69) % EBITDA $ 1,092 $ 710 54 % Share-based compensation 60 37 62 % Restructuring and realignment 103 34 203 % U.K. pension settlement expense — 140 100 % Special charges 136 20 580 % Gain from sale of business 1 (1) (200) % Adjusted EBITDA $ 1,392 $ 940 48 % Adjusted EBITDA margin 18.9 % 17.0 % 190 bp The tables below provide a reconciliation of each segment's operating income (loss) to EBITDA and adjusted EBITDA: Year Ended December 31, 2023 (in millions) Water Infrastructure Applied Water Systems Measurement and Control Solutions Integrated Solutions and Services Operating Income $ 419 $ 310 $ 113 $ 8 Operating margin 14.1 % 16.7 % 6.5 % 1.0 % Depreciation 55 19 32 65 Amortization 55 2 107 65 Other non-operating expense 3 (2) (4) — EBITDA $ 532 $ 329 $ 248 $ 138 Share-based compensation 15 4 7 7 Restructuring and realignment 22 13 18 15 Special charges 29 — 4 21 Loss/(Gain) from sale of business — — 1 — Adjusted EBITDA $ 598 $ 346 $ 278 $ 181 Adjusted EBITDA margin 20.2 % 18.7 % 16.1 % 22.2 % 50 Year Ended December 31, 2022 (in millions) Water Infrastructure Applied Water Systems Measurement and Control Solutions Integrated Solutions Services Operating Income $ 418 $ 258 $ 2 $ — Operating margin 17.7 % 14.6 % 0.1 % NM (Loss)/Gain from sale of business — — 1 — Depreciation 44 17 33 — Amortization 9 2 104 — Other non-operating expense (4) (2) (2) — EBITDA $ 467 $ 275 $ 138 $ — Share-based compensation 2 4 6 — Restructuring and realignment 11 13 10 — Special charges — — 14 — Loss/(Gain) from sale of business — — (1) — Adjusted EBITDA $ 480 $ 292 $ 167 $ — Adjusted EBITDA margin 20.3 % 16.5 % 12.0 % NM 2023 versus 2022 (in millions) Water Infrastructure Applied Water Systems Measurement and Control Solutions Integrated Solutions and Services Operating Income (Loss) $ 1 $ 52 $ 111 $ 8 Operating margin (360) bps 210 bps 640 bps NM (Loss)/Gain from sale of business — — (1) — Depreciation 11 2 (1) 65 Amortization 46 — 3 65 Other non-operating expense 7 — (2) — EBITDA $ 65 $ 54 $ 110 $ 138 Share-based compensation 13 — 1 7 Restructuring and realignment 11 — 8 15 Special charges 29 — (10) 21 Loss/(Gain) from sale of business — — 2 — Adjusted EBITDA $ 118 $ 54 $ 111 $ 181 Adjusted EBITDA margin (0.1) % 2.2 % 4.1 % NM 51 Water Infrastructure Operating income was $419 million for our Water Infrastructure segment (operating margin of 14.1%) during 2023, an increase of $1 million, or 0.2%, when compared to operating income of $418 million (operating margin of 17.7%) during the prior year, or a total decrease of 360 basis points of operating margin.
The increase in adjusted EBITDA margin was primarily due to the same factors impacting adjusted operating margin noted above; however, adjusted EBITDA was not negatively impacted by the relative impact of depreciation and software amortization expense. 54 The table below provides a reconciliation of total and each segment's operating income to adjusted operating income, and a calculation of the corresponding adjusted operating margin: (In millions) 2023 2022 Change Water Infrastructure Operating income $ 275 $ 279 (1.4) % Operating margin 12.4 % 16.5 % (410) bp Restructuring and realignment costs 18 9 100.0 % Purchase accounting intangible amortization 47 4 1,075.0 % Special charges 28 — NM % Adjusted operating income $ 368 $ 292 26.0 % Adjusted operating margin 16.6 % 17.3 % (70) bp Applied Water Operating income $ 310 $ 258 20.2 % Operating margin 16.7 % 14.6 % 210 bp Restructuring and realignment costs 14 13 7.7 % Purchase accounting intangible amortization — — NM % Special charges — — NM % Adjusted operating income $ 324 $ 271 19.6 % Adjusted operating margin 17.5 % 15.3 % 220 bp Measurement and Control Solutions Operating income $ 133 $ 19 600.0 % Operating margin 8.3 % 1.5 % 680 bp Restructuring and realignment costs 19 10 90.0 % Purchase accounting intangible amortization 57 57 — % Special charges 4 13 (69.2) % Adjusted operating income $ 213 $ 99 115.2 % Adjusted operating margin 13.2 % 7.8 % 540 bp Water Solutions and Services Operating income $ 132 $ 122 8.2 % Operating margin 7.8 % 15.4 % (760) bp Restructuring and realignment costs 20 2 900.0 % Purchase accounting intangible amortization 72 11 554.5 % Special charges 22 1 2,100.0 % Adjusted operating income $ 246 $ 136 80.9 % Adjusted operating margin 14.6 % 17.1 % (250) bp Corporate and other Operating loss $ (198) $ (56) 253.6 % Restructuring and realignment costs 35 — NM % Special charges 84 2 4,100.0 Adjusted operating loss $ (79) $ (54) 46.3 % Total Xylem Operating income $ 652 $ 622 4.8 % Operating margin 8.9 % 11.3 % (240) bp Restructuring and realignment costs 106 34 211.8 % Purchase accounting intangible amortization 176 72 144.4 % Special charges 138 16 762.5 % Adjusted operating income $ 1,072 $ 744 44.1 % Adjusted operating margin 14.6 % 13.5 % 110 bp NM Not Meaningful 55 The table below provides a reconciliation of net income to consolidated EBITDA and adjusted EBITDA: (in millions) Year Ended December 31, 2023 2022 Change Net Income $ 609 $ 355 72 % Net Income margin 8.3 % 6.4 % 190 bp Depreciation 193 111 74 % Amortization 243 125 94 % Interest expense, net 21 34 (38) % Income tax expense 26 85 (69) % EBITDA $ 1,092 $ 710 54 % Share-based compensation 60 37 62 % Restructuring and realignment 103 34 203 % U.K. pension settlement expense — 140 (100) % Special charges 136 20 580 % Gain (loss) from sale of business 1 (1) (200) % Adjusted EBITDA $ 1,392 $ 940 48 % Adjusted EBITDA margin 18.9 % 17.0 % 190 bp The tables below provide a reconciliation of each segment's operating income (loss) to EBITDA and adjusted EBITDA: Year Ended December 31, 2023 (in millions) Water Infrastructure Applied Water Systems Measurement and Control Solutions Water Solutions and Services Operating Income $ 275 $ 310 $ 133 $ 132 Operating margin 12.4 % 16.7 % 8.3 % 7.8 % (Loss) from sale of business — — (1) — Depreciation 34 25 27 105 Amortization 55 3 97 79 Other non-operating expense, excluding interest 3 (2) (4) 1 EBITDA $ 367 $ 336 $ 252 $ 317 Share-based compensation 13 3 7 10 Restructuring and realignment 18 13 17 20 Special charges 28 — 4 22 Loss from sale of business — — 1 — Adjusted EBITDA $ 426 $ 352 $ 281 $ 369 Adjusted EBITDA margin 19.2 % 19.0 % 17.4 % 21.9 % 56 Year Ended December 31, 2022 (in millions) Water Infrastructure Applied Water Systems Measurement and Control Solutions Water Solutions and Services Operating Income $ 279 $ 258 $ 19 $ 122 Operating margin 16.5 % 14.6 % 1.5 % 15.4 % Depreciation 24 22 27 36 Amortization 10 3 92 14 Other non-operating expense, excluding interest (3) (2) (2) — EBITDA $ 310 $ 281 $ 136 $ 172 Share-based compensation 7 4 6 3 Restructuring and realignment 9 13 10 2 Special charges — — 13 1 Loss/(Gain) from sale of business — — (1) — Adjusted EBITDA $ 326 $ 298 $ 164 $ 178 Adjusted EBITDA margin 19.3 % 16.9 % 12.9 % 22.4 % 2023 versus 2022 (in millions) Water Infrastructure Applied Water Systems Measurement and Control Solutions Water Solutions and Services Operating Income (Loss) $ (4) $ 52 $ 114 $ 10 Operating margin (410) bps 210 bps 680 bps (760) bps (Loss)/Gain from sale of business — — (1) — Depreciation 10 3 — 69 Amortization 45 — 5 65 Other non-operating expense, excluding interest 6 — (2) 1 EBITDA $ 57 $ 55 $ 116 $ 145 Share-based compensation 6 (1) 1 7 Restructuring and realignment 9 — 7 18 Special charges 28 — (9) 21 Loss/(Gain) from sale of business — — 2 — Adjusted EBITDA $ 100 $ 54 $ 117 $ 191 Adjusted EBITDA margin (10) bps 210 bps 450 bps (50) bps 57 Water Infrastructure Operating income was $275 million for our Water Infrastructure segment (operating margin of 12.4%) during 2023, a decrease of $4 million, or 1.4%, when compared to operating income of $279 million (operating margin of 16.5%) during 2022, or a total decrease of 410 basis points of operating margin.
The increase in operating income for 2023 included an increase in special charges of $122 million, an increase in purchased intangible amortization of $104 million, and an increase in restructuring and realignment costs of $72 million as compared to 2022.
The increase in operating income for 2024 included a decrease in special charges of $81 million, an increase in purchased intangible amortization of $40 million, and a decrease in restructuring and realignment costs of $15 million as compared to 2023.
Under the market approach, we calculate fair value based on recent sales and selling prices of similar assets. 56 Determining the fair value of a reporting unit or an indefinite-lived intangible asset is judgmental in nature and involves the use of significant estimates and assumptions, particularly related to future operating results and cash flows.
Determining the fair value of a reporting unit or an indefinite-lived intangible asset is judgmental in nature and involves the use of significant estimates and assumptions, particularly related to future operating results and cash flows.
Orders/Backlog An order represents a legally enforceable, written document that includes the scope of work or services to be performed or equipment to be supplied to a customer, the corresponding price and the expected delivery date for the applicable products or services to be provided.
Organic revenue growth was led by the U.S. due to higher volume in the dewatering business. 51 Orders/Backlog An order represents a legally enforceable, written document that includes the scope of work or services to be performed or equipment to be supplied to a customer, the corresponding price and the expected delivery date for the applicable products or services to be provided.
Results of Operations (in millions) 2023 2022 2023 v. 2022 Revenue $ 7,364 $ 5,522 33.4 % Gross profit 2,717 2,084 30.4 % Gross margin 36.9 % 37.7 % (80) bp Total operating expenses 2,065 1,462 41.2 % Expense to revenue ratio 28.0 % 26.5 % 150 bp Restructuring and realignment costs (102) (30) 240.0 % Acquired intangible asset amortization (176) (72) 144.4 % Special charges (106) (16) 562.5 % Adjusted operating expenses 1,681 1,344 25.1 % Adjusted operating expenses to revenue ratio 22.8 % 24.3 % (150) bp Operating income 652 622 4.8 % Operating margin 8.9 % 11.3 % (240) bp U.K. pension settlement expense — 140 NM Interest and other non-operating expense, net 16 43 (62.8) % Gain/(loss) from sale of business (1) 1 (200.0) % Income tax expense 26 85 (69.4) % Tax rate 4.1 % 19.2 % (1,510) bp Net income $ 609 $ 355 71.5 % NM Not Meaningful 2023 versus 2022 Revenue Revenue generated for 2023 was $7,364 million, an increase of $1,842 million, or 33.4%, compared to $5,522 million in 2022.
Results of Operations (in millions) 2024 2023 2022 2024 v. 2023 2023 v. 2022 Revenue $ 8,562 $ 7,364 $ 5,522 16.3 % 33.4 % Gross profit 3,212 2,717 2,084 18.2 % 30.4 % Gross margin 37.5 % 36.9 % 37.7 % 60 bp (80) bp Total operating expenses 2,203 2,065 1,462 6.7 % 41.2 % Expense to revenue ratio 25.7 % 28.0 % 26.5 % (230) bp 150 bp Operating income 1,009 652 622 54.8 % 4.8 % Operating margin 11.8 % 8.9 % 11.3 % 290 bp (240) bp U.K. pension settlement expense — — 140 NM NM Interest and other non-operating expense, net 28 16 43 75.0 % (62.8) % Gain on remeasurement of previously held equity interest 152 — — NM NM (Loss)/gain from sale of business (46) (1) 1 4,500.0 % (200.0) % Income tax expense 197 26 85 657.7 % (69.4) % Tax rate 18.1 % 4.1 % 19.2 % 1,400 bp (1,510) bp Net income $ 890 $ 609 $ 355 46.1 % 71.5 % NM Not Meaningful 2024 versus 2023 Revenue Revenue generated for 2024 was $8,562 million, an increase of $1,198 million, or 16.3%, compared to $7,364 million in 2023.
Under the income approach, we calculate fair value based on the present value of estimated future cash flows.
Under the income approach, we calculate fair value based on the present value of estimated future cash flows. Under the market approach, we calculate fair value based on recent sales and selling prices of similar assets.
Specifically, the Company analyzes the estimated future returns based on independent estimates of asset class returns and evaluates historical broad market returns over long-term timeframes based on the strategic asset allocation, which is detailed in Note 16, “Post-retirement Benefit Plans” of the consolidated financial statements. 57 For the recognition of net periodic pension cost, the calculation of the expected return on plan assets is generally derived by applying the expected long-term rate of return to the market-related value of plan assets.
Specifically, the Company analyzes the estimated future returns based on independent estimates of asset class returns and evaluates historical broad market returns over long-term timeframes based on the strategic asset allocation, which is detailed in Note 16, “Post-retirement Benefit Plans” of the consolidated financial statements.
Adjusted EBITDA was $346 million (adjusted EBITDA margin of 18.7%) during 2023, an increase of $54 million, or 18.5%, when compared to adjusted EBITDA of $292 million (adjusted EBITDA margin of 16.5%) during the prior year. The increase in adjusted EBITDA margin was due to the same factors impacting the increase in adjusted operating margin.
Adjusted EBITDA was $352 million (adjusted EBITDA margin of 19.0%) during 2023, an increase of $54 million, or 18.1%, when compared to adjusted EBITDA of $298 million (adjusted EBITDA margin of 16.9%) during 2022. The increase in adjusted EBITDA margin was due to the same factors impacting the increase in adjusted operating margin.
The gross margin decline for the year included 60 basis points from increases in acquired intangible asset amortization and special charges as compared to the prior year.
Gross Margin Gross margin as a percentage of consolidated revenue decreased 80 basis points to 36.9% in 2023 as compared to 37.7% in 2022. The gross margin decline for the year included 60 basis points from increases in acquired intangible asset amortization and special charges as compared to 2022.
Corporate and other Operating loss for corporate and other increased $142 million, or 253.6%, compared to the prior year. The increase in operating loss for the year was primarily due to higher special charges and restructuring and realignment costs as compared to the prior year.
The increase in operating loss for the year was primarily due to higher special charges and restructuring and realignment costs as compared to 2022. Excluding special charges and restructuring and realignment costs, adjusted operating loss increased $25 million during 2023, or 46.3%, compared to 2022.
Adjusted EBITDA was $598 million (adjusted EBITDA margin of 20.2%) during 2023, an increase of $118 million, or 24.6%, when compared to adjusted EBITDA of $480 million (adjusted EBITDA margin of 20.3%) during the prior year.
Adjusted EBITDA was $529 million (adjusted EBITDA margin of 20.7%) during 2024, an increase of $103 million, or 24.2%, when compared to adjusted EBITDA of $426 million (adjusted EBITDA margin of 19.2%) during the prior year.
Measurement and Control Solutions Operating income was $113 million for our Measurement and Control Solutions (operating margin of 6.5%) during 2023, an increase of $111 million, or 5,550.0%, when compared to operating income of $2 million (operating margin of 0.1%) during the prior year, or a total increase of 640 basis points of operating margin.
Measurement and Control Solutions Operating income was $133 million for our Measurement and Control Solutions segment (operating margin of 8.3%) during 2023, an increase of $114 million, or 600.0%, when compared to operating income of $19 million (operating margin of 1.5%) during 2022, or a total increase of 680 basis points of operating margin.
Additional financial highlights for 2023 include the following: • Net income of $609 million, or $2.79 per diluted share, up 42.3% ($825 million or $3.78 per diluted share on an adjusted basis, up 20.0% from 2022) • Net cash provided by operating activities of $837 million and free cash flow of $599 million, up 54% from 2022 • Orders of $7,501 million, up 19.9% from $6,257 million in 2022 (up 1.0% on an organic basis) • Dividends paid to shareholders increased 10% in 2023.
Additional financial highlights for 2024 include the following: • Net income of $890 million, or $3.65 per diluted share, up 30.8% ($1,041 million or $4.27 per diluted share on an adjusted basis, up 13.0% from 2023) • Net cash provided by operating activities of $1,263 million, up 51% from 2023, and free cash flow of $942 million, up 66% from 2023 • Orders of $8,730 million, up 16.4% from $7,501 million in 2023 (up 4.7% on an organic basis) • Dividends paid to shareholders increased 9% in 2024.
The increase in adjusted EBITDA margin was due to the same factors as those impacting the increase in adjusted operating margin; however, adjusted EBITDA was not favorably impacted by the relative impact of depreciation and software amortization expense. 52 Integrated Solutions and Services Operating income was $8 million for our Integrated Solutions and Services segment during 2023 (operating margin of 1.0%).
The increase in adjusted EBITDA margin was due to the same factors as those impacting the increase in adjusted operating margin; however, adjusted EBITDA was not favorably impacted by the relative impact of depreciation and software amortization and share-based compensation expense. Corporate and other Operating loss for corporate and other increased $142 million during 2023, or 253.6%, compared to 2022.
We estimate the fair value of our reporting units using an income approach based on the discounted value of estimated cash flows. Our projected cash flows are discounted using weighted costs of capital and are derived using revenue growth rates and operating margin estimates, taking into consideration industry and market conditions.
To determine the reasonableness of the calculated fair values, we review the assumptions to ensure that neither the income approach nor the market approach yielded significantly different valuations. Our projected cash flows are discounted using weighted costs of capital and are derived using revenue growth rates and operating margin estimates, taking into consideration industry and market conditions.
Excluding special charges and restructuring and realignment costs, adjusted operating loss increased $25 million, or 46.3%, compared to the prior year. The increase in adjusted operating loss is primarily related to increased operating expense due to the acquisition of Evoqua, increased employee costs and spending on strategic investments.
The increase in adjusted operating loss is primarily related to increased operating expense due to the acquisition of Evoqua, increased employee costs and spending on strategic investments. Interest Expense Interest expense was $49 million and $50 million for 2023 and 2022, respectively.
Liquidity and Capital Resources The following table summarizes our sources and uses of cash: Year Ended December 31, (in millions) 2023 2022 Change Operating activities $ 837 $ 596 $ 241 Investing activities (628) (191) (437) Financing activities (157) (790) 633 Foreign exchange (a) 23 (20) 43 Total $ 75 $ (405) $ 480 (a) The favorable impact of foreign exchange as compared to 2022 is primarily due to strengthening of the Euro, Chinese Yuan and the Canadian Dollar.
Liquidity and Capital Resources The following table summarizes our sources and uses of cash: Year Ended December 31, (in millions) 2024 2023 Change Operating activities $ 1,263 $ 837 $ 426 Investing activities (482) (628) 146 Financing activities (615) (157) (458) Foreign exchange (a) (53) 23 (76) Total $ 113 $ 75 $ 38 (a) The impact of foreign exchange is primarily due to weakening of the Euro, Canadian Dollar and the Chilean Peso. 59 Sources and Uses of Liquidity Operating Activities During 2024, net cash provided by operating activities was $1,263 million, compared to $837 million in 2023.
Order intake for the period was negatively impacted by $23 million of foreign currency translation.
Revenue was negatively impacted by $6 million of foreign currency translation.
The market-related value of plan assets is based on average asset values at the measurement date over the last five years. The use of fair value, rather than a calculated value, could materially affect net periodic pension cost.
For the recognition of net periodic pension cost, the calculation of the expected return on plan assets is generally derived by applying the expected long-term rate of return to the market-related value of plan assets. The market-related value of plan assets is based on average asset values at the measurement date over the last five years.
A reconciliation of adjusted net income and adjusted earnings per share is provided below. 40 (in millions, except per share data) 2023 2022 Net income and Earnings per share $ 609 $ 2.79 $ 355 $ 1.96 Restructuring and realignment 106 0.49 34 0.19 Acquired intangible amortization 176 0.81 72 0.40 Special charges 138 (a) 0.63 160 (b) 0.88 Tax-related special items (115) (0.53) 1 0.01 (Gain) loss from sale of business 1 — (1) (0.01) Tax effects of adjustments (c) (90) (0.41) (51) (0.28) Adjusted net income and Adjusted earnings per share $ 825 $ 3.78 $ 570 $ 3.15 (a) The special charges in the year primarily relate to $126 million of acquisition and integration related costs.
(in millions, except per share data) 2024 2023 Net income and Earnings per share $ 890 $ 3.65 $ 609 $ 2.79 Restructuring and realignment 91 0.37 106 0.49 Acquired intangible amortization 216 0.89 176 0.81 Special charges (a) 57 0.23 138 0.63 Gain on remeasurement of previously held equity interest (152) (0.62) — — Tax-related special items (19) (0.08) (115) (c) (0.53) Loss from sale of business 46 0.19 1 — Tax effects of adjustments (b) (88) (0.36) (90) (0.41) Adjusted net income and Adjusted earnings per share $ 1,041 $ 4.27 $ 825 $ 3.78 Weighted average number of shares - diluted 243.5 218.2 (a) The special charges in the years end December 31, 2024 and 2023 primarily relate to $50 million and $134 million of acquisition and integration related costs, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+0 added−1 removed9 unchanged
Biggest changeIn addition to the senior notes, we also have $75 million in equipment financings with fixed interest rates.
Biggest changeIn addition to the senior notes, we also have $74 million in equipment financings with fixed interest rates. Our long-term debt portfolio also includes $32 million of variable rate debt, comprised entirely of the $32 million for equipment financings.
Additionally, we are subject to foreign exchange translation risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. Dollar. The translation risk is primarily concentrated in the exchange rate between the U.S. Dollar and the Euro, British Pound, Canadian Dollar, Chinese Yuan, Australian Dollar, Indian Rupee, and Swedish Krona. As the U.S.
Additionally, we are subject to foreign exchange translation risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. Dollar. The translation risk is primarily concentrated in the exchange rate between the U.S. Dollar and the Euro, British Pound, Chinese Yuan, Canadian Dollar, Australian Dollar, Swedish Krona, and Indian Rupee. As the U.S.
We estimate that a 1% movement in interest rates would not have a material economic impact on our financial position and results of operations. Based on the current interest rate market we do not anticipate material risk associated with our debt refinancing within the target time frame of maturity.
We estimate that a 10% movement in interest rates would not have a material economic impact on our financial position and results of operations. Based on the current interest rate market we do not anticipate material risk associated with our debt refinancing within the target time frame of maturity.
Interest Rate Risk As of December 31, 2023, our long-term debt portfolio is primarily comprised of four series of fixed-rate senior notes that total approximately $1.9 billion. The senior notes are not exposed to interest rate risk as the bonds are at a fixed rate until maturity.
Interest Rate Risk As of December 31, 2024, our long-term debt portfolio is primarily comprised of four series of fixed-rate senior notes that total approximately $1.9 billion. The senior notes are not exposed to interest rate risk as the bonds are at a fixed rate until maturity.
Commodity Price Exposures For a discussion of risks relating to commodity prices, refer to “Item 1A. Risk Factors.” 60
Commodity Price Exposures For a discussion of risks relating to commodity prices, refer to “Item 1A. Risk Factors.” 66
Foreign Currency Exchange Rate Risk Approximately 46% of our 2023 revenues were from customers in various locations outside the U.S. Our economic foreign currency risk primarily relates to receipts from customers, payments to suppliers and intercompany transactions denominated in foreign currencies.
Foreign Currency Exchange Rate Risk Approximately 43% of our 2024 revenues were from customers in various locations outside the U.S. Our economic foreign currency risk primarily relates to receipts from customers, payments to suppliers and intercompany transactions denominated in foreign currencies.
Removed
Our long-term debt portfolio also includes $326 million of variable rate debt, primarily comprised of the $278 million for the Term Facility (as defined in Note 15, “Credit Facilities and Debt” to the consolidated financial statements) and $48 million of equipment financings with variable interest rates .

Other XYL 10-K year-over-year comparisons