The operator introduces the conference call for Xylem's first quarter 2024 results, and Andrea van der Berg, Vice President of Investor Relations, welcomes participants and introduces the CEO and CFO. The call will include a question and answer session and a slide presentation. Forward-looking statements will be made, but the company is not obligated to update them.

In the second paragraph, the speaker provides a summary of the company's key performance metrics, including both GAAP and non-GAAP metrics. They also mention that all references will be on an organic and/or adjusted basis unless otherwise indicated, and that non-GAAP financials have been reconciled and included in the presentation. The CEO then takes over and thanks the team for their strong performance in the first quarter, highlighting the outstanding numbers from the Measurement & Control Solutions and Water Solutions and Services segments. The company also saw continued momentum on integration synergies with Evoqua, with a solid Q1 run rate on cost capture and confidence in tracking revenue and cost synergies.

The company has had a successful first quarter, with strong performance and demand leading to an increase in revenue and margin guidance. They are focused on maximizing value and simplifying operations. The demand for their solutions is supported by ongoing trends and challenges in the water industry. The company will be hosting an Investor Day to provide updates on their strategic outlook and sustainability goals. The first quarter results exceeded expectations and the company's backlog has increased.

In the fourth quarter, organic orders for the company grew by 3%, with book-to-bill ratio above 1%. The company's total revenues grew by 40%, with organic revenues rising by 7%. The growth was driven by strength in developed markets, particularly in the Water Solutions and Services division. The company also saw growth in all regions, with double-digit growth in the US. EBITDA margin increased by 290 basis points, driven by productivity savings, strong volume, price, and mix. The company's EPS in the quarter was $0.90, above expectations. The company's Measurement & Control Solutions division had a strong quarter, with orders growing by 3% and backlog increasing by 6% organically. Revenue in this division was up 22%, driven by smart metering demand. Water Infrastructure also had a good quarter, with orders growing by 6% and revenue exceeding expectations with a total growth of 40%.

The company saw a 320 basis point increase in EBITDA margin for its segment due to productivity, mix, volume, and price. Orders for Applied Water declined but book-to-bill was greater than one due to a few large project wins. Revenues were down 4% as expected, with a decline in developed markets. Water Solutions and Services saw a 7% increase in orders and a 6% increase in organic revenue. Adjusted EBITDA margin was strong at 22.3%, driven by favorable mix, volume, price, and productivity. The company is raising its full year guidance, with revenue now expected to be approximately $8.5 billion and an EBITDA margin of about 20%.

Xylem's EPS guidance has increased by $0.08 at the midpoint, and they expect around $100 million of cost synergies in 2024. They anticipate healthy demand across most end markets and applications, but are closely monitoring the macro environment. The CEO has spent time with colleagues and is impressed with their work and the smooth integration of Xylem and Evoqua. They see potential for growth and impact as they pivot to stronger execution of their strategy.

The company is intentionally building a culture focused on empowerment, accountability, and innovation, which they call their high-impact culture. The leadership team is working to align the culture throughout the organization, and they will discuss it further at their upcoming Investor Day. They will also be launching their 2023 sustainability report, which will introduce combined company goals through 2030. The Evoqua integration is expected to bring revenue synergies, particularly in the European market, and there is potential for new outsourcing contracts. The company will also be focusing on a large outsourced contract.

The speaker discusses the recent success of their WSS segment and the integration of Evoqua, which was completed in record time. They mention that cost synergies are on track to meet their goals and that revenue synergies are ramping up. The company is also making progress on international expansion, particularly in the services sector. The speaker emphasizes that the integration has not slowed down their progress and they will have more updates at their upcoming Investor Day.

The company has seen great results in their WSS segment and recently won a $100 million 20-year outsourced water project. They have a strong pipeline of opportunities and are focused on above-market growth. The upcoming Investor Day will address portfolio optimization and growth strategies.

The speaker discusses the positive impact of the Evoqua synergies on the company's first quarter results and mentions the new leadership team. They are proud of the team's top line mindset and focus on driving profitable growth and expanding margins. The company is simplifying their business and focusing on high-growth markets with accretive margins. They have just completed value mapping work to inform their capital deployment strategy. The speaker is optimistic about the company's future and looks forward to sharing more information in a few weeks. The analyst asks about the initial impressions of the new leadership team and their progress so far.

The speaker mentions that the team is feeling good about their progress in the first 100 days and believes they are building on momentum from Q1. They have a strong platform and have been executing on strategic priorities, including value capture, simplification, and scaling services. The integration with Evoqua is going well both economically and culturally. The speaker also emphasizes the importance of having the right culture in order to execute consistently, and mentions the work they have been doing on their high-impact culture with their senior leadership team and top 150 employees. The speaker is pleased with the progress but acknowledges that there is still a lot of work to be done.

The speaker is pleased with the company's current position and orders. They report a pro forma organic growth of 7% and a book-to-bill ratio of greater than one. The demand in most end markets remains strong, supported by favorable trends and government funding. They have not seen any slowdown in rates and are proud of their backlog conversion. The only concern is in the Applied Water segment, which is performing as expected.

The speaker discusses the progress of the company in the second half of the year and mentions that they are working on improving performance. They also mention their synergy target after a recent acquisition and state that they plan to exceed the target and use the additional funds for both bottom-line growth and investing in top-line growth.

The speaker discusses the challenges of cost synergies in business deals and the impressive capabilities that have been built through a recent transaction. They also mention the importance of cultural changes and operational rigor in improving the company's performance. The speaker emphasizes the need for simplification in order to better serve customers and colleagues, and mentions the use of tools such as 80/20 to achieve this goal.

The speaker discusses the company's focus on improving their commercial execution, specifically in regards to customers and product SKUs. They believe this will lead to significant benefits in the future. They also mention that Applied Water, their most cyclical segment, had a good Q1 in terms of orders, but they continue to expect a low single-digit decline for the year due to soft markets in Europe and emerging markets. They are closely monitoring the business and remain optimistic about its long-term performance.

The company believes that the issues with complexity will be resolved in the second half of the year and they have initiatives in place to reduce it and focus on growth. The new EPA rules regarding PFAS will have a slow and steady impact on the company, but they are well positioned and have a differentiated offering through their service capabilities. They are also working on destruction technology for PFAS.

In this paragraph, Matthew Pine, Bryan Blair, and Bill Grogan discuss the strong performance of M&CS margins in the first quarter. They attribute this success to factors such as productivity, volume, price mix, and restructuring actions. They also mention that the team has faced challenges in the past but has been able to overcome them and leverage their increased output. They expect the positive trend to continue in the second quarter, but there may be some unfavorable mix impacts in the back half of the year.

The company is encouraged by the teams' momentum and expects to see record margins by the end of the year. They have started their 80/20 initiatives which will provide additional tailwinds. The government money is starting to trickle in, but the company is tempering expectations for growth opportunities related to the IIJA. The company expects the funding to slowly drip in and support market growth over the next three to five years.

During a conference call, Nathan Jones from Stifel asks about Xylem's strategy for offsetting inflation with price. Bill Grogan responds by stating that they are focusing on price capture and will discuss a new approach to strategic pricing at the end of the month. Matthew Pine adds that there are opportunities for Xylem's business in Europe due to increased focus on non-revenue water.

Xylem has technology to capture PFAS through their acquisition with Evoqua and has over 80 installations to date. However, they are still working on developing technology for destruction and real-time sensing of PFAS. They recently had a successful installation in Maine and are focused on innovation in this area.

The company is focused on innovation in the areas of destruction and real-time sensing, and their teams are working on this through their innovation labs. The merger of Xylem and Evoqua will allow them to move faster and spend less money. There is potential for growth in the power sector, particularly in the area of data centers, where they have already had a small synergy win. Data centers require a lot of water for cooling and the company has solutions to help with this, making it a potential growth opportunity for them.

The conference call has ended and the operator hands it back to Matthew Pine for closing remarks. Pine thanks everyone for their questions and invites them to attend Xylem's Investor Day on May 30 for more insights into their priorities and strategic direction. The call has now ended and participants can disconnect.

This summary was generated with AI and may contain some inaccuracies.