Xylem reports organic revenue increase and strong growth in 2017 4th quarter earnings

Leading global water technology company dedicated to solving the world’s most challenging water issues, Xylem, Inc., has reported a fourth quarter 2017 net income of US$71 million, or US$0.40 per share. Excluding the impact of restructuring, realignment, acquisition-related charges and other special items, the Company delivered adjusted net income of US$137 million or US$0.76 per share in the quarter, a 15 per cent increase over the prior year period. Fourth quarter revenue was US$1.3 billion, up 17 per cent including the full quarter contribution from the Sensus business versus the prior year period which included only two months of Sensus results.

Revenue for the quarter increased seven per cent on a pro forma organic basis, driven by a strong performance in the public utility end market in nearly every geography and continued growth in industrial, commercial and residential end markets. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) improved by 40 basis points year-over-year to 20.2 per cent driven by net productivity gains and volume leverage. Reported operating margin in the quarter was 14 per cent and adjusted operating margin decreased 10 basis points year-over-year to 15.2 per cent, including a 20-basis-point impact due to purchase accounting amortisation.

For the full year 2017, Xylem generated US$4.7 billion in revenue, up 25 per cent on a reported basis and four per cent on a pro forma organic basis. Full-year reported net income was US$331 million, or US$1.83 per share, with an operating margin of 11.8 per cent. Adjusted net income, which excludes the impact of restructuring, realignment, acquisition-related charges and other special items, was US$433 million, or US$2.40 per share, an 18 per cent increase over the prior year. Adjusted EBITDA improved by 80 basis points to 18.7 per cent year-over-year. Xylem delivered a full-year 2017 adjusted operating margin of 13.4 per cent, down 20 basis points versus the prior year including a 50-basis-point impact due to purchase accounting amortisation. The company also generated US$544 million in free cash flow, an increase of 41 per cent as compared to 2016, representing a 147 per cent conversion.

“Our teams delivered a strong performance throughout 2017 and I’m very pleased with our full-year results,” Patrick Decker, President and CEO of Xylem, said. “Our relentless focus on the customer and continuing to enhance our execution in the field translated into improved results in revenue, orders and backlog growth, with the momentum we built in the second half of the year carrying into 2018. We capitalised on improving end market conditions, particularly in public utilities where we continue to gain share. Our productivity for growth initiatives continue to generate significant savings and fund critical R&D investments for our long-term growth. The successful integration of the new capabilities and capacity we gained with the addition of Sensus and Visenti are opening up new growth opportunities for us. And we’re building upon this as we continue to execute our strategy of disciplined capital deployment.”

Xylem also confirmed the completion of its previously announced acquisition of Pure Technologies, a leader in smart infrastructure assessment and management. Pure’s diagnostic and analytics solutions and services address key water and wastewater infrastructure challenges, including non-revenue water and asset management, a critical issue as infrastructure ages.

“Pure’s solutions are highly complementary to the broader Xylem portfolio. This business brings a unique set of proprietary technologies as well as data analytics expertise that further augment our ability to identify and address some of our customers’ most urgent needs,” Decker continued. “As we bring these and other advanced infrastructure analytics capabilities together, we will create a portfolio of solutions that is holistic, disruptive and scalable to significantly improve the economics of our customers’ operations.”

Xylem announced that its Board of Directors declared a dividend in the amount of US$0.21 per share, an increase of 17 per cent. The dividend is payable on March 15, 2018 to shareholders of record as of February 15, 2018.