UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☑	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended	December 31, 2022
	or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to         

Commission file number: 1-35229

Xylem Inc.

(Exact name of registrant as specified in its charter)

Indiana	45-2080495
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

300 Water Street SE, Washington, DC 20003

(Address of principal executive offices and zip code)

(202) 869-9150

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	XYL	New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ  No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.      Yes  ¨  No  þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ  No  ¨

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  þ  No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  ☑        Accelerated Filer  ☐        Non-Accelerated Filer  ☐        Smaller reporting company  ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☑ No  ¨

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ☐  No  ☑

The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant as of June 30, 2022 was approximately $14.0 billion. As of February 17, 2023, there were 180,278,376 outstanding shares of the registrant’s common stock, par value $0.01 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for its 2023 Annual Meeting of Shareowners, to be held in May 2023, are incorporated by reference into Part II and Part III of this Report.

Xylem Inc.

ANNUAL REPORT ON FORM 10-K

For the fiscal year ended December 31, 2022

Table of Contents

ITEM		PAGE
PART I
1	Business	5
1A.	Risk Factors	17
1B.	Unresolved Staff Comments	30
2	Properties	31
3	Legal Proceedings	31
4	Mine Safety Disclosures	32
*	Information about our Executive Officers	33
	Board of Directors	34
PART II
5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	35
6	Reserved	37
7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
7A.	Quantitative and Qualitative Disclosures About Market Risk	59
8	Financial Statements and Supplementary Data	60
9	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	114
9A.	Controls and Procedures	114
9B.	Other Information	114
9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	114
PART III
10	Directors, Executive Officers and Corporate Governance	116
11	Executive Compensation	116
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	116
13	Certain Relationships and Related Transactions, and Director Independence	116
14	Principal Accounting Fees and Services	116
PART IV
15	Exhibits, Financial Statement Schedules	117
16	Form 10-K Summary	121
	Signatures	121

* Included pursuant to the Instruction to Item 401(b) of Regulation S-K.

2

PART I

The following discussion should be read in conjunction with the consolidated financial statements, including the notes, included elsewhere in this Annual Report on Form 10-K (this "Report").

Forward-Looking Statements

This Report contains “forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” "contemplate," "predict," “forecast,” “likely,” “believe,” “target,” “will,” “could,” “would,” “should,” "potential," "may" and similar expressions or their negative, may, but are not necessary to, identify forward-looking statements. By their nature, forward-looking statements address uncertain matters and include any statements that: are not historical, such as statements about our strategy, financial plans, outlook, objectives, plans, intentions or goals (including those related to our social, environmental and other sustainability goals); or address possible or future results of operations or financial performance, including statements relating to orders, revenues, operating margins and earnings per share growth.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Additionally, many of these risks and uncertainties are, and may continue to be, amplified by impacts from changes in international conditions, including as a result of the war between Russia and Ukraine, coronavirus (“COVID-19”) pandemic and macroeconomic conditions, including inflation. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include, among others, the following: the impact of overall industry and general economic conditions, including industrial, governmental, and public and private sector spending, inflation, interest rates and related monetary policy by governments in response to inflation, and the strength of the residential and commercial real estate markets, on economic activity and our operations; geopolitical events, including the war between Russia and Ukraine, and regulatory, economic and other risks associated with our global sales and operations, including with respect to domestic content requirements applicable to projects with governmental funding; continued uncertainty around the ongoing impacts of the COVID-19 pandemic on the macroeconomy and our business, operations, growth, and financial condition; actual or potential other epidemics, pandemics or global health crises; availability, shortage or delays in receiving electronic components (in particular, semiconductors), parts and raw materials from our supply chain; manufacturing and operating cost increases due to macroeconomic conditions, including inflation, energy supply, supply chain shortages, logistics challenges, tight labor markets, prevailing price changes, tariffs and other factors; demand for our products, disruption, competition or pricing pressures in the markets we serve; cybersecurity incidents or other disruptions of information technology systems on which we rely, or involving our products; disruptions in operations at our facilities or that of third parties upon which we rely; ability to retain and attract senior management and other diverse and key talent, as well as competition for overall talent and labor; difficulty predicting our financial results; defects, security, warranty and liability claims, and recalls with respect to products; availability, regulation or interference with radio spectrum used by certain of our products; uncertainty related to restructuring and realignment actions and related costs and savings; our ability to continue strategic investments for growth; our ability to successfully identify, execute and integrate acquisitions; volatility in served markets or impacts on business and operations due to weather conditions, including the effects of climate change; fluctuations in foreign currency exchange rates; our ability to borrow or refinance our existing indebtedness, and uncertainty around the availability of liquidity sufficient to meet our needs; risk of future impairments to goodwill and other intangible assets; failure to comply with, or changes in, laws or regulations, including those pertaining to anti-corruption, data privacy and security, export and import, our products, competition, and the environment and climate change; changes in our effective tax rates or tax expenses; legal, governmental or regulatory claims, investigations or proceedings and associated contingent liabilities; risks related to our proposed acquisition of Evoqua Water Technologies ("Evoqua"), including related to realization of expected benefits and synergies, our ability to complete the transaction and need to incur additional transaction costs and expenses, impacts to our share price and dilution of shareholders’ ownership, and incurrence of additional costs and expenses to integrate the combined companies; and other factors set forth under "Item 1A. Risk Factors” in this Report and in subsequent filings we make with the Securities and Exchange Commission (“SEC”).

Additionally, risks and uncertainties relating to our plans to acquire Evoqua could cause our actual results to differ, perhaps materially, from those indicated by these forward-looking statements, including: the risk that the conditions to the closing of the transaction are not satisfied, including the risk that required approvals of the transaction from the shareholders of Xylem or stockholders of Evoqua or from regulators are not obtained; litigation relating to the transaction; uncertainties as to the timing of the consummation of the transaction and the ability of each party to

3

consummate the transaction; risks that the proposed transaction disrupts the current plans or operations of Xylem or Evoqua; the ability of Xylem and Evoqua to retain and hire key personnel; competitive responses to the proposed transaction; unexpected costs, charges or expenses resulting from the transaction; potential adverse reactions or changes to relationships with customers, suppliers, distributors and other business partners resulting from the announcement or completion of the transaction; the combined company’s ability to achieve the synergies expected from the transaction, as well as delays, challenges and expenses associated with integrating the combined company’s existing businesses.

Forward-looking and other statements in this Form 10-K regarding our environmental and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or are required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking social, environmental and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. All forward-looking statements made herein are based on information currently available to us as of the date of this Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

4

ITEM 1.        BUSINESS

Business Overview

Xylem is a leading global water technology company with 2022 revenues of $5.5 billion and approximately 17,800 employees worldwide. We design, manufacture and service highly engineered products and solutions across a wide variety of critical applications, primarily in the water sector, but also in energy. Our broad portfolio of products, services and solutions addresses customer needs of scarcity, resilience, and affordability across the water cycle, from the delivery, measurement and use of drinking water, to the collection, testing, analysis and treatment of wastewater, to the return of water to the environment.

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, and applied water systems for commercial and residential building services and industrial processes. 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 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

•A dedicated, experienced, qualified and technologically advanced group of experienced employees focused on safely satisfying our customers' requirements in the water and energy spaces

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 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. 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. By 2025, more than 30% of the world’s population is expected to live in areas without adequate water supply. 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. 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. 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 compete in areas that are pivotal to improving "water affordability" and "resilience", while reducing the impact of "water scarcity". "Water affordability" refers to the more efficient delivery, use and treatment of clean water and wastewater. "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. Our customers often face all three 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). Additionally, we also provide solutions to enhance communications and efficiency, improve safety and conserve resources to customers in the water and energy sectors. Delivering value in these areas creates significant opportunity for the Company.

5

The Global Water Industry Value Chain

The water industry value chain includes Equipment, Technology and Services companies, like Xylem, that address the unique challenges and demands of a diverse customer base. This customer base includes water and wastewater utilities that supply, treat and monitor clean water or transport, treat and analyze wastewater or storm water through an infrastructure network, and engineering, procurement and construction ("EPC") firms and third party contractors, that work with utilities to design and build water and wastewater infrastructure networks, as depicted below. Utilities and other customers require products, solutions, services, technology and application expertise from their Equipment, Technology and Services providers to address trends such as rising pollution, stricter regulations, increasing operational costs and the increased outsourcing of process knowledge. In addition to utilities, Equipment, Technology and Service companies also provide distinct technologies and application expertise to a wide array of entities, including farms, mines, power plants, industrial facilities (such as food and beverage and pharmaceutical manufacturers) and residential and commercial customers seeking to address similar trends.

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. 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. As part of this, we are implementing a digital platform to discover, select, get price quotes, and purchase our offerings. Second, we seek to lead the way as digital technologies transform our sector by further integrating our digital solution portfolio and broadening our solution sales, digital literacy and marketing capabilities company-wide. Third, we seek to help customers get the most out of their systems by providing world-class services that enable increased uptime, efficiency and resilience. We partner with them by providing powerful, integrated lifecycle services and solutions.

6

•Grow in the Emerging Markets. We continue to invest in localizing our capabilities in the emerging markets. We will continue building innovation, product management and engineering teams in these regions, expanding our market coverage in key growth markets such as China, India, Eastern Europe, Latin America and Africa. We seek to address the base of the pyramid population by providing water and sanitation needs with new solutions and business models.

•Strengthen Innovation and Technology. We seek to create new customer offerings that help them solve water challenges more powerfully than ever before, while also providing our company with rapid growth opportunities. We are focused on building and enabling infrastructure for digital growth by making our hardware, networks and software applications interoperable and creating a common software experience. This will further strengthen our core product offerings, and deliver strategic, sustainable innovations that help us tap into new markets through advanced technology and new business models.

•Build a Culture of Continuous Improvement. We seek to continue embedding a continuous improvement mindset throughout the Company, and will continue to improve our efficiency, simplify our business and manage costs to support continued growth. We are committed to eliminating business complexity by streamlining internal bureaucracy and expanding standard business platforms and processes to help people do their jobs. This will result in freeing up time to ensure that we focus on work that creates customer value. Other focus areas include removing unnecessary costs from our end-to-end value chain to free up resources for growth; and building resilience and sustainability into our supply chain to protect our ability to serve customers.

•Cultivate Leadership and Talent Development. We continue to foster an empowering, mission-driven, diverse, equitable and inclusive culture. We will continue to build leadership succession depth and breadth in keeping with our commitment to developing the next generation of leaders. We will also align our incentives, including share-based and performance-based compensation, and organizational structure to our strategy, favoring approaches to drive 'one company' skills, mindset and behaviors, and stakeholder value creation.

Our strategic plan firmly embeds sustainability at the heart of our competitive advantage and unique business model, and aligns each of our five core strategic pillars to the overarching goal of integrating sustainability into everything we do.

While our strategy will evolve in response to the changing world, our four values are the enduring principles that go to the heart of who we are and guide how we conduct ourselves each day: Respect, Responsibility, Integrity and Creativity.

7

Business Segments, Distribution and Competitive Landscape

We have three reportable business segments that are aligned around the critical market applications they provide: Water Infrastructure, Applied Water, and Measurement & Control Solutions. See Note 21, “Segment and Geographic Data,” in our consolidated financial statements for financial information about segments and geographic areas.

The table and descriptions below provide an overview of our business segments:

	Market Applications	2022 Revenue (in millions)		% Revenue		Major Products	Primary Brands
Water Infrastructure	Transport	$	1,943	82	%	•  Water and wastewater pumps •  Filtration, disinfection and biological treatment equipment • Mobile dewatering equipment and rental services	•   Flygt •   Godwin •   Leopold •   Sanitaire •   Wedeco •   Xylem Vue
	Treatment	421		18	%
		$	2,364	100	%
Applied Water	Commercial Building Services	$	659	37	%	•   Pumps •   Valves •   Heat exchangers •   Controls • Dispensing equipment systems	• A-C Fire Pump • Bell & Gossett •   Flojet •   Goulds Water Technology • Jabsco •   Lowara •   Standard     Xchange •   Xylem Vue
	Residential Building Services	306		17	%
	Industrial Water	802		46	%
		$	1,767	100	%
Measurement & Control Solutions	Water	$	1,126	81	%	• 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	265		19	%
		$	1,391	100	%

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. The Transport application also includes sales and rental of specialty dewatering pumps and related equipment 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 customer base consists of two primary end markets: utility and industrial. The utility market includes public, private and public-private entities that support water, wastewater and storm water networks. The industrial market includes customers that require similar water and wastewater infrastructure applications to support various industrial operations.

8

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. 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 efficiencies and resilience 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.

Given the highly fragmented nature of the water industry, the Water Infrastructure segment competes with a large number of businesses and no one business competes across all the markets Water Infrastructure serves. 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. Increasingly digital solutions and analytics are important competitive differentiators. We are actively expanding our capabilities in these areas and integrating them together with our legacy technologies and service offerings as well as capabilities from other Xylem business units to present ever more compelling solutions to our customers. In the sale or rental of products and provision of services, we benefit from our large installed base, which requires maintenance, repair and replacement parts due to the critical application and nature of the products and the conditions under which they operate. Timeliness of delivery, quality and the proximity of service centers are important customer considerations when selecting a provider for after-market products and services as well as equipment rentals. In geographic regions where we are locally positioned to provide a quick response, customers have historically relied on us, rather than our competitors, for after-market products relating to our highly engineered and customized solutions. Our key competitors in the Water Infrastructure segment include KSB Inc., Sulzer Ltd., Grundfos, United Rentals, Trojan (Danaher Corporation) and Evoqua.

Applied Water

Applied Water encompasses the uses of water to serve a diverse set of customers in the commercial, residential and industrial end markets. Residential consumers represent the end users in the residential market, while owners and managers of properties such as apartment buildings, retail stores, institutional buildings, restaurants, schools/universities, hospitals and hotels are examples of end users in the commercial market. The industrial market includes original equipment manufacturers ("OEMs"), exploration and production firms, 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. As such, the Applied Water segment provides the majority of its sales through strong indirect channels with the remaining sales going through our global direct sales channels. We have long-standing relationships with many of the leading independent distributors in the markets we serve and we provide incentives to distributors, such as specialized loyalty and training programs.

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.

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 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. 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.

9

Measurement & Control Solutions

Measurement & Control Solutions develops advanced technology solutions that enable intelligent use and conservation of critical water and energy resources. The segment delivers 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. 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. 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. At the center of our offering is the FlexNet communication network, which provides a common communications platform and infrastructure for essential metering services. This two-way communication technology remotely connects a wide variety of smart points in a given network with protocols, frequently on Federal Communications Commission ("FCC") licensed spectrum in the U.S., to enable reliable, resilient and secure transmissions. These technologies allow our customers to remotely and continuously monitor their water and energy distribution infrastructure, prioritize and manage maintenance, and use data to optimize many aspects of their networks. Our digital software solutions complement these offerings with intelligent applications that help utility decision-makers manage and maintain their networks more effectively in real time.

The majority of our sales in the U.S. are conducted through strong, long-standing relationships with leading distributors and dedicated channel partners for the water and energy markets. Internationally, direct sales are often made in markets without established distribution channels; however, some distribution channels are used in more developed markets. A more 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. Water scarcity and conservation, as well as the need to prevent revenue loss (via inaccurate meter readings, leaks or theft) are among the drivers of smart meter and leak detection technologies.

Our Sensus-branded meters are well positioned in the smart metering sector, the fastest growing sector of the global meter industry. 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. Our YSI and WTW-branded instruments have a strong position in the analytical instrumentation market and provide critical readings of various water quality, level and flow parameters for customers. We provide a differentiated offering in the reliability and accuracy of our products often in rugged, remote, and hazardous locations. 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 & Control Solutions segment include Itron, Badger Meter, Landis+Gyr, Neptune (Roper), Kamstrup, Echologics (Mueller Water Products), Hach (Danaher Corporation) and Teledyne.

Geographic Profile

The table below illustrates the annual revenue and percentage of revenue by geographic area for each of the three years ended December 31.

	Revenue
(in millions)	2022				2021				2020
	$ Amount		% of Total		$ Amount		% of Total		$ Amount		% of Total
United States	$	2,573	47	%	$	2,280	44	%	$	2,297	47	%
Western Europe	1,411		26	%	1,414		27	%	1,259		26	%
Emerging Markets (a)	1,074		19	%	1,066		21	%	919		19	%
Other	464		8	%	435		8	%	401		8	%
Total	$	5,522			$	5,195			$	4,876

10

(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. 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. While we may recover some cost increases through operational improvements, we are still exposed to pricing risk, including due to duty and tariff assessments by the U.S. or other governments on foreign imports. We attempt to control costs through fixed-priced contracts with suppliers and various other programs, such as our global procurement initiative.

Our business relies on third-party suppliers, contract manufacturing and commodity markets to secure raw materials, parts and components used in our products. We typically acquire materials and components through a combination of blanket and scheduled purchase orders to support our materials requirements. 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. From time to time, we acquire certain inventory in anticipation of supply constraints or enter into longer-term pricing commitments with suppliers to improve the priority, price and availability of supply.

Our business segments experience a modest level of seasonality in their operations. 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.

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 10% of our consolidated revenues in 2022, 2021 or 2020.

Backlog

Backlog includes orders on hand as well as contractual customer agreements at the end of the period. 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. Typically, large projects require longer lead production cycles and deployment schedules, and delays occur from time to time. Total backlog was $3,605 million at December 31, 2022 and $3,240 million at December 31, 2021. We anticipate that approximately 55% of the backlog at December 31, 2022 will be recognized as revenue during 2023.

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 and application know-how that address anticipated customer needs and emerging trends. Our engineers are involved in new product development as well as improvement of existing products to increase customer value. Our businesses invest substantial resources into R&D. We anticipate we will continue to develop and invest in our R&D capabilities to promote a steady flow of innovative, high-quality and reliable products and integrated solutions to further strengthen our position in the markets we serve. In addition to investments made in software development, which were capitalized, we incurred $206 million, $204 million, and $187 million as a result of R&D investment spending in 2022, 2021 and 2020, respectively.

We have R&D and product development capabilities around the world. R&D activities are initially conducted in our technology centers, located in conjunction with some of our major manufacturing facilities to enable an efficient and robust development process. We have several global technical centers and local development teams around the world where we are supporting global needs and accelerating the customization of our products and solutions to address local needs. In some cases, our R&D activities are conducted at our piloting and testing facilities and at strategic customer sites. These piloting and testing facilities enable us to serve our strategic markets globally. As part of expanding our bandwidth and to increase our access to technology, we have built innovation eco-system

11

partnerships with academic institutions as well as other technology firms, start-up accelerators and venture capital organizations.

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, 2022 and 2021 we had net capitalized software used in sales and services to external customers of $213 million and $211 million, respectively.

Intellectual Property

We generally seek patent protection for inventions that we believe will improve our competitive position and are not suitable to be kept as a trade secret. 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 core business segments, is not materially dependent on any one intellectual property right or related group of such rights.

Patents, patent applications and license agreements expire or terminate over time by operation of law, in accordance with their terms or otherwise. 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.

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 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. 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.

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. We do not anticipate these liabilities will have a material adverse effect on our consolidated financial position or results of operations. At December 31, 2022, we had estimated and accrued $4 million related to environmental matters.

Other Regulations

As a company with global operations, we are subject to complex U.S. federal, state and local and foreign laws and regulations in the countries where we conduct business, including with respect to trade, such as tariffs, imports and exports; anti-bribery and corruption; antitrust and competition; data security and privacy, such as the EU General Data Protection Regulation (“GDPR”) and the China Personal Information Protection Law ('PIPL"); use of regulated radio spectrum, including that of the U.S. FCC; lobbying activity; health and safety; and the environment, among other matters. We have policies and procedures in place to promote compliance with these laws and regulations. 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.

12

Sustainability

At Xylem, sustainability is at the center of who we are and what we do. As a leading global water technology company, we address some of the world’s most urgent sustainability challenges - responsible stewardship of our shared water resources and resiliency of communities to climate change. Technology is playing an increasingly important role in helping the world solve water issues. 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. 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. The progress towards these goals can be found in our 2021 Sustainability Report, which is aligned to the Global Reporting Initiative and the Sustainability Accounting Standards Board frameworks.

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. While Xylem embraces all 17 of the UNSDGs, we have a special focus on SDG6: Clean Water and Sanitation.

Additionally, in 2021, Xylem announced our commitment to reach Net Zero greenhouse gas ("GHG") emissions before 2050 across our value chain, further aligning our long-term commitment to sustainability with sector-wide moves towards reduced carbon footprint. In 2022, we submitted our 2030 GHG reduction targets to the Science Based Target Initiative for validation. As of year end, these are currently under review.

In 2022, we announced investments in CNote’s Impact Cash™ platform, a mechanism through which we invest and deposit cash at scale in community finance institutions that strengthen and transform underserved communities. In 2021, in partnership with Goldman Sachs, we continued our work towards further integrating our business and finance strategies with sustainability by creating a cash account tied to performance of select 2025 Sustainability goals. In 2020, Xylem completed a $1 billion Green Bond offering in senior unsecured notes, consisting of $500 million of 1.950% senior notes due in January 2028 and $500 million of 2.250% senior notes due in January 2031. The proceeds of this offering were allocated to green projects that help improve water accessibility, water affordability, and water systems resilience. This follows our 2019 execution of a five-year revolving credit facility (the “2019 Credit Facility”) with Citibank, N.A., as Administrative Agent, and a syndicate of lenders. The 2019 Credit Facility includes a pricing grid that determines the applicable margin based on Xylem's credit rating, with a further adjustment depending on Xylem's annual Sustainalytics Environmental, Social and Governance (“ESG”) score, an important barometer of Xylem’s continued commitment to sustainability. Additionally, during the first quarter of 2021, we issued a special grant 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. We continue to foster an empowering, mission-driven, people-centered, diverse, equitable and inclusive culture. 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 colleagues with skills in our strategic competencies, such as engineering, innovation, digital technologies, sales excellence, sustainability and product and project management, as well as production and technical services talent. The market for production, technical services, leadership and highly-skilled talent 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, 2022, Xylem employed approximately 17,800 employees worldwide. We have approximately 5,600 employees in the U.S., 7,100 in Western Europe, and 4,300 in the Emerging Markets, with the remaining 800 in other geographies in which we operate. Approximately 37% of our colleagues are represented by labor unions, including 16% of our U.S. colleagues. In certain foreign countries, our colleagues are represented by work councils. We believe that our relations with our employees are good, including with our employees that are represented by labor unions or works councils.

13

We conduct regular employee engagement surveys to understand our employees’ perspectives, identify areas for additional focus and establish action plans. These surveys cover a range of topics, including employee engagement, company culture, customer focus, organizational effectiveness, employee well-being, safety, diversity, equity and inclusion, pay for performance and career development opportunities. Our approach currently includes a periodic comprehensive global survey, shorter pulse surveys and listening sessions. 86% of our employees globally participated in our 2021 comprehensive engagement survey, and our engagement index showed increases from the 2019 survey.

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. 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.

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 and able to bring their authentic selves to work. At Xylem, we recognize the power of diversity, equity and inclusion to drive innovation, make us more competitive, positively impact employee and customer 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.

Our commitment to building a global, diverse, equitable and inclusive culture starts with our Board of Directors and senior leadership team members, who represent a broad spectrum of backgrounds and perspectives. We believe that the diversity of our Board of Directors and senior leadership enhances our ability to evolve and execute our business strategy and to attract and retain diverse and highly-qualified talent, and also fuels our commitment to foster a culture of inclusion and provide our colleagues with equitable access to opportunities. As of December 31, 2022 globally, 26% of our colleagues identify as female; in the U.S., 28% of our colleagues identify as U.S. minorities.

Diversity and inclusion metrics are included in our regular business reviews to provide transparency and drive accountability by highlighting progress on goals and outlining steps to achieve them. In addition, we publicly disclose various workforce metrics regarding gender, age and racial and ethnic diversity, including our U.S. EEO-1 report. One of our strategies for becoming a more diverse organization—and incorporating broader experiences, skill sets, and perspectives into our work—is expanding sourcing channels for diverse talent through external diversity partnerships and affiliations.

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. 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 3,900 colleagues participate as members of our network groups.

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.

In our 2021 employee engagement survey, we sought specific feedback from our colleagues on their efforts to manage stress and disconnect from work and, based on the survey responses, we have augmented our holistic well-being strategies, including providing mental health awareness training to our people leaders, which more than 500 people managers have participated in, and expanding our Employee Assistance Program support across the globe.

14

In response to the ongoing crisis in Ukraine, we continue to provide financial and logistical support to our colleagues and partners in Ukraine, including travel assistance and temporary accommodations near our facilities in Poland.

Compensation and Benefits

Xylem takes a total rewards approach that integrates programs for compensation, benefits, recognition and work-life balance and we strive to provide our colleagues with competitive compensation and benefits. In 2022, for our U.S. colleagues, we enhanced our paid parental leave and short-term disability coverage, provided for flexible time off, and expanded our health and welfare benefits, including with respect to reproductive care. While individual program components may differ by country, role or level, our culture and commitment to results and equity remain constant. 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.

We seek to align our human capital and sustainability strategies to support our mission-driven culture and further our shared value approach, which is designed to generate increased economic and social value for our investors and other stakeholders. Accordingly, in 2021, the Company expanded its sustainability-linked compensation for all of our senior leaders, as well as a broader group of executives, with a special, one-time grant of performance share units with goals that are based on 5 of our strategically transformative 2025 Sustainability goals. 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 technology 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 believe that an appropriately tailored approach that balances in the office, fully remote and hybrid arrangements increases our ability to retain and attract the best, most diverse talent, while reducing our carbon footprint associated with unnecessary commuting and business travel. We are continuing to explore ways to help our colleagues thrive in a variety of work settings and have formalized guidelines that support remote and hybrid work. To better support our colleagues in a more flexible workplace, we also provide high-touch global onboarding and leverage collaboration technologies.

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. 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. 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 prioritize employee engagement through regular, year-round discussions focused on employee performance feedback and development, opportunities to work on special projects, and volunteer activities involving Watermark, our corporate social responsibility program, as well as Xylem Ignite, our youth engagement program. 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.

Labor Relations

Xylem recognizes the work of labor organizations, work 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. An employee’s decision to join or not join a labor organization will in no way result in any discrimination against that employee. Xylem informs managers at all levels of the importance of respecting the rights of colleagues to organize or be represented. We work to establish favorable employment conditions that promote positive relationships between our colleagues and their managers, facilitate communications among our colleagues and support their development.

15

Available Information

We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports are available free of charge on our website www.xylem.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.

In addition, the public may read or copy any materials filed with the SEC, free of charge, at www.sec.gov.

16

ITEM 1A.    RISK FACTORS

In evaluating our business and investment in our securities, investors should carefully consider the following discussion of material factors and events, along with all of the other information in this Report and in our other filings with the SEC. 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. Our business is also subject to general risks that affect many other companies. In addition, we operate in a continually changing business, economic and geopolitical environment and as a result, new risk factors, or changes to our risk profile, may emerge from time to time. Risks not currently known to us, or that we currently believe are immaterial, may impact our business, operations, financial condition or share price. The global economic and geopolitical climate, including as a result of the war between Russia and Ukraine, the coronavirus ("COVID-19") pandemic, and macroeconomic conditions, amplify many of the risks below. Risks in this section are grouped in the following categories: (1) Risks Related to Geopolitical, Macroeconomic and Industry Factors; (2) Risks Related to Our Business and Operations; (3) Risks Related to Financial and Tax; (4) Risks Related to Legal and Regulatory; and (5) Risks Related to the Proposed Acquisition of Evoqua. Many risks affect more than one category, and as a result the risks are not in order of significance or probability of occurrence.

Risks Related to Geopolitical, Macroeconomic and Industry Factors

Industry and economic conditions may adversely affect our markets and our customers’ operating conditions, which can in turn affect our business, results of operations and financial condition.

With sales in approximately 150 countries, we compete across a wide range of geographic and end-markets. Material economic and industry factors impacting our businesses include: (i) the overall strength of, and our customers’ confidence in, local and global macroeconomic conditions; (ii) 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 with respect to 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 with respect to water infrastructure investments. Macroeconomic impacts and dynamics, including as a result of the COVID-19 pandemic, with respect to supply chain shortages, logistics challenges, tight labor markets and inflation, have had, and continue to have, a material adverse effect on our business and results of operations. Future slowdowns, economic recession, or other prolonged downturns in the global economy or our markets could have material adverse effects on our business, financial condition, cash flows, results of operations and stock price.

We are exposed to geopolitical, regulatory, economic, foreign exchange and other risks associated with our global sales, supply chain and operations.

In 2022, 47% of our total revenue was from sales to U.S. customers and 53% was from sales to customers outside the U.S. We expect our sales from international operations and export sales to continue to be a significant portion of our revenue. Many of our manufacturing operations, employees, suppliers and distribution channels are located outside of the U.S. Our 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 with respect to the relationships among the U.S., European Union, 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;

•threat or outbreak of epidemics, global health crises or pandemics, such as COVID-19, and related uncertainties;

17

•changes in tax laws and potential negative consequences from the interpretation, application and enforcement by governmental tax authorities of tax laws and policies, and changes in other laws and regulations or how such provisions are interpreted or administered;

•disruptions in our global supply chain, operations or those of third parties upon which we rely, including due to labor or supply shortages, freight and logistics challenges;

•actual or threatened war or armed conflict, labor actions, or civil, political or other disturbances;

•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.

In the year ended December 31, 2022, 19% of our total revenues were generated in emerging markets and we have placed a particular emphasis in our strategy on increasing our growth and presence in emerging markets, including China, India, and key markets in Africa. Beyond the general risks that we face outside the U.S., our operations in emerging markets are subject to additional risks and uncertainties, including: (i) governments may impose or increase withholding or other taxes on remittances and other payments to us; (ii) governments may seek to nationalize our assets; (iii) governments may impose or increase investment barriers or other restrictions affecting our business; (iv) difficulty in enforcing commercial agreements; (v) challenges collecting receivables, or protecting our intellectual property and other assets; (vi) pressure on the pricing of our products and services; (vii) higher business conduct risks; and (viii) challenges in our ability to attract and retain qualified talent and labor. We cannot predict the impact that such factors might have on our business, financial condition, cash flows, results of operations and stock price.

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 China’s evolving laws, regulations and policies, including with respect to its evolving COVID Policy, import and export tariffs and restrictions, and information security and privacy. Our business and operating results could also be adversely impacted by changes in the political and geopolitical environment involving China, including U.S.-China or China-Taiwan relations. For example, the U.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, and sales and operations in China. Furthermore, geopolitical changes in China-Taiwan relations could disrupt the operations of several companies in Taiwan that are critical to our complex, global supply chain, including with respect to the supply of semiconductors (“chips”) and other electronic components. Such changes could likely 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.

In the year ended December 31, 2022, 47% of our revenues was from sales to U.S. customers, which included sales of products sold into federally funded projects. We expect our U.S. sales in 2023 and beyond to be similar. However, we may not be able to successfully compete for federally funded projects as some of our products may not comply with the domestic content requirements of the U.S. Buy America mandate under the Infrastructure Investment and Jobs Act (“IIJA”), as well as other federally funded projects. We continue to evaluate the risks associated with the Buy America mandate, as well as related mitigation options around sourcing and manufacturing, but there is no guarantee that we will be able to meet applicable domestic content requirements across all our product lines. While governmental exemptions and waivers may in the future be issued that negate the application of the Buy America mandate to some or all of our potential sales into IIJA and other federally funded projects, it is uncertain whether and to what extent such exemptions or waivers may be issued. An inability to meet applicable domestic content requirements for U.S. federally funded projects could have a material adverse impact on our business, financial condition or results of operations.

18

We are unable to predict the extent to which the ongoing global COVID-19 pandemic, or other outbreaks, epidemics, pandemics, or public health crises may adversely impact our business, results of operations and financial condition.

Our global operations expose us to risks associated with public health crises, including epidemics and pandemics. Outbreaks of epidemics, pandemics, or public health crises could adversely affect, among other things, demand for our products and services; our operations and sales; our supply chain; our research and development capabilities, engineering, design, and manufacturing processes; and other important business activities. Such outbreaks could result in the restriction or suspension of travel, prohibitions of non-essential activities, and limit in-person activities within our Company and with customers and could also present operational challenges, such as disruptions in our manufacturing and supply chain and logistics, all of which can adversely affect our ability to fulfill orders, provide services, respond to customer requests and maintain our business operations. We are unable to predict the full extent of the impact of the outbreak of epidemics, pandemics, or public health crises on our operations, customers and suppliers.

Since early 2020, the COVID-19 pandemic and its variants have resulted in, and may continue to result in, a slowdown of global economic activity, travel restrictions, prohibitions of non-essential activities in some cases, disruption and shutdown of businesses, including that of our customers and suppliers. Our operations have been affected by a range of external factors related to the COVID-19 pandemic that are not within our control, including the various governmental restrictions on employees, customers, partners and suppliers, such as China’s COVID Policy, designed to limit the spread of COVID-19. The pandemic and broader global market supply and demand dynamics have impacted, and continue to impact our supply chain with unpredictable disruptions due to material and component shortages, including with respect to key electronic components such as chips, capacity constraints, delays in shipment of materials necessary to the manufacture of our products, freight and logistics challenges, tight labor markets and inflation. While component supply shortages are showing signs of recovery, they may nevertheless persist, adversely disrupting our business. The ultimate extent of the impacts of the COVID-19 pandemic, including as a result of possible subsequent outbreaks of new variants and measures taken in response thereto remains highly uncertain and cannot currently be predicted and we may not be successful at mitigating such impacts.

The COVID-19 pandemic caused significant volatility and uncertainty in the global financial and capital markets. A further disruption of these markets, or resulting economic downturn from the COVID-19 pandemic or outbreak of other global health crises, may impact our ability to incur debt or access capital, or increase our cost of capital. There are no assurances that the credit markets or the capital markets will be available to us in the future or that the lenders participating in our credit facilities will be able to provide financing in accordance with their contractual obligations. Additionally, concerns over the economic impacts of COVID-19 have caused, and may continue to cause, volatility in our stock price. A sustained economic downturn could impact our liquidity position, including our ability to continue to pay dividends, or could impact our asset values resulting in the carrying value of our goodwill or other intangible assets exceeding their fair value, which may require us to recognize an impairment to those assets.

Inflation, tariffs, customs duties and other increases in manufacturing and operating costs have, and could continue to, adversely affect our cash flows and results of operations.

Our operating costs are subject to fluctuations, particularly due to changes in prices for commodities, parts, raw materials, energy and related utilities, freight and logistics, and cost of labor, which have been and may continue to be driven by a variety of factors, including inflation, tight labor markets, prevailing price levels, exchange rates, changes in trade agreements and trade protection measures including tariffs, and other economic factors. Throughout 2022 our operating costs have been adversely impacted by price inflation, including with respect to the cost of certain raw materials, electronic components, commodities, freight and logistics, and we expect this to continue for the foreseeable future. In addition, we have significant manufacturing operations in Europe, which could be adversely impacted by increased costs for energy as a result of the Russia-Ukraine conflict and governments' efforts to decrease dependence on Russia energy supplies. The U.S. has enacted various trade actions, including imposing tariffs on certain goods we import from China and other countries, which has resulted in retaliatory tariffs by China and other countries. Additional tariffs imposed by the U.S., or further retaliatory trade measures taken by China or other countries, could increase the cost of our products that we may not be able to offset through price increases or productivity. Further, in a declining price environment, our operating margins may contract because we account for inventory using the first-in, first-out method. Actions we take to mitigate volatility in manufacturing and operating costs may not be successful and, as a result, our business, financial condition, cash flows and results of operations could be materially and adversely affected.

19

Risks Related to Our Business and Operations

Failure to compete successfully in our markets, including our ability to develop and commercialize innovative and disruptive technologies, could adversely affect our business.

We offer our technologies, products and services in highly competitive markets. We believe the principal points of competition are 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 our service centers to customers, effectiveness of our distribution channels, price and customers’ experience in doing business with us. 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.

Our competitive position and future growth rate depend upon a number of factors, including our ability to successfully: (i) innovate, develop and maintain competitive and secure products and services, as well as business models and customer experience, to address emerging regulations and trends and meet customers’ needs (including those related to 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 competitors from outside our industry, such as large technology firms, or those out of emerging markets, (iii) enhance our product and service offerings by adding innovative features, increased efficiency or disruptive technologies that differentiate them from those of our competitors and prevent commoditization, (iv) develop, manufacture and bring compelling, secure and efficient new products and services to market quickly and cost-effectively, (v) continue to cultivate, develop and maintain our distribution network of channel partners, (vi) attract, develop and retain individuals with the requisite innovation, digital and technical expertise and understanding of customers’ needs to develop and commercialize new technologies, products and services, (vii) continue to leverage and expand our external ecosystem of innovation partners from universities, venture capital, the start-up of community and other technology firms, (viii) continue to invest in our manufacturing, research and development, engineering, sales and marketing, digitization of customer service and support tools, and distribution networks, (ix) win large contracts, and (i) compete for business subject to applicable governmental procurement laws, regulations and policies, including new and existing domestic content requirements in the U.S. and globally, as they may evolve over time.

We may not be successful in maintaining our competitive position, which could adversely affect our business, financial condition, cash flows or results of operations. The failure of our technologies, products or services to maintain and gain market acceptance due to more attractive offerings, failure of our products to comply with new governmental regulations or policies, or customers’ slower-than-expected adoption of and investment in our new and innovative technologies could significantly reduce our revenues or market share and adversely affect our competitive position. Pricing pressures could cause us to adjust the prices of certain products to stay competitive, or we may not be able to continue to win large contracts, which could adversely affect our market share and competitive position.

20

Cybersecurity incidents or other disruptions to our information technology infrastructure, communications networks and operations could adversely affect our business, products and services.

Our business operations, including manufacturing, rely on information technology, operational technology, and communications networks, some of which are operated by third parties, including cloud-based service providers, to process, transmit and store our electronic information, including sensitive data such as confidential business information and personal data relating to employees, customers or other business partners. As a result of the evolution of new ways of working, a significant portion of our workforce has transitioned to remote working and are therefore reliant on our information technology infrastructure and communication networks and access to reliable and safe communication networks in their communities in order to be able to perform their jobs. We also rely on third parties’ information technology systems to run manufacturing processes, to store or manage data, or to manage or support a variety of business processes and activities, including with regard to remote work. Regardless of protection measures, essentially all systems are susceptible to damage, disruption or shut-down due to cybersecurity attacks, including ransomware, denial-of-service, computer viruses and security breaches; equipment or system failure, including due to maintenance, obsolescence or age; and other events or circumstances, such as human error or malfeasance, vandalism, natural disaster, fire, power, communication or other utility outage, shutdown or failure. While we have certain system redundancies as well as business continuity and disaster recovery planning and response plans, we cannot guarantee that these measures will be effective or adequate to respond to damage, disruption or shut-down circumstances.

In addition, we have in the past offered and continue to offer certain services and products, including pumps, controllers and meters, that are digitally-enabled or that connect to and are part of the “Internet of Things” (IoT), and are used by our customers and other third parties for operational purposes or to collect data. Cybersecurity attacks may target hardware, software and information installed, stored or transmitted by our products after they have been purchased and incorporated into customers and other third parties’ products, facilities or infrastructure, including critical infrastructure applications. While we attempt to provide security measures to safeguard our products and services from cyber threats, the potential for an attack remains. In addition, our customers may continue to use digitally-enabled products that were designed, manufactured and sold by us at a time when current security features were not available. A successful attack may result in the misappropriation, destruction, unauthorized access to or disclosure of customers or other third parties' confidential information, damage or disruption to customer or third parties’ operations, potentially with personal health and safety risks, recall of our products or increased costs for security and remediation, as well as damage to our brand reputation.

Like many multinational companies, we, and some third parties upon which we rely, have experienced cybersecurity attacks on information technology networks and systems, products and services in the past and may experience them in the future, likely with more frequency and involving a broader range of devices and modes of attack. To date, none have resulted in any material adverse impact to our business, operations, products, services or customers. We have adopted measures designed to mitigate potential risks associated with cybersecurity threats, breaches or other disruptions or damage to our information technology networks and systems, products and services but the unpredictability of the timing, nature and scope of such disruptions and threats could impact our business, operations, products and services. Disruption to information technology and communications networks on which we rely, or an attack on our products and services, could interfere with our operations, disrupt our supply chain and service to our customers, interrupt production and shipments, result in theft or compromise of our and our customers’ intellectual property and trade secrets, damage employee, customer and business partner relationships, negatively impact our reputation, result in legal claims and proceedings or regulatory enforcement actions, and increase our costs for security and remediation, any of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

Although we continue to assess these risks, implement measures to mitigate these risks and perform business continuity and disaster recovery planning, we cannot be sure that cybersecurity attacks or other interruptions with material adverse effects will not occur, or that our business continuity and disaster recovery efforts will be effective and adequate.

Lack of or delay in availability of products, parts, raw materials and energy from our supply chain or the inability of suppliers to meet delivery and other requirements, could adversely affect our business.

Our business relies on a large and complex network of suppliers (and their suppliers), including contract manufacturing, commodity markets and freight and logistics providers, to secure and ship finished goods and raw materials, parts, electronic components and other components that are used in our products. We expect that our reliance on, and the complexity of, the supply chain will continue to increase. Parts and raw materials commonly used in our products include electronic components, including semiconductors, motors, fabricated parts, castings, magnets, bearings, seals, batteries, and PCBs, as well as commodities, including steel, brass, nickel, copper,

21

aluminum and plastics. We are exposed to the availability of these parts, components, materials and finished goods, which throughout 2022 have been and may in the future be subject to delay, curtailment or change due to, among other things, macroeconomic factors including supply and demand dynamics, labor shortages, changes in the strategy or production planning of suppliers including decisions to exit production of key components upon which we rely, interruptions in suppliers' production, labor disputes, the impaired financial condition of a particular supplier, suppliers’ capacity allocations to other purchasers, changes in trade agreements and trade protection measures including tariffs, exchange rates and prevailing price levels, ability to meet regulatory requirements, weather emergencies and associated effects of climate change, the ongoing effects of the COVID-19 pandemic, or other public health crises, or threatened or actual terrorism, armed conflict, or war, including the ongoing conflict between Russia and Ukraine. In addition, any threatened or actual escalation of the Russia-Ukraine conflict, including impacts such as disruption or increased cost of energy supply in Europe, could delay or interrupt our supplies from suppliers of energy intensive materials, such as steel, glass and plastics, among others. We have also experienced, and continue to experience, increased freight and logistics costs, delivery delays related to port congestion and other logistics-related challenges. Although we have insurance, 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.

Some of our key components are available only from a sole or single source supplier or a limited group of suppliers and so we are subject to supply and pricing risk. In addition, if a sole or single source supplier were to cease or interrupt production or otherwise fail to supply a key component to us, it could adversely affect our product sales and operating results.

In addition, as a result of the ongoing COVID-19 pandemic and broader global market supply and demand dynamics, we have experienced and may continue to experience shortages, capacity constraints and delays with respect to the supply of components, including electronic components (in particular, chips), and other parts and raw materials. We have and continue to take measures, including with respect to buffer stock, the use of alternative suppliers and re-design of certain products, to mitigate the impacts of the ongoing supply chain, freight and logistics issues. However, if these shortages and disruptions continue, if additional disruptions occur (including related to the aforementioned risk of disruption in the global semiconductor industry due to China-Taiwan geopolitical issues), or if our efforts to mitigate these shortages and disruptions are insufficient or unsuccessful, we may be unable to, or delayed in our ability to execute on our backlog, fill new customer orders or timely deliver products to our customers and therefore could have a material adverse effect on our business, financial condition or results of operations.

A material disruption to any of our facilities or operations, or that of third parties upon which we rely, may adversely affect our business and financial performance.

Our facilities and operations 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, utilities providers, and freight and logistics providers. In addition, we rely on certain third parties to supply critical business processes and activities, including in the areas of Finance, Human Resources, Procurement, Travel and Information Technology. Our facilities and operations and those of certain third parties on which we rely, have experienced, and may in the future experience, disruptions or delays as a result of an actual or threatened event or circumstance, including due to a significant equipment, technological or system failure, natural disaster, weather event, effects of climate change, power, energy curtailment or outage, water or communications outage, fire, explosion, critical supply chain failure, terrorism, cybersecurity attack, political disruption, the effects of COVID-19, outbreak of an epidemic, pandemic or other public health crisis, insurrection, armed conflict or war, labor dispute, work stoppage or slowdown, technology failure, financial viability or other reason. In addition, our facilities or that of third parties upon which we rely operate in certain circumstances with equipment that may be unique and difficult to replace or involve long lead times for replacement. A significant disruption to any of our facilities or operations, or that of third parties upon which we rely, could cause material adverse impacts to our financial performance, operations and business, including an inability to meet customer demand or contractual commitments, increased costs, and reduced sales, and could impact our business processes and activities, including our ability to timely report financial results. Any interruption in capability may be lengthy and 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 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. Although we continue to assess these risks, implement mitigation plans and perform business continuity and disaster recovery planning, we cannot be sure that interruptions with material adverse effects on our operational and financial performance will not occur.

22

Failure to retain our existing senior management, engineering, technology, sales, services and other key talents or the inability to attract new qualified and diverse talent could negatively impact our business.

Our success has depended, and will continue to depend on our ability to attract and retain highly qualified and diverse employees in senior management positions, and in strategic or core competencies, including engineering, innovation, digital technologies, commercial excellence, service, and project management, as well as general production-related talent. The market for highly-skilled talent, leaders and labor in our industry remains highly competitive. As a result, our success in attracting and retaining employees, particularly in the areas of services, digital technologies, innovation and data science, has depended, and will continue to depend on our ability to offer attractive career growth opportunities, work arrangements, compensation, and benefits, and also policies and ways of working that support employee wellbeing. In addition, continuing to evolve our culture, which includes advancing diversity, equity and inclusion, is critical to attracting and retaining talent needed to execute our strategy, while also driving innovation, remaining competitive and creating long-term value. 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. 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 use or inadequate disclosures with respect to our products could adversely affect our business, reputation and financial condition and results of operations.

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 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, property or environmental damage. These events could also lead to recalls, safety or security alerts relating to our products, result in the removal of a product from the market and/or result in warranty or liability claims against us. Although we have liability insurance, 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 liability claims. Manufacturing, design, software, security or service defects or inadequacies may also result in contractual damages against us, warranty expenses or issuance of credits, which could impact our profitability. Recalls, removals, and warranty, liability and quality claims can result in significant costs, as well as negative publicity and damage to our reputation that could reduce demand for our products and have a material adverse effect on our business, financial condition and results of operations.

We may not achieve some or all of the expected benefits of our restructuring and realignment plans or our restructuring and realignment may adversely affect our business.

In 2022 and recent prior fiscal years, we initiated restructuring and realignment plans in an effort to optimize our cost structure, improve our operational efficiency and effectiveness, strengthen our competitive positioning and better serve our customers. Additionally, in 2020, in response to the business and economic conditions resulting from the COVID-19 pandemic, we initiated additional restructuring and realignment activity. We are also engaged in a multi-year effort to transform many of our support functions and related technologies, including Finance, Human Resources and Procurement. Challenges with the enabling technologies and delays in implementing planned restructuring and realignment activities have delayed the realization of some of the expected operational and financial benefits from such actions. 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. Realignment and restructuring require a significant amount of management and other employees' time and focus, which may divert attention from operating and growing our business.

The successful implementation and execution of our restructuring and realignment actions are critical to achieving our expected cost savings, as well as effectively competing in the marketplace and positioning us for future growth. 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. If our restructuring and realignment actions are not executed successfully, it could have material adverse impacts on the effectiveness of our internal controls over financial reporting, our competitive position, business, financial condition, cash flows and results of operations.

The execution of our strategy includes acquisitions, which we may be unable to successfully execute or effectively integrate.

23

To execute our growth strategy, we plan to continue to pursue the acquisition of companies, assets, technologies, product lines and customer channels that complement or expand our existing business or improve our competitive position. We may not be able to complete acquisitions with favorable terms or timing, or at all, or obtain financing that may be needed to consummate acquisitions. In addition, our results of operations may be adversely impacted by: (i) the failure to successfully integrate acquired businesses into our operations, technology and 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.

Acquisitions involve a number of risks and present financial, managerial and operational challenges, including: diversion of management’s attention from existing businesses and operations; insufficient internal controls over financial or compliance activities or financial reporting; the failure to realize expected synergies; the assumption of new material risks associated with the acquired businesses; and the loss of key employees of the acquired businesses. Failure to successfully execute our growth strategy via acquisitions and successfully integrate these acquisitions could adversely affect our competitive position, business, financial condition or results of operations.

A significant portion of our products and offerings in our Measurement & 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 & Control Solutions segment use radio spectrum, which is subject to government regulation. To the extent we introduce new products designed for use in the U.S. or another country, such products may require significant modification or redesign in order to meet frequency requirements and other regulatory specifications. Limitations on frequency availability or the cost of making necessary modifications may preclude us from selling our products in certain countries. The regulations that govern our use of radio spectrum may change, which may require us to modify our products or seek new partnerships, either directly or due to interference caused by new consumer products allowed under the regulations. In addition, we may not be able to secure suitable partners for co-development of products.The inability to modify our products to meet such requirements, the possible delays in completing or the cost of such modifications could have a material adverse effect on our business, financial condition, and results of operations.

In the U.S., our products are primarily designed to use FCC-licensed spectrum in the 900MHz range. If the FCC does not renew our existing spectrum licenses, or materially changes regulations affecting the use of these licenses, our business, financial condition, and results of operations could be adversely affected. In addition, there may be insufficient available frequencies in some markets to sustain or develop our planned operations at a commercially feasible price or at all.

Outside the U.S., certain of our products require the use of radio frequency and are subject to regulations. In some jurisdictions, radio station licenses may be granted for a fixed term and must be periodically renewed. Our advanced and smart metering systems offerings transmit to (and receive information from, if applicable) handheld, mobile, or fixed network reading devices in licensed bands made available to us through strategic partnerships and are reliant to some extent on the licensed spectrum continuing to be available through our partners or our customers. We may be unable to find partners or customers that have access to sufficient frequencies in some markets to sustain or develop our planned operations, or to find partners or customers that have access to sufficient frequencies in the relevant markets at a commercially feasible price or at all.

Weather conditions, including the effects of climate change and associated efforts by governmental or regulatory authorities to mitigate such effects, may cause volatility in our served markets, and may affect our businesses, operations and financial results.

Globally, the frequency and severity of weather events due to the effects of climate change is increasing. The unpredictable nature of weather events and related conditions, including heavy flooding, water stress due to prolonged droughts, and fluctuations in temperatures or weather patterns, including as a result of climate change, can positively or negatively impact portions of our business. For example, heavy flooding and rain events attributable to the effects of global climate change may increase customer demand for some of our solutions that help manage water and stormwater overflows or remove and transfer excess or unwanted water. Prolonged drought conditions may increase demand for our pumping technology used in agriculture and turf irrigation applications. Demand for water reuse applications, including those provided by our treatment business, may also increase as communities look to address water scarcity challenges due to the effects of climate change. In addition, fluctuations in temperatures result in varying levels of demand for our products used in residential and commercial hydronic applications, where homes and buildings use circulating water to heat and cool living spaces. Significant fluctuations in these weather conditions and climate changes can therefore result in volatility in our financial results.

24

Severe weather events and other effects of climate change have also caused, and may in the future cause, disruptions to our facilities and operations, as well as those of our customers and suppliers. In 2021, a physical risk analysis using the Task Force on Climate Related Financial Disclosures (“TCFD”) framework indicated that certain of our facilities are at a moderate risk for exposure to water stress, coldwave and wildfire impacts due to the effects of climate change. While we continue to assess these risks, implement mitigation plans and perform business continuity and disaster recovery planning, we cannot be sure that disruptions with material adverse effects will not occur.

Governments may implement emissions trading schemes, carbon taxes, fuel taxes and other policies to reduce the impacts of climate change that could impact our business and financial results. The timing, scope and effect of governments’ implementation of carbon pricing and taxes are uncertain, but could significantly increase our expenses in the future and therefore have material adverse impacts on our business, financial condition, cash flows, results of operations and market price of our common stock.

Our commitments, goals, targets, objectives and initiatives related to sustainability, and our public statements and disclosures regarding them, expose us to numerous risks.

We have developed, 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. Achieving these goals and commitments will require evolving our business, making capital investments and developing technologies that might not currently exist. We might incur additional expense or be required to recognize impairment charges in connection with our efforts. These commitments, goals, targets and other objectives reflect our current plans and there is no guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on these commitments, goals, targets and objectives expose us to operational, reputational, financial, legal, and other risks. 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 pace of changes in technology, the availability of requisite financing, and the availability of suppliers that can meet our sustainability and other standards.

Our business may face increased scrutiny from the investment community, regulators, media and other stakeholders related to our sustainability activities, including our commitments, goals, targets and objectives, and our methodologies and timelines for pursuing them. We are subject to increasing regulatory requirements around sustainability-related disclosures, including significant anticipated rulemaking by the SEC, which may continue to evolve. Complying with regulators’ disclosure requirements may impose substantial additional costs and require additional resources, including with respect to third-party attestation, to enable the capture, analysis and audit of appropriate data. Any actual or alleged failure to comply with regulatory requirements could result in fines, penalties and civil liabilities, and damage to our reputation. Furthermore, if our sustainability reporting and practices do not meet investor, regulator or other stakeholders’ expectations, standards and requirements, our reputation, ability to attract or retain employees, and attractiveness as an investment, business partner or acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our sustainability commitments, goals, targets, and objectives, to comply with ethical, environmental, or other standards, regulations, or expectations, or to comply with reporting requirements and standards with respect to these matters, within the timelines we announce, or at all, could have operational, reputational, financial and legal impacts.

Risks Related to Financial and Tax

Our business is subject to foreign currency exchange rates fluctuations.

Sales outside of the U.S. for the year ended December 31, 2022 accounted for approximately 53% of our net sales. We also have significant operations in various locations outside of the U.S. Our principal currency exposures for which we enter into cash flow hedges relate to the Euro, Swedish Krona, British Pound, Canadian Dollar, Australian Dollar, and Polish Zloty. Changes in the value of currencies of the countries in which we do business relative to the value of the U.S. Dollar or Euro could affect our ability to sell products competitively and control our cost structure, which has had and may continue to have a material adverse effect on our business, financial condition, cash flows and results of operations. 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, Chinese Yuan, British Pound, Canadian Dollar, Australian Dollar, Swedish Krona and Indian Rupee. As 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. Refer to

25

Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" for additional information on foreign exchange risk.

Our financial results can be difficult to predict.

Our business is impacted by a substantial amount of short cycle and book-and-bill business, which we have limited insight into, particularly for the business that we transact through our significant distribution network. Our businesses, including that of our Measurement & Control Solutions segment, are also impacted by our long-cycle business, including large projects, which could be unexpectedly cancelled, 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. We rely on a complex global supply chain, which has been subject to dynamic conditions, volatility, unexpected changes and disruptions due to international conditions, including as a result of the war between Russia and Ukraine, the COVID-19 pandemic and macroeconomic conditions, including high inflation. These supply chain challenges have affected, and may continue to affect, our cost structure, production and ability to timely fill customer orders. We cannot predict when, or if, these conditions will ease or subside in the future. Accordingly, our financial results for any given period have been and will continue to be difficult to predict.

We may incur additional impairment charges for our goodwill and other indefinite-lived intangible assets which would negatively impact our operating results.

We have a significant amount of goodwill and purchased intangible assets on our balance sheet as a result of acquisitions. As of December 31, 2022, the net carrying value of our goodwill and other indefinite-lived intangible assets totaled approximately $3 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. 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. For example, in 2020 we recorded goodwill impairment charges $58 million within our Measurement & Control Solutions segment primarily related to the performance of the business of the Pure Technologies Ltd. acquisition ("Pure") (as detailed in Note 11, “Goodwill and Other Intangible Assets”). We did not record goodwill impairment charges within our Measurement & Control Solutions segment in 2021 or 2022. Material impairment charges have in the past and could in the future adversely affect our results of operations and financial condition.

Changes in our effective tax rates and tax expenses may adversely affect our financial results.

We sell our products in approximately 150 countries and 53% of our revenue was generated outside the U.S. for the year ended December 31, 2022. Given the global nature of our business, a number of factors may increase our effective tax rates and tax expense, including:

•the geographic mix of jurisdictions in which profits are earned and taxed;

•the statutory tax rates and tax laws in jurisdictions in which we conduct business;

•the resolution of tax issues arising from tax examinations by various tax authorities; and

•the valuation of our deferred tax assets and liabilities.

Additionally, tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. The recent agreement by countries in the Organization for Economic Cooperation and Development to implement additional legislative changes increases the uncertainty of future income tax positions, and such changes may result in additional tax expense and effective tax rate volatility.

Our businesses are regularly examined by various tax authorities throughout the world and the resolutions of these examinations do not typically have a significant impact on our effective tax rates and tax expenses, but they could. 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 6, “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. 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. Although we

26

believe our tax estimates and accruals are reasonable, there can be no assurance that any final determination will not be materially different than the treatment reflected in its historical income tax provisions, accruals and unrecognized tax benefits, which could materially and adversely affect our business, operating results, cash flows and financial condition.

Our pension and other defined benefit plans are subject to financial market risks that could adversely impact our earnings, financial condition and cash flows in future periods.

Certain current and retired employees are covered by pension and other defined benefit plans (collectively, “post-retirement benefit plans”). We make contributions to fund our post-retirement benefit plans when we consider it necessary or advantageous to do so. Significant changes in market interest rates, decreases in fair value of or investment losses on plan assets, changes in discount rates, or changes in minimum funding requirements established by governments, taxing authorities or other agreements, could increase our funding obligations and adversely impact our earnings, financial condition and cash flows in future periods. In addition, the cost of our post-retirement benefit plans is incurred over long periods of time and involves factors that can be volatile and unpredictable, including rates of return on plan assets, discount rates used to calculate liabilities and expenses, change in laws and regulatory actions, and changes in actuarial experience and assumptions, which could adversely impact our earnings, results of operations, financial condition and cash flows.

Our debt obligations may adversely affect our business and our ability to meet our obligations and pay dividends.

As of December 31, 2022, our total outstanding indebtedness was $1,880 million as described under “Liquidity and Capital Resources" and we may incur additional debt in the future. Our current or future indebtedness could have adverse consequences to us and our investors, including:

•increasing our vulnerability to general adverse economic and industry conditions;

•limiting our ability to obtain additional financing or borrow additional funds;

•reducing or eliminating our ability to pay future dividends or repurchase our common stock;

•limiting our flexibility in planning for, or reacting to, changes in our business and industry;

•requiring a substantial portion of our cash flows from operations to make principal and interest payments;

•reducing the cash flows available to fund working capital, capital expenditures, acquisitions or other investments to grow our business;

•increasing the amount of interest expense that we must pay if future borrowings are at variable interest rates, which, as interest rates increase, would result in higher interest expense; and

•increasing the risk of a future credit rating downgrade, which could increase future debt costs and limit the availability of debt financing.

In addition, there can be no assurance that future borrowings or equity financing will be available to us on favorable terms or at all for the payment or refinancing of our indebtedness. The terms of any future debt indentures, including those related to green financing, may also impose additional and more stringent restrictions on our operations than we currently have.

Our ability to make scheduled principal payments of, to pay interest on, or to refinance our indebtedness and to satisfy our other debt obligations will depend on our future cash flows from operations, which may not be sufficient or may be affected by factors beyond our control. If we are unable to service our indebtedness, our business, financial condition, results of operations and share price could be materially adversely affected.

Risks Related to Legal and Regulatory

Failure to comply with laws, regulations and policies, 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.

Given our global operations, we are subject to regulation under a wide variety of U.S. and non-U.S. laws, regulations and policies, including laws and regulations related to anti-corruption, trade including export and import compliance, anti-trust and money laundering. Our policies mandate compliance with these laws and regulations. The U.S. Foreign Corrupt Practices Act (the "FCPA"), the U.K. Bribery Act of 2010 and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to

27

government officials or other persons for the purpose of obtaining or retaining business. We operate in many parts of the world that are recognized as having governmental and commercial corruption and in certain circumstances, strict compliance with anti-corruption laws may conflict with local business customs and practices. We cannot guarantee that our internal controls, policies and procedures will always prevent and protect us from improper conduct of our employees or business partners. In the event that we believe or have reason to believe that our employees or business partners have or may have violated applicable laws, regulations or policies, including anti-corruption laws, we are required to investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, termination of relationships with business partners and curtailment of operations in certain jurisdictions, and as a result might materially and adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business.

Additionally, to conduct our operations, we regularly move data across borders, and consequently we are subject to a variety of continuously evolving and developing laws and regulations regarding data privacy, data protection and data security, including the California Consumer Protection Act, the EU's GDPR and PIPL. The scope of the laws that may be applicable to us is evolving, often uncertain and may be conflicting, particularly with respect to foreign laws. GDPR greatly increases the jurisdictional reach of EU law and adds a broad array of requirements for handling personal data, including the enforcement of data subject rights, enhanced security requirements, obligations to guarantee EU data subject rights are not compromised in countries outside the EU, and public disclosure of significant data breaches. Other countries, such as China with its PIPL, have enacted or are enacting data localization and security laws that require data to stay within their borders. All of these evolving legal and operational requirements impose significant costs of compliance that are likely to increase over time. In addition, any such violation could result in substantial fines, sanctions and/or civil penalties, damage to our reputation and might materially and adversely affect our business, results of operations or financial condition.

We face risks related to legal and regulatory proceedings.

We are subject to various laws, regulations and other requirements of government authorities in the U.S. and foreign countries, any violation of which could potentially create substantial liability for us and damage our reputation. Changes in laws, ordinances, regulations or other government policies, the nature, timing, and effect of which are uncertain, may significantly increase our expenses and liabilities.

From time to time, we are involved in legal and regulatory proceedings that are incidental to the operation of our businesses (or the business operations of previously owned entities). These proceedings may seek remedies relating to environmental matters, tax, intellectual property, acquisitions or divestitures, product liability, property damage, personal injury, privacy, employment, labor and pensions, government contract issues and commercial or contractual disputes. Our continued transition to connected and digital technologies and solutions has increased our exposure to intellectual property litigation and we expect that this risk will continue to increase as we execute on our innovation and technology priorities.

It is not possible to predict with certainty the outcome of claims, investigations, regulatory proceedings and lawsuits, and we could in the future incur judgments, fines or penalties or enter into settlements and claims that could have an adverse effect on our reputation, our business, results of operations and financial condition. Additionally, we may be required to change or cease operations at one or more facilities if a regulatory agency determines that we have failed to comply with laws, regulations or orders applicable to our business.

The global and diverse nature of our operations, coupled with the increase in regulation and enforcement in many regions of the globe, means that legal and compliance risks will continue to exist and additional legal and regulatory proceedings and other contingencies, the outcome of which cannot be predicted with certainty, will arise from time to time. 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.

28

Infringement or expiration of our intellectual property rights, or allegations that we have infringed upon the intellectual property rights of third parties could negatively affect us.

We own numerous patents, trademarks, copyrights, trade secrets and other intellectual property and licenses to intellectual property owned by others, that are important to our business. Our intellectual property rights may provide us with competitive advantage because they may help us differentiate our technologies, products and services, including our growing portfolio of data analytics and digitally-enabled offerings. However, our current or future intellectual property rights may not be sufficiently broad or may be challenged, invalidated, circumvented, misappropriated, independently developed, or designed-around, particularly given our operations in countries where laws governing intellectual property rights are not highly developed, protected or enforced. Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property, or detect or prevent circumvention, misappropriation or unauthorized use of such property, as well as the cost of enforcing our intellectual property rights, could adversely impact our business, financial condition and results of operations.

From time to time, we receive notices from third parties alleging intellectual property infringement or misappropriation. Any dispute or litigation regarding intellectual property could be costly and time-consuming to defend due to the complexity and uncertainty of intellectual property litigation. We may not be successful in asserting a counterclaim, or negotiating a license, in response to a claim of infringement or misappropriation. In addition, as a result of such claims of infringement or misappropriation, we could lose our rights to use critical technology, be unable to license critical technology or sell critical products and services, be required to pay substantial damages or license fees with respect to the use of third-party intellectual property rights, or be required to redesign our products at substantial cost, any of which could adversely impact our competitive position, financial condition and results of operations. Even if we successfully defend against claims of infringement or misappropriation, we may incur significant costs and diversion of management attention and resources, which could adversely affect our business, financial condition and results of operations.

Developments in, and compliance with, current and future environmental and climate change laws and regulations could impact our business, financial condition or results of operations.

Our business, operations, and product and service offerings are subject to and affected by many U.S. federal, state, local and foreign environmental laws and regulations, including those enacted in response to climate change concerns.

Increasing public and governmental awareness and concern regarding the effects of climate change has led to significant legislative and regulatory efforts to limit greenhouse gas emissions and will likely result in further environmental and climate change laws and regulations. Compliance with existing laws and regulations currently requires, and compliance with future laws is expected to continue to require, increasing research and development, operating and capital expenditures, including with respect to the design or re-design of our products in order to conform to changing environmental standards and regulations, including with respect to emissions and efficiency, which could impact our business, financial condition and results of operations. Furthermore, environmental laws and regulations may authorize substantial fines and criminal sanctions as well as facility shutdowns to address violations, and may require the installation of costly pollution control equipment or operational changes to limit emissions or discharges. We also incur, and expect to continue to incur, costs to comply with current environmental laws and regulations. Developments such as the adoption of new environmental laws and regulations, stricter enforcement of laws and regulations, violations by us of such laws and regulations, discovery of previously unknown or more extensive contamination conditions, litigation involving environmental impacts, our inability to recover costs associated with any such developments, or financial insolvency of other responsible parties could have a material adverse effect on our financial condition and results of operations.

Risks Related to the Proposed Acquisition of Evoqua

We may not realize some or all the expected benefits and synergies from our proposed acquisition of Evoqua.

On January 23, 2023, we announced that we entered into a definitive merger agreement under which we will acquire Evoqua. While we and Evoqua will continue to operate independently until the completion of the acquisition, the success of the acquisition will depend, in part, on our ability to realize the anticipated benefits from successfully combining our and Evoqua’s businesses. We plan on devoting substantial management attention and resources to integrating our and Evoqua’s business practices and operations so that we can fully realize the anticipated benefits and synergies of the acquisition. Nonetheless, difficulties may arise during the integration process that could result in the failure to achieve the synergies that we anticipate, including the loss of key talent that may be difficult to replace, the disruption of each company’s ongoing business or inconsistencies in each company’s standards,

29

controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with customers, partners, suppliers or creditors. As a result, the anticipated benefits of the acquisition 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 well as adversely impact the stock price of the combined company.

In addition, at times, the attention of certain members of each company’s management and each company’s resources may be focused on completion of the merger and the integration of the businesses of the two companies, which may divert attention from day-to-day business operations and disrupt each company’s ongoing business, as well as the business of the combined company.

Furthermore, we and Evoqua could potentially become targets of securities class actions or derivative lawsuits in connection with the acquisition, which could result in diversion of management’s attention and resources and substantial costs, and could delay or prevent the acquisition from being completed.

Failure to complete our proposed acquisition of Evoqua could negatively impact our reputation, stock price and our future business and financial results.

Our obligations and the obligations of Evoqua to complete the merger are subject to satisfaction or waiver of a number of conditions. There can be no assurance that the conditions to completion of the acquisition will be satisfied or waived or that the acquisition will be completed. If the acquisition is not consummated for any reason, we may receive negative reactions from our shareholders, suppliers, customers, regulators and employees, including damage to our reputation. We may be subjected to various material risks, including the possibility that the price of our common stock and other securities may decline to the extent that current market prices reflect a market assumption that the acquisition will be completed.

Also, in the event of a termination of the merger agreement under certain specified circumstances, we would be required to reimburse expenses of Evoqua or pay Evoqua a termination fee of up to $325 million. We could also be subject to litigation related to any failure to complete the merger or to specifically enforce our obligation to perform our obligations under the merger agreement. In addition, the merger agreement places certain restrictions on the conduct of our businesses prior to completion of the merger, and such restrictions, the waiver of which is subject to a written consent of Evoqua in advance, may prevent us from making certain acquisitions or taking certain other specified actions during the pendency of the merger that we would have made or taken if these restrictions were not in place.

If any of these risks materialize, they may materially and adversely affect our business, reputation, results of operations, financial condition, ratings, stock prices and/or bond prices.

If our pending acquisition of Evoqua is consummated, our shareholders’ ownership percentage will be diluted, and the combined company’s earnings per share may decrease.

If the proposed acquisition is consummated, we will issue to Evoqua stockholders shares of our common stock. As a result of the issuance of these shares, our shareholders will own a smaller percentage of the combined company after the acquisition and will therefore have a reduced voting interest after the acquisition. In addition, the market value of the combined company’s common stock may also decrease due to the additional transaction and integration-related costs or other factors beyond our control. All of these factors could cause dilution of the combined company’s earnings per share, or decrease or delay the expected accretive effect of the acquisition, which could negatively affect the market price of our common stock.

The acquisition and integration of Evoqua may result in additional costs and expenses.

We have incurred and expect to continue to incur a number of non-recurring costs, expenses and fees for professional services and other transaction-related costs in connection with the proposed acquisition and integration of Evoqua, whether or not the acquisition is completed. We may also incur unanticipated accounting and other costs in the integration of the businesses of Evoqua, which may lead to reserves in the future. Such costs could negatively impact our free cash flow, and the net benefit from efficiencies and synergies related to the integration of the businesses may not be realized in the near term or at all.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

None.

30

ITEM 2.        PROPERTIES

We have approximately 370 locations in more than 50 countries. These properties total approximately 13 million square feet, of which more than 300 locations, or approximately 7 million square feet, are leased. We consider the offices, plants, warehouses and other properties that we own or lease to be in good condition and generally suitable for the purposes for which they are used. The following table shows our significant locations by segment:

Location	State or Country	Principal Business Activity	Approx. Square Feet	Owned or  Leased
		Water Infrastructure
Emmaboda	Sweden	Administration and Manufacturing	1,197,000	Owned
Vadodara	India	Manufacturing and Research & Development	366,000	Leased
Stockholm	Sweden	Administration and Research & Development	182,000	Leased
Bridgeport	NJ	Administration and Manufacturing	136,000	Leased
Shenyang	China	Manufacturing	125,000	Owned
		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 & 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
		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

From time to time, we are involved in legal and regulatory proceedings that are incidental to the operation of our businesses (or the business operations of previously-owned entities). These proceedings may seek remedies relating to matters including environmental, tax, intellectual property, acquisitions or divestitures, product liability, property damage, personal injury, privacy, employment, labor and pension, government contract issues and commercial or contractual disputes. See Note 19, "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.

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 7, 2023:

NAME	AGE	CURRENT TITLE	OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS
Patrick K. Decker	58	President and Chief Executive Officer (2014)
Sandra E. Rowland	51	Senior VP and Chief Financial Officer (2020)	• Executive Vice President and Chief Financial Officer, Harman International Industries Inc. (2015)
Dorothy Capers	61	Senior VP, General Counsel (2022)	• Executive Vice President, Global General Counsel and Corporate Secretary, National Express Group (2015)
Franz Cerwinka	53	Senior VP and President, Emerging Markets and Applied Water Systems (2023)	• Senior VP and President, Emerging Markets (2020) •Chief Executive Officer, Johnson Controls-Hitachi Air Conditioning (2015)
Michael McGann	52	Senior VP and President, Americas and Measurement & Control Solutions (2023)	• VP, North America Utilities Commercial Team (2022) - • VP, Sensus Americas, Global Engineering and Assessment Services (2017) - • VP, Quality, Sensus USA Inc. (2013)
Geri McShane	49	VP, Controller and Chief Accounting Officer (2019)	• Controller, Accounting and Reporting (2016)
Matthew Pine	51	Chief Operating Officer (2023)	• Senior VP and President, Americas, Applied Water Systems and Measurement & Control Systems (2022) • Senior VP and President, Americas and Applied Water Systems (2020) • President, Carrier Residential, United Technologies Corporations (2018) • VP and General Manager, Carrier Residential, United Technologies Corporations (2017)
Claudia S. Toussaint	59	Senior VP, Chief People and Sustainability Officer (2021)	• Senior VP, General Counsel and Corporate Secretary (2014)
Hayati Yarkadas	54	Senior VP and President, Europe, Water Infrastructure and Global Services (2020)	• Senior Vice President and President, Performance Materials, Trinseo S.A. (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 7, 2023:

NAME	TITLE
Robert F. Friel	Board Chair, Xylem Inc., Former Chairman, President and CEO, PerkinElmer, Inc.
Jeanne Beliveau-Dunn	Chief Executive Officer and President of Claridad, LLC
Patrick K. Decker	President and Chief Executive Officer, Xylem Inc.
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. Morelli	President and Chief Executive Officer, Vontier Corporation
Jerome A. Peribere	Former President and Chief Executive Officer, Sealed Air Corporation
Markos I. Tambakeras	Former Chairman, President and Chief Executive Officer, Kennametal, Inc.
Lila Tretikov	Corporate Vice President & Deputy Chief Technology Officer, Microsoft Corporation
Uday Yadav	Chief Executive Officer, TK Elevator

34

PART II

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, 2023, there were 8,359 holders of record 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. In the first quarter of 2023, we declared a dividend of $0.33 per share to be paid on March 22, 2023 for shareholders of record on February 22, 2023.

There were no unregistered offerings of our common stock during 2022.

Fourth Quarter 2022 Share Repurchase Activity

The following table summarizes our purchases of our common stock for the quarter ended December 31, 2022:

(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)
10/1/22 - 10/31/22	—	—	—	$182
11/1/22 - 11/30/22	—	—	—	$182
12/1/22 - 12/31/22	—	—	—	$182

(a)Average price paid per share is calculated on a settlement basis.

(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, 2022. There are up to $182 million in shares that may still be purchased under this plan as of December 31, 2022.

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, 2017 through December 31, 2022 and assumes that $100 was invested on December 31, 2017 in our common stock, the S&P 500 and the S&P 500 Industrials with the reinvestment of any dividends.

	XYL	S&P 500	S&P 500 Industrials Index
December 31, 2017	100	100	100
December 31, 2018	99	96	87
December 31, 2019	118	126	112
December 31, 2020	155	149	124
December 31, 2021	184	191	151
December 31, 2022	172	157	142

The graph is not, and is not intended to be, indicative of future performance of our common stock.

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

ITEM 6.        [ Reserved ]

37

ITEM 7.        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto. This discussion summarizes the significant factors affecting our results of operations and the financial condition of our business. 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 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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. Our broad portfolio of solutions addresses customer needs across the water cycle, from the delivery, measurement and use of drinking water to the collection, test, treatment and analysis of wastewater to the return of water to the environment. Our product and service offerings are organized into three reportable segments that are aligned around the critical market applications they provide: Water Infrastructure, Applied Water and Measurement & Control Solutions.

•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. 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. In the Water Infrastructure segment, we provide the majority of our sales directly to customers along with strong applications expertise, while the remaining amount is through distribution partners.

•Applied Water serves the water usage applications sector with water pressure boosting systems for heating, ventilation and air conditioning, and for fire protection systems to the residential and commercial building services markets. In addition, our pumps, heat exchangers and controls provide cooling to power plants and manufacturing facilities, circulation for food and beverage processing, as well as boosting systems for agricultural irrigation. 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 & 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. We also provide analytical instrumentation used to measure and analyze water quality, flow and level in clean water, wastewater, and outdoor 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. In the Measurement & 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

COVID-19 Pandemic Update and Macroeconomic Conditions

The global spread of COVID-19 has curtailed the movement of people, goods and services worldwide, including in many of the regions where we sell our products and services and conduct operations.

This section summarizes the most significant impacts related to the ongoing COVID-19 pandemic that we have experienced to date, and we have included additional details as applicable throughout other sections of this Annual Report.

Given the magnitude and duration of the COVID-19 pandemic and its economic consequences, it has become more difficult to distinguish specific aspects of our operational and financial performance that are most directly related to the pandemic from those more broadly influenced by ongoing macroeconomic, market and industry dynamics that may be, to varying degrees, related to the pandemic and its consequences.

The COVID-19 pandemic, as well as broader global market supply and demand dynamics, have adversely affected, and are expected to continue to adversely affect, our supply chains. We have experienced, and expect to continue experiencing shortages in the supply of components, including electronics, particularly semiconductors ("chips"), parts and raw materials. To help mitigate the effects of these challenges and increase the resilience of our supply chain, we continue to enhance and augment our risk management activities, including supplier pulsing and redundancy. Additionally, we have and continue to take measures with respect to buffer stock, the use of alternative suppliers and redesign of certain products to mitigate the impacts of the ongoing supply chain, freight and logistics delays and bolster our access to electronics, parts and raw materials.

We have also experienced, and continue to experience, increased inflation, freight, logistics, labor and overhead costs. The Company has taken specific actions to mitigate these inflationary headwinds, including pricing actions to pass cost increases through to customers and productivity efforts, including selective chip allocation, product redesigns, alternate sourcing options, and global procurement efforts. We have also initiated and plan to continue to initiate restructuring actions in 2023 to further optimize our cost structure.

These supply chain issues have also impacted our delivery times to customers. To some extent, our mitigation strategies have alleviated these issues but our lead times continue to be impacted to varying degrees.

If these issues continue, they could have a negative impact on our results of operations.

Many of our offices globally remain in a substantially remote work from home or hybrid status, with no material disruption to operations, financial reporting systems, internal control over financial reporting or disclosure controls and procedures.

The severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, and the pandemic’s ongoing and future impacts on our business, financial condition, results of operations, and stock price remain uncertain and difficult to predict.

Risks related to the impacts of COVID-19 as well as our supply chain are described in further detail under "Item 1A. Risk Factors" in the Company's 2022 Annual Report.

Evoqua Acquisition

On January 23, 2023, Xylem entered into a definitive agreement under which Xylem will acquire Evoqua, a leader in mission-critical water treatment solutions and services, in an all-stock transaction that reflects an implied enterprise value of approximately $7.5 billion. The transaction, which is anticipated to close in mid-2023, is subject to approval by shareholders of Xylem and Evoqua, the receipt of required regulatory approvals and other customary closing conditions.

Evoqua, a leader in North America water treatment, complements Xylem’s distinctive portfolio of solutions with advanced water and wastewater treatment capabilities, a powerful and extensive network of service professionals and access to a number of attractive industrial markets with resilient, recurring revenue streams.

Key Performance Indicators and Non-GAAP Measures

Management reviews key performance indicators including revenue, gross margins, segment operating income and operating income margins, free cash flow, orders growth, working capital and backlog, among others. In addition, we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating performance for the periods presented, and to provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives, including, but not limited to, dividends, acquisitions, share repurchases and debt repayment. Excluding revenue,

39

Xylem provides guidance only on a non-GAAP basis due to the inherent difficulty in forecasting certain amounts that would be included in GAAP earnings, such as discrete tax items, without unreasonable effort. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. We consider the following non-GAAP measures to be key performance indicators, as well as the related reconciling items to the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures may not be comparable to similarly-titled measures reported by other companies.

•"organic revenue" and "organic orders" defined as revenue and orders, respectively, excluding the impact of fluctuations in foreign currency translation and contributions from acquisitions and divestitures. Divestitures include sales or discontinuance of insignificant portions of our business that did not meet the criteria for classification as a discontinued operation. The period-over-period change resulting from foreign currency translation impacts is determined by translating current period and prior period activity using the same currency conversion rate.

•"constant currency" defined as financial results adjusted for foreign currency translation impacts by translating current period and prior period activity using the same currency conversion rate. 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, special charges, gain or loss from sale of businesses and tax-related special items, as applicable. A reconciliation of adjusted net income and adjusted earnings per share is provided below.

(in millions, except per share data)	2022					2021
Net income & Earnings per share	$	355		$	1.96	$	427	$	2.35
Restructuring and realignment	34			0.19		22		0.12
Special charges	160		(a)	0.89		12		0.07
(Gain) loss from sale of business	(1)			(0.01)		(2)		(0.01)
Tax effects of adjustments (b)	(32)		(c)	$	(0.18)	$	(7)	$	(0.04)
Adjusted net income & Adjusted earnings per share	$	516		$	2.85	$	452	$	2.49

(a) The special charges in the year primarily relate to the U.K. pension settlement expense of $140 million and asset impairment charges of $14 million recorded in the period.

(b) 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.

(c) The $32 million in tax effects of adjustments in the period primarily consists of $23 million related to the U.K. pension settlement expense and $3 million related to the asset impairment charge.

▪"adjusted operating expenses" and "adjusted gross profit" defined as operating expenses and gross profit, respectively, adjusted to exclude 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, special charges and gain or loss from sale of businesses, and "adjusted EBITDA margin" defined as adjusted EBITDA divided by total revenue.

40

▪“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. Our definition of "free cash flow" does not consider certain non-discretionary cash payments, such as debt. The following table provides a reconciliation of free cash flow.

(in millions)	2022		2021
Net cash provided by operating activities	$	596	$	538
Capital expenditures	(208)		(208)
Free cash flow	$	388	$	330
Net cash used in investing activities	$	(191)	$	(183)
Net cash provided (used) by financing activities	$	(790)	$	(855)

Executive Summary

Xylem reported revenue of $5,522 million for 2022, an increase of $327 million, or 6.3%, from $5,195 million reported in 2021. On a constant currency basis, revenue increased by $586 million, or 11.3%, during the year. The increase at constant currency was driven by an increase in organic revenue of $595 million reflecting strong organic growth in all end markets as well as across all major geographic regions.

Operating income for 2022 was $622 million, reflecting an increase of $37 million, or 6.3%, compared to $585 million in 2021. Operating margin was 11.3% for both 2022 and 2021. Operating income for 2022 included an increase in special charges of $12 million and an unfavorable impact from increased restructuring and realignment costs of $12 million as compared to 2021. Excluding the impact of these items, adjusted operating income was $672 million, with an adjusted operating margin of 12.2% in 2022 as compared to adjusted operating income of $611 million with an adjusted operating margin of 11.8% in 2021, an increase of 40 basis points. The increase in adjusted operating margin was primarily due to cost reductions from our productivity, restructuring and other cost saving initiatives, favorable volume and price realization. These impacts were partially offset by cost inflation and increased spending on strategic investments.

Additional financial highlights for 2022 include the following:

•Net income of $355 million, or $1.96 per diluted share, down 16.6% ($516 million or $2.85 per diluted share on an adjusted basis, up 14.5% from 2021)

•Net cash provided by operating activities of $596 million and free cash flow of $388 million, up 18% from 2021

•Orders of $6,257 million, down 0.7% from $6,300 million in 2021 (up 4.0% on an organic basis)

•Dividends paid to shareholders increased 7% in 2022.

2023 Business Outlook

We anticipate total revenue growth in the range of 3% to 5% in 2023, with organic revenue growth anticipated to be in the range of 4% to 6%. The following is a summary of our 2022 organic revenue performance and the 2023 organic revenue outlook by end market.

•Utilities revenue increased by approximately 10% for 2022 on an organic basis driven by strength in the U.S. and western Europe, partially offset by weakness in the emerging markets. For 2023, we expect organic revenue growth in the high-single-digits. On the clean water side, we expect improvements in chip supply through 2023 allowing for large deal deployments already secured in our backlog. Additionally, we can expect continued momentum for water quality products and increased demand for pipeline assessment services due to aging infrastructure. We expect wastewater utilities to remain focused on mission-critical applications in wastewater. Long-term capital expenditure outlook is strong due to aging infrastructure and the emerging markets’ continued advancement.

41

•Industrial revenue increased by approximately 13% for 2022 on an organic basis driven by strength across all major geographic regions. For 2023, we expect organic revenue growth in the low to mid-single-digit range. We expect to see continued robust growth in our dewatering business, driven by mining demand and strategic growth investments. We expect sustained demand in light industrial activity globally.

•In the commercial market, organic revenue in 2022 increased by approximately 12%, led by growth in the U.S and western Europe. For 2023, we expect organic revenue growth in the low-single-digit range. We expect sustained demand for energy efficient related projects, particularly in Europe, and continued commercial development in the emerging markets, partially offset by moderation in new construction.

•In the residential market, organic revenue increased by approximately 16% in 2022 driven primarily by strength in the U.S. as well as strength in the emerging markets. This market is primarily driven by replacement revenue serviced through our distribution network. For 2023, we expect a low-single-digit organic revenue decline due to normalizing demand in the U.S., partially offset by continued strength in emerging markets.

We will continue to strategically execute restructuring and realignment actions in an effort to optimize our cost structure, improve our operational efficiency and effectiveness, strengthen our competitive positioning and better serve our customers. During 2022, we incurred $15 million and $19 million in restructuring and realignment costs, respectively. We realized approximately $3 million of net savings from our 2022 actions. As a result of our 2022 actions we expect to realize approximately $14 million of incremental net savings in 2023 and beyond. During 2023, we currently expect to incur between $25 million and $35 million in restructuring and realignment costs.

We are strongly positioned to deliver on our 2023 commitments with commercial and operational momentum. We expect resilient demand due to our differentiated solutions addressing long-term secular trends in our largest end markets. Our 2023 commitments are supported by backlog execution, price realization, continued productivity actions to more than offset the impact of persistent inflation and potential headwinds from slowing demand in our most cyclical end markets. Beyond 2023, we remain on track to deliver our longer-term strategic and financial milestones. In addition to our organic 2023 commitments, we expect to successfully integrate the planned merger of Xylem and Evoqua with a closing estimated by mid-2023.

42

Results of Operations

(in millions)	2022			2021			2022 v. 2021
Revenue	$	5,522		$	5,195		6.3	%
Gross profit	2,084			1,975			5.5	%
Gross margin	37.7		%	38.0		%	(30)	bp
Realignment costs	4			4			—	%
Adjusted gross profit	2,088			1,979			5.5	%
Adjusted gross margin	37.8		%	38.1		%	(30)	bp
Total operating expenses	1,462			1,390			5.2	%
Expense to revenue ratio	26.5		%	26.8		%	(30)	bp
Restructuring and realignment costs	(30)			(18)			66.7	%
Special charges	(16)			(4)			300.0	%
Adjusted operating expenses	1,416			1,368			3.5	%
Adjusted operating expenses to revenue ratio	25.6		%	26.3		%	(70)	bp
Operating income	622			585			6.3	%
Operating margin	11.3		%	11.3		%	—	bp
U.K. pension settlement expense	140			—			NM
Interest and other non-operating expense, net	43			76			(43.4)	%
Gain from sale of business	1			2			(50.0)	%
Income tax expense	85			84			1.2	%
Tax rate	19.2		%	16.3		%	290	bp
Net income	$	355		$	427		(16.9)	%

NM     Not Meaningful

2022 versus 2021

Revenue

Revenue generated for 2022 was $5,522 million, an increase of $327 million, or 6.3%, compared to $5,195 million in 2021. On a constant currency basis, revenue grew 11.3% during 2022. The increase at constant currency was driven by an increase in organic revenue of $595 million, reflecting strong organic growth in all end markets as well as across all major geographic regions.

The following table illustrates the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to revenue during 2022:

	Water Infrastructure				Applied Water				Measurement & Control Solutions				Total Xylem
(in millions)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change
2021 Revenue	$	2,247			$	1,613			$	1,335			$	5,195
Organic Impact	266		11.8	%	220		13.6	%	109		8.2	%	595		11.5	%
Acquisitions/(Divestitures)	—		—	%	—		—	%	(9)		(0.7)	%	(9)		(0.2)	%
Constant Currency	266		11.8	%	220		13.6	%	100		7.5	%	586		11.3	%
Foreign currency translation (a)	(149)		(6.6)	%	(66)		(4.1)	%	(44)		(3.3)	%	(259)		(5.0)	%
Total change in revenue	117		5.2	%	154		9.5	%	56		4.2	%	327		6.3	%
2022 Revenue	$	2,364			$	1,767			$	1,391			$	5,522

(a)Foreign currency translation impact for the year primarily due to the weakening in value of various currencies against the U.S. Dollar, the largest being the Euro, the British Pound, the Swedish Krona, the Canadian Dollar, the Australian Dollar and the Hungarian Forint.

43

Water Infrastructure

Water Infrastructure revenue increased $117 million, or 5.2%, to $2,364 million in 2022 (11.8% increase on a constant currency basis) compared to 2021. Revenue was negatively impacted by $149 million of foreign currency translation, with the change at constant currency coming entirely from organic growth of $266 million. Organic growth for the year was driven by strength in both the utility and industrial end markets. The utilities end market experienced organic growth of $151 million led by strength in the U.S. driven by strong price realization, solid backlog execution, timing of projects as compared to prior year and continued strength in the construction sector. Western Europe also experienced strong organic growth due to good price realization, coupled with strong demand in utilities' capital spending. This increase was partially offset by weakness in the emerging markets, primarily due to the continued negative impacts from COVID lockdowns in China. The industrial end market had $115 million of organic growth across all major geographic regions, particularly in western Europe due to strong backlog execution and good price realization, and in the emerging markets, driven by mining projects and price realization in both Latin America and Africa.

From an application perspective, organic revenue growth was driven by our transport applications. Transport

experienced $247 million of revenue growth, almost half of which came from the dewatering application. All three of our major geographic regions contributed to the organic revenue growth in transport, led by the U.S. where we continued to experience strong price realization and had strong backlog coming into the year, followed by western Europe, which also experienced strong price realization coupled with strong demand from utility capital projects. We also experienced strong growth in the emerging markets driven by good price realization as well as robust mining demand in our dewatering business, particularity in Latin America and Africa, which more than offset declines in China due to COVID impacts. Organic revenue for the treatment application was $19 million for the year, as revenue growth from strong backlog execution in western Europe and the U.S. was partially offset by declines in emerging markets led by the continued negative COVID impacts on China.

Applied Water

Applied Water revenue increased $154 million, or 9.5%, in 2022 (13.6% increase on a constant currency basis) compared to 2021. Revenue was negatively impacted by $66 million of foreign currency translation, with the change at constant currency coming entirely from organic growth during the year of $220 million. Organic growth was driven by strength in all three end markets and across all major geographic regions. The organic revenue growth was led by strength in the industrial water application of $103 million, where in the U.S. we benefited from price realization and demand from OEM customers, in western Europe where we had healthy order intake across the sector, and in the emerging markets where we saw market recovery in China, despite continued COVID restrictions. Commercial building services grew $74 million organically during the year, particularly in the U.S. and western Europe, where we benefited from strong price realization and healthy market conditions. The residential building services application had $43 million of organic revenue growth during the period, primarily in the U.S. driven by price realization and healthy market conditions.

Measurement & Control Solutions

Measurement & Control Solutions revenue increased $56 million, or 4.2%, in 2022 (7.5% increase on a constant currency basis) compared to 2021. Revenue was negatively impacted by $44 million of foreign currency translation during the year, with the change at constant currency driven by an organic growth of $109 million, or 8.2%, and $9 million of reduced revenue related to divestiture impacts during the year. We experienced organic revenue growth across all three major geographic regions and in both of the segment's end markets for the year, driven by $91 million of organic growth in the utility end market, primarily in the U.S. as a result of the easing of electronic component shortage and strong price realization, followed by $18 million in the industrial end market driven by strong backlog execution in our test business.

From an application perspective, organic revenue growth during the year consisted entirely of growth in the water application of $114 million, which was slightly offset by a decline in the energy applications of $5 million. Organic revenue growth in the water application was driven by strength in the U.S. as a result of easing of electronic component shortages and strong price realization. Backlog execution in the emerging markets and strength in our test and pipeline assessment services businesses in western Europe also contributed to the growth. Declines in the energy applications were driven by impacts from electronic component shortages in the U.S. during the first half of the year, more than offsetting modest growth in the second half of the year.

44

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. An order often takes the form of a customer purchase order or a signed quote from a Xylem business. Orders received during 2022 decreased by $43 million, or 0.7%, to $6,257 million (3.7% increase on a constant currency basis). Order intake was negatively impacted by $279 million of foreign currency translation and $18 million of reduced orders related to divestiture impacts. The increase on a constant currency basis primarily consisted of organic order growth of $254 million, or 4.0%, over the prior year.

The following table illustrates the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to orders during 2022:

	Water Infrastructure				Applied Water				Measurement & Control Solutions				Total Xylem
(in millions)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change
2021 Orders	$	2,471			$	1,860			$	1,969			$	6,300
Organic Impact	302		12.2	%	2		0.1	%	(50)		(2.5)	%	254		4.0	%
Acquisitions/(Divestitures)	—		—	%	—		—	%	(18)		(0.9)	%	(18)		(0.3)	%
Constant Currency	302		12.2	%	2		0.1	%	(68)		(3.5)	%	236		3.7	%
Foreign currency translation (a)	(166)		(6.7)	%	(68)		(3.7)	%	(45)		(2.3)	%	(279)		(4.4)	%
Total change in orders	136		5.5	%	(66)		(3.5)	%	(113)		(5.7)	%	(43)		(0.7)	%
2022 Orders	$	2,607			$	1,794			$	1,856			$	6,257

(a)Foreign currency translation impact for the year primarily due to the weakening in value of various currencies against the U.S. Dollar, the largest being the Euro, the British Pound, the Swedish Krona, the Canadian Dollar, the Australian Dollar and the Hungarian Forint.

Water Infrastructure

Water Infrastructure segment orders increased $136 million, or 5.5%, to $2,607 million (12.2% increase on a constant currency basis). Order intake during the year was negatively impacted by $166 million of foreign currency translation. Organic orders increased during the year as strength in the transport applications came primarily from the U.S. where we benefited from strong market demand in water utilities, price realization and timing of large infrastructure projects. Western Europe also contributed to order growth from increased demand in utility capital projects and healthy market conditions. The treatment application saw a slight decrease in orders driven by the emerging markets due to declines in China related to COVID impacts, which more than offset modest growth in the U.S. and western Europe.

Applied Water

Applied Water segment orders decreased $66 million, or 3.5%, to $1,794 million (flat on a constant currency basis). Order intake during the year was negatively impacted by $68 million of foreign currency translation, making organic order growth relatively flat. Weakness in the U.S. from lapping strong demand in the prior year was partially offset by strength in the emerging markets and western Europe as a result of strong project orders and stocking by channel partners.

Measurement & Control Solutions

Measurement & Control Solutions segment orders decreased $113 million, or 5.7%, to $1,856 million (3.5% decrease on a constant currency basis). Order weakness during the year was negatively impacted by $45 million of foreign currency translation and reduced orders related to divestiture impacts of $18 million. The organic order decrease was $50 million, or (2.5)%. The order declines during the year are lapping strong organic order growth of 38% in the prior year. The order weakness for the year was driven by the water application due to the moderation of early orders to mitigate electronic component shortages and longer lead times that drove order growth in the prior year. This decrease was partially offset by strength in the energy applications, primarily driven by demand and advanced ordering to address electronic component shortages.

45

Backlog

Backlog includes orders on hand as well as contractual customer agreements at the end of the period. 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. Typically, large projects require longer lead production cycles and deployment schedules and delays occur from time to time. Total backlog was $3,605 million at December 31, 2022 and $3,240 million at December 31, 2021, an increase of 11.3%. We anticipate that approximately 55% of our total backlog at December 31, 2022 will be recognized as revenue during 2023.

Gross Margin

Gross margin as a percentage of consolidated revenue decreased 30 basis points to 37.7% in 2022 as compared to 38.0% in 2021.The gross margin decline for the year included 730 basis points of negative impacts, driven by 580 basis points of cost inflation, as well as increased spending on strategic investments of 60 basis points and 40 basis points of inventory management costs. These negative impacts were partially offset by favorable impacts of 700 basis points, driven by 470 basis points of price realization and 230 basis points of productivity savings.

Operating Expenses

(in millions)	2022			2021			Change
Selling, general and administrative expenses	$	1,227		$	1,179		4.1	%
SG&A as a % of revenue	22.2		%	22.7		%	(50)	bp
Research and development expenses	206			204			1.0	%
R&D as a % of revenue	3.7		%	3.9		%	(20)	bp
Restructuring and asset impairment charges	29			7			314.3	%
Operating expenses	$	1,462		$	1,390		5.2	%
Expense to revenue ratio	26.5		%	26.8		%	(30)	bp

Selling, General and Administrative ("SG&A") Expenses

SG&A expenses increased by $48 million (increase of 4.1%) to 22.2% of revenue in 2022, as compared to 22.7% of revenue in 2021. Revenue growth was higher than SG&A increases resulting in a lower SG&A as a percentage of sales. Cost increases were driven by increased investments in strategic growth initiatives of $59 million and inflation of $38 million, partially offset by $48 million of favorable currency impacts.

Research and Development ("R&D") Expenses

R&D expense was $206 million, or 3.7% of revenue, in 2022 which was fairly consistent with the 2021 expense of $204 million, or 3.9% of revenue.

Restructuring and Asset Impairment Charges

Restructuring

From time to time, the Company will incur costs related to restructuring actions in order to optimize our cost base and more strategically position itself. Restructuring charges were $15 million in 2022 as compared to $6 million in 2021.

During 2022 we incurred these charges primarily as a continuation of our efforts to reposition our business to optimize our cost structure and improve our operational efficiency and effectiveness. The charges primarily included the reduction of headcount across all segments.

In response to the changes in business and economic conditions arising as a result of the COVID-19 pandemic, on June 2, 2020 management committed to a restructuring plan that includes actions across our businesses and functions globally. The plan was designed to support our long-term financial resilience and simplify our operations, strengthen our competitive positioning and better serve our customers.

As a result of this action, during 2021, we recognized restructuring charges of $4 million and $2 million in our Water Infrastructure and Applied Water segments, respectively. These charges included reduction of headcount across both segments. Other less significant restructuring actions taken in 2021 resulted in $3 million of charges during 2021 and are included in the information presented below.

46

The following is a roll-forward of employee position eliminations associated with restructuring activities for the years ended December 31, 2022 and 2021:

	2022	2021
Planned reductions - January 1	60	319
Additional planned reductions	203	83
Actual reductions and reversals	(161)	(342)
Planned reductions - December 31	102	60

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 2020, 2021 and 2022 restructuring actions:

(in millions)	Water Infrastructure		Applied Water		Measurement & Control Solutions		Corporate		Total
Actions Commenced in 2022:
Total expected costs	$	6	$	4	$	4	$	—	$	14
Costs incurred during 2022	6		4		4		—		14
Total expected costs remaining	$	—	$	—	$	—	$	—	$	—
Actions Commenced in 2021:
Total expected costs	$	3	$	—	$	—	$	—	$	3
Costs incurred during 2021	3		—		—		—		3
Costs incurred during 2022	—		—		—		—		—
Total expected costs remaining	$	—	$	—	$	—	$	—	$	—
Actions Commenced in 2020:
Total expected costs	$	23	$	6	$	30	$	—	$	59
Costs incurred during 2020	19		4		30		—		53
Costs incurred during 2021	4		2		—		—		6
Costs incurred during 2022	—		—		—		—		—
Total expected costs remaining	$	—	$	—	$	—	$	—	$	—

During 2022, we also incurred charges of $1 million within the Measurement & Control Solutions segment, related to actions commenced prior to 2020. During 2021, we recorded a reduction of $3 million within the Measurement & Control Solutions segment, related to actions commenced prior to 2020.

The Water Infrastructure, Applied Water and Measurement & Control Solutions actions commenced in 2022 consist primarily of severance charges. The actions commenced in 2022 are complete.

The Water Infrastructure actions commenced in 2021 consist primarily of severance charges. The actions commenced in 2021 are complete.

As a result of the actions initiated in 2022, we achieved savings of approximately $2 million in 2022 and estimate annual future net savings beginning in 2023 of approximately $14 million, resulting in $12 million of incremental savings from 2022 actions.

47

Asset Impairment

During 2022, we determined that certain assets, primarily software and customer relationships, within our Measurement & Control Solutions segment were impaired. Accordingly, we recognized an impairment charge of $14 million. Refer to Note 11, "Goodwill and Other Intangible Assets," for additional information.

Operating Income and Adjusted EBITDA

Operating income was $622 million (operating margin of 11.3%) during 2022, an increase of $37 million, or 6.3%, when compared to operating income of $585 million (operating margin of 11.3%) during the prior year. Operating margin included unfavorable impacts of 40 basis points from increases in special charges and restructuring and realignment costs as compared to the prior year. Additionally, operating margin included 1020 basis points of expansion from favorable operating impacts, driven by a 670 basis point increase from price realization, 280 basis points from productivity savings and 70 basis points from favorable volume. Margin expansion was offset by 980 basis points of unfavorable impacts driven by 660 basis points of inflation, 180 basis points of increased spending on strategic investments, 40 basis points of inventory management costs and 30 basis points of unfavorable mix. Excluding special charges and restructuring and realignment costs, adjusted operating income was $672 million (adjusted operating margin of 12.2%) for 2022 as compared to adjusted operating income of $611 million (adjusted operating margin of 11.8%) during the prior year.

Adjusted EBITDA was $940 million (adjusted EBITDA margin of 17.0%) during 2022, an increase of $50 million, or 5.6%, when compared to adjusted EBITDA of $890 million (adjusted EBITDA margin of 17.1%) during the prior year. The slight decrease in adjusted EBITDA margin was primarily due to the same factors impacting adjusted operating margin noted above; however, adjusted EBITDA margin did not benefit from a year over year reduction in depreciation and 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)	2022			2021			Change
Water Infrastructure
Operating income	$	418		$	387		8.0	%
Operating margin	17.7		%	17.2		%	50	bp
Restructuring and realignment costs	11			12			(8.3)	%
Adjusted operating income	$	429		$	399		7.5	%
Adjusted operating margin	18.1		%	17.8		%	30	bp
Applied Water
Operating income	$	258		$	240		7.5	%
Operating margin	14.6		%	14.9		%	(30)	bp
Restructuring and realignment costs	13			7			85.7	%
Special charges	—			1			(100.0)	%
Adjusted operating income	$	271		$	248		9.3	%
Adjusted operating margin	15.3		%	15.4		%	(10)	bp
Measurement & Control Solutions
Operating income	$	2		$	12		(83.3)	%
Operating margin	0.1		%	0.9		%	(80)	bp
Restructuring and realignment costs	10			3			233.3	%
Special charges	14			—			NM	%
Adjusted operating income	$	26		$	15		73.3	%
Adjusted operating margin	1.9		%	1.1		%	80	bp
Corporate and other
Operating loss	$	(56)		$	(54)		3.7	%
Special charges	2			3			(33.3)
Adjusted operating loss	$	(54)		$	(51)		5.9	%
Total Xylem
Operating income	$	622		$	585		6.3	%
Operating margin	11.3		%	11.3		%	—	bp
Restructuring and realignment costs	34			22			54.5	%
Special charges	16			4			300.0	%
Adjusted operating income	$	672		$	611		10.0	%
Adjusted operating margin	12.2		%	11.8		%	40	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,
	2022			2021			Change
Net Income	$	355		$	427		(17)	%
Net Income margin	6.4		%	8.2		%	(180)	bp
Depreciation	111			118			(6)	%
Amortization	125			127			(2)	%
Interest expense, net	34			69			(51)	%
Income tax expense	85			84			1	%
EBITDA	$	710		$	825		(14)	%
Share-based compensation	37			33			12	%
Restructuring & realignment	34			22			55	%
U.K. pension settlement expense	140			—			100	%
Special charges	20			12			67	%
Gain from sale of business	(1)			(2)			(50)	%
Adjusted EBITDA	$	940		$	890		6	%
Adjusted EBITDA margin	17.0		%	17.1		%	(10)	bp

The tables below provide a reconciliation of each segment's operating income (loss) to EBITDA and adjusted EBITDA:

	Year Ended December 31, 2022
(in millions)	Water Infrastructure	Applied Water Systems	Measurement & Control Solutions
Operating Income	$