XYLXylem Inc.

We note that you have included Revenue as your Company-Selected Measure pursuant to Item 402(v)(2)(vi) of Regulation S-K. Please include your Company-Selected Measure in the Tabular List provided pursuant to Item 402(v)(6) of Regulation S-K. In that regard, we note that you included “Organic Revenue” in your Tabular List, but not Revenue.

We confirm that we will revise the Company’s future proxy disclosures to include the exact Company-Selected Measure in the Tabular List in accordance with this comment from the Staff. Read in the reply ↗

We note that you have included Revenue as your Company-Selected Measure pursuant to Regulation S-K Item 402(v)(2)(vi). Please include your Company-Selected Measure in the Tabular List provided pursuant to Regulation S-K Item 402(v)(6).

We confirm that we will revise the Company’s future proxy disclosures in accordance with this comment from the Staff. Read in the reply ↗

Refer to the reconciliation tables in the footnotes to your pay versus performance table. It is unclear what amounts are reflected in the rows titled "Plus (less), year over year change in fair value of equity awards granted in prior years that vested in the year." Specifically, equity awards granted in prior years that vest during the relevant year should be valued as the difference between the fair value as of the

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end of the prior fiscal year and the vesting date, not the "year over year" change in value. Please ensure that your table headings reflect accurately the amounts used to calculate compensation actually paid. Refer to Item 402(v)(2)(C)(iv) of Regulation S-K.

We confirm that we calculated these values as the difference between the fair value as of the end of the prior fiscal year-end and the vesting date. We will make that label clear in future proxy disclosures in accordance with this comment from the Staff. Read in the reply ↗

You disclose that revenue from performance obligations related to services is recognized over time, as the performance obligation is satisfied. Tell us what types of services these represent and the amount of revenue generated from services. To the extent such amounts are greater than 10% of total revenue tell us your consideration for presenting these separately on the income statement.

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Refer to Rule 5-03 of Regulation S-X.

Revenues from services represented approximately 7% ($373 million), 7% ($378 million), and 5% ($251 million) of the Company’s total revenue for the years ended December 31, 2019, 2018, and 2017, respectively. These revenues from services represent the satisfaction of performance obligations primarily related to maintenance, repair, and inspection services and software as a service ("SaaS") subscriptions.

In considering Rule 5-03 of Regulation S-X, revenues from services are less than 10% of total revenue and are not separately stated on the face of the Consolidated Income Statements.

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We will continue to assess the percentages attributable to the relevant subcaptions in Rule 5-03, and to the extent relevant subcaption revenue exceeds 10% of total revenue in the future, we will modify the presentation accordingly.

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We note your disclosure of the non-GAAP measure Free cash flow conversion. Please revise to also present the most directly comparable GAAP measure with equal or greater prominence to the non-GAAP measure. Further, disclose why management believes the presentation of this non-GAAP measure provides useful information to investors and, to the extent material, a statement disclosing the additional purposes, if any, for

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which management uses the non-GAAP measure. Refer to Item 10(e)(1)(i) of Regulation S-K. In closing, we remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the staff.

to the Staff's comment, in future filings the Company will present net cash from operating activities and net cash from operating activities as a percentage of net income (“Operating Cash Flow Conversion”), which we consider to be the most directly comparable GAAP measures, with equal or greater prominence to the non-GAAP measures of Free Cash Flow and Free Cash Flow Conversion, respectively.

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Please see the updated applicable language and non-GAAP reconciliation table below using our Form 8-K filed on February 6, 2020 as a representation of how we plan on displaying this information.

Xylem reports fourth quarter and full-year 2019 earnings

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Full-year 2019 reported net income of $401 million or $2.21 per share; adjusted full-year net income of $547 million or $3.02 per share

Full-year operating cash flow conversion was 209%; free cash flow conversion was 124%

Fourth quarter 2019 reported net income was $118 million or $0.65 per share; adjusted net income of $161 million or $0.89 per share

Announces 8% increase in cash dividend, representing the company’s ninth consecutive annual dividend increase

Provides 2020 organic revenue growth guidance range of 1% to 3% and adjusted earnings per share range of $2.96 to $3.16

RYE BROOK, N.Y., February 6, 2020 - Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported full-year 2019 revenue of $5.25 billion, up one percent on a reported basis and four percent on an organic basis. Full-year reported net income was $401 million, or $2.21 per share, with a reported operating margin of 9.3 percent. Adjusted net income, which excludes the impact of restructuring, realignment and special charges, was $547 million, or $3.02 per share. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was 19.5 percent, flat year-over-year. Xylem delivered full-year 2019 adjusted operating margin of 13.9 percent, up 20 basis points versus the prior year. Net cash from operating activities was $839 million, and operating cash flow conversion was 209 percent. The Company generated $613 million in free cash flow, representing a 124 percent conversion.

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Xylem Inc. Non-GAAP Reconciliation

Net Cash - Operating Activities vs. Free Cash Flow

($ Millions)

Year Ended

2019

2018

Net Cash - Operating Activities

$

839

586

Capital Expenditures

(226

)

(237

Free Cash Flow

613

349

Cash paid for Sensus acquisition related costs

—

(1

Free Cash Flow, excluding Sensus Acquisition Related Costs

350

Net Income

401

549

Gain/(Loss) from sale of businesses

Special Charges - non-cash impairment

(158

(2

Significant deferred tax benefit/(charge)

Net Income, excluding gain on sale of businesses, non-cash impairment charges and significant deferred tax items

494

467

Operating Cash Flow Conversion

209

%

107

Free Cash Flow Conversion

124

Management believes the presentation of free cash flow conversion is useful information for investors evaluating our operating performance for the periods presented, providing a tool to evaluate our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measuring our ability to both repay debt and deploy capital for strategic initiatives, including but not limited to, dividends, acquisitions and share repurchases.

Free cash flow conversion and the metrics listed in the “Non-GAAP Measures” section of our 8-K are used by management to evaluate our business and make financial, operating and planning decisions. This information is included in the “Non-GAAP Measures” section within our Form 8-K filings as shown below.

Additionally, going forward, the Company will include the non-GAAP measure Free Cash Flow Conversion in the "Non-GAAP Measures" section when this measure is presented in the Company’s SEC filings. Please see below for how the Company plans on presenting the Free Cash Flow Conversion non-GAAP measure using our Form 8-K filed on February 6, 2020 as an example:

Xylem Inc. Non-GAAP Measures

Management reviews key performance indicators including revenue, gross margins, segment operating income and margins, 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, 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 items to represent non-GAAP measures 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, to be key performance indicators:

“Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures as well as adjustments for other significant items that impact current results which management believes are not related to our ongoing operations and performance, and "Free Cash Flow Conversion" defined as Free Cash Flow divided by net income, excluding gain on sale of businesses, non-cash impairment charges and significant deferred tax items. Our definitions of "free cash flow" and "free cash flow conversion" do not consider certain non-discretionary cash payments, such as debt.

We would be pleased to discuss any of the foregoing responses to the extent you require further clarification or additional information. Please feel free to contact E. Mark Rajkowski at mark.rajkowski@xyleminc.com or myself at geri.mcshane@xyleminc.com or by phone at (914) 323-5700.

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