Welcome to Xylem's Fourth Quarter 2023 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Andrea van der Berg, Vice President of Investor Relations. Please go ahead. Thank you, operator. Good morning, everyone, and welcome to Xylem's fourth quarter 2023 earnings call. With me today are Chief Executive Officer, Matthew Pine, and Chief Financial Officer, Bill Grogan. They will provide their perspectives on Xylem's fourth quarter and full year 2023 results and discuss our outlook and guidance for 2024. Following our prepared remarks, we will address questions related to the information covered on the call. I'll ask that you please keep to one question and a follow-up, and then return to the queue. As a reminder, this call and our webcast are accompanied by a slide presentation available in the Investors section of our website. A replay of today's call will be available until midnight, February 13. Additionally, the call will be available for playback via the Investors section of our website under the heading Investor Events. Please turn to slide 2. We will make some forward-looking statements on today's call, including references to future events or developments that we anticipate will or may occur in the future. These statements are subject to future risks and uncertainties, such as those factors described in Xylem's most recent annual report on Form 10-K and subsequent reports filed with the SEC. Please note that the company undertakes no obligation to update any forward-looking statements publicly to re-reflect subsequent events or circumstances, and actual events or results could differ materially from those anticipated. Please turn to slide 3. We have provided you with a summary of our key performance metrics, including both GAAP and non-GAAP metrics. For purposes, for purposes of today's call, all references will be on an organic and/or adjusted basis unless otherwise indicated, and non-GAAP financials have been reconciled for you and are included in the appendix section of the presentation. Now, please turn to slide four, and I'll turn the call over to our CEO, Matthew Pine. Thanks, Andrea. Good morning, everyone, and thanks for joining us. It's a pleasure to share the Xylem team's exceptional performance in the fourth quarter of a transformational year for the enterprise. The team delivered both Q4 and full year results, exceeding expectations on revenue and earnings per share. Looking at the fourth quarter, strong demand drove organic revenue growth of 9%, with disciplined execution delivering EBITDA margin expansion of 90 basis points. That drove double-digit orders growth, and our backlog is now more than $5 billion. Our Q4 performance capped off a year in which the team over-delivered in every quarter. Full year organic revenues were up 12%, with EBITDA margin expansion of 190 basis points and adjusted earnings per share growth of 20%. The team even delivered Evoqua run rate cost synergies in 2023 ahead of plan. Both the quarter and the full year give us very strong momentum entering 2024. Despite a dynamic environment and the excitement of our combination with Evoqua, the team stayed focused on serving our customers. Joining forces with Evoqua has put the sector's most advanced portfolio of capabilities in the hands of our customers and opened up new opportunities to address even more of their water challenges. In our last earnings call, we shared a bit about the synergy traction we're seeing between the legacy Evoqua Services business and Xylem's Dewatering business. Since then, we've seen the momentum continue to build as the team wins in the marketplace with our combined offering. On January first, we made it even easier for our customers to access the full breadth of our capabilities with the creation of the Water Solutions and Services segment, effectively combining Xylem and Evoqua services offerings in a realigned segment structure. The move supports the continuing growth of our services business and expansion of recurring revenues, and it puts Xylem in an even stronger position to capture value by serving industrial water customers who are increasingly outsourcing water management as water stresses intensify. Looking forward, we are starting off strong in 2024, with momentum from our outperformance in 2023 and continued healthy demand in our major end markets. Though we're keeping a close eye on demand dynamics in China and are taking a prudent view of end markets for Applied Water, which is our most cyclical segment, our backlog across the business is a source of continuing strength, especially in M&CS. We also feel very confident in our ability to drive continuing margin expansion by focusing our energy on the parts of the business delivering the greatest value. Overall, we're well-positioned for profitable and sustainable growth. We expect 2024 organic revenues to be up 3%-5%, with solid EBITDA margin expansion, resulting in earnings per share between $4 and $4.20. I'll now turn it over to Bill to walk through the quarter's results and our outlook for 2024 in more detail. Thanks, Matthew. Please turn to slide 5. As Matthew mentioned, we are pleased with the strong finish to 2023. The team has stayed focused and consistently delivered throughout the year, exceeding on our expectations on revenue and earnings per share for Q4 and the full year. We continue to see resilient demand and are supported by our $5.1 billion backlog, which grew 5% organically for the year. Organic orders grew 10% in the quarter, with book-to-bill approximately 1 for the quarter and greater than 1 for the full year. ... Total revenues grew 41%, while organic revenues rose 9%, exceeding our guidance of 4%-5%. Outperformance was led by M&CS and Water Infrastructure. All regions grew, led by double-digit growth in the U.S. EBITDA margin was 19.6%, up 90 basis points from the prior year. With productivity savings, price, and higher volume more than offsetting inflation, this reflects 33% incrementals on the legacy Xylem performance. We finished the year with EBITDA margin of 18.9%, up nearly 200 basis points over prior year. Our EPS in the quarter was $0.99, above the high end of our guide by $0.03. When excluding the impacts of Evoqua, EPS was $1.10, up 10% over prior year. Our financial position remains robust, with over $1 billion in cash and available liquidity of approximately $2 billion. We ended the year with adjusted free cash flow conversion of 122%, exceeding our expectations and significantly improved versus last year. Please turn to slide 6. Before I highlight each segment's fourth quarter performance, I want to touch on some changes you'll see in our earnings materials going forward. In the spirit of 80/20, we have simplified our earnings materials to focus on what is most important for investors. To assist with the transition this quarter, we have provided our historical presentation format in the appendix. Now, on to the segment performance. Measurement & Control Solutions saw robust orders growth of 14%, with strength across the portfolio, led by metrology and assessment services. Backlog is $2.3 billion, and Book-to-Bill is above 1, a reflection of the strong demand for our AMI solutions and other digital offerings. MCS revenue is up 21%, driven by metrology backlog execution and strong demand. We finished the quarter with improved EBITDA margins of 17.3%, up 220 basis points versus the prior year, and up 160 basis points sequentially on productivity, price, and higher volumes. Water Infrastructure also saw orders growth of 9% for the quarter, with strength across the portfolio, led by robust treatment demand globally. Revenue exceeded our expectations with total growth of 30% on organic growth of 9%, driven by robust OpEx demand across all regions. EBITDA margin for the segment was down 90 basis points, driven by the impacts of legacy Evoqua. When excluding the impact of Evoqua, EBITDA margin was up 50 basis points, primarily due to price, productivity, and volume more than offsetting inflation and unfavorable mix. In Applied Water, although orders grew, book-to-bill was 0.9 times as we continue to work down our backlog, and we saw a softer demand environment in the U.S., our largest geography. Revenues were flat, in line with our guide, with a decline in developed markets offset slightly by growth in emerging markets. Segment EBITDA margin expanded 80 basis points, with productivity and price more than offsetting inflation and volume declines. Integrated Solutions and Services, orders grew 5% on a pro forma basis, and book-to-bill was 1. Demand was driven by services. Pro forma revenue growth of 10% exceeded our expectations, as implied in our reported guidance, with healthy growth across the portfolio. Adjusted EBITDA margin was strong at 21.1%, driven by price realization and volume. Please turn to slide 7, and I will cover our segment outlook for the year. As Matthew mentioned, in December, we announced the creation of Water Solutions and Services segment. We are providing organic revenue guidance based on our previous reporting segments. Later this month, we will provide recast financial information aligned to the new segments. However, we expect the segment guidance outlook to largely be in line with the new segment structure and will update as needed in our Q1 earnings call. In M&CS, we expected growth of low teens. Demand and order momentum for our AMI solutions remain strong. We expect to see sequential revenue improvement throughout 2024, supported by a robust backlog. In Water Infrastructure, we expect growth of mid-single digits. We expect resilient OpEx demand due to mission-critical nature of our applications and a healthy CapEx demand. We are continuing to closely monitor softness in China, where the majority of our business is in the utility end market. In Applied Water, we expect a modest decline of low single digits. We continue to see pockets of softness across our end markets, particularly in developed markets, which make up about 80% of our business. We also expect to see headwinds as we lap price increases and our backlog returns to more historic levels. ISS growth is expected to be mid-single digits, with growth across both capital and services. We continue to see strong activity in our funnel, particularly in high-growth verticals, such as food and beverage, energy, and life sciences. This segment is supported by $1 billion in backlog and a durable service business model. As a reminder, the ISS growth outlook is on an organic basis. Now, let's turn to slide 8 for our 2024 and Q1 guidance. The growth outlook by segment translates to 2024 full revenue of $8.4 billion-$8.5 billion, resulting in total revenue growth of 14%-15% and organic revenue growth of 3%-5%. EBITDA margin is expected to be 19.4%-19.9%. This represents 50-100 basis points of expansion versus the prior year, driven by higher volume, productivity, and price offsetting inflation. This yields an EPS range of $4-$4.20, up 8% at the midpoint over prior year. We are expecting approximately $100 million of exit run rate cost synergies in 2024, which is embedded in our guide. Free cash flow conversion for the year is expected to be 115% of net income. Drilling down on the first quarter, we anticipate total revenue growth will be in the 36%-38% range on a reported basis and 4%-6% organically. We expect first quarter EBITDA margin to be approximately 18%, up 170 basis points, driven by higher volumes, continued price realization, and productivity gains. This yields first quarter EPS of $0.80-$0.85. We are entering the year with momentum and from a position of strength. Our balanced outlook reflects our strong commercial position and the durability of our portfolio. While we also continue to monitor broader market conditions, particularly in China and Applied Water, which is our shortest cycle business. In the case of larger than expected volume declines, we're ready to take additional cost actions as needed to ensure continued focus on margin expansion. Overall, our expectations for the year remain positive as we build on our strong momentum. With that, please turn to slide 9, and I'll turn the call back over to Matthew for closing comments. Thanks, Bill. It's been incredibly exciting to step up as CEO at a time of such great momentum and opportunity for Xylem. I, I began the year by spending time with customers and colleagues in India and the Middle East. Bill and I started off in India, and the scale of ambition there to modernize infrastructure and tackle the big water challenges is, frankly, awe-inspiring. We have an outstanding team there, doing great work to serve customers from our localized R&D and manufacturing platform that gives us a real competitive advantage. Both India and the Middle East provide great reminders of the fundamental interconnectedness of economic value and social value creation in our business. These markets present expansive commercial opportunity, and in both markets, every project improves lives and increases sustainability of communities. We took some time out with colleagues in India to visit a school in a rural area outside of Bangalore. We got hands-on building a small-scale water treatment system that now provides clean drinking water to those students and their community. I'll be honest, the experience of celebrating with those kids and their teachers as the clean water started to flow, well, it's just hard to describe. And you also know that the impact on educational outcomes, health, and quality of life is likely to be profound. That experience drove home for me, not just the importance of what Xylem does, but it reinforced the focus we're bringing into 2024. Whether at the scale of a school or the scale of a megacity, we have to make it easier for customers and communities to solve their big water challenges. Reducing the complexity of water solutions, that is our focus, simplifying water. We have assembled the most advanced and most comprehensive portfolio of products, solutions, and services in the sector. The value creation opportunity in front of us is to make all that capability far easier for customers to access, to empower them to solve their most critical water challenges and deliver great outcomes with far less complexity. We started the year with great pace, with strong execution off the back of a great Q4 in 2023 across both legacy Xylem and legacy Evoqua businesses. Our integration is well on track to deliver on the full value creation opportunity of the combination. Our end markets are resilient, and as long as the long-term trends in waters continue to intensify, our team is energized to take all of our capabilities to deliver an even greater impact for our customers. Our investment thesis remains robust, and we continue to execute on the strategy that has positioned us so strongly for further economic and social value creation. We look forward to sharing further insights into our priorities and strategic direction at our upcoming Investor Day on May 30 in Washington, D.C., when I hope many of you will join us. Now, operator, I'll turn the call back over to you for questions. We will now begin the question-and-answer session. To ask a question, you may press Star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Deane Dray with RBC Capital Markets. Please go ahead. Thank you. Good morning, everyone. Hey, good morning, Deane. Hey, Matthew, as we start the year, I'd love to hear what's top of mind for you on your priorities. I know we're going to get a lot more specifics at the Analyst Day, but I think everyone would love to hear more about what you're thinking the path and the opportunity for margin improvement broadly, and just some early thoughts on optimizing the portfolio potentially. Great. Thanks, Deane. You know, first, I wanted just to acknowledge the team's Q4 and full year performance during a really transformational year for Xylem. You know, we had the Evoqua combination, we announced that in January, followed by the Idrica partnership. And then obviously, we had a leadership change, all that while dealing with a lot of macro challenges out there around the globe. So the team's done an incredible job staying focused. You know, I'm really humbled and excited to lead Xylem into the next chapter. We've built, as I've said before, an incredible platform over the past decade. You know, if you look back, you know, six or seven years ago, half the company did not even exist. So a lot of really good momentum there. You know, from my perspective, we're in a very unique position with our, our platform leadership of this ten-year journey, to have visibility across the water value chain. This really enables us to provide holistic, kind of optimized solutions to our customers. You know, moving forward, excuse me. Moving forward, you know, we're gonna continue to build on that platform. You know, as COO last year, I did lead the strategic planning process at Xylem, so we have, you know, I'd say, really strong strategic continuity as we transition this year. I've talked about three strategic execution priorities that we're focused on. Number one, we have to deliver the Evoqua value capture. That's first and foremost. That's the transformational deal that we did last year. Number two is, and you hit on it, is we've got to get after margin expansion acceleration, and we're gonna do that through productivity and continuing to drive operational excellence through the business. And then lastly, scaling our services business, enabled by digital, which we'll talk probably later in the call about the WSS segment for 2024 and its ability to help us do that. You know, one thing I'd mention that we don't talk a lot, it's kind of the soft side, and that's on culture. You know, as we bring two large companies together, culture is really important, and we put a lot of focus in that area. We call it high impact culture. And there's behaviors to drive alignment around our culture, and those behaviors are, first of all, to have our people be inspired to innovate. We don't want people to feel a fear of failure. We want them to innovate, and that's gonna drive the next, you know, cash flows and top-line growth in the company. The second is, we want them to be empowered to lead, and empowered in the business. And then thirdly, and most importantly, you know, we want them to be accountable to deliver. And so those are things we're really pushing the organization on to get alignment around that'll, I think, help us going forward. Maybe the last comment I would make is, you know, we have a call to action in the company that we've been working on over the past few months, and that's we want to simplify water. What that means is really bridging our aspiration, which is, "Let's solve water," which everybody knows our tagline, to our strategic execution priorities, which is really the, what we're gonna focus on. So, you know, that's really the rallying cry in the organization, and that's where we're gonna be focused in 2024. Appreciate all that color. And just as a follow-up for Bill, would love to get an update on the rollout of 80/20, besides, you know, the check the box, a successful recast of the slides, which I really like. And then could you also lead in on the update on the revenue synergy plans on Evoqua, specifically? I know there's a plan to roll out existing North America customers who have asked to have similar facilities outsourcing in Europe. So an update there, please. Sure. So maybe I'll start with the first part of the question. And, you know, first off, 80/20 is a multi-year journey. You know, as it gets weaved into the fabric of the culture, you know, Matthew just highlighted, you know, we are on a cultural evolution to incorporate some new tools and behaviors into the organization. And you have to remember, 80/20 is kind of about systematic complexity reduction, you know, and that takes time. You know, it's not just a quick math exercise, and you're done. You know, it's really about focused resource allocation methodology, aligning the teams around the things that matter most in the business. Obviously, there's a tremendous margin opportunity that comes with the tool set. But longer term, you know, it's really a tool to drive better organic growth performance by over-serving your best customers and innovating around your best ideas. You know, we've kicked off two pilots late in Q4 within Applied Water North America and North American Metrology within the M&CS. You know, it takes some time to do the analytics, and I'd look to see some benefits starting to evolve, you know, within 6-12 months. Obviously, as we get to Investor Day, we'll be able to put some more specific numbers around that. But I really think it's gonna be a transformational tool for the organization as we roll it out and be a big part of our longer-term margin improvement story. Yeah, and maybe a little bit of color on revenue synergies, Deane. You know, I was proud of the team. In Q4, we completed the Evoqua integration to Water Infrastructure, which was a big deal. We've appointed regional synergy leads for the, the revenue capture around the globe, and incentives are in place to drive that execution. And one thing, you know, we've been really focused on is training our sales teams as well as our service teams. As you know, in December, we announced the creation of the WSS segment for 2024. And a few comments there: number one, we feel it's gonna accelerate our synergies, both on the cost side as well as the revenue side, which is where we're focused the most. One thing that maybe is not as intuitive, I do think it's gonna help us with technician utilization, so we can leverage our technicians across the broader portfolio and also provide better career pathing for them long term, as well as leveraging technology. And then the big thing it does for us, it really helps us leverage and enable the international expansion of WSS going forward in 2024, like I said, internationally. And then the most important thing, it makes it easier for our customers, because at the end of the day, it's about customer focus. And our customers, instead of picking up the phone to make four phone calls, they can make one to Xylem to solve their biggest problems. The next question is from Mike Halloran with Baird. Please go ahead. Hey, good morning, everyone. Morning, Mike. So a couple questions here. First, you know, you commented on, you know, confidence in the end markets and sustainability of existing trends. Maybe talk a little bit about for utility and industrial markets, what the customers are saying at this point, you know, willingness to put capital forward for CapEx-related projects. Any signs of softness, acceleration? You know, how are you thinking about things on that side? Yeah, I could start us out. I mean, from on the CapEx front, we've seen continued momentum there. You know, the for us, the proxy is our treatment business. Orders were very strong, both in Q4 and the full year of double digits. And so that's, you know, that gives us a lot of confidence. And that number is not only just in the U.S., that's a global number. So every region is performing very well in treatment. So from a CapEx perspective, we haven't seen any pullback or any concern there. And obviously, you know, big part of our focus and our portfolio in utilities is focused on the OpEx side, and that's about 75% of the revenue, and that remains pretty strong. And it's also, you know, we've talked about buoyed, especially the long term. It's not gonna be this year or even in the next year, but over the next 5-7 years, it's buoyed by regulation globally. Whether that's, you know, in the U.S. with the infrastructure bill, which includes PFAS funding, or if you get into Europe with the Recovery and Resilience Act and then the AMP cycle in the U.K., that gives us a lot of confidence that we'll continue to see those markets do well. You know, I'd say industrially, it's a little bit of a mixed bag on the new segment, WSS, which is a legacy ISS business, which contains assessment services and dewatering now. You know, we're seeing strong momentum there, especially in, you know, power, life sciences, microelectronics. We're seeing a lot of bid activity there, and we feel good about that. We've seen a little bit of lumpiness in the Applied Water end markets, especially resi. Some of that is just due to, you know, coming out of the pandemic, where people were, you know, investing their discretionary income and upgrading their houses. And also, weather's played some of a role in that, as a lot of our resi products are applied into ag applications. And so we've seen some lumpiness there in the U.S. and a little bit in Western Europe. So that's a little bit of the, you know, the view of the landscape. Appreciate that. Second question, just on the pricing side of things, I guess twofold. One, how are you thinking about pricing for 2024? And, and as you think about the multi-year journey here, as you're rolling out 80/20 and all the other toolkits you're, you're gonna be implementing, what is the opportunity for pricing as you think about the broader portfolio? Yeah, Mike, maybe I'll take that one. So price expectations for next year are gonna ramp down versus the capture that we experienced in 2023, will be a little over a point. You know, that's still significantly higher than pre-pandemic pricing, you know, but it is an opportunity as we look forward, you know, as we calibrate and hone in the skills to continue to capture the value for our products across the portfolio. Obviously, that, you know, 1 point plus varies across the different segments, you know, with M&CS and WSS going forward, probably stronger price capture opportunities. And then 80/20, I think, will be up, as we roll out opportunities within AWS, as they've done some additional analytics, and we look for just better pricing methodology and capture on some of the longer tail customers that we have. Obviously, we're leveraging price as one of our components to offset inflation. You know, the team does a really good job driving operational productivity as a second lever to offset inflation. So, you know, we're gonna manage price and material costs and stay positive. You know, obviously, that'll compress a little bit next year as pricing goes down, but also our expectations relative to inflation will be price, material, cost positive, and then look for productivity to really enhance our margins as we move forward. The next question is from Scott Davis with Melius Research. Please go ahead. Hey, good morning, everybody. Hey, good morning, Scott. I wanted to. You made some comments incrementally on China, seemed a little bit more cautious, which is not a surprise, just given what we've heard from others. But it looks like your business there has held up okay, at least versus some peers out there. But what, maybe a little bit more granularity there would be helpful. Thanks. Yeah. Thanks for the question, Scott. You know, China for us, now with the new combination of the company, is about mid-single digit in terms of our revenue. With, you know, over 50% of that being water infrastructure from an exposure standpoint, largely tied to public utilities. You know, we've seen pretty decent orders there. Q4 orders were up 11%, full year up 10%. You know, on the revenue side, you know, we were up on a full year about 2%, low single digits. But if you look back on a two-year stack, we're down mid-single digits in China. So the backlog is building, but we haven't seen that convert to revenue yet. You know, things continue to slide to the right in terms of funding. I think if you, you know, read the news, you continue to see the government's intervention in the economy there, and that's taking some of the funds away from investing in some of the infrastructure. But you know, we believe that's more of a short-term issue. You know, across the utilities exposure, we continue to see, you know, again, a healthy pipeline, and we'll continue to monitor that funding. I would say on the industrial side, it's a little bit of a similar demand environment. And that's held up a little bit more resilient, to be honest, over utilities. And the last thing I would say, you know, with China, overall, we expect China to be, you know, roughly flat in 2024 for the business. Okay, that's super helpful. All right, your balance sheet's in fantastic shape, and, you know, given the way you structured the Evoqua deal, just, it leads me, you know, the natural question would be, are there-- should we expect to kind of bolt-- some bolt-on acquisitions or anything kind of in 2024 that... You know, or perhaps you could talk about your M&A backlog, and just as much as talk about the pipeline, perhaps talk about your interest in doing deals. That would be helpful. Yeah, no, it's no, thanks. It's a good question. You know, we closed out 2023 very strong following the close of our largest, you know, transformational deal in our history. And so one of the things we're laser focused on is making sure that we integrate Evoqua well, and we get the value capture in the near term. You know, to your point, we do have a strong M&A pipeline, and the structure of the Evoqua deal allows us flexibility with a strong balance sheet. The short-term focus, Scott, is gonna be, you know, to focus on small to medium bolt-ons. Evoqua, we can fairly ring fence within the business, but there's other parts of the portfolio where we do want to continue to be inquisitive, with, again, with small to medium bolt-ons. You know, we'll continue our disciplined approach, and, you know, we're evaluating our longer-term capital allocation framework, and we'll share more about that in Investor Day in May. The next question is from Andy Kaplowitz with Citigroup. Please go ahead. Hey, good morning, everyone. Good morning, Andy. Matt or Bill, when you look at the 50-100 basis points of margin expansion for 2024, could you give us a little more color on how that margin improvement, improvement translates by segment? And then you mentioned the 80/20 pilots with a focus on MCS. You did have nice improvement, margin improvement in MCS in Q4. So how do you think about the margin potential in that particular business over the longer term? Yeah, I mean, relative to, you know, the largest impact in margin expansion for next year, I think M&CS leads the pack. Obviously, you know, we've started our journey on margin improvement and recovery as they've gone through chip supply shortages, which I think for the most part has resolved. You know, they've added capacity within the production facility to meet kind of the record backlog levels that they've had. They've gone out with incremental pricing to improve the quality of the margin within the backlog, and I think the value of their products and solutions, they're able to continue to drive incremental price as we go into next year. So, you know, I think their ability to exit the year at near historic record levels of EBITDA margin is the target, you know, as they continue to leverage their volume and drive some pretty significant productivity as they look at their labor and material footprint around their products. So we're excited about the progress that they've made and look for them to continue to sequentially improve as we progress through the year in 2024. Very helpful. And Matt, maybe just a bigger picture question for you. I know you want to guide conservatively for this year. You know, you're being prudent and applied in China, but you've got such a strong growth business in MCS, and you're still only guiding 3%-5%. You know, Xylem's had a longer term algorithm of 4%-6%. So as you take over the CEO reins, do you worry at all that that's higher, given all the self-help focus, you know, focus on digitization, all these kinds of things, that that's still the right longer-term growth rate? Yeah, I think, you know, again, a lot of, a lot of that is not changed from what we've said in the past. It's just, I think, being balanced in our approach and with a watchful eye to China. You know, we've got that flat year-over-year, but, you know, there could be some potential headwinds there. And also with Applied Water, which is, you know, it's some of that cyclicality, you know, and timing, you know, as we think about that, Andy. So I, you know, from a long-term framework, none of that's changed. It's just really more thinking about in the context of 2024 and, you know, thinking about going out with a balanced approach. We do have a lot of healthy demand, you know, across our largest end markets. You know, when you look at the year from a seasonality standpoint, it's normalized. There's no, you know, change in terms of the seasonality of our business and how we ramp from Q1 through the balance of the year. You know, I think the thing I'd leave you with, too, is our, our margin guide reflects low 40s pro forma incrementals. And so we feel really, really strong about the margin that we're delivering as well in the growth. The next question is from Nathan Jones with Stifel. Please go ahead. The next question is from Nathan Jones with Stifel. Please go ahead. Mr. Jones, is your line open? Good morning, everyone. Hey, good morning, Nathan. I'm gonna follow up on the margin question. I, I think the, your vocal cost synergies get you something like 80 basis points, and you're obviously gonna get some pretty good margin expansion out of the M&CS operating leverage, which, when I do the math, gets me well in excess of the 100 basis points, top end of your margin expansion target. So can you talk about what, what could be the offsets there, or increased growth investments, or anything that's, that's kind of muting some of that margin expansion that I might otherwise expect? Yeah, I think the biggest piece, probably in your high-level math, is we continue to invest in the business. Obviously, we've got significant growth opportunities over the long term that we wanna make sure that, you know, we're allocating resources around, you know, across all four segments. You know, there's exciting things relative to product launches and market expansions that, you know, put a little bit of pressure on some of the significant accretion relative to productivity and then the synergies that you highlighted. And then also, you know, Nate, there's obviously a volatile macro environment that, you know, we wanna make sure that we're prudent relative to the guide, that we have the ability to account for things that come up. So I think our guide relative to the margin expansion is fairly balanced. You know, I think Matthew just highlighted you know, at 40% incrementals on a pro forma basis, that's really strong flow-through. So, excited about the opportunities the team has laid out here as we look for a really strong year on our margin expansion journey. And I think, you know, longer term, obviously, we're just starting with the 80/20 implementation. That'll add some tailwind as we exit the year and into 2025, to try to get us at the higher end of that range longer term. Great. And then, my follow-up, Bill, I think you just mentioned that the chip supply issue has basically worked itself out. Can you guys comment on where the past due backlog is in M&CS today, and when you expect that to get to, whatever a normal level of past due backlog is? Hey, Nate, I'll take it. It's Matthew. Yeah, we're making good progress on the past due backlog. If you remember, we started 2023 around 30% past due. We exited at 20, and we feel that we're gonna get through the bulk of the past due backlog in 2024. Some of that may stray into 2025, but for the most part, we feel pretty confident that we'll get through the past due backlog in 2024, with again a little bit of carryover into 2025. And so, you know, really from a bottleneck standpoint, it really just comes down to our customers' ability to go out and execute the deployments. Chip supply is flowing. We've made investments over the past few years in our capacity, so there's no capacity limitations from our point of view, internally here at Xylem in our four walls. The next question is from Joe Giordano with TD Cowen. Please go ahead. Hey, guys. Morning. Hey, good morning, Joe. Hey, so I wanted to touch on Idrica. I guess, one of the more, like, interesting, kind of, high level, where can we go type stories within water, you know, how to get a real connected utility. And I'm just curious how you guys think about this. Like, how do we judge success? What, what-- how meaningful could something like this turn into, you know, kind of over a near to medium term? And, just kind of maybe set expectations about where that can go. Yeah, I mean, I've been pretty bullish on this. So, you know, you've heard me talk about being the aggregator of data in the utilities. Much like, you know, folks are in the building management world or in the residential home, we believe we have the capabilities through this partnership to be able to be the leader in aggregating utility data. You know, we're off to a really good start. We only had about six months under our belt last year once we got the combination closed. The teams have made great progress globally, and we built a significant pipeline. And one of the things I've talked about is, you know, it's one thing is to get the platform in play at the utility, but it's about building on the applications as well as pulling through our core products. So, you know, a little bit of a land and expand is how I would frame it. You know, get the platform in place, help them optimize their water networks with our applications, as well as pulling through our products like AMI, you know, our treatment products, et cetera. So we've had some significant wins. Some of those I've highlighted on prior calls. We continue to, you know, have wins and build momentum. Like I said, and it's not a specific region, it's across the world. Whether that's in the U.K., Italy, we just won a big deal in the Middle East, which is, you know, for a new city with fully digitizing their water management system with this platform. I've talked in the past about some of the deals in Spain and the U.S. we've done, you know, in terms of putting the platform in and being able to sell AMI deals as well as treatment products. So I think it can be, you know, a big opportunity for us. Obviously, we'll give you a lot more color as we get closer to May 30th at our Investor Day, but we're really bullish on the partnership. That's great color. And then, apologies if you mentioned some of this on the prepared remarks. I had to join late. But on Evoqua, like, revenue side synergies, I know, like, selling an ISS solution outside the U.S. is gonna take a long time to build out. But I'm curious if there's anything you could point to about, like, leveraging existing channels that you have in, like, Europe to put product through, which, you know, I would imagine would be a lower lift than to try to do a solutions-based sell. Yeah, that's kind of a shorter to medium term, you know, objective, and we've already had some wins. We just had one in South Africa, actually, where we took the capital from the legacy Evoqua business through the legacy Xylem business in South Africa. So we were able to execute and deploy that capital into an industrial application without really having to have service, you know, folks on the ground and infrastructure. So those are things that we're focused on, kind of, in the short to medium term, is leveraging the product side and really the capital side of the legacy Evoqua business through those Xylem channels, both in the U.S. as well as internationally. So we are starting to see progress there. This concludes our question and answer session. I would like to turn the conference back over to Matthew Pine for any closing remarks. Yeah, I just wanna thank everybody for joining our call today, and for your interest in Xylem. You know, we look forward to speaking again in early May, followed by our Investor Day on May 30th, where we're gonna provide more details on our long-term outlook. Take care and make it a great day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.