Welcome to the Xylem First Quarter 2018 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions following the presentation. I would now like to turn the call over to Mr. Matt Latino, Senior Director of Investor Relations.

Thank you, Kristal, and good morning, everyone, and welcome to Xylem's first quarter 2018 earnings conference call. With me today are Chief Executive Officer, Patrick Decker and Chief Financial Officer, Mark Rajkowski. They will provide their perspectives on Xylem's first quarter 2018 results and discuss the full year outlook. 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 at www.xylem.com. A replay of today's call will be available until midnight on June 2. Please note the replay number is 800-585-8367 and the confirmation code is 4177-4098. Additionally, the call will be available for playback via the Investors section of our website, under the heading, Investor Events. Please turn to slide two. 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 in subsequent events and subsequent reports filed with the SEC. Please note that the company undertakes no obligation to update any forward-looking statements publicly to reflect subsequent events or circumstances and actual events or results could differ materially from those anticipated. Please turn to slide three. We have provided you with a summary of our key performance metrics including both GAAP and non-GAAP metrics. For purposes of today's call, all references will be on an 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 will turn the call over to our CEO, Patrick Decker.

Thanks Matt, and good morning, everyone. Thanks for joining us today to discuss our first quarter results. We had a strong start to 2018, and with the solid game plan in hand, our teams were focused in their execution and delivered strong results growing across all end markets and in nearly every geography. The momentum we began to build in the second half of last year strengthened in the first quarter and is continuing as we uncover new opportunities in healthy end markets. As we look at our first quarter results, nearly every metric met or exceeded expectations. So, let me quickly review a few of the details. In the first quarter, we delivered solid broad-based orders and revenue growth across all of our major markets. Orders increased 10% in the first quarter, the second consecutive quarter of double-digit orders growth. This was driven by a strong performance in our Water Infrastructure businesses where treatment orders were up 27%. Many of those projects have longer lead times. So, these orders will not ship until 2019. In addition, we had very strong orders grew up in the emerging markets, up more than 20% year-over-year. This reflects solid growth overall as well as a few large project orders that pushed that growth significantly higher. We also secured healthy order growth in our North American Sensus water business. For the quarter, revenue grew 7% organically. From a regional perspective, the U.S. market generated strong growth with a 9% increase year-over-year. This reflects continued strength in utilities where we are capturing share gains as well as improved performance in industrials and the timing of certain projects in the quarter. Emerging markets continued to deliver solid revenue growth, up 6% overall. Our investments in product localization and capacity are beginning to pay off in a…

Thanks, Patrick. I'm very pleased with our strong start to the year. Overall, revenues were up 14% in the quarter, this represents 7% organic growth, 4 points of growth from foreign exchange tailwind and 3 points of growth from acquisitions. From an organic perspective, the strength in revenue was broad-based, across all of our end markets in most geographies. Utilities end market led the way with 8% growth. This was above our expectations and was driven both by the timing of project deliveries and very strong performance in North America and emerging markets. Most of the growth in emerging markets was from the outstanding performance from our China and India teams, which grew revenue by more than 40% and 30%, respectively, due in part to heightened regulatory focus and growing opportunities across all of our businesses that serve utilities. Industrial revenue was also up nicely this quarter with 6% growth which was at the higher end of our expectations. Market conditions remain healthy in our Applied Water business as well as dewatering. Here, the strength was primarily in the U.S., Canada and Western Europe. Rounding out the end markets, we continued to see solid performance in our commercial and residential end markets which were up 6% and 4%, respectively. Moving to operational performance, we increased our adjusted EBITDA by 130 basis points to 17.5% in the quarter. This improvement was primarily driven by increased productivity savings and volume leverage from strong organic growth which was partially offset by cost inflation, unfavorable mix and foreign exchange impacts. Adjusted operating margin increased 60 basis points to 11.1% which includes 40 basis points of noncash amortization related to purchase accounting for the acquisitions in our new AIA platform. Our teams continue to perform well, executing on our productivity programs where we delivered $36…

Thanks, Mark. As we discussed this morning, we had a strong first quarter and we have solid momentum moving forward. We're well-positioned to deliver on our full year commitments while continuing to invest in our longer term growth initiatives. At the top line, we continue to expect to deliver full year revenue of approximately $5.1 billion to $5.2 billion. This continues to represent an organic growth rate of 4% to 6%. And as we previously stated, we expect our new AIA platform to add about 2% to our total revenue. Our continuous improvement efforts continue and our forecast is to generate about $160 million in cost savings for the full year. This result will keep us well on pace to meet our long-term target. These savings are expected to help fuel our operating margin expansion. Our adjusted operating margin is forecast to expand 60 basis points to 100 basis points to between 13.9% and 14.3%. This expansion excludes about 30 basis points of margin dilution from purchase accounting for acquisitions. Adjusted EBITDA is expected to improve by 70 basis points to 100 basis points which would bring that to a range of 19.5% to 19.8%. At the bottom line, we continue to expect to generate adjusted full year earnings per share in the range of $2.82 to $2.97. This excludes integration, restructuring and realignment cost of about $35 million. Adjusted EPS growth is projected to be in the range of 18% to 24% for the year. And as Mark discussed, we expect to continue to generate solid cash from operations which will enable us to deliver free cash flow conversion of at least 115% in 2018. Anticipated capital expenditures are $190 million to $200 million. Now please turn to slide 11 and I'll walk you through our end market assumptions.…

Consistent with what we disclosed last quarter, we're providing the seasonal profile of our business as well as highlights of our 2018 planning assumptions. For the second quarter, we expect sustained growth in the utility market in the mid- to high-single digit range. We expect industrial markets to moderate sequentially and return to low-single digit growth. We expect the commercial and residential markets to both continue to grow in the low- to mid-single digits. All in, we anticipate this will result in organic revenue growth in the range of 5% to 6%. We expect the contribution from the AIA platform to be about $30 million. We expect second quarter operating margins to be up 50 basis points to 80 basis points, this includes a 30 basis point negative impact due to purchase accounting for our recent AIA acquisitions. Our outlook also reflects an uptick in direct material costs from increasing global demand for certain materials in electronic components. Our procurement and operational teams have done a great job securing adequate supply and we expect they will continue to do so, but it is impacting cost. To address the impact of rising material costs, our commercial teams are in the market with price actions. We expect to see some realization in the second quarter and higher price realization in the back half of the year. Finally, please note the summary of our FX assumptions on this slide, which includes our euro guidance assumption, which remains at $1.21. In the second quarter, we expect year-over-year operating margins to be impacted by FX transaction headwind, similar to the first quarter and predominantly in our Water Infrastructure segment. We expect the year-over-year impact in the second half of the year will be minimal based on current FX rates. With that, I'll now turn the call back over to Patrick for some closing comments.

Thanks, Mark. Again, we had a strong first quarter and momentum is continuing, both in the end markets we serve and within our teams across the company. But it's only the first of four quarters and we take nothing for granted. We will remain vigilant in our execution and remain focused on best serving our customers. At the same time, we will continue to invest in our strategic initiatives, to fuel our longer-term growth to drive greater value for our shareholders. With that, operator, we'd be happy to take questions.

Our first question comes from the line of Nathan Jones with Stifel. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: Good morning, everyone.

Good morning.

Good morning.

Hi, Nate. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: So unsurprisingly, I'm going to start on margins here. And I wanted to look at your full year guidance for margins because you actually ex-purchase accounting increased the margin expansion guidance by 10 basis points. You've got headwinds from mix. You've got headwinds from inflation. You've got headwinds from the stronger dollar. Yet you've actually taken the guidance for core margins here up by 10 basis points for the year. Can you talk about how you get to a better number than you did before with certainly some increasing headwinds to margins here?

Yeah. I'll go first here, Nathan. I think the – our read through on margins both in the quarter which came in a little bit light because of the mix of treatment, that subsides in the second half of the year, as does the impact of the FX transaction effect coming out of Europe. That subsides in the second half of the year. And I think the fact that we're getting ahead of the emerging inflationary pressure that we're seeing on some of the components and others, with price early in the year. We went out earlier this year with price increases in addition to what we'd already announced, so we could get ahead of this. And so when you rack all that up together, that's what gives us the confidence around the margin expansion for the full year. So, not concerned at all about margins.

Yeah. And Nate on the – yeah, the guidance is essentially the same. The purchase accounting amortization ticked up 10 basis points. That might be what you're thinking about if you exclude that impact, but it's essentially the same. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: Yeah. It's the same including that extra 10 basis points, but without the...

Yeah. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: ...amortization, it actually went up 10 basis points. So, there must be the anticipation of some pretty meaningful price realization in the back half of the year here, correct?

Yeah. That's right. We saw a little bit in Q1. We'll expect to see a bit more in Q2, and then we see the full effect of that in Q3 and Q4.

And we continue to ramp up productivity and cost savings as well. So, we've got good confidence in our ability to deliver those full-year margin targets, Nathan. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: Okay. And then, on the first quarter, you're about 30 basis points below what you had forecast for the first quarter. Can you maybe break down the impact of what mix was? I mean, you obviously had a strong treatment shipment quarter, can you break that down maybe between...

Yeah. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: The mix impact, the inflation impact.

Yeah. Really, I mean the biggest piece of this, Mark can go through the details, I mean if there was one takeaway from the quarter, if you think about the higher revenue that we delivered above and beyond what we had guided to, that really was predominantly coming from some large treatment in emerging market project deliveries that accelerated into the quarter from Q2. Those came with lower margin because they're greenfield, they have great aftermarket profiles, but in the initial install they're lower margin and that impacted us alone by about 70 bps in Q1. And so, that gives you a feel for the magnitude of what we're talking about. That begins to subside. We have a little bit more of that in Q2, but we've got that reflected in our guide and then it really subsides in second half the year.

Yeah. Nathan, I guess, yeah, it comes under the heading of no good deed goes unpunished. We've got exactly what we were looking for in terms of growing our position in those end markets and, as Patrick said, the project margins are a little bit lower. We're going to like the aftermarket margins a lot. But the impact that was probably 30 basis points to 40 basis points more because of that mix. In terms of the margin impact, inflation was – ran a little a bit harder than we thought. But obviously we got some nice benefits from volume leverage which offset a lot of that and also we performed better than – a little better than we were expecting on our productivity as well. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: I guess the project work has to stay the aftermarket for the future and that will drag on in the quarter. So, I think that's helpful color. Thanks a lot.

Sure, thanks.

Thank you.

Our next question comes from the line of Deane Dray with RBC Capital Markets.

Thank you. Good morning everyone.

Good morning, Deane.

Good morning, Deane.

Hey, I'd just like to stay on the topic, the emerging markets and these greenfield projects. Just to follow on, what's your line of sight for additional infrastructure needs across the emerging markets? I mean, you don't see it in developed markets. We're not building new plants but what inning are we for emerging markets in infrastructure build-out on the municipal side over the next couple of years?

Yeah. So, Deane, I think, it's hard to predict exactly what inning we're in but, I would say, it's the early innings based on what I've seen when I've been traveling there and when we take a look at our bidding pipeline, particularly, I would say, in India. Certainly, I think the only thing that could ever change that trajectory would be if there was a change in political administration and we're not getting any reason to believe that's going to happen. So, that's going to have a long tail to it because it really is being driven by the Smart Cities initiatives, as well as the Ganges River clean-up, as well as the connecting their population to treatment – treated water across the country. So, we've got a very significant pipeline there. The same in China. We continue to see, especially in the second- and third-tier cities, tremendous investments in water treatment there. We would be expecting those to be 30%, 40% on a regular basis. I mean, we're guiding there through our long-range plan of certainly low-double digit for those businesses. The Middle East, I think, is still very early in its recovery, coming out of the energy downturn. And so, we've seen that begin to recover quite nicely. That one in my mind is probably a little bit less predictable than China and India would be. And I just got back from South America. I spent a week there two weeks ago and was very encouraged by what I see especially in Argentina, Chile, Colombia, may be less so Brazil. So, I think we're in the early innings here, Deane, in terms of continued run for emerging markets.

Got it. And just one last point on these projects. What's the content, the Xylem content? How broadly are they taking your different products and services in these projects?

Yeah. It has broadened. I mean, it depends obviously on what the application is. But generally speaking, you're talking about projects that we're able to cross-sell. The team has done a great job there of getting in, for example, maybe on an ozone job and then being able to pull through our flight pumps pulling through analytics on the water quality side. Just to give you kind of one example. But we also – that's one of the areas where we're seeing some of the best early activity on pilots for some of some of our new Sensus revenue synergies as well.

Great. And then I'd like to ask a few questions regarding the advanced infrastructure analytics, the new subsector platform. What are the growth expectations here? This really feels like a tech incubation...

Yes.

...holding co for you. A lot of these are still in pilot programs in terms of different projects you might even be pre-revenue. But just help us calibrate what the growth expectations over the next couple of years should be from this platform?

Yeah. I think, it's – what I would kind of reply would be, the comments I had in my script initially and that was we're really making a new market here, Deane, as you can appreciate. You probably of anybody understands that the most in terms of, we're kind of really addressing new unmet needs and sorting through what is the best way to optimize the revenue generation out of this given the significant disruption possibly. It's going to be having and is already having to large CapEx spend. But certainly, the businesses as we see them today, we would expect these businesses to be growing double-digit consistently and that's just with the businesses that we have today. I mean, it's a small part of our portfolio, you're right it's an incubator. We're doing probably about $120 million right now of revenue, but we're going to see that grow exponentially and we're going to be adding to it in terms of new acquisitions.

And I'm sorry, I just got one other one. We heard some rumblings that regarding the combined sewer overflow, that the EPA is like backing off on some of the enforcements and maybe this will result in some delays in orders. Are you seeing any of that showing up in like EmNet's business?

Yeah. It's interesting you asked that question Deane. I haven't been out with a number of these customers whether it be utilities or whether it be the works departments because in many cases, as you know, it's not always the same entity in any given city that manages this issue. But the conversations I had, they were not seeing the EPA alleviating pressure. They may not be getting fined right now in immediate term, but the consent decree still hold. And one of the opportunities that we have here is obviously EmNet can actually serve as one solution to helping significantly reduce what that capital burden would be and working with the EPA to actually allow that technology to be used as an alternative. Regulatory is also only one driver in this area, as I know you'd fully appreciate. It's also the public nuance that utilities and works departments have to deal with when there is a storm water overflow situation. So, it is one of the biggest headaches that works departments have across the country. So, our customers see this as a long-term issue and I'm very confident that their needs are going to persist beyond one potential administrative change in policy.

Thank you.

Thank you.

Our next question comes from the line of Ryan Connors with Boenning & Scattergood. Ryan Michael Connors - Boenning & Scattergood, Inc.: Great. Thanks for taking my question. I wanted to talk a little...

Good morning.

Good morning, Ryan. Ryan Michael Connors - Boenning & Scattergood, Inc.: Good morning. I want to talk about the project delays on the metering side that you talked about. And certainly you're not alone there, your peers have made similar comments, but at the same time, you're seeing the strength in treatment which, in theory, is also a project-oriented business. So, my question is what is it about metering projects specifically that's different, that's leading to the delays there? And what's different about treatment where we're not seeing delays on those types of projects?

Yeah. Actually, I would say our issue was less of a project delay as much as it was just timing of projects. I mean, our orders were up 10% and that was coming from project orders coming in. We had a little bit of softness in the quarter, a little bit of that was weather. That certainly had some impact, but then you might say, well doesn't it have an impact on treatment, but it just depends on what utility you're dealing with, what location it is. I wouldn't read too much into that. We still feel very confident about looking at a mid-to-high single digit growth in our water utility business for the full year. I don't know, Mark, if you want to make a comment.

Yeah. I mean, it's timing of deployment of existing projects. I don't – the pipeline is very good. The order rates, we had 12% order growth in our water business in North America for Sensus. So, this is more of a quarterly phenomenon than it is anything that's long term.

Yeah. If you go back to the – to go back to the fourth quarter of last year, we had double digit growth in that part of the business in terms of orders growth. So, it really is it can be lumpy in terms of the deployment from quarter-to-quarter, but this is not a long-term trend that I'd be concerned about. Ryan Michael Connors - Boenning & Scattergood, Inc.: Got it. Okay.

Okay. Ryan Michael Connors - Boenning & Scattergood, Inc.: And then my other question had to do with, Patrick you talk about a willingness on the part of customers in the utility space to accept price increases and yet if you look at their situation, those customers are actually having a harder time getting price themselves. We've really seen tariff inflation recede and it's now kind of they're barely running above CPI. So, can you just talk about – give us your take on that and why we're confident that we can push price when that the customer base there is maybe not able to pass that through themselves as well as they have historically?

Yeah. I think, firstly, part of that is just the, again, the critical nature. These are mission critical applications and so obviously we want to be respectful of these, so we're not going to gouge them on price, but it's also more than utility. We're talking about each one of our end markets here. So, you also need to bring in the industrial part of the equation to this as well. When we go back and we look at previous periods of time where we were in an inflationary period, back then you're talking about kind of the 2011, 2012 timeframe. We were realizing quite significant price at that point in time well above what you've heard us talk about here in the last couple of years, and it was because there was an understanding that it is inflationary environment. Secondly, what we're finding especially in the pockets of business where we've been most successful to get price here most recently, it is where we brought much more innovative solutions to bear. So, when we've embedded more intelligence and whether it be energy efficiency, whether it be cost of use, it's part of a broader value proposition here rather than just an across the board take a list price increase. Ryan Michael Connors - Boenning & Scattergood, Inc.: Got it. Okay. So, if I could paraphrase that, you think you can kind of take wallet share so to speak?

That's correct. Ryan Michael Connors - Boenning & Scattergood, Inc.: Yeah. Okay.

And you take a look at the size of our installed base and the replacement nature of that, there's opportunity there that we're seeing on the repair and replacement side of the business to take some price. Ryan Michael Connors - Boenning & Scattergood, Inc.: Okay. Great. Well, I'll get back in queue. Thanks for your time.

Thanks.

Thanks.

Our next question comes from the line of Walter Liptak with Seaport Global.

Hi. Thanks. Good morning, guys.

Good morning, Walt.

Good morning.

I wanted to ask about the oil and gas business, and if you could just refresh us now how big percentage of revenue is that? And then the comments about dewatering, what inning are we there? Are you able to get pricing on the dewatering related products?

Yeah. Sure, Walt. It's about the scale, it's about 2% of our enterprise revenues. Dewatering had a very solid quarter. And just looking at oil and gas, they were up strong double digits. And in fact, I had remarked in earlier comments about accelerating some capital investment to build out our rental fleet to meet market demand. So, it's relatively small in the overall scheme of things, but it is growing nicely and we're investing to make sure we can meet market demand.

Yeah. All in – to be clear, Walt. All in, our oil and gas and mining exposure both together roughly about 5% with mining in. But that's not the only piece of our dewatering business just to make sure that we don't confuse anyone there. I mean, dewatering is larger than that. It plays into also other industrial markets, muni and certainly what's been driving growth in that business also was during the middle of the downturn that team did a good job of diversifying beyond oil and gas and mining. Now we're getting the benefit of oil and gas and mining coming back. That's putting some pressure on our rental fleet, and there we're making the capital investments to support it.

Okay. Good. And then on the pricing side there, I mean, it's probably a little bit easier getting price in this part of the business.

Yeah. I'd say we had a little bit of a lag recovery. We began to see growth in order rates in oil and gas and mining second half of last year. We did not see the pricing realization early on. But now the market is absorbing that price as, again, obviously I think ours and our competitors' fleets are tightening in terms of utilization.

Okay. All right. Great. And if I can just do one more, you mentioned the flight business and the currency issues. I wondered about anything that you could do to mitigate that. Is there a way of manufacturing in a different location or if there isn't anything, is there demand destruction that happens because of the foreign currency, the higher prices?

Yeah. There's a couple things that we can do and are doing. One is we do hedge the cash flow impact to that. But as currencies continue to rise, it's not 100% coverage. So that is one thing, and with the rapid rise in euro-based currencies that we saw the impact to that. The other that we can do and are doing is make sure that in the markets where those products are coming into, we again go after price to offset some of that higher cost. And the teams are out there, as we mentioned in our comments, taking price actions to address some of the uptick in cost inflation.

The good news for us, Walt, is that at least in that part of the business which is really the business that is most exposed to euro-based manufacturing, pretty much all of our competitors are as well. And so it does not create a market share challenge or a competitive dynamic. And so, we tend to take the longer view here in terms of what we want to do strategically. We are and have been shifting some capacity to the U.S. That was just really to support the U.S. market growth anyway; it wasn't really being driven by currency movement.

Okay. Got it. All right. Thank you.

Yeah. Thank you.

Our next question comes from the line of Chip Moore with Canaccord.

Wondering maybe if you could provide a bit of an update on where we stand in terms of localization in emerging markets, potential for some more investments there, how you think about the benefits.

Sure. Yeah. So, I think we're pretty well progressed on the localization efforts in China, India and the Middle East. I would say we're furthest in China. There today, we do about 90% – north of 90% of our revenue in the market actually comes from products that are localized. And we're obviously looking to get that as close to 100% as possible. Secondly is India and I would say India is just behind that at roughly about 80% localized and we would expect that to continue to grow. Middle East, we have local factory there. We had a greenfield that we opened up about two years ago. And I'd say there, we're still moving things into that facility and also we're ramping up the actual design locally as opposed to just the manufacturing of it locally. Then I would say there probably are opportunities as we look forward in a couple areas. One is I do think we're going to have an opportunity to do some further localization on the metering side, leveraging some of our footprint in those locations as we look to grow those businesses. And then secondly would be in Latin America. Based on my visit down there, there clearly are some opportunities that we're going to be exploring in a couple of key markets. Just got to find the right timing and find the right channels to market to support that.

That's great color. Thanks.

Thank you.

Our next question comes from the line of Jim Giannakouros with Oppenheimer. Jim Giannakouros - Oppenheimer & Co., Inc.: Good morning, Patrick, Mark, Matt.

Good morning, Jim.

Hey, Jim.

Morning. Jim Giannakouros - Oppenheimer & Co., Inc.: Clarification point on that pop in treatment, I mean you cited broad-based sales growth across Europe and North America, but that pop in orders, that 27%, is that a couple large orders driving that or broad-based as well?

It's pretty – I mean, we had a few large projects but it was pretty broad-based. I would say, if it's skewed anywhere, it's skewed heavily towards the emerging markets and that was mainly again in China and India. But there was pretty broad based growth in orders. I mean, we saw good growth in North America as well as in Europe. So, it was not a lumpy one-off. I mean there were some big projects in there but not a meaningful piece of the 27% that we quoted. Jim Giannakouros - Oppenheimer & Co., Inc.: Got it. Okay. And then seems like you're pacing well, at least on an aggressive plan on it with internal initiatives on the cost side, productivity side. Can you – maybe this is more of a question for Mark, refresh us on the areas that will accelerate into 2019 and 2020 to kind of get you to that stated margin goal that you have out there, 17% to 18%?

Yeah, Jim. Sure. Right now, what we have seen and are continuing to see is significant procurement and savings around our continuous improvement Lean Six Sigma programs. What we have launched this year and are ramping up and we'll see some modest benefit at the end of this year, but significant benefits into 2019 and 2020 is our global business services program where we're looking to standardize our platforms and processes and tools across finance, HR, procurement and IT. So, that is all in front of us and those are substantial programs. Jim Giannakouros - Oppenheimer & Co., Inc.: Thank you. And one more if I may. I recall aftermarket sales, I mean just pre Sensus, pre Pure aftermarket was kind of dubbed at that 30%, 35% of Water Infrastructure and Applied Water. Is that still a good number? And can you kind of isolate your aftermarket sales, how much it grew in those two segments and what the obvious influence, I would think, positive on margins was? Thanks.

Yeah. Listen, I don't think it shifted that much. I mean, as we're looking at it, it's..

It's roughly about 40%. It ebbs and flows from quarter to quarter, but it's roughly about 40% all in. And that's if you throw in the impact obviously of the new Measurement & Control Solutions segment.

Yeah. Services is bumping that up a little bit. And the transport, Jim, the transport aftermarket was up double digits there. So, that was where we saw some good help. Jim Giannakouros - Oppenheimer & Co., Inc.: Thank you all.

Yeah.

Thank you.

Our next question comes from the line of Joe Giordano with Cowen. Joseph Giordano - Cowen & Co. LLC: Hey, guys. Good morning.

Good morning, Joe.

Good morning. Joseph Giordano - Cowen & Co. LLC: Hey Patrick, can you talk about how – as you've added these platforms and you're having these discussions with these pilots, how has like the selling pitch changed? Like is it more you now doing a lot of this stuff, going into big customers and doing like a pitch to a CEO whereas maybe a couple years ago it was individual product people talking to people like at lower levels of utility?

That's a good question, Jim (sic) [Joe] (58:33). Let me be clear, this is a team sport. So there's a lot of people and a lot of executives that are having these conversations. But what I would say to your point, the nature of the conversation very much has changed. So, a lot of these are me going out with the teams and meeting with the CEOs, the Chief Technology Officer, the CFO, for example, of a utility, but there are many other executives that are off doing these meetings as well. What's most important is the nature of the conversation has evolved. Before, we would be selling in, this was before the Sensus acquisition and certainly before the new AIA platform, we would go in, and quite frankly, it was more of a courtesy call. We were serving the wastewater side of the market, not very capital intensive other than large treatment plants, and they didn't have any headaches with our product. I'm not saying that overconfidently but it was not their top of mind issue. They were happy with what they got or they had issues they would share with me. Now, we're having conversations around their large capital plans which is what gets the CEO's attention and the CFO's attention, and we get to talk about what are their biggest pain points? What are the big headaches for them both from an OpEx and CapEx perspective? And it really is those pain points that I talked about in the opening around non-revenue water, the age and decay of their infrastructure, as well as headaches like storm water overflow, outdoor water, smart watersheds, et cetera. So, we leave them, we try to leave them to a process of discovery to say depending up on what their pain point is. We're pretty confident that we have a technology and a solution in the portfolio to then go do a pilot with them, and that's where we're really seeing the inflow of these pilots that I'm referring to not just on the Sensus side, but really the new AIA platform. So, it's early days, Joe, I mean I think we are evolving, we are learning a lot as we go. But it's a great – it's very different and great set of conversations with the customer to really understand what their biggest challenges are. Joseph Giordano - Cowen & Co. LLC: And then, and Mark, if we get another leg higher in cost inflation or if there's something that ramps on tariffs or anything, how much flex do you have on the cost side of things to be able to maybe bring forward some of the savings at a faster rate or flex spend somewhere to kind of keep offsetting inflation with productivity like you've done so far this year?

Well, yeah, I think we're going to continue to drive our productivity programs or actually perform a little bit better than what we had expected and planned in the first quarter and the teams are doing very well there. But as inflation ticks up, we need to do a better job in getting price in the marketplace to cover that. So I think that's really what we need to be pushing on.

Joe, we also have flexibility in some of the planned investments in the back half of this year as well as in the next year that obviously we can throttle those as we need to. Obviously, we're not going to cut ourself short in terms of investing in growth of the business, but we've got some other incremental discretionary investments that we've held back on thus far just until we get a better feel for what the environment is going to be in the second half. Joseph Giordano - Cowen & Co. LLC: All right. Thanks, guys.

Yeah. Thank you.

As a reminder, please limit yourself to one question. Our next question comes from the line of Robert Barry with Susquehanna.

Hey, guys. Good morning.

Hey, good morning, Robert.

Thanks for taking the question. Just a couple of follow ups...

Sure.

...I guess at this point. On the emerging markets, I think in China and India are about 25% of the total, that implies, I think, the rest is down like mid-single digits. So, just curious what's going on in those other pieces? Are there some particular pockets of weakness and what's the outlook for those?

Yeah. I'm not exactly sure how you did your math. I would say...

Yeah. The Middle East...

Middle East.

Middle East was up low-single digits. And I would say we had a little bit of softness in Latin America...

Yeah.

...that would have – and a little bit in Eastern Europe, but they're quite small, so maybe all those together that gets you down maybe around flattish for the rest of emerging markets but I think our math would still show us with low-single digit growth in the rest.

Got it. I'll follow up with that, Matt. And then just a quick one on just setting the expectations for growth in MCS, I know it's lumpy but with starting at 5%, I think that implies you need to do 8% to 9% and the remaining quarters and it's toughening comps in the back half. So, just any level setting there on how we should model that?

Yeah. On that one, I think there's a bunch of components right? The first is when you just think about Sensus which is the biggest piece of that segment. In the first quarter, they grew at 6% but we do expect that to ramp up in the second quarter and over the back half of the year to high-single digits. We've got pretty strong backlogs there. We – also on the test side we're a little bit light, we are in low-single digits and that ramps up as well. So, the next three quarters are bigger than what we see in the first quarter. So, we're confident that we'll get to that higher revenue.

So, Robert, we had a 16% increase in shippable backlog for that whole segment and we expect high-single digits in Q2 through the end of the year and that's based on some very specific project deployments, things that we've won previously that we're announcing for, so the Alliant deal, the Nicor deal, those kind of things that are out there. So, we've got quite a high level confidence on hitting those numbers.

Great. Thank you.

Yeah.

Thank you.

Our next question comes from the line of Scott Graham with BMO Capital Markets.

Yeah. Good morning.

Good morning, Scott.

Would you guys mind just – I think I'm asking a question that maybe some people are trying to get to. If we look at your page five, your mix/price/FX/other, that was a minus 80 basis points, and in the fourth quarter, it was a plus 30 basis points. So, that shift – I know that gap gets reduced in the coming quarters by pricing and the mix things that you've already talked about. But I think it would be really helpful to us if you could tell us specifically what pricing was in each of the two legacy segments, is that possible?

We'll take that offline. I mean, we've, I think, laid out pretty clearly what that margin delta was year-over-year. The biggest driver was volume, okay? And that was 170 basis points, 180 basis points. And we also saw significant improvement from productivity that was roughly 40 basis points. Then you had mix was roughly 70 basis point hit year-over-year and we've talked a lot about that. And obviously inflation was 220 basis points. So, those were the big drivers, the other that we mentioned briefly was a little bit of a headwind, relative to transactional FX. And obviously, we continue to invest in our business as well. So, I mean, those are the components. I don't think there's anything that's changed in terms of the model.

Understood. Thank you. And I just – a follow-up would be residential construction spending has been slowing. I mean, it's been a great market for such a long time, law of large numbers. Do you think that that ultimately backs up into utility spending in 2019?

We're not seeing the signs at this point, Scott, I mean, based on all of the indicators we see in our bid pipeline, all the conversations we're having across utility base. You are correct that over the long-term of the cycle, depending upon where that – it really depends on the pockets around the country that it's happening as to whether or not that resi expansion is impacting the need for greenfield expansion of treatment capabilities. So it really depends on where. We're not seeing it and we're not hearing any indications of that at all certainly in terms of the bid and quotations coming in to us.

Sounds good. Thank you.

Okay.

Yeah.

Our next question comes from the line of Brian Lee with Goldman Sachs. Brian Lee - Goldman Sachs & Co. LLC: Thanks for taking the question.

Hi Brian.

Good morning, Brian. Brian Lee - Goldman Sachs & Co. LLC: Good morning. I'll just squeeze one in here, I know we're nearing the end of the call. But on analytics in India, I think, Patrick, you made some specific comments around that. Can you speak to China and then maybe some other regions where you're seeing some revenue synergy opportunities and also maybe speak to the scale of some of these opportunities given the commentary around them being larger deals and now maybe being more 2019 versus 2018 impact on the P&L? Thank you.

Sure. Yeah. So we're seeing – I would categorize it overall that especially in the emerging markets, I mean, I'll come back in North America in a moment and Europe, but certainly in the emerging markets, that's where we're probably seeing the quickest uptake on some of the pilots that we've been talking about because there, you've heard me say before and I don't mean to be kind of facetious about it, but the emerging markets in many cases don't have the basic infrastructure in place, and therefore, they're going to skip investing in dumb infrastructure. They're going to go right to smart infrastructure and they've got the money to pay for these things. And so, there are a number of sizeable opportunities there that we are very confident about. That's not to say that North America and Europe are great opportunities as well, especially with the AIA platform. We're seeing a lot of uptake there. That's where Pure already had a strong base as well as these other small start-ups that we brought into the fold, and we're bringing them channels to market that they didn't have before. So, I want to hold sort of talking about specifically size of deals just from a competitive standpoint and, again, we'll have more to share on that as we secure a couple of these and convert from pilot to larger project. Brian Lee - Goldman Sachs & Co. LLC: Okay. Fair enough. Thanks a lot, guys.

Okay. Thank you.

Thanks, Brian.

Thank you. This does conclude today's Xylem first quarter 2018 earnings conference call. Please disconnect your lines at this time and have a wonderful day.