FLOW - Earnings call transcript Q2 2019

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Operator

Good morning, ladies and gentlemen and welcome to the SPX FLOW Second quarter 2019 Earnings and 2019 Guidance Call. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Officer. Strategy Chief Taylor, Ryan

Ryan Taylor

Chief Thanks Ian us. Marc you joining Easley, everyone. our good me on morning our Jaime With and are and Thank Officer. the President for CEO and Financial call Michael, today

this Our be and found was spxflow.com. can website, morning QX our release XXXX earnings issued on

current Note to forward-looking that markets. elements statements ask that available QX with that of subject webcast of view the is of and includes change which presentation our are webcast that our results. contain based replay the you located this a on view on our of are A call in that be today. This their being and businesses in later is we Those will website, elements details presentation also the section site of them our investor light.

Principal in identified the have performance adjusted non-GAAP risk our And impact of and most provided today's that factors in our filings. we presentation, for appendix SEC are may reconciliations recent measures.

today, begin highlight to reporting. I to we Before changes some our key want

As are strategy premier sale we a our the building and are Energy focusing solutions and we May business. announced Power enterprise strategy, on part process Xnd, as of our pursuing of on that XXXX,

and Bran+Luebbe product notably, for not reported in dosing Most now the this offered Beverage the Energy our probable business sale In reported business. Power that of presented, XX Power periods in previously company reporting, business and certain the discontinued The includes next sale. for includes segments: operations were product and all months. latter of Industrial, former is These and being the results lines our the were be pump the financial lines segment. QX the Energy for as continuing determination reportable within completed which reported metering reflecting and it Food are operations will two the management's of

support costs on allocated were our Energy the as XXXX. expense. Power million Note that the former results $X.X per an for and been the XXXX totaled segment roughly reclassified operations, segment that basis Energy continuing or quarter. annual previously business also have to re-casted that Within corporate Power costs million and $X approximately appendix includes These and

a has to in in and interest in accordance portion periods been guidance. of allocated accounting, presented discontinued all expense GAAP with our operations Additionally, today

million approximately The quarter. and $X.XX allocated approximately expense portion basis, totals interest an $XX million on per annual of

support growth XXXX year. to discrete guidance exclude on unique Our plans. continuing now are items investments measures operations is This with adjusted the basis strategic a our that long-term making to includes certain we're to

rates Energy, Note is XXXX we XXth when keep at that lastly, or further of this that and to guidance appropriate pegged only comments process required by intend we respect is and ongoing, currency please updates mind provide our Power that disclosure divestiture the and and as is with in determine of to June law.

not confidential discuss do the to elements of we intend Specifically, process. sale

I'll to call that, With the Marc. turn over

Marc Michael

our significant our portfolio team joining [ph] simplify our Ryan. To morning, operating we better thanks quarter are narrow customer understatement. steps further deliberate business Thanks, and QX everyone, for taking us as point was a our focus, call. the Good for a XXXX for represents is on to say pivot enhance focus an and structure.

enterprise the to our with work, fronts in confident many pleased strong by to team thanking the process tireless the solutions with out and hard growth sheet for want enterprise I'm across to progress build start their and morning a quarter. on effort strategy. a balance made I this all customer-centered our contributions premier members plan positive and

the enterprise. for of SPX We've into employees. shareholders, to high-performing our along been and a Since transform way. creating We're FLOW committed excited about start and the progress journey on the to future we've operating value remain XXXX, a made customers significant long-term

The continues quality higher gross work of XXXX in and revenue, we journey driving expanding high-performance world-class margins. experience, a to a creating toward as customer

taking reduce in and dairy historical front, to our generated profitability contributed to strategic high-value These and overshadowed the to been On our quality revenue applications. delivered performance, we've our Energy steps verticals the operating product in lines. and markets volatility exposure of cyclical underlying and large dry Power

As we of point begin this XXXX, nearing of in the we are portfolio second half an inflection transformation.

vertical. the been XXXX in on won and methodically is execution in have reducing business that dairy, back the dry we to our and Energy process sell we moving winding with positive our down, micro In momentum. large In is parallel, exposure Power orders forward

as months. operations, of this completing the were in confidence a results our business sale discontinued within the mentioned, reflecting Ryan XX reported As next

that supporting cost approach the a manner the reduce want are and ensure you of completing to overhead we milestone, understand for the to in scope timely I to we As business upon well-prepared divestiture. the that

provide to the and balance Once deleveraging, and ample to growth, for further flexibility investments, shareholders. further through ROIC-centered return going will complete, on disciplined we create organic forward. intend and capital strengthen our quickly redeploy financial value proceeds invest allocation This sheet to

value premier enable With a an solutions eye creation design process our aligning on the world-class enterprise. future, customer deliver optimum and experience organization we're to as a

along this committed of streamlining of to support. reduction with functional further achieving X% part the through we to overhead and of cost cost productivity concept, our simplification material are As X% spend and

achieve half plans this to invested time of the year substantial the first detailing We've our goal. in

are them months. expect refining and the to to execute over next XX those plans XX We

in and process ROIC Our solutions EBITDA margins that to double in mid-teens goal achieve our is digits business. timeframe

improvements. is an margin potential growth Over ROIC there organic the and higher we even continuous profile through long-term, to believe achieve and operational

optimize on excellence of in has and customer closely organic an a Dwight broader this speed cycle. leverage commercial into in X% through transitioned team Jeffers, focused believe Gibson Ty approach customer are the focus to innovative and combined role to growth. our his X% leading and delivery. team drive pathway with utilizing one on of We analytics realigning increased products and project efficiency together growth He operations Dwight commercial economic to to fulfillment. development, Manufacturing and Chain, to range increase Global more Supply VP our product and is potential working lean market of portfolio drive

I want Looking which to on on side May which at adjusted results of and Power consolidated versus actual guidance, QX right the our Xnd highlight the and slide our the chart a comparable compares first our includes results, basis Energy.

As see, and We for EBITDA. you can we of guidance million million our revenue profitability. revenue and of ranges exceeded $XXX delivered $XX

and through and the reporting, backlog expectations and old Energy revenue segment exceeded Food On Beverage strong conversion. both Power

in Segment $XX and Power in or million, $X.XX million the strong Industrial margin share gross and above $X performance income per by midpoint led came at Energy.

team of orders of in to QX or and pipeline we Larios I'm our America delivered XX% grew in team driven from Power North our Jose margins EPS, and more Our than high-level the operationally divestiture $X.XX delivered and at for period quite while Energy operating midpoint. consolidated managing QX, by aftermarket. his orders a that's double-digit global the proud guide, also process. $X.XX On and XX% executing comparable to basis, a above valve

the our and strategic quarter, on under time completed we Also restructuring budget. actions in

technology completed With the quarter ramping our large reduce to dry late in we projects structure in cost to Food actions category. that and down, the in Beverage accordingly,

past consistent South Additionally, been balance we've closed point the made three Strengthening has progress America. us years in we for that the our of and time. remarkable a over also emphasis for facility sheet

significant with $XX want ended a In growth and long-term capacity We To the on our strategy. teams their the voluntary term June, better no modestly to it reiterate to leverage have we gratitude loan support maturity for our extending debt XXXX. million pricing the sincere net to quarter. of our I and XXXX to QX, increasing we effort period the amended X.X at while materials made in my required off, also until a top times, achieving now milestone. senior credit end at prepayment facility, of proactively all our payments

We things effectively are our executing control. manage can and strategy we the

to economic Turning environment. the

across most most contributed basis, activity In conditions first reflecting industries. operations macroeconomic our in orders our organic declined capital over our second of an year the customer a order in the across year delayed to spending half. with on slowdown year-over-year continuing cycle of broadly short businesses across a for Softening base quarter, XX% declines

From most Pacific. degree, North a lesser impacts these Asia regional were in to prominent a America and perspective,

healthier Our to anticipated environment original a growth. sequential order guidance for the demand drive year

we encouraged from full-year QX in revenue, reflect reduced Even the half first $XX orders the stability we million revenue significantly. environment. with to with improve orders to of second our guidance to QX, to the in we in economic anticipate the have by While half current the booked are level profitability adjustment that of

guidance compared segment improvement. we half by half, approximately the XXX as to primarily the at at the margin of first margin gross expansion driven second points are level Looking targeting

where expansion our orders past we've see to majority is Additionally, on The also Food selective execution Beverage in systems increasingly and while business, delivery. savings margin expected over incremental improving we of half cost to expect project been the year new half. the

segments and higher-value stream and and our overall In focus the $XX million this see in We in world-class the fermented and beverage, our to market Beverage. condiments profile contrast, process expertise fats where dry projects nutritional as margin on in in been accretive will dairy which areas expect a large of backlog we've Food dairy, half, of such reducing oils. we funnel revenue system decline second methodically be to opportunities have

revenue first to that assumption, product stable across in half underlying and flat roughly With in for components the targets second half. remains half are our our business order rates spirits Our first assumes our lines and both cycle service short sales the aftermarket second guidance and in half. segments

about a consolidated guidance operation taken provided full-year of burdened represents revenue, operation Xnd EBITDA, out million This guidance. at $XXX Looking is segment supporting the This chart May provided the approximately cost. this our fully on which from guidance of the of walk not of morning. we income due We've continuing million to $XX the discontinued we high-level provides with and million guide. $XX

performance, we and a those supporting EBITDA. with In targets $XX approximately million we're revenue Energy lowered by $XX along adjusted our annual reflect half half which continuing This segment implemented guidance of Power income million, target mitigate second assumes to the anticipated X% continuing the to of cost $X $X.X approximately we revenue, We business. and operations On segment and of million billion basis, approximately adjusted $XXX declines. corporate our revenue $XXX targeting about organic income million million. our the expense of the of lower countermeasures includes volume first EBITDA operations, or

which Power of expected capital time, the assumptions The execution strategy expenditures, productivity sale the X% and the including and facing expect strategic of with following our increase in the timing the to divestiture to associated the appropriate product actions discrete few and these development more on breakdown of That and proceeds amount well goal, As cost related we our and capital the growth, concludes next margin and detail business: items at net years. provide X% cost in progresses intend remarks. our further my we as benefits to benefits; redeployment; as, investments Energy modeling to over of and for gradually new the opening

At our to guidance this time, over provide to the Jaime turn I'll and QX more results, color position. in financial call

Jaime Easley

earnings I'll The EPS morning, was EPS and share. $X.XX good everyone. of and begin Marc, Thanks, $X.XX QX per with per continuing operations $X.XX EPS per was from share. The share. from reported operations discontinued

The $X.XX discontinued Energy Power are $XX resulting that divestiture. or from included be basis tax realized million to on expected a gain the differences EPS and

expect tax continuing was due these to with South not the guidance countries in operations, related facility of losses cost for incurred in quarter well a America. from XX% tax we incurred a above portion the assumption to of where closure to losses EPS A at rate do benefit. effective our realize Looking XX%,

is using from reported $X.XX On EPS. rate, an basis, to XX% a with calculate guidance our adjusted a per tax earnings adjustment This share. consistent we're

restructuring with The $X.XX year are $X.XX professional items the a fees legacy benefit mark-to-market equity charge this to $X.XX of actions develop growth other strategy, to gain adjusted strategic related on include making from our investment. associated investments and we a

operations Excluding in EPS these continuing period. $X.XX adjusted the from items, was

been Bran+Luebbe is results Note in in year. This and re-casted Taking year was Power lines with and have to using all product and were $XXX smaller segment look over Industrial. reported the same a QX previously at starting guidance. figures include the for our full-year that Energy million, down segment. basis the we other periods X.X%

segment of was in and income offset Organic declined growth a by due exchangers headwind. declines headwinds, projects, and in shipments coming partially the to These year, heat revenue. X.X% Despite the equipment. level mixers. capital in versus lower X% revenue prior or Currency $XX million X% decline were XX.X% of of dehydration at a improved revenue

factories, This as, XX%. focus at XXX higher which increasing driving quality across by expanded net gross as revenue. operating Margins of well our driven efficiency nearly points benefits from margins, reflects price, a came on our higher improved in cost

Looking slowdown X% the across the demand prior-year organic cycle Industrial versus at reflecting orders period, America. short in down orders, North were particularly overall

across Industrial our Lightnin mixers, saw was decline our exception high majority orders. the we the in Plenty growth and The single-digit of products with of

continued our We this year. mixer performance business to see with exceptional

Moving revenue quarter level down the due, part, on to declined Beverage. was revenue to was Organic Food $XXX systems of for was in over a and year. X% anticipated. Revenue year headwind. a This lower X% Currency X%. than million,

Component offset aftermarket sales. sales by prior North America the were in down partially versus modest in also growth year

million margins it investments to to delayed by Beverage likely and imposed Food North exports. U.S. revenue America, X.X%. $XX decline is attributable tariffs believe we to income capital component the most As were in on relates was and Segment producers, due

significantly dairy America. incurred income by costs facility exit in of volume certain declines. lower and The losses was and margin also to year-over-year Profitability contributed sales to net large in diluted installations, two quarter high-value component South dry the on a the

We improve Pacific, second to America. investments systems, expect Marc Asia lower for in of Organic a described. North components broadly on and significantly the level margins segment XX% delays orders orders for process declined in customer capital half reflecting in as particularly in the

Dwight system to activity we of their strategic opportunities Gibson remain and approach of to disciplined his better order funnel and are the quote opportunities. systems healthy, much in team seeing at That is and outset QX. continue in

QX look continuing basis. first Moving our guidance to operational guidance. on Taking a on a at

revenue. high decline a single-digit of This year. prior We represents approximately million the to $XXX are targeting

and a the high We X% are organic revenue an single currency assuming X% headwind decline and between in digits.

Our which projects decline revenue Industrial large guidance from Food mid organic single-digit the down. assumes the -- decline in in of organic reflects Beverage, portion a double-digit decline and our segment a revenue and a ramping contribution large

order we've experienced quarters. broad for three development revenue two and over organic described short the reflects last our we've assumptions softer QX in Overall, the slowdown the Industrial activity cycle to

are of targeting about segment approximately income $XX XX%. We million margins with of

This of modeling corporate and $XX million. are cost includes We $X.X expense business. Energy Power around at supporting the million

$XX sorry, between our at a EPS interest million $X be be and Adjusted to tax per $XX is million is -- $XX million range between million EBITDA expected EPS to adjusted $X.XX and adjusted is $XX expected and rate. XX% expense and share. to I'm $X.XX guidance assumes million This

Looking at the full-year continuing operations guidance.

the changes more in $XXX segments. guidance to approximately revenue material little and This XX% Power the segment. XX% primarily in organic detail, basis, In target reflecting for an reported revenue and are the to our includes beginning range. through segment million walk segment, the previously guidance for our now first we with Energy margins in targeting line. $XX Let's our in our Bran+Luebbe demand. revenue Industrial reduced On our Industrial May a cycle This $XX the million guide, of product from May now is short we about slowdown the million of

to Food a detrimental now our projects. the and to of component which in target range. revenue level we've our reflects reduced we the the reduced as, level lower million expected Margins expectations $XXX for of This as spend to Beverage, revenue. customer are component a capital and profitability be reflects the in XX% to margins in below impact XX% of well $XXX revenue, delays the in the Food low This was million. and on range seen In QX, of Beverage full on year

key to our other guidance. Two updates

business. already, $X As and the mentioned of cost million a Power expense now few times corporate annual supporting includes Energy

completing keeping are for to maintain the these costs guidance upon divestiture. our accountability We in addressing

about with accounting are the discounts. for to expense at Looking discontinued expense, XXXX's allocating consistent of $XX million methodology operations interest we now interest

$XX operations the Our interest now is million expense for year. continuing

reduce think interest if million look less. thoughts divestiture about reasonable, of As our -- will use we expense proceeds or fair conservative not annual to our assume I it years, to the you $XX is estimate. a $XX the in expense interest modeling future think million proceeds, today, to on is Based the

already, be and I'll slide more our so of We've view a full-year next offers a brief. of guidance lot modeling this The covered comprehensive assumptions. ranges

EPS rate. This and this interest million the expected operations working XXXX, million just full For adjusted share $XX expense to assumes a $X.XX our XX% Adjusted be cash for free between $XX of guidance per assumes at Note tax is over $XX flow year. midpoint. CapEx is from and positive impact capital continuing of $XX the modestly million million. and

liquidity, Moving capital now and our to sheet, principles. balance on allocation

facility. a the take at look credit and start Let's

the worked our During team facility. our our successfully to together senior treasury lender with quarter, credit group amend

had in was a been in and As QX set facility spinoff mature our XXXX, place to in since the reminder, prior XXXX.

a our facility the a XX% revolver on the foreign to million our to with $XXX USD, of certain security now our from loan, purposes allows certain new foreign gross and a term and net are credit transactions. which for borrowing performance reporting. to includes Our simplify able our And $XXX for capacity of provide previous grids pricing, compliance guarantee tranche, a global amendment $XXX instrument were million to we against pricing in increase million improve facility. parties currencies, able issuance modestly process, counter balance Through in borrowings cash fully instruments

and for of slide, thank value to instruments, committed debt creation the pursue Note amendment notes. finalized providing for continued as including our of to side an material of capabilities our XXXX. On maturities required we I would our support principal can schedule this through toward banking all until senior step the you Getting like our marks their financial partners plans. important strategic company. teams our we our that our payment have maturity are see staggered no right the

gross our At million X.X slide, leverage net end the was the cash this Debt the have next of and And end capital QX, to capital of XX%. of we $XXX times at down overview $XXX structure. you was on to an million. hand On total period. of debt can of current see

Just fixed is under rates, outstanding X.XX%. with just interest which over XX% has at attractive debt, floating debt of rates at our XX% approximately

previously, majority the and $XX million cash second debt. cash to in June, million the half. using the expected expected the committed year We $XX remain generated I be Through down our to between for $XX As reduce flow adjusted the is free be to paid debt. mentioned majority we've million, of of to

Between our consider remains we expect potential when full-year a and cash Our million. from hand million financial we reduction the debt in $XX position. the today, to of $XXX have Energy we $XX very and liquidity Power on commitment to million proceeds divestiture, over and strong to revolver, be

As we to to general on be based ROIC-based. approach return organic current growth mix and for back our thinking these allocation, consider be shareholders. our allocate a in more of capital terms would further information, options it deleveraging to Stepping deploying intention and proceeds, of will investments, our

side You ratios of deliver approach and can balance a guiding invest principles leverage to ROIC-centered target target stability, economic shareholder chart. in times. through are business financial X.X see intend this right-hand with net return, that between profile. the and strong financial our all We to investment-grade on maintain X.X enhanced sheet cycles, consistent

continue we'll forward, of areas Going opportunity in ROIC that long-term strong consistent with our and capital value strategy. create prudently invest to provide

Marc back I'll turn that, closing With to remarks. the over call for

Marc Michael

closing, and focus. significant enhance strategy, structure, pivot Thanks, operating represents simplify execute XXXX our a our portfolio our customer point for business as Jaime. we our In

throughout on operations, cycles, optimal and and our a throughout economic driving highest our improved revenue invest to include be to value world-class productivity experience, flexibility of throughout capital balance opportunities. in position design invest continuing to have creation in higher Our return customer a a objectives and business the our to organizational to aligning drive sheet portfolio, strengthening enable our cost quality our

our want across I for thank effort as hard contributions as, our to partners their quarter. business well enterprise, again, the work, the and positive tireless Once teams to

time, morning, our We up prepared That at are and shareholders, and and this for employees. future, excited open the remain questions. to we'll committed about call for the concludes remarks long-term creating value our this customers

Operator

Nathan is from Jones Stifel. question from first The

Adam Farley

Hi on good for Nathan. This Adam is morning. Farley

Jaime Easley

Hey, good morning, Adam.

Marc Michael

Adam. Hi

Adam Farley

as on book short is cycle more broad-based markets progress about just wanted weakness commentary longer then could did with. through quarter? talk that or to cycle just of the I How projects, you And the holding the Was the how comment around begin your well? concentrated? some up end across to also, order if

Marc Michael

to Jaime, Yeah, Adam, sure, in And jump if got add. take I'll that. color you've any

it's segment. look I we by best think it at if

stories and we for market what main in overall the we're food components in in think be beverage, of demand, business, softer than the part we expected. and I our slower seeing America, is a market North cycle do would bit short the

associated influencing are is we we tariffs from capital really mentioned, with China customers' As this spend believe decisions. that

business. influenced has develop American that's North And short cycle So a slower China, our planned. systems components in business a our to in bit than slowdown been we

due that to is of Some timing.

some that LOIs and hand through QX. of orders beginning to starting had here those translate We in we're come at see actually into didn't QX in the

to a off in good we're So start systems in QX. business our

we're throughout The other pricing is selectivity thing years projects. indicated the business we've last of say I systems is in that the the couple in in discipline our would the maintaining of

So in has some from some are pricing we too away the gotten competitive. if walking orders cases,

which upturns our on the our upturn of that's that With what's in as seeing in trade down kind And would beverage in and with in expectations the wars, to of of see result so we say sequential Food as business purchases that and happen did Europe, So European we some in of hope that region that. then see pickup are the America, out to going China some in overall slow was North starting see. from on hope purchasing China. in Europe, And a happened improvements see to beverage, business the nice believe and are goods a China some there. a we some really we see in to our and situation we food basis, I of exceed some

seeing business, would second systems to in I expected half of expected North slower We're of kind pretty the already in in So story China than up. in but But mixed the sum there that recover Slower beverage. year. in component we it QX. here some American and of overall, food

Europe, we're we'd in bit a orders, Mix better than the still And in in moderation think slowing at And industrial, a if a look big year. so was dehydration we especially then what pretty were pumps the or in industrial, bit. story stable far and I it pacing expect as exiting still saw orders our sequentially. good then QX. in of and short We cycle business was pretty hydraulics our that

America So across was the nice short Europe. acceleration QX and kind in of business. that to from story North Europe, America in cycle North the across a APAC and And really then saw in China we our QX region, industrial

China So the again, and in a in a bit of North slower but in story there region. America Europe accelerating APAC mixed industrial, and

that's cycle consistent we the just of short sequential brought from really QX saw the kind QX we what what us overall the to our half, again stability holding So cycle part. to short in in that given in our to business first orders saw

uptick our through really half we've based that the the planned just systems orders on in of of maintained China. business an in year second so orders And the with developing the

meeting soft so first here. QX mentioned, weeks we're we've a five gone good I as again, start, So track on through the expectations, and to as or is our

Adam Farley

areas the like Thanks. All cost some in on update productivity Then right. you you the Marc. are doing, what color on? just continue initiatives to then business can you to helpful, That's really provide this and guys improve some of Could your and operational excellence turning just journey, goal.

Jaime Easley

take that one. I'll and Yes,

the were together, think at coming last plans we I we talked we nicely. that together time as your that around developing So have been are mentioned conference

we cost, also or some give they'll thought engaged we party and bit, that functions modifications make we these run really do third to benefit the us a grow. up long would functions a go back look function-by-function in Going help help to as how benchmarking to the our us through during set

So up. works wrapped that

The the out. leaders have functional teams, have plans that at looked and the set

woven the of As QX, piece P&E through those the -- a along that morning, through this and to on work is is plans comments support ready those. that required that we was is level we begin business. with that are There executing goes there we finalized a functional had

and we to as bit in order resources to we're quite operate run business, need continue long so. to a P&E as going So of the do those

to the it's what ready sure exit of are But are than doing time can of of -- we'll of actions in be that those earlier plants ahead, business the do execution business, really with through making then the the there is to P&E, the needing and the those of teams and concert [inaudible]. the sale the that move really and So extent, TSA so. go the

through may most most toward it's these started, of actions I up, divestiture the materialize the really wrapped that difficult get this to then what predict. relates to XXXX. well, process, end is, of of it will say likely would as is that be as course of we So process that and timing seek to very going year, and The is we'll to get begin

Adam Farley

it I'll on. Thanks. Okay. pass

Marc Michael

Adam. Thanks

Operator

from The Halloran is you. from question Thank Mike Baird. next

Mike Halloran

good Hey, morning gentlemen.

Marc Michael

Hi, Mike.

Jaime Easley

Hi, Mike.

Mike Halloran

on before sounds, process up setting context we is consistent on on in how How certain just acceleration? to I areas, how initiatives, here? as that in maybe to preparation give give event, But across yourself final moving of here some the is these pretty board move just out this through some getting there? timing much trends it and look of other you're sale much how sales the the now you areas. context pacing the So Or mean, response based it much here, productivity around try -- some of sticking can just impacting is quickly past the

Marc Michael

Marc. Mike, yes, it's Hey,

the has and got we've to place, objectives, move plans get and As with Jaime cost mentioned, they've was initiatives really we to to goals mentioning, particular in forward those. significantly mean, their our pathway the X% Again X% I as ability have, impacting there's identify there. not each Jaime function

develop of year, exit we of working a those based realize get half start we around on provide next we'll on into time to we the and we'll expect year, complete as second through So so early XXXX guidance. expect for the fully schedule we part to those benefits the our how the those and go XXXX, as

how the in time are as that's was of the cost the P&E that well the we how X% million But a the those timing, close going we've the other out that business, period move margin through and transaction to And those and needed. we in are of that of line, point productivity. cost layer in corporate defined costs upon on expansion through and coming that XXXX that's that will long the the timing the the support bit cost supports mentioned part to $X the know remarks, prepared X% the timing, depend got

Now what's TSA we owner million out would needed support new in with of which important those is would business. costs that cover to services those anymore, point intended the aren't take and be $X -- then until that the a

Mike Halloran

Makes then there's the into quarter triple F&B the stuff? third the system sense. Or of on through second last side, quarter of is the from the here? lower-margin And any that

Marc Michael

Yes.

in We the with in $X have each kind and minimal dry about a evenly quarter. both the associated split of million of large revenue between revenue QX, quarters, for amount dairy two projects QX

those the backlog, that once large we're system dry with revenue dairy So that -- finished trends projects. that's stream on

the as half we we and in backlog if about you improvement started supporting improvement margin gross second year point into the What to a expect I is what's about see overall the get year. compare expansion margin part mention the XXX-basis of the would where the we of to

basis the really systems margin than into board of we better points total. the in looks go is terms improvement. of backlog half with a And the performance in year bit XXX our So business as that about second improving the even across

Mike Halloran

situation good a And promise The And bit thinking about one little of going be the looking talk transaction a be then a acquisition once so for opportunities more is of at, That's just perspective. in you're that in financial that you're filling the from you're seat which last really inorganic May like perspective? good. the closes me. that what just is down funnel That's -- obviously, look from something good. very does side, to your from the targeted now? one

Marc Michael

where verticals want at support identify that We're look the funnel building We're to can actually high-value, we micro work third we are. high-quality party's some with We additional pursue. streams revenue now. some of to really doing various

and things at funnel But to we're present always thinking as can and capital, and opportunities we've sure them. and deploying are make we that some we'll value building as create a look that themselves, about in closer be be We're been and develops disciplined near we'll that adjacencies. to we how in are So capital, going core that return. now deploying that considering good get

Mike Halloran

Thanks, appreciate it. Marc. I

Marc Michael

Mike. you. bet, Thank You

Operator

is Barclays. from The you. question Thank Mitchell Julian next from

Unidentified Analyst

everyone. Hey, Harvallowan good [ph] Julian. This Jack is for morning,

Jaime Easley

Good morning.

Unidentified Analyst

push quick outs one your guess, I some you're seeing project of that customers. these from So question

of and quarter, that cite kind Do is the sort tariff it sense one You outs are, how of push a stemming from trade a conflicts. far sidelines it bit is get some or sitting are of of you guess, of out things sort on this up solid more your ramping quarter do the week? a until light customers of there's think two I a resolution, especially of in

Marc Michael

call in to cycle business America, doing really will question that where that been been customers and That's a may our the exactly what run have looking to what in we've be. the good boy, upgrades. we especially support shorter tough capital tends why that's North deployment of feel prudent at bit rates some Yes, a timing

So, -- we over years. see what Food bit a in we've this at to than Beverage level couple historically slower is really that and we'll but a albeit steady and last This a anticipate unprecedented. rhythm our of is seen specifically the continue business,

cycle this are of still it though Typically, it's there. The go the a more make back experiencing continued that pipeline, in of to through, it's started year and But for call. so last we kind half to difficult bit business. short even short these slowdowns second you if nature

but decide funnel funnel watching slower a it ticked active. and that's but in to -- customers, a well-positioned a bit conversion the the rates customers QX down capital. the first back lot got of It's have the closely. the the of know We the -- came it but should year in terms and than historical what release been projects We've we're to when the are we're when half

Jaime Easley

about Yes, the description components the you're also F&B that. the asking business. I U.S. to was I'll That just business and the systems some add think of of of

to million that come $XX business of in million in saw last the slides our one of you been So has few systems $XX quarters, revenue. the

intake do in around uptick order systems. is we have fairly significant What the a second in half

his the business. in mentioned are strong we've Marc the watching that we've think been that July around systems projects remarks and prepared through now. those a seen I already in And selective more seeing are come

the the backlog those in the from we and improvement basis the and to margins. QX, accretive to he of also gave quality points year-end at and since year. in bookings, that are or references of in backlog be XXX-basis-points XXX rest last June made Marc projects of should margin margin taking improvement The And for here to margins and year reference those

Unidentified Analyst

follow-up. for it. And then that. Thanks quick one Got

deployment. Leverage when earmarked and towards lower debt return there's if more starting of coming deployment Just to of timeline right to down to kind is of curious capital or for trend getting know is so end just now. pay your rather cash that that down of acquisitions back X.X kind target sort for a to to I shareholders flow I'm play.

particularly light and just on something more a more Energy that in to so, dividends, or is the I guess, closing, of of see acquisitions kind first you before come buybacks, running is basis? and whole Power analysis that And has ROIC more

Jaime Easley

through I course referenced down continue debt end Yes, certainly I of complete playbook do whenever the P&E. then we'll bit committed to And to the we divestiture we've our a there. the that you of say and our the up quite getting to year opens lower range as of would the think

at some a the restructuring are be that to the that talked investments factories pay for organic the that about also probably of approach amount business. And the within There either we we'll certain on to that to keep activities of going of take we're balance some our or side cash here. time on so sheet make the we'll

to the to to and look shareholders do taken of proceeds. the reference be would But then, we consideration and we in And the trades, between business, going stock P&E -- fashion, to effect then continue you return deploy also approach now selling made as to recognize we'll we'll that target the that whenever a and those into what some be. there, best to watch where will dilution I

Marc Michael

strong we understand to what we in X.X I the I -- right? at the a which add for sale do OK, would sheet we more that'll of uncertain Hey, that's to redeploy things from under period times and time. sale proceeds. just Yes, the And dry for power a I'd the of good allow we proceeds that. that are healthy, and mean, those time, up to flexibility want that be if is look and mentioned areas a capital more once to balance we to energy end do and position in. over want powder business us

ranges target won't a X.X healthy these would to period good being our position time a a with kind times, in. that during balance be to below uncertain in. of bad position a really So be but for is really X.X X.X sheet be That to be

Unidentified Analyst

be all That'll Got me. from Thanks. it.

Marc Michael

you. Thank

Operator

from Robert question next Buckingham Research. you. The Barry is Thank from

Robert Barry

Hey, guys. Good morning.

Marc Michael

Robert. Hi,

Jaime Easley

Hi, Robert.

Robert Barry

a I guidance the on me. the stage things the the just wanted comments cycle. bridge. of on to Slide couple I on sheet XX, to agree this Yes. you of at the here It balance sounds kind clarify in good with

out and million in income. Energy, putting Power you're So from $XX segment of $XXX million revenue

that implies margin. a I XX% think

coming than math adjustment imply don't have You X%. would know, would some thought or X% in Is out, there in the to I that, kind there? guided of higher even the be, X% be I Bran+Luebbe business.

Jaime Easley

Robert, from business. power does say shift the margin slightly above and is what is industrial, our energy would correct, segment have the principally business for average Well, the you're which Bran+Luebbe brand, the into I that

but total see they affect there In are you'll the moving within addition to that debt pieces over. smaller may come that, there generally aren't material

more as well. principally some it's Bran+Luebbe over coming brand, the that's So but

it As we'll revenue coming coming and $X operationally, reduction so EBITDA the million margins by to down relates and million. revenue $XX have of the and down

that of cost the another From that business, the half that there to by about About price systems reduction detrimentals over our backlog, shorter we've to would the of year. see improvements componentry. our we margins some seen now the really then and benefited revenue of will in be this the standpoint, course half some of happy cycle relate talked

on protect what's But side you deleverage. can some to trying details Stuart are or pieces over. the that really those your EBITDA and to so with later. coming moving help There -- point And of of back

Robert Barry

to was Right. Yes I next. actually go and where you went going is where

might like including kind the like-for-like also $XX implies sales, that $X you're of now kind out of is million I couple sounded better. So it bit of little be or you clarify like million Is a It are sounds wanted than on EBITDA that things $X of million especially but that. to guidance right? costs a there EBITDA when costs better that price of tracking -- of thought,

Jaime Easley

momentum the driver, on our inflation as main see we and be forward we price we continuing will how the seeing look of side, some the price, course see we're that's and think to sit of I Yes, that trends year, then cost through with the where be of would biggest and develop difference. with kind the

Marc Michael

great doing with projects switch, that, systems Jaime was and our doing emphasized better would on there's And what inflation, then teams to as a price, mentioning. and a we're of other liquid our thing the chain add Robert, there's margin supply impact under job I of lucrative the more kind having Yes, profile. mitigating these I

the significant So as go year. we're of into really in going a margin second there we half profile to flip see the the

food of we're in another done, too, this up -- lot that with business systems half important a piece to also completed. and So show the our will restructuring and in better we've beverage margins, half is

Robert Barry

the you're flow, me, million. also this million, Got think just on now and I $XX it's to points $XXX tracking from I lastly things guess, guiding cash midpoint, maybe it. better

So $XX there. million CapEx of on of million $XX million or million there's less $X EBITDA. $X I out like, that's pulling maybe mean,

million, million. seems by flow cash $XX million it would So guide reducing the like, you're $XX $XX and have like, expected of out, I only

know, also I'm kind better don't else in or there missing? that bridge I is So of, tracking working something some capital

Jaime Easley

No.

you think if cash on back flows. of of face statement the I take to it the what's

ops So cash $XX would year-to-date, we'll be and disc million of have, flow. free this continuing in ops total, of so

year, the of the back to we expect call million. to, million the that up it throughout course to work we $XXX trend do As $XXX

significant ops sheet balance go P&L how difficult And I'd and have from But capital some the disc statements, from a strokes, capital, split pretty what positions other between working that it our to free The bit on broad cash of particularly and big of financial business. systems ops. we Robert, flow do be of are ops would of driver us a through GAAP from QX, in come to some we in working for then in improvement continuing the see slightly the disconnected to get in and front saw certain level then and improvements is maybe And to through and AR. the continuing disc that starting comes operations, ops continuing place inventory. say last

us, think remainder already the for mentioned what couple orders expecting systems been of times less a those this a now a the we've of we're of number headwind the of as that's developments year, reminder, we've and through to and and larger a with degree come as I seen be milestone payments in And do July, to we've down the of So the and projects. tend year. taken orders in front payments those end

positive year. We we are that turn for that us exit the as will expecting

Robert Barry

All right. that for Thanks color. all

Jaime Easley

You're welcome. Thank you.

Marc Michael

Thanks, Robert.

Operator

from Thank The you. Coe next Research. Nigel question Wolfe is from

Nigel Coe

morning. Thanks. Good

Marc Michael

Good morning.

Nigel Coe

be of I'd then kind a with that any or in that And sheet? of that balance you've investment, the of depth. some talk first guys. business, But in side there stronger option two a companies and curious was of within was deployments curious did I'm change do capital which that about. the just your degree organic what But the and covered sort in we've organic mention means you might you year how So lot constraints for had if last

Jaime Easley

Yes, Yes. sure.

different couple So I of buckets. a in it think about

and come first NPDs change be The development the of investments in new to would product level out. that

team, and I restructuring forefront done the are investments, allow them, that recently, us bring have new going opportunities an our created strategy. investment they give the design how so organizational some products reorganization and And tied and to a allow too, framework where across net faster, to here organization, and to to and his visibility have of better Dwight team think are ideas which

of spend revenues to success to be roughly in an push So I is going believe think that We would've X% driver you absolute future of historically, we seen NPD. that our profile would quality up of I'd the double a revenues, time. of vitality say, least revenue index, the improve period that lead and to of and the our over vitality to, at

have identifying is those really rapid we're the the in fund forefront, pulling look opportunities, those again more historically. working team on to to those we So to the than pace going

more bit So that on would Ty spent to we've historically we've look plants, continue we year. our be then significantly CapEx couple those less than on which plants come Jeffers next see into number a and of months, benefit are to expect aligning product from that bringing we half the during this product of believe and a the we here back come depreciation. team the size. And as year And strategies the just seen last there are and some in and and some rapidly recapitalization, to could second forward, his of ideas forward to those the

to lead Those of serve products, So CapEx, higher and that faster, think quality. of allow roughly investments times we the I reduce our automation, going of customers to type recapitalization, we're focus buckets on. investments believe a would factory that organic those are us the

Marc Michael

cost have certain as a X% productivity months, capital need other that the of next is deploy Nigel, to go we and XX amount cash Hey, those -- to one and would thing the we through toward we'll that. mention I X% objective

your So very the news over several we -- the efforts. to in mean, that's beginning wanted everything's deployment, that think percent going and is, during of from a hasn't toward of past, in capital past it was things question, do debt the restructuring the years I good approach. our the in reduction terms I been balanced

to and organic of terms balance Jaime's our out areas we're to deploying capital being important returning hitting really in in is -- more and So plants and and investment. we're in products, shareholders mine, goal and that how how too,

able capital flows. been and stronger a much sheet of the years going last to the deployment to that out So three the to balance better much balance look back we're really in to on be we're going differently than cash it's and do

Nigel Coe

with touched projects helpful. a -- restructuring terms to Marc, effect to in there this on you That's Is demand program? obviously, to do trend X% -- on the the a Thanks. here just environment, goal. the and another toward weaker of X% bang big and there driving need you're need that is

Marc Michael

bang restructuring program. Yeah, a big I see don't

and of our from been managing put overall the place experience, We've in much couple Some in years, very of disciplined the more and our structure headcount effectively. last things efforts. being cost we hiring learning

this anticipated. So are developing as the even first saw year, moving we things not we through of as half had

our hiring process We making areas, in we were contractor overtime headcount. and weren't much that running slowing down our certain reducing in sure facilities, the as

So need big continue half a bang. don't orders of the I second how that manage prudently see the as move to for the and We'll we look develop. year, see and our

Nigel Coe

sharply? plan can business the give business how see Has so energy -- the how not And just then given sure and can -- in or sense the to a what tracking parts your plan? Or do quick import portfolio have bisected around follow it on. question, is we the less Obviously, as sense you've some can the discontinued tracking certain deteriorating bulk is I'm versus [Inaudible] of you've but business power that and industrial. sensitivity proceeds? the we just is more the of

Marc Michael

Energy? and Power For

Nigel Coe

Yes.

Marc Michael

Yes. rates a as it from North as in income double-digit pipeline Jose the QX with recovered orders, executed good they expected his mean, No, QX we did American I job Larios good mentioned We order valve sharply team to and that QX. margins.

than anticipated, hit objectives. So the much revenue better

good not made from the going that interested already running right the to they're execution, be are team proud switch QX, executing and bigger of presentations business then of visits through and factory And only management good buyers. part quarter, that a aspects part just spent of various we've really and more couldn't reemphasize, on the Jose his where So the internally and team of path.

So already energy. and of and be due final in expected we're for moving the phases power diligence second doing to bids

it's So well. performing

a positive outcome. as a we're pretty and Jose and job, his about confident doing team indicated great are

Nigel Coe

much. Great. Thanks very

Jaime Easley

at timing to seen in QX, of all said orders, Marc would through which there's the timing expected we come in differences add end Yes. there. mentioned just be the QX, orders come quarter. to which that. I of the we in Those that second we've

year. P&E an it kind order on income when that a then of remain the it's last basis from -- here profile, in continues margins that XXX and And of almost couple would've years. QX basis, performance for it points been of you strong. run where our well margin stream highest for for was old business has segment QX over business, the at that that in just been aftermarket And look of to The up

is So business the very well. performing

and done their well, and mentioned, of well. factories a product, customers performing are reach Jose are Marc team, customers to have lot as responding

through, very that it's So on holding all Marc quarter. going well been see nice business things to the that's together mentioned is that this

Nigel Coe

you That's great very to hear. much. Thank

Marc Michael

Nigel. Thanks,

Operator

next from Research. Vertical from Brett Linzey The you. Thank is question

Brett Linzey

Hi, good morning, guys.

Marc Michael

morning. Good

Jaime Easley

Good morning.

Brett Linzey

good the in of some productivity what's efforts. go once to streamlining and Hey, of pace, It's primed to just teams want that back ready here. hear come to are just terms and But to be great. to phasing plans loaded, when of heavier timing in now back-end are initiated, the starts the finalized it products more productivity color these Is that lifting? the would Any ramp?

Jaime Easley

they are would I Yes. that back-end say loaded. somewhat

significant a degree So fairly have multiple are that across of parties, execution number etc. require degree jurisdictions, actions a the ones multiple we of significant planning, fairly a that of

So they're in motion now.

the point earlier, this But of really next over we'll Marc's half take to shape see think, second of the begin take of them first place year. half to I in some year.

the before well actions. XXXX, realized the unlikely all of half savings second to hit of the see that going to but benefit half of we're I fully think begin over will the that in XXXX the

the the knowing make the of that remainder in TSA that around are executed well begin under and the soon. to that progress have teams certainty needs to be, piece relates projects there's planned, P&E the There's to where that and be fairly will with we'll go sure will business but

Brett Linzey

segment? have with in orders and you the there maybe assuming great. to to the the you are a the bids the activity of be, region? the of quarter in on just in specific guide in then follow-up type And would for And are How what seen balance then stance then question nationalist year? And any that respect new China orders. Okay

Marc Michael

sure. Yes,

industrial. So down and food let's it in again, China, break maybe between and beverage

QX. in quarter we QX the So I orders through we slower we expected, mentioned, we're within some that already to but was into seeing happen systems than that LOIs come a hand didn't expected had them in in bit business as translate but

business have QX and and orders food beverage coming we of for quarter. So in in and see business, components increase picked and systems then that up did within sequentially more aftermarket the our

business the exemption then an overall, is disciplined in really that So system food in orders. cycle across would with on just associated in component China or of and we that short to follow you and operating expected still thing entire business with acceleration for on a system as some nice of business and selectivity and beverage timing we're the in our that China. our business. matter, pricing, the with I across business at staying industrial QX look industrial that QX as from APAC goes the we And saw business

of in well. say is China, first is performing I half in the the would -- So business overall, the years

of the executing point to and to in evidence specific couldn't with nationalism. we're say they're front they Hello? we're I in We anchored our We're the plans -- QX. come and perform already early systems even business team. expected our to should just with and teams, any half of that in any better seeing here them. well with We're that look there's that second the localized well have there And

Brett Linzey

sale maybe process. at types just with looking the list of buyers of color or some Is that to quick the on speak are today. one looks and the it how just buyers follow-up financial Can the long a strategic combination asset? bid more Sorry you

Marc Michael

now the pleased from of both things bidders going but confident and through of and and and through and lot say right gone through of second And as We've due already second number the first site for final presentations. the healthy Yes, into we're gone preparing in in that I gone not round list still with of depth kind and had the management overall would will progress the I bids. process through then visits, we've the interest. we're a bidder half mentioned, who's diligence we're interest round year process, I'm on of bids. We've again, we've

there's on front. So we'll soon provide an significant update process developments that moving along and as is well, as

Brett Linzey

it. appreciate I great. Okay, Thanks.

Marc Michael

bet. You

Jaime Easley

you. Thank

Operator

RBC Deane from The you. Dray Thank question next is from Capital.

Andrew Krill

Hi, is good morning. This on Andrew thanks, Krill for Dean.

up P&E, pieces the has the going Just is that question -- whole process business recently than rather be can on quick oil just impact had you but Thanks. comment? And any segment in wrapping sales willing on at well, would this choppiness sell to potential just the seems and a the you I It multiples? gas point?

Marc Michael

the work the backwards teams business point, from but the to And apart sell are parties performance We it you there. And to the not this good from from improve, value see to to defined outcome. as for performance individually. continues plan can would at maybe one way. Yes, or as QX team and We break looking it business business getting a support getting hi, Andrew, the to only interested expect sell as it. and in that business any that the we we've don't then, have we're as of building what that the up an intention

Andrew Krill

pressures And tariffs, to up. on continue it. then got kind the recently, ratchet to lastly, just seem Okay, of

any confidence you you some you us give input on But other your direct it like, color cost, So give point? be comment have just in on increasing just to increases? price still. in seen And in offsetting can the cost seems favor before this your at potential any

Marc Michael

throughout really the this that there's in stage, What not year Yes, there an produce team recently a the tariffs, job announced throughout doesn't the we at our really done tariffs. It has inflationary or our specifically any I year most the touch minimizing would supply impacts chain nice is this in products impact implications year. say area. really

commercial products a in tariffs themselves good half team chain year. supply significant our we're move price, with on a producing So we have doing to impact a in are good of is what job teams our on second the we're our spot done as having the

food business, deployment volume. back beverage the tariffs, the what China part and given are are decisions, announcements. tariffs that what's to customers We cycle recent But expect going those our wouldn't we in is that influencing impacted that's impacted, their being and the impacting short our is those Chinese believe of and -- tariffs from capital

Andrew Krill

Thank you. great. Okay,

Marc Michael

Andrew. You bet,

Operator

showing at am this Mr. questions conference I like time. back no to turn the would I Ryan to Taylor. further

Ryan Taylor

be the next available we'll your throughout any the webcast joining presentation, for earnings follow-up today. and and everybody will QX appreciate I Ian. time. have. you participation, Thanks, you that our talk day you to to for That call might Thank Stuart the answer concludes questions

Marc Michael

Thanks, everyone.

Jaime Easley

Thank you.

Operator

concludes a today's and Thank Ladies day. and have participation this for wonderful you your gentlemen, conference.

You may all disconnect.

SPX FLOW (FLOW) 9 Aug 192019 Q2 Earnings call transcript