FLS - Earnings call transcript Q2 2019

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Operator

Welcome to the Flowserve 2019 Second Quarter Earnings Conference Call. My name is Paulette, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session [Operator Instructions]. Please note that this conference is being recorded.

the Relations to and turn President Roueche, now Investor of Treasurer. will call Jay over Vice I

You may begin.

Jay Roueche

to second Thank you, in today participating We appreciate Flowserve's Paulette, and good our morning conference financial results. quarter everyone. you discuss XXXX call

Flowserve's morning and Executive Senior President Rowe, Eckert, Officer. Financial and and Chief Joining me Chief Scott President this Vice are Officer Lee

replay is Following as a And our for being and call webcast questions. prepared available. comments, the we will an audio this will event be open reminder,

our review do are materials you our press that measures in non-GAAP in call this company's our contain which Harbor non-GAAP of statements. include encourage of they the XXXX, at note information upon section. site are August which will disclosures, also Please to other and of as release are the as on involve earnings earnings forward-looking We and to beyond Investor flowserve.com and and to of as and included reconciliation forecasts, measures Relations both management Safe are risks the well control. available presentation our expectations XX, many available our Web and and our These based reported statements results, fully uncertainties,

the turn now like Scott his President Rowe, Flowserve's Chief over I'd to Executive comments. call to and prepared for Officer,

Scott Rowe

the of first quarter. the good Thanks, financial results Jay, everyone. morning Flowserve momentum and building delivered quarter solid on second

seeing and streams We results our in continue journey, X.X each we're program. good to of make on different the progress from transformation the work Flowserve

the that and our becoming and deliver each program every operate have company. embraced throughout strategic cost drive high company day. to growth, they and associates' improvement is we lower the Flowserve X.X remains fully engagement Our way operational our

divestiture delivered and basis margin some growth highlights and respectively. quarter XXX turning the X.X%, second and in of Let revenue We detail. to XX drove points our improvement me points excluding and before of currency growth operating segments impacts or adjusted and markets X.X% begin quarter basis with of

bookings and transformation EPS costs solid drive year-over-year. we both $X.XX exchange below full increased results, included and first $XXX sequentially guidance realignment and million. improvements, our backlog range with increased of continue operational $X.XX $X.XX. foreign of year further half $X.XX the of and million and our growth With to of line Adjusted XX%, to productivity impact Reported EPS adjusted to our expectations including EPS combined to $XXX the

our the leverage Turning improvement points the and excluding in of quarter impact half up bookings for in and FPD's platform points are increased and our growth adjusted and XXX and validate customers. FPD's or of XXXX. second decision first our drove pump operating currency margins continued divestitures Operating serve to leverage respectively. and improvement XX% now the X.X% combine its half basis XX.X%, and segment. our performance XXX first to scale to better basis

With now the optimistic multiyear complete, the we segment. largely for about ahead realignment this are program opportunities

to drive growth, and including supply quarter, transformation expected X.X% in IPD currency legacy manufacturing FPD gaining at level. facilities further this negative improvement our delivered are show inventory impact. improvement lean traction with on the continued quarter These efforts productivity, site implementation and past management. initiatives a chain X.X% Our we solid bookings and to of are planning,

due activity. quarter at a slowdown short the of work margin in impacted lower MRO and mix project negatively were Margins to in shipping higher cycle

by margins and XXX result, respectively. basis a adjusted points growth decreased in year-over-year XXX As operating

next four led the for him valve the platform the month team retired fully on wish past for FCD we growing the deliver expect who we future. we years. solid of another also year and well However, the John earlier life. his will like segment to our Lenander and would I as performance thank in full John this recognize focus FCD has chapter

markets. end in bookings overall our to now Turning

$X.X Second years. of reaching increased including the over in quarter growth three X.X% billion, highest booking to level X.X% sequential

second impact all the growth our oriented of The core XX.X%. energy markets. increased transformation our across of initiatives drove combination divestitures, quarter infrastructure bookings currency wins investments and project Excluding and improved

larger the exceeding had we the quarter, few during $XX smaller million a were size. majority vast bookings the awards While in of

Looking forward, and award. move markets healthy projects our we solid another to we near-term, quarter global continue in QX to remain of bookings expect toward expect as

ramp grew vigilant environment larger However, bookings uncertainty we type global of ongoing we both With XX% geopolitical remain reaching fluctuation Original work pricing do beginning recognize disruptions of expect competitive for equipment the XXXX over to of commodity up, year quarter. trade valves. second sequentially, this for highly and pump accounting projects to and prior volatility, the over to orders and due and nearly pricing. the XX% since in and highest X% level remain for

with However, remain we visibility, will and been project market in our improve have disciplined pursuits.

there prospects to the targeting more this ability seeing base solution where remain These while committed global of strengthen We're a backlog markets. gas building We projects our is to ultimately services. aftermarket probability drive and high relationships, optimistic where aftermarket differentiated a based quality of number a of significant chemical project oil and on offer provide L&G, will in cycle and a and in progression customer install midstream growth. we're to new our opportunities

customers and pure increasing leveraging flow of XXXX. support control pleased transformation end collaboration As launched the are across seeing we at large better year, the expected results increase growth capture our segments, initiatives, are with to we power project play the our that last of in and of We concept investment. we Flowserve's the part the the our of are

associated of a come and comprised with second quarter, seals was the the large services L&G In it. fact, and pumps, that valve, award that received we in

technology customers' pursuing portfolio projects we where actively to meet full at can We the bring other are our Flowserve better challenges.

aftermarket Turning franchise. to our

intensity our $XXX roll aftermarket increased producing with consecutive in We the and continue to rollout million. quarter quarter, initiatives bookings the the commercial capture of fifth driving over

year. Our efforts prior currency resulted increase in versus of a constant X.X%

we'll aftermarket growth. Flowserve ongoing initiatives, increased spending of implementation the continue that we the drive X.X with coupled expect to growth We see, customer

As increased many have focus of meet upgrades their their facilities our the on efficiency and customers regulatory required to of challenges.

oil and perspective, and with and served the market largest starting our market from end gas. Now

are North the a a and Both where pipelines tremendous Second crude quarter primarily LNG Texas. pipeline to of quarter. driven are midstream with zone and and initiative XX% this represented of contributing FCD's, project transformation to resources largest when part pipeline technology LNG American Both awards X% we midstream growth Flowserve's a award awards increased bookings in focus our we oil and year-over-year, the the each related Two bookings success by Flowserve. X% of LNG over XX% increase. quarter in FPD's seeing strike available

IMO experienced million range continue the global refining debottlenecking not million and orders Additionally, we and Middle benefit upstream XXXX America levels the investment upstream a the from $X the North delivered in upgrades. efficiency that it in back to of to East $XX number since XXXX. the North Regionally, but markets. we recovered across American slowdown, to has first is downstream in modestly quarter and

delivering Our growth, million by strong X% Europe. was the headwind. of second XX% currency X.X% rate $XX award including and in included quarter, chemicals remained growth, in FCD's nearly market investments run which primarily smaller an in Growth project projects driven

will in believe continue Middle including crackers opportunities, strong the derivative and ethylene present facilities. to pipeline near-term Asia expected We East and North investment market that the the America,

concentrated received quarter to pleased our declined traditional expect in wide markets power that in X% power and fossil the bookings year-over-year. growing Overall, near-term. seals. headwinds in switching, fuel $XX the niche nuclear We to differentiating competitive continue have continue opportunities Challenges we in build a offering Asia. our for related were for in where industry continue fuel FPD which market award East, pumps, We second development new do Middle valves see power project for and for solar us where is million markets we a power the China to

We us $X quarter. upgrades facilities also supporting continue drove in this Pacific which award extension, with million life nuclear Asia for aftermarket existing and maintenance,

in declined by higher Second FCD's XX% lower primarily to was year-over-year, FPD's nearly industries impacted XX% including distribution currency X% activity of X% decrease, levels more negatively our offset due oil at of headwind. locations. general and price volatility was quarter by inventory that than partner increase bookings

bookings and and pump industry increased food while beverage mining, declined. activity, included General and also paper agriculture

overall markets than our currently combined represent less Although, X% of these bookings.

representing smallest in in the project Europe. XX% bookings North market, second increased awards America quarter, water including small and Lastly, our

bookings seeing a we We're African to delivered increase Turning significant by East Middle geography, XX% project markets. total and growth activity. in in the

XX% Asia in growth We X% also This North partially grew decline in decrease America. and in Pacific X% XX% America. and in Latin by offset Europe was

our over and remarks to call the the to greater detail. answers. turn now Lee we financial for closing then I'll results questions call up return open cover And to before Lee? I'll in

Lee Eckert

Thanks, Scott and everyone. morning good

of share and on strong mentioned, deliver of quarter. performance our earnings are another second we $X.XX, with per adjusted adjusted to previously our As keeping We in in growth. EPS with delivered substantial expectations the pace us year line pleased

was second impact. EPS transformation and line below included basis, the of charges currency $X.XX negative $X.XX reported quarter $X.XX, of a On which and realignment

months For year. the six our adjusted XXXX, XX% the of above prior first EPS is $X.XX of

realignment EPS continue improvement as and quality of XX% reduce expense. we last EPS, was reported of our from addition, transformation to XX% approximately adjusted In meaningful our earnings a to year Flowserve's improve

$XXX basis grew normal year-over-year. divestiture XX.X% up organic million, in revenues an and X.X% On currency sequentially, the revenues quarter were a excluding of X% with Second and constant prior increase year line seasonality. headwinds, versus over

$XXX X% to million, on similar a XX% increased Second quarter or year. to or sales of our aftermarket prior mix basis constant currency sales X.X%

Turning to our margins.

XX.X%, control combination. basis adjusted was XX.X%, percentage the adjusted margin improvement, included to by cost as sales offsetting realignment as on to pumps basis margin FCD's items of driven XX.X%, lower operational in to loss XX.X% FCD's XXX Partially Reported gross and point of gross continual an basis increased quarter execution, asset well points FPD's lower margin points and decreased primarily decline XXX and MRO increased Second margin from strong basis project leverage to our higher work, which mix sale. of performance gross on improvement aftermarket XXX to sales. XX XXXX's operational improved impact points due

to SG&A quarter $XXX approximately $X.X declined million. Second adjusted million

adjusted as growth points SG&A of second of With operating On leverage. focused SG&A margin improvement, as point As cost $XX improvement a well quarter modest $XX sales, versus items a margin adjusted a cost to basis percentage reported decreased year. gross adjusted to XXX solid result XXX revenue in a ongoing prior including as reduction decreased drove we and XX.X%. control, basis, million our approximately control basis million, adjusted XX.X% tight in

XXX XXX operating FCD's FPD's increased basis margin was points offset partially which XX.X% year-over-year, basis decrease. point by adjusted

million delivered Although, operational as a basis approximately improvements, in well margin XX.X%. which benefited still as reduction FCD respectable XXX $XX Reported increased points, of operating adjusted margin operating net from adjusted continued items.

adjusted low was the of XX% full adjusted our of at end Our to guidance rate XX%, tax rate year XX%. tax

Turning to cash.

year, prior quarter drove approximately $XX earnings versus First million than last in our working balance million growth cash and improvement including roughly capital, approximately $XX balance. flows or second half million, year's which operating cash increased $XXX million higher to $XXX

sales working capital to primary XXX as a percentage of declined XX.X%. basis Additionally, points

While cash processes to order we in we early operating capital, still some our until embedded they systemic progress on working drive and our into need improvements to sustainable, cadence. and continue inventory made are

expenditures Capital $XX for million. approximately second quarter the are

to has through $XX returned In this supported debt. long-term senior credit XXXX. million million since five entered also Flowserve We of July and dividends a the replacing year, that million facility, shareholders one new of $XXX into us repaid year $XX

will liquidity the coming flexibility to facility provide new Our company over support the the years. and with Flowserve

want partners strong and very agreement, are banking their ongoing with our and outcome thank of pleased We to new for relationship. the support the

other year. between outlook $X.XX per our we for Turning adjusted the our $X.XX year, our adjusted million, effect The the the transformation and impact half XXXX approximately strong first full the half range may year. share. expectations range remainder the as increased target year discrete well results the With which below-the-line of EPS during of and and foreign the occur EPS of target realignment of for items, for $XX and second as expected excludes expense currency

EPS XXXX. and between we or As we year's expect per delivered adjusted share. exceed a reported result, $X.XX reported EPS Essentially, this range equal in EPS increased $X.XX we to our also the

currency tightened growth from strong year to range X.X%. prior the of X% X% prior also our to headwinds X% of We due to dollar full X% versus expected of we U.S. where X% now to expectation continuing revenue expect

also business revenue roughly headwind last We of year's from an faced X.X% divestitures. additional

to last organic and total excluding at now impact the year's of full revenue range our X.X% However, XXXX. remains high-end original to FX divestitures, growth, our of for the narrow X.X% year

has in decelerated indicated last our work projects, cycle quarter, business short higher see As growth the percentage growth our MRO in year revenue I sales of from a of the original as will recently equipment larger months.

full rate Net to the with dividends expect an for $XXX interest tax expected in million a $XX expected Capital XXXX of full through to the XX%. shareholders. $XXX cash our interest $XX year XX% From adjusted to to approximately return million. between and is million expense we $XX be million million expenditures perspective, year to

We credit long-term million plan, year. expect the our debt plan contribute facility service during remainder approximately funded. ongoing to also global our fully it costs U.S. our of cover within pension continue largely to remains our to reduce And $XX to as the the we mainly

me now closing turn it his back Let Scott for to remarks.

Scott Rowe

Lee. Great, thank you,

wrap few and on transformational the minutes our I like efforts. outlook As up, progress a our spend I'd to of

to drive employees the necessary cultural serve in that I our program Flowserve we our transformation We are better momentum the very the journey on to early the that shareholders. well commenced and building operational customers, into and pleased X.X are improvements XXXX. with our am multiyear

significant two the from that making drive the the this levels They with on pleased our couldn't at we associates around and leaders are willingness all informed, are months, empowered Over meeting to of last their Flowserve. globe. I've be and challenges transformation. of the time to engaged I with take the and more spent changes progress

leaders Today, performance and time around largely level lot and our past. our of where than is and is in transformational spending based investing globe. of being has the Flowserve workforce led, creating our better program was the improved executed We're in overall leaders by in a of years, the health two dramatically engagement The frontline past closer. a is significantly it internally our the from

ahead manufacturing are are we still encouraged business, to reduced working capital our deliver more increased starting We Flowserve. is productivity, and areas of strong bookings lower the results in growth, backlog opportunity that by margin encouraging, to there the and backlog. including significant consistent path Even for improvement,

that processes and sustainable we path create we on model year, changing value. long-term remains last the the our operational work presented the targets to instilling Much XXXX are but developing the culture, to

approach that have innings that momentum we to further on I confident created improvements middle the Flowserve. the As our at of am transformation, build we'll and continue drive we

have like Paulette? Operator, call for prepared concluded open questions. And our the to we comments. we'd now

Operator

you. Thank

the question question-and-answer Please begin now Instructions]. will first from [Operator Andrew We from session Citi. our comes ahead. go Kaplowitz And

Andrew Kaplowitz

Scott, and about can step back you it. you talk the as cycle see

XXXX, many and peers general cycle but $X.X talking of short in bookings recorded in you're about billion seen been been since have You early slowdown have that a delays we industrial your feeling yet so have project your business.

the strike think pipeline So as you can you give Flowserve Do us or you of of come next could some perspective the from how you it? good enough level cycle this on for commercial from that out is bookings help booking quarters? sustain the self grow there's have for actually bookings the a And on there sees could higher level coming or initiatives that few zone with intensity? and much

Scott Rowe

markets probably project feel LNG And very that project two that's the about of health I've for now the the So project pipeline really another well. and or midstream least active And further at petrochemical great we as quarter. we've there. very awards is two our months year this the oil here XX are had in strong activity, next We The say still portfolio. and about robust. good quarters. positive, our markets so of are and in some outlook remains got I'd And talked and awards still gas expect

a talked of and that similar of for work I a the MRO The think at the so be lot still to to pretty the from second half we us. North of project year expect would what be the its about end business. we're quarter standpoint, first seeing and in very project American more of concern I And activity robust

distribution primarily XX% services a year-over-year. the you also and where markets, industries so seeing our is this that's network midstream, in -- more And the of the that upstream of down were some the bookings slowdown. but see category that can some And general our we're where

where focus that's say putting on But the I'd we transformation. most are

I our for will least with that think overall, there for But the to sentiment And attack continue here another And So trying the and again, and I MRO I our with and QX to internal offset QX at type market the we say that reasonably actions. projects feel really intensity solid. business. remains meant outlook is the positive year markets. are negative address would commercial

Andrew Kaplowitz

following you on industrial general just And us quarter just week margin segment. last margin can on up that. But you was Scott, give business cycle progression You more your in impacting into FCD? color short also. said slowdown mentioned

So what half for FCD trajectory 'XX? generally margin and a second changed this still should see the upward quarter of on we

Scott Rowe

backwards certainly, North say, big within comes first to the a back. impacted never business being OE American we took MRO go would the mix step margins. FCD that It's through work distribution. by for the want really and slower in time, our I that's And the

not it that it's side. between OE work, And the is pivoted in MRO significant. is pretty margins so and And projects is the And OE shown differential project. in to after more in

also off it start it bleed at as that see don't the quarter two American active last of lot in unfortunately, I we looked improvement was get don't and over we've product North inventory a expect inventories which shelf so there with significant before detail. distribution, bookings know there. down. get situation products the a year just probably expect lot start a of worse. And great which And activity on got to We from to to to levels to next the that But facilities. is or XXXX I

Operator

go from Deane comes Markets. Capital ahead. RBC question Dray Please next Our from

Deane Dray

Andy's happening Scott, industrial whole would is and love been follow-up everyone. to cycle short questions this I to on pressure

in And and quarter, it how for you're progressed the if might could business. your what there, seeing and you What manifested it terms helpful the during thanks. commentary that channel. good And then surprise expectations did any gave be about July? is of start I no color there's the So really

Scott Rowe

in we knew activity Sure. it don't year. we give level QX, were progressed any is bookings the rate July has for But had QX. a improved expecting. well did at the not want concern of then I'd And the to would I expected would our we as half in We in that I'd it say what color say say the it on of yet. guidance this I or quarter have QX. not as with back third in

don't And so we in that's that and already baked guidance. in any have uplift

half I think just of I'd I'd we year it's to markets June. the little a start then in something would is I back the saw from start we move of continue are. improve, as add where they say in this say North move happening the to which If the up American to just is So thing everybody. bit improvement forward other we -- that's to

said, since you upstream and short it's it's business As that's now pulled December. that North cycle the back American industrial

won't move down that of things There's activity It to There's have forever. are stay lot forward happen. to that with. going a has to

just And on inventory question so And timing. for single of more it the shelf. back us just is the and probably distributor biggest a thing it's comes

generate because And as come did visibility down, good to inventory that increase work. and will cycle bookings so And we we'll and short start to very with levels. revenue see pretty our here quickly, partners it's start we our their

Deane Dray

it on And love like more the the because one project, this to LNG given win bookings your positives here. that does sound were color in hear perfect results, here of large I'd

services. You valves, seals had pumps, and

for selling what aftermarket it this like win the versus Is for Flowserve X.X this the And a about does about proposition project little what opportunity? different say was a it pricing? maybe was on what doing? bit So,

Scott Rowe

when allowed details it's haven't to would early we'll do the is in the Flowserve. we But the press the do shortly. speak for process, put unfortunately, it's flagship this So, us I say concept efforts release in can't in hopefully, bare. on I yet. zone the out that pre-FID we get award our to and the so first absolutely what time a whole that customers what where to And strike And because all across really we of saw our of And portfolio phase. is products

that help share start our proper get then and and and we throughout can with all flow reliability about that customers them that sure the And of with when partnering a commissioning isolation we and projects, bigger When bring opportunities them can of right we have through the our our early efficiencies better the we present and with seals do with to in to operations. barrier can uptime. then safety business; with be have how start our aftermarket the do partner then and assuring control them valve; pump; incredible will of and these up, in we bigger we share a making

just excited. about the transformation award. super It's we're play. been validates office. talking of we've exemplifies It so efforts flagship it what the definitely power a And pure on And in the also

talked And the zone about also LNG market is we've so midstream strike pipeline, like for on a us.

one been been is our enhancing pretty market. serve on. in great technology We've and And focusing so is have win growing to the this a this market. just us we've making a been We've we And portfolio. for the right that better big sure the

Deane Dray

So assurances have? is explain a that more one, hinted me it you from on and and some detail there -- the in clarification Could participating the in that congrats you'll aftermarket bit defer You at of Is that be aftermarket. in -how opportunity terms Is discussion there is? the it formal project-to-project one aftermarket that how the last for a realistic that process? team then you does for is. a just

Deane Dray

the ideally to love facility. we're to in of Ideally, long-term sign on the frontend we would negotiating So love the agreement we process lifecycle a like Greenfield sign, valve. would while

original confidence haven't base rate the because agreement But the -- say all I've got we and install valves got the field long-term We on And this we've have that it's pumps, for here. XX% service award. done just get we'll what will I'd and is this equipment. about

anticipate and aftermarket both we long aftermarket so services have We I work, in the annuity on are taking that highly on sides get a commissioning that. this pumps up the will facility. But will and and we on installation

Operator

from Please Jones question Nathan next comes Out from go ahead. Stifel.

Adam Farley

Good morning. Adam for This on Nathan. is Farley

late is pretty Could work. little confident bit color you from projects? the this the some of have cycle I you are more to provide the uncertainty. this lines right, along really that in So are to a We project a end late a the mean heard bit sound cycle markets? slip macro companies little in seeing you starting of given anywhere projects pause any just there

Scott Rowe

concerned. drop. the should in So I of we're But a back us think always work is there the say And for I'd continue. lot negativity QX, in QX project and absolutely

are active. are is FID these Pacific East is so already Middle projects would active North through say I America And that active, and or nearing Asia And FID. the incredibly is

bookings. and so further to out feel QX the Certainly, the good get QX. of about overall, in would oil us And We the pretty some our projects say I down. confidence And But back concern as really delay good feel reasonable drop some I with into of we about and other and got the starts we think have larger visibility commodity here, for the QX. provides QX we will pricing awards. potentially go in and

Adam Farley

just structural technology and where free maybe color in are you made of Maybe just view flow capital to performance a capital, and working cash processes And improvements more management. some then on working implementing you've how capital little there. into provide turning working terms you and

Scott Rowe

inventory. little be would I'll pleased made. area to I'll I been we on to on are. since say here. been is Lee let What some frustrated get also I've that where do may But then is Yes, an that the and this and focused I'm a taking I side, we progress with long it's this the we've very am start details receivable

in inventory systemic to standpoint and place inventory planning the down that I this think that and further. we're will inventory momentum on from process continue the certainly putting sustain move even

really fact, good about In that. feel

very has the receivable there. we nature that make locations start starting progress we're Flowserve we're the is just driving And disparate receivables, made understand good this is numbers. leaders incredibly to to What leading say, the the our challenging. and year-over-year would fragmented have the on both here that good and seeing and to of I see at working I'm inventory importance side, much But movement the capital. very Lee just On progress of pleased

Lee Eckert

recently ended that and ago. the inventory and didn't they're years think was receivable thing they exist at a talking and are in I about of that India I key few talking spent about with time three our Scott improvement awareness. facilities, improvement

across was So I'd a say which is, very company, awareness high the start.

One major strategies service at of operation. our work. I'd of the of shared have work to have XX% try we beginning is say our at our we about Flowserve year collections collections the roughly consolidate

XX% year. Our that, customers. more on goal of what's our transparency what's of and is wrong to receivable get and growing the around doing got By we with a our insight lot in performance

and are past process a and We not are been invoices have paid, buildup understanding across we in organizations, which didn't get information the to also which tools of building power sales what is for tools insight late, better looking is pass due being our BI much that at around our and better understanding ones providing what say. in

preventing with or that from Let's customers are are the delinquent issues them that paying. say, now are here us have

there. shift and tools to So to the performance. the trying awareness And the But improve up ownership. with the We're clearly our we also the building up process. shared expect we're that is services, solely collections as catch we with

Operator

go Suisse. Walsh Please from Our ahead. next Credit question from comes John

John Walsh

guess around a pricing. just question I

You've the side momentum the been on talking last couple about aftermarket quarters. of positive

of capacity some European competitors actually One tightening. your mentioned

if is industry a starting actually little pricing on landscape, wanted your see view the to just to on bit? view get and capacity tighten So we're your

Scott Rowe

not really it's a So, lot of QX. different commentary my in than

the very year. pricing we so in early And our had

started actually late in QX. and increase we second price we December So a did

so that ahead off cost service expected. of work the doing for of is distribution about spare And and valves, very we than we're curve, then so that our that confident MRO, smaller a talked we're and lower pump, our that now that a lot really and of that well. that Unfortunately, we which parts, price through and channel, is contracts some services our that of work, would priceless be the some

mix So start see if side. the that's higher more and comes back margin prices to we then on

What happy little I've am for about first for the what say talk our starting pricing bigger peers say is highly competitive. our hear is starting time I'd And about I've we're very still I'd see been progress that that's they three now since to remain talking but seen to on to projects, I a price, quarters.

though honestly disciplined more pretty see believe we're valves, begins I QX, more to the peer the And competitive still projects. in people But in to across in feel both so, group I think that get it I think was pumps do as on capacity pricing. larger and project going

And the excited bigger be more get reason, people whatever for and seem provided. to more discounts project, so the the

so that's concern. area an of And

I our commercialization would area focus. And an of It's focused we're on pricing. part What work incredibly intense it's stream. our say is of

remain on And work our that year, margins and transformational And the so through And our as shareholders we're make or Flowserve on the back through sure to this very stream. we'll the we'll deserve. focus they going continue move of half project. selective that to provide the we

John Walsh

terms bogie? quarters, loss And in that conversation. anything on follow right free a around Lee out of half? about of Last the for cash you've been back Is talking flow. maybe then call And couple still XX% to in the cadence this

Lee Eckert

just everybody. to So remind

the the free $XXX year business. the a free flow cash working cash year. half capital, for quality priority which up of versus earnings, is million, of in Improving flow the high $XX first conversion So was prior was million

line Now, really really And timing the first mentioned we improvement cash but on million half second conversion. that had the got the pleased good accrual reversed year. really some $XXX in quarter of from flow benefit we've at the a we out were as quarter. XX% sight But I with of first strong call, in last

Operator

our question Joe from go And Please Cowen. from next ahead. Giordano comes

Joe Giordano

something to the clarify I want on margin. just you said FCD

You materially an until said half that XQ you Because a not that's back distribution talking XXXX something you're second at lows in look like of half obviously talking expecting typically, and high dropped are year improvement up freeze we XXs, last But little. and XXs. are like year-on-year? like from a some we business the if or the

in second think half we should year-on-year? how So business about that

Scott Rowe

expect gross right don't go we margins margins, gross down now. quarter where to second the from from we So are

America able our there in add general responds more industries really through on products category. and North -- that if the so depends get progression And to we're how distribution

we it activity dependent feel think we But it good North on see QX QX. so up that now in the right stepped And I America. reasonably is and that in

Joe Giordano

that step-up then about by Is couple the corporate back the half? quarter. in a pretty think is people, Or that in it's was should one the to line or compensate timing how And we that being was brought just light up that? of

Lee Eckert

on as see down focused in remarks, really as So corporate That of percentage cost. that SG&A driving the sales are you line a we -- I unallocated is year-over-year. my prepared reflects corporate

that's They $XXX on $XXX I cost does bounce costs. it legal overall, represent calls, the and costs, expect around for about from mentioned number that roughly And million CEO quarter-to-quarter. around of we year. As unallocated. board million previous to it's some costs be But

Joe Giordano

business. And then on maybe one more level higher the

that something to you ways and have the you like a have. the well? refinery, past For LNG, you a a your be you I pretty at know market we've of Is some given content product raise in to leverage than for that for don't valve, projects? ways here been how certain you're Is there that these having on has there doing success lower categories that to seems the like stuff historically some pumps like guess I talked

Scott Rowe

Sure.

the through power how pure the we think play that's raise the I absolutely content. of

good can there. hold things doing we get in and we're in seals if so And locked get valves then

is portfolio The new product through just expanding the other thing R&D development. and our

within And on more make got sure to cryogenic a that the development, of add side pump the on the the products, so each focus LNG entitlement we product bigger and both side continue to we've trains. new and our LNG valve is

Operator

from comes go Liptak question next Please Our Walter from Global. Seaport ahead.

Walter Liptak

half done the about added I of LNG wanted like visibility that you of of FID ask are LNG and into have pre-FID the you projects And us projects your small moved projects to is, that there LNG could moving because think forward. that selling And wonder good on insight a the number or got too. forward. And some too? the have do is I then those an if XXXX. market on the share value provide could you've maybe And there question question some that have second selling they wins? those give How bunch go onto rates, you win been projects look it's

Scott Rowe

pump I win to And category. that don't is awards. been we would award award we $X say around get have the million but a just getting a million $XX range. doing valve on it's rates get or $XX want I'd to we're because a of LNG, under bit into specific what But well with reasonably in a been radar, million little

successful have we far. been reasonably so thus And

been and has the that really was time bring assets the quarter able of This together single all into to award. a first we've technology Flowserve

about award was power for and that again the play. flagship us, $XX talk pure so roughly on And million to of a

We of trying involved the But But when to in type things of a we be are at more discussion, our do and really with we and do we're timing of don't is -- of the to in base. make that for the point, of these customers operators, our sure way upfront I'd one engaged type part know this sure. package solution for other see providing licensors better and they're that those And another of reticent that service in our because to get that commit award. concept but long the part customers technology and run. of to is just

Walter Liptak

visibility comes half any And in back fourth the what end an is pipeline quarter, XXXX, not spending gears think about switching that you're the you've the Do XXXX? you have midstream. in the third I but visibility just talking to of pipelines, guess some the quarter, I to into were then year? of sure, so this you because And got

Scott Rowe

And little of QX just, can the on bit talk into America me Let go then award the I'll half North nice a received back and I in here really a about We year. large the pipeline. about work. us pipeline it. of big a the it's interstate for very get number flagship a really into We're crude It's back a excited award to us. oil

launched So booked over XX and thus year this in last ago months $XXX a initiative pipeline. we million far, midstream we've about the

is our midstream. feel outlook another We for incredibly the million we've $XX activity believe I the have to QX quarters, the slowdown million about and $XX outlook remainder for the range, reasonably robust but got $XX And QX in the in to that in award We remains lot in of do the large to million of XXXX. good believe a and we $X don't healthy. starts pipeline. range. But million midstream year certainly, for few

Operator

ahead. Vertical question Research. comes go next Linzey Brett from from Please Our

Brett Linzey

Just organic uncertainty I upstream sales want the deliverables? confident half. that to you're come guide, and back mentioned the to holding of percent the to and of big in micro standpoint, back the what of guess you just here. second if guide you around backlog the the it terms the in some but ship hit backlog from up I so, a Is ramp weaker of in some the -- guess need half And de-stock, plan? to do

Scott Rowe

Yes, walk the through half. guidance in I'll let revenue back here Lee our

Lee Eckert

to XX% around So answer to backlog of just and your expecting XX% convert. now we're our between directly, question

it's Our up backlog is actually year-over-year. end up XX% year and since XX%

And right line year-over-year. pretty on XX%. the then is book expect would basically the now, I and based burn balance we've got flat roughly much it's of between So and XX% and sight, what

and good feel able we've that our the the had to guidance. about give revenue we backlog we same amount should historically. be we and convert So -- can burn If of book

Brett Linzey

standpoint and a to mix QX Anything those thinking progression, about hits from but both way from modeling also just standpoint aftermarket to be OE then versus quarters? the aware And QX a margins. the growth of

Lee Eckert

glad I'm brought Sure. you that up.

highly Driving Flowserve progress remind our five expansion great initiatives to important quarters. of shareholder to just around margin in seen focusing We've over our last are out expansion. to is six X.X of everybody, margins. Four we us order margin remain on year-over-year drive value. So expanding the

Our growth in bookings being being and Scott and has talk resulted half, first in talked backlog initiatives up that the year-over-year. OE that XX% OE -- we about up our XX%

I in in call year remarks, project discussed the expect the the to and as that prepared sales OE in of quarter the work the strong towards mix for half my the have. discussed bookings the first we shift rest So we with

aftermarket to OE see heavy earnings the of we're a will there versus in going sales, quarter and result our margins as an mix. we where we've base. which in be what help increase obviously say on that to downward some so first a But drive installed seen pressure going is And to build had

Brett Linzey

And is the just a as QX half that comment or back whole? a

Lee Eckert

back the it's I would say half.

Brett Linzey

think Could $XX scope size and the the quick large million led up. fewer one mentioned on on Could you put a of in timing of those finer when you just just that then the projects I the you the in range. any quantify and follow quarter? visibility were out? what just a then And point just

Scott Rowe

had power as midstream LNG award that million nice above in million, East million $XX $XX award our pipeline solar was right at was well. we award concentrated and big $XX then was a around Middle the

we large projects, margin we our the And deserve we when that's so like. that's talk that the and size can we that So get about technology in bring that range.

Operator

UBS. Our ahead. Fisher go question from Please next from comes Steven

Steven Fisher

said the just tells that, you that XXXX. going on is that that it's ago million to going after in range of XXXX? in up side million you just the couple it's said big $XX would telling on activity, there Is year, comment your smaller or this there $XX your a What they but well already to it you to the questions customers follow Where this I million about slowdown bound in recent will this, you it hey, think $XX lots slow range, is million slowdown? to down wanted midstream. assumption really are $XX I

Scott Rowe

it The is as that should. I as just visibility probably beyond Yes, work. on slows this that's a don't bit reason pipeline great a have we because well think down point, I the answer I didn't year

And cycle ship fast. is a type XX shorter can built work, months. within it gets pretty And so we bit little this typically, and

And visibility and QX. QX so in for got us, have we

share $XX is will that to great and We work of XXXX. get we visibility to all believe million midstream $XX Our million again we that. our have just don't work

and North the look So out in to when though, -- in at you back there of be America other pipeline macro certainly build parts look world. when you still the step needs and

would to in to start don't opportunities other have so through some in come that ones XXXX we And expect just visibility and now. I XXXX, international probably right big to

looking We in we're have talking chasing down dramatically midstream a I don't and -- don't right in So think I visibility necessarily customers. in just of our XXXX. in now don't at what believe to comes lot

Steven Fisher

the any quarter on any there oil then that fourth tied connection up? to piece there directly in And or assumption America margin is is to And that FCD North gas pick back would indirectly? to up have and in so the your MRO get

Scott Rowe

Our is oil channel and gas. largely distribution

that others others, there petrochemical and -- of oil Now refining, big portion that and gas a markets. the but is is is there

of gas to so year, start need revenue the and the the and And cycle move certainly in the in we half to upstream back pick because up our oil we a on short that in up our it's such And business happens, more side. as there. bookings

Operator

now Thank disconnect. you, Thank you today's conference. may And you ladies and concludes gentlemen. This participating. for

Flowserve (FLS) 1 Aug 192019 Q2 Earnings call transcript