FLS - Earnings call transcript Q4 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to Flowserve’s Fourth Quarter Year Ending 2019 Earnings 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 to turn Investor Mullin, now Relations. will call Mike over Director I

may You begin.

Mike Mullin

good We fourth morning, on and Paulette, Thanks, everyone. call year financial to full our appreciate today discuss and Flowserve’s quarter XXXX results. conference participating you

Rowe, are Officer; Roueche, Financial this Chief and Jay President Scott me Chief Flowserve’s Joining Interim Officer. morning Executive and

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

our do materials that call this control. company’s contain which non-GAAP of statements. include they XXXX, note information upon are February will also Please other and of as are involve earnings forward-looking beyond and and to and forecasts, measures management risks the expectations XX, many available and These based statements uncertainties,

to and available fully reported to metrics our Relations in our and review our the in disclosures press which included section. safe website our of reconciliation Investor and are are encourage release We on presentation you our the at non-GAAP flowserve.com results, of both harbor earnings

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

Scott Rowe

you, Mike. joining call. strong everyone, make to fourth the X.X and Good thank with Flowserve today’s our a as you transformation. finish expectations quarter for mark we XXXX, continue and morning, Flowserve’s to exceeded Thank full-year Great. initial significant progress

their our efforts to want let associates I Flowserve in and contributions and how XXXX. appreciate first I know leaders much

continue rise We have from occasion. asked to the and a team to lot our they

been employees transformation demonstrated our customers; Flowserve. and the shareholders. for improvement employee team increasing on program I’ve engagement highest performance our at level ownership continue in have has Since strategy, program; of to our our challenges since support reached value XXXX, our delivered the initiating our overall and Despite the created our

environment. confident performing as building an any capable market drive accountability, that trust of enterprise we a in and we and am improvement are of respect culture sustainable create I

I results, China situation. our briefly Before would coronavirus turning like and about to the talk to

focus is families. We in have XXX and their based associates safety their our number that one of China and

We Asia closely we Pacific working and are as possible. as governmental all ensure of in keep actively monitoring health our safe the organizations workforce situation to with

Suzhou, miles Wuhan. large about a manufacturing east is which of XXX complex have in We

QRCs Additionally, well region, we offices. have several administrative the sales and as smaller in as

All of our to now extension and Year after the holiday. government-mandated operational Chinese Lunar New facilities to back are a work

global We have our supplier network China products also in large Flowserve that a provides operations. to

These by mandated in been suppliers throughout impacted virus the the quarantines also have China.

impact extended chain, we in While we China shutdown global the will that do have supplier flexible have deliveries. supply expect a some on near-term

to China defer do first half We an our on some expect of situation and the our impact revenue ability in support have year. in the to this customers

for on demand our time. we short-term Finally, and will early still a the But have this impact the it’s epidemic products at too this tell services. to believe magnitude

We on doing of to this everything minimize the focused are situation. can fully we impact

year year. at full financial quarter of charges me million highlights year net of and represent versus a $XX of $X.XX million XX% XXXX the as of full for improve guidance a $XX $X.XX adjusted revised turn quarter full and XXXX. year. over to and transformation quality prior range, continues earnings realignment improvement in our The decrease EPS delivered the the to the and fourth Let now fourth the Flowserve high-end our for

the equipment mix original roughly quarter, year-over-year, reflecting of and were sales the in higher larger project work. margins Operating flat fourth

aftermarket greater original than rate. XX% our Our XXXX bookings than growth in more of X rate equipment times bookings growth was

the growth transformation to note, in full points XXX On mix aftermarket XXX outsized the basis than progress respectively, in year bookings improved in OE growth drive margins years the a as offset come. basis, of a will operating positive and this to challenges. growth continue On initiatives for more

cost target to reduction, chain opportunities improved improvement and to significant planning, manufacturing product G&A design-to-value productivity supply further management cost drive continue lean-focused We control. through initiatives, margin

income, on in in of was On cash the our Our improvement cash net XX% spending focus versus transformation all Increased significant flow XX%. realignment drove flow. flow management working disciplined continued basis, a XXXX. income, improvement capital conversion a and Flowserve’s GAAP free XX% reduced contributed in our cash adjusted spending, our improved capital cash conversion to operating to increase

operating Moving and leverage continue growth, our transformation a growth shift drove XX operational and original margin improvements points improvements basis towards XX.X% fourth sales driven reflected by to now FPD drive in our despite improvement X% on project and segments, productivity to mix the quarter, adjusted respectively. operating work, the equipment XX increased solid of

For the revenue growth in operating income XXXX. impressive increased on and well of Full $XX an X% full a in adjusted FPD XX% year, year of million bookings backlog, increase for million improvement drove $XX growth positioning FPD revenue. delivered

slowdown orders. Turning distribution slower now MRO results the in to American FCD, to and fourth and quarter by activity be North bookings continue short-cycle impacted operating

mix I’m which Despite lower-margin OE pleased declines focus, for XX XX full adjusted margin team’s and control points basis fourth the respectively. year the the cost resulting with and to work, shift operating towards held quarter

adjusted sequential where quarter increases of they XXX on gross and and basis drove $XX fourth income operating was respectively. million million increased $XX in of adjusted performance XXX operating revenue, encouraging, FTD’s increase points and margin

but Pacific. in included The million and were constant offsetting increase year industries, was X% the which full year-over-year, distribution year-on-year, down XX% Partially for bookings primarily the declines and general from was roughly chemical fourth decrease a by quarter up power Asia driven the third flat currency in award FTD’s bookings. $XX approximately bookings were quarter. including

We first to challenged of year. return the in the the half bookings growth expect in remain second and American XXXX, half to the of MRO North

served end-markets, quarter to billion a fourth $X.XX our X.X% increased X.X% bookings basis. in now a currency consolidated constant Turning to bookings on or

the increased the quarter consecutive bookings uncertainty with achieve market the bookings billion to were we quarter, $X pleased year-over-year during over Given and both fourth Xth growth.

the chemical our drove mid XX%, work markets. north of overall quarter $X which award, projects number nearly in primarily million, $XX The smaller of $XX growth refinery million increased included one and bookings and range. to downstream million equipment driven and in a from oil-and-gas was original FTD’s upgrade and

macro-environment While discussions uncertainty as infrastructure budgets, delay customers, our as energy will with some in continues reported XXXX. in for indicate funding well that and progress dampen to progress CapEx demand overall the large the projects,

We continue to expect in LNG primarily downstream growth moderate chemical gas, this and oil markets. year, and

primarily XXXX, XX% basis, For our year the equipment by full organic increased on in the X% bookings approximately growth bookings. original driven

such zone initiatives growth transformational in to market our intensity, current expect share the strike and commercial drive as environment. gains We

more we our to Flow solutions comprehensive upon Additionally, build believe can through Control customers. of the the our we pure-play, and power provide portfolio complete

quarter since aftermarket, fourth bookings as aftermarket X.X%. currency quarter decreased was It highest tough at Flowserve compare to constant the fourth period bookings XXXX. of Turning represented level a the XXXX

to a commercial growth, our on aftermarket continues the intensity basis, bookings program FPD’s spending. while However, currency share traction customers aftermarket X% on and grew year. sequential for X.X% grew our full of bookings X% our gain Constant grew maintenance

We continue opportunity our aftermarket combination customers expect the growth base, XXXX grow through an of initiatives. of efficiency, changes our proven installed to to provide and increased larger franchise supported on execution our regulatory focus

mid-single-digit in gas and including smaller gas. with East midstream our about to bookings LNG, our the X% $XX across and roughly by growth quarter FPD market quarter several year-over-year, project now both million FCD. pipeline impact starting driven awards included markets, including Fourth downstream and Let’s X% and oil turn negative The totaling mentioned Asia-Pacific, North currency America. previously increased $XX end over oil the refining and and million projects award of largest Middle

flat by continued, XX% continue and full basis, by growth bookings year, oil captured driven Activity small the approximately in and with For gas see offset FPD’s opportunities. Coast were quarter increased decline. a of a FPD roughly FPD’s a future project currency FCD’s constant bookings pipeline XX% where Gulf fourth the the growth. On we to XX% in XX% chemical

growth. FPD The Asia, on bookings solid Middle demand increased XXXX the outlook that’s in and continue project the investment to downstream look on to CapEx East For North based drive X% global the for America. year, forecasted XX% in expected strong

project in in of concentrated XX%, markets power Asia-Pacific. award bookings Our million with $XX opportunity provided including a solar quarter up power the

Following power decline bookings XXXX contributing delivered FPD XX%, with while markets, of years XX% was FCD X%. in our growth up

of forecasting base extensions America global and with opportunities fossil type limited in primarily look installed and Although, as life and fuel growth projects participate build Asia. to North to upgrades and we as nuclear will maintenance, support well in we fuel XXXX, our not continue switching in are Europe this in new

Flowserve power at offers As to seals. of we products while pumps, valves the differentiated quarter and saw renewable and concentrated set across in arena, opportunities our provide solar continues

distribution FPD FCD from face General to North decreased XX% X%. industries X% in continued Fourth with bookings in America. slowdown MRO the down specifically year-over-year by driven quarter decline headwinds

roughly reminder, through bookings of FCD XX% a distribution. come As

markets marine, from and other we impact industry bookings solid general and and pulp the food paper, distribution including markets to In addition while decreased growth. contributed saw mining, also agricultural in destocking, beverage,

general For driven industry markets. were and X% marine the year, by primarily distribution, down bookings mining

decreased a in low-single-digit the smallest row year growth. representing of water our Finally, year in fourth marks quarter, third while XXXX XX% the market, full bookings bookings

positively market We the horizon. water continue desalination opportunity with solid to view of in management this on pipeline projects

America XX% to down Asia-Pacific X%. Middle Turning and East and North respectively. both geography, of growth XX% Europe bookings and with contributing roughly delivered America by X%, Africa Latin and were quarter fourth the growth

growing than Middle Africa Europe increased with For bookings The the remaining regions year, to regions and XX% all the in X% full other the range. increased X% in X% East decline.

call turn And some up the before the will in now cover detail. to our we return to financial call then, closing I’ll Jay? remarks results I greater over for open Q&A. to Jay

John Roueche

morning, everyone. Thank you, good and Scott,

our finish are solid We with to year. pleased very the

guidance which full EPS guidance quarter. earnings we highlighted, our given that we performance initial $X.XX fourth high-end our our year in Scott the exceeded As provided the reached third This after $X.XX. the the quarter, of revised share last of adjusted per range delivered adjusted and of February brings

earnings during of Importantly, the our quality XXXX. improved significantly

our EPS just and as realignment, Flowserve’s retirement $X.XX impacts. reported a of and represented expenses to of compared included fourth to well increased XX% year line On XX% the EPS of EPS reported XXXX. quarter $X.XX, currency basis, below XX% transformation of $X.XX voluntary $X.XX in adjusted full as

revenue aftermarket respectively. XX.X% billion sales included fourth impact excluding XX% versus was aftermarket contributor quarter foreign increased level sales The and FCD of growth X.X% years. It increased of X.X%, prior X%, X.X%, quarter primary year the highest and of and X in with of and OE OE exchange our the of the growth was respectively. Fourth strong $X.XX quarterly or headwinds.

XXXX XXXX headwinds, were to an our year full $X.X guidance, XXXX increase divestiture excluding X.X%. with revenues X.X% of increase full and the billion, year for the compared and in was currency line The recent most

XX than offset more adjusted was XXX point our gross now point Turning increase Fourth basis to by margin margins. points. decline. decreased quarter XX FCD’s basis FPD’s basis

includes which XX.X% FPD’s performance year, adjusted XXX was FCD’s increase full however, productivity top-line, in FPD’s year and adjusted margin. gross full basis XXX decline increased offsetting point the basis to operational margin driven Partially the improvements. For transformation basis XXX gross point points from strong

business well FCD basis and to continued in improvement and managed project point distribution be revenue sequential the Scott as however, MRO heavily towards fourth margins the Mix XXX mentioned generating quarter, work on more persist, modest weighted earlier. as sequential address growth. the gross headwinds a

other increased Flowserve’s profit expense lower performance, million points growth. a transformational gross quarter versus full gross to million basis, Full Flowserve’s margin reduction incremental reported basis year of and On sales million to realignment of to XX.X% just XX $XX XX.X%, margins year increased reported were margins year. million basis gross on expenses. $XXX points $X realignment as XXX initiatives fourth adjusted driven substantial, primarily $XX FPD’s by improved due strong in prior

basis adjusted of prior XX and in the SG&A Fourth basis, as XXX expense of sales flat sales a sales declined also quarter percent as percent of XXXX, to as points, to sales a as a basis XX.X%. primarily year-over-year points a to as and adjusted a of declined On points On reported year transformation full tight $XX were basis percent roughly decreased control compared cost million percent was basis realignment and year-over-year. a SG&A XX basis, expenses SG&A reported year. lower XX declined SG&A points due

impact basis Fourth quarter offset primary points margin is variance. to as XX.X% the FCD’s by decreased the basis adjusted basis XX improvement mix was point for XX XX point the reason decline. operating essentially FPD’s Again,

margin behind to For operating XX.X%. year operating FPD’s increased margin margin full basis increased however, basis points operating for XXX increased operating strong points, points while the fourth basis Reported XX XX.X% year, the quarter XXX full reported leverage. adjusted and

for rate XXXX revised our XX%. tax adjusted modestly guidance which better XX.X%, was Our of range XX% last was to than

Turning to cash.

accounted for fourth of the this keys operations to $XXX million. The strong earnings strong operating during of outflows our XXXX. Our where XX% cash cash $XXX flow million. flow by increase, continued year improved million half from year-over-year again cash quarter seasonally was from on progress quarter compared at flow The $XXX and improvement, capital. over our and In our working realignment transformation operations total, lower to our full

year free year-over-year. flow XXX% increased over full million, Flowserve’s cash of $XXX

generated reported free a our to million our we of performance of earnings cash kept total Our representing and spend disciplined adjusted earnings. XXXX, approach expenditures and $XX of a capital maintained flow XX% conversion XX% in XXXX. Like our

we still While about our targets. on work longer-term to the cash feel our do good we progress do have towards conversion, very

key flow incremental demonstrated improvement cash component our made working of progress capital management. the A in have is we

of compared XXXX to improvement fourth delivered fourth the the and XXXX quarter. have days in the versus driven we instance, For quarter, we X days quarter, DSO fourth of X improvement

versus as of turns well level progress the with XXXX XXXX times. shown has X.X of in X.X times Inventory

driving We and goals. fully within position towards XXXX. in order drive processes And improvement cash focused inventory we make systemic our will to to very as much working in our capital on further cash sustainable progress our we expect remain long-term

and $XX finished $XXX million million over XXXX XXXX Flowserve quarter. million, cash with against up balance the XXXX third $XXX of up

down paid shareholders we million repurchases. we debt and year, dividends share to returned and million the of $XXX During $XXX through

less our amount invested we through we expenditures. enterprise was systems. investments planned, addition, that wide million add that with IT right than value have our business on This In focus like the in $XX applications originally but ensured capital

fully plan plans, also our we pension U.S. million to the funded. Lastly, keeping $XX contributed

XXXX our to outlook. now Turning

We full X% to on adjusted of revenue of $X.XX year are increase to X%. an $X.XX targeting EPS expected

year We million effects impact of discrete as other occur expecting may acquisitions, potential EPS expenses the cetera. currency this expected adjusted impacts the as initiatives, currency during tax excludes laws, line divestitures, et and approximately and are well at material not as which any range, such time. the foreign The items, transformation below target special reform $XX of realignment

initiatives transformation equipment due Our mix foreign original and IT price commodity headwinds offset outlook inflation, were assumes exchange and reported planned improvement and than more the prices. target development and the investments. increase range adjusted research current combined the and incremental currency Both in volume, the rates productivity also the and expected EPS shift, with to merit assume

will We continuation and million Our expectations current further of interest are levels of have we’ll XXXX backlog, adjusted and be our range year-end market between $XX that on million, to tax an based expect the anticipated net booking conditions. expense XX% $XX in the rate and XX%.

half monitor very and from several as In back to you are than China to weighting that know, months. due next usual likely many in headwinds as terms potential of And associated continue much would in noted, of uncertainty seasonality. persist the phasing, Flowserve’s results In exists because of for that expect half the closely. weighted we currently we XXXX, will second the Scott normally the China situation more it

million to return perspective, cash $XXX approximately a our dividends. to From shareholders usage expect XXXX we through

$XXX will throughout with estimate we’ll range. prior expenditures the years spending be prudent capital is continue like year. to capital to But Our the $XX and in million we million planned reevaluate current investments for our

repay back-half reminder, to pension QX. expect coming Traditionally, in be as flows the the primarily expect the most to weighted a in and finally, contribute half, flow equivalent and XXXX. seasonal are of during also to modest very to in in plan. in years second of year positive first-half XXXX, our and to due and the we also during they amount cash in We XXXX cash were our as global the service plan our costs cash And debt use

out I current Gabelli XXXX. and will be Industrials anticipate Water this in potential this Symposium and at with and Citi’s I to Mike headed Closing and a in shareholders Canada relations calendar for City. Scott maintaining week active Then investor again later later New Global are Conference. close Florida there. out, visiting month, in we’ll Pump, very the And Valve, February we York

call much the let Scott for to we closing investors, back many to turn that, value and of and very year. during shareholders remarks. look with seeing forward time With our me the his We you our

Scott Rowe

minutes Thank in the Jay. about a how to will on the I’d over Great. we Flowserve few the by that to wrap and up talking journey been XXXX. last years continue X provide transformation you, like have at spending support

we since trend the of in XXXX. with start to expect I’ll XXXX. returned in progress made we XXXX consecutive following XXXX, fully Flowserve years X revenue this declines, continue to sequential growth and And

XX% up backlog prior to which XXXX. starting year, XXXX provides yearend for is Our a compared solid point

budgets XXXX overall, to have CapEx While each flat over the believe be some that of end-markets we slightly customers’ will cyclical characteristics, of our unique level. increased

Beyond results which our from two driven prior outperformance growth-oriented further we years. expect transformation market, also have the the initiatives, in

also global through We cost better delivered in and management. operations our improvements have better margins significant

the modest Over strong margin on years, X driven we last have improvement revenue growth.

and year basis XXX growth since adjusted operating Our XXX and XXXX. margins have points increased respectively, full

environment. Our capital a decline, focus basis driven sales, as percentage in XXX improvement of on a working growing has points

The growth on up Flowserve’s which have invested is the created years. on we substantial points improvement a now X that XXXX. last capital basis continue is has opportunities of combination have in XXX and to from we What to is level, build of most us margin momentum that the return restored ahead reasonable to promising

that the aligned The and company. plan, of are we voice with culture that making It in was and culture. our transformation a the need an to significant early confident communication our provided on at my improved clear has am the for to associates. health me organizational would days progress transformation Flowserve focus the created I also

Our all-time scores at are engagement employee highs.

talent top in and is Our we marketplace. down the attracting voluntary are attrition significantly

operating grown EPS progress toward over our long-term are annually. XX% expecting of guidance year As XXXX, target. XX% our growth, our improvements indicates, has continued or Since adjusted further another and XXXX we

on backlog, solid of Flowserve expect transformation to traction Based transformation deliver X.X fully very outlook adjusted initiatives, driving results growth earnings XXXX. in in that our continued the market and project XXXX. our The we we’ll catalyst remains the pipelines, our solid improved much

opportunities remain right last improvement, we I achieve made with by progress believe longer-term ahead solid the extremely in date December the I we’re margin where the we introduced that the years feel we And optimistic us. steady encouraged on and to the have am and few we path XXXX. to are. of With targets growth

made in return the we’ve improvements addition capital conversion, great nearly in flow the our to In investment grew XX%. on our cash income and XXXX statement metrics, to free progress

While performance do involve in transformation we’re pleased heavy with the our XXXX date, to lifting. efforts some

office remain in sustainable chain this The design the as process improvements, improvement reductions. enterprise improvements dedicated transformation throughout year continue will to into G&A supply culture place drive to and manufacturing deep with further we a value, cost product

I We will am the to confident functional designated progress that have great the ownership as XXXX, date. we and leadership down team on we’ll to capitalize responsibility end continue the transformation the wind assume that at program. to of of greater our achieved continues

We moving value and no levels I this that to will service higher doubt have for customers closer in are shareholders. be creation and our metrics, our our reflected to level a our

comments, Operator, open we call the our prepared now like have questions. any we now concluded to and to

Operator

you. Thank

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

Andrew Kaplowitz

guys. morning, Good

Scott Rowe

Andy. Hey,

John Roueche

good morning. Andy,

Andrew Kaplowitz

that XXXX still and obviously, refining, But chemical your focus in confidence from Jay, see growth self-help all So, initiatives? bookings comments want of LNG. this on good How led that by much you I comes your and just execution Scott quarter. modest to

And last think at uncertainty macro did was then, little in stabilize a quarter, down QX, this or bit. it given a continue drop pipeline to it Did little your point? I project

Scott Rowe

I’ll Andy, Sure, Yeah. this one. take

is volatile of to and growth. couple I’ll to committed that is coronavirus talked help. still the of a just going hit But the are obviously, not highly you the marketplace of certainly kind impact things We remaining about.

still year we’re QX, said pipeline, But QX you down is First it’s ago. the from what seeing project healthy. from relatively incredibly as we saw in was stable in a slightly what which

that across project has us, opportunities got QX. the for And the selective then more projects there. awards so out QX. to a are as to of awards And spot well. LNG nice lot project the LNG the in had downstream midstream visibility ability it’s – We win We in space, pipeline that spot about got in and

that reasonably last we faced in And so, business. really that challenge, feel our side is bookings. year the big project the book-to-ship and in the I’d say one bookings well of we MRO the the about project back-half

that’s in to so, America. be out. primarily two carefully I probably But continuing probably earlier it the North growth. destocking, with a one at ago, the to pivot more And XXXX. just – we’re or was And XXXX, to distributor second half that thinking now move month of in turn the growth that watching is would I now expect to and I

Andrew Kaplowitz

And of around That’s of all be the follow-up about. just you helpful, impact what and Scott. talked maybe would margins the

looks range. So if margin. have at puts just XXXX can see like margin the XXXX, in and at you you XXXX Maybe improvement your on that modest I you midpoint the relatively look takes of about talk

And initiatives, you price have tailwind, this self-help versus maybe a cost.

your progress put a a yellow goal. check on did towards XX% to XX% margin the You

we do Maybe maybe in you’ve a been the think harder mix longer-term can and these how goals? growth. environment, It’s headwinds this that. So talk little got about lower you modestly where about

Scott Rowe

long-term here it’s as prepared alluded that put and OE. talk to, out it about higher XXXX guidance I is the guidance our aftermarket. just targets that growth times we didn’t me our in really the didn’t the when of X being anticipate let when And mix, you the talked And impact of right, challenge the the anticipate headwind the first. put XXXX OE Sure, comments, versus we we the the than about we And my magnitude out. quite frankly, aftermarket

a our aftermarket the OE to continue between up. transformation is We move our with headwind, margins that the ability holding feel the what’s overcoming is becoming so, the and of back. differential in And confident But margins really mix headwind margin challenge. to

XXXX. XXXX not we’re – And we softer so, that’s why improvements little from XXXX XXXX to showing that a and or made the to is probably

expectation let’s the to the target. margin we – long-term is at below a map on to kind operating committing to laid linear did out so recognition changing is. XX%, previously, we’re anticipate the margins not we’re just operating then, like margins. said that growth. checkmark the And I The the same of yellow dramatically what we And when if we’re time, a did that, a little mix But you switch still

But at we’re time, the same up that. giving not on

to And just so, OI still to not to the margin. we it’s believe do is happen just continue to make progress get thought. we said on I We the do transformation. we and And still I have opportunities. need XXXX, can just this unfortunately, What so we pace say – remarks we’ve got – XX% that we – the in many in going at

productivity made later of moving hasn’t way that is Design-to-value year into chain financials the we yet manufacturing an this really well. really impact well. and Supply into really and The see is its XXXX. moving

a of up, there lot for still playbook. in to us transformation move levers margins So to our the have is on we just execute

Andrew Kaplowitz

Scott. quarter. Thanks, Nice

Scott Rowe

Andy. Thanks,

Operator

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

Deane Dray

you. Thank morning, everyone. Good

John Roueche

Deane. Hi,

Scott Rowe

Good morning, Deane.

Deane Dray

for give just out Jay stint wrapping CFO. as the up second here Hey, a to shout Interim

So your Jay. all thanks help there, for

John Roueche

Yeah, happy Deane. it, to do

Scott Rowe

Appreciate a job. is the there, doing Deane. recognition great He

Deane Dray

OE and and on maybe that you’ve on Yes, follow-up so bookings. much our explanation this kind But Flowserve your the mix, there? replace in of aftermarket, Hey, in how problem win-rate just make the talk customer just this winning the sir. that want of chooses high-quality and because take a the market you is, Flowserve to – just often clarified what’s confidence your the there aftermarketX in you question have to is this a any about sure Andy’s did been experience your there on the degree is –

Scott Rowe

as grow critically not and I’ll continue X high-class just aftermarket. not I’ll or to said, important X are with both – we’re the right? is Sure, aftermarket as the a it much. growing share the that start problem, we or is okay If I’m growing and, it. we Where that we’re times losing it OE, in if And is the growing okay, you then OE aftermarket

the for us a within is this initiative so, transformation. And major

The base our biggest called making our that this where customers is commercial the is segmentation and have essentially, of kind we aftermarket is the defining And moving our of commercial aftermarket program up we’re program installed for around intensity. intensity services. truly market sure value curve the

we make there’s we so, know have progress We know to continue bigger here. to a prize. And

I lost share in but it for the think, I year wasn’t us. for wouldn’t XXXX, growing aftermarket say great we a business

down doubling if continue much we expect to we’re come we lot rate. and really And program, in financials a faster then a on do make XXXX. a of in do to better higher to start here progress the at – the and can that, up So a

Deane Dray

where you see us has that in they glad in MRO, the – and falloff that’s you’re in would destocking, that, assessment and in distributor All really out flat just feel right, delay helpful. And kind I’m more aftermarket. and giving it’s a of a you frank because because oil especially experience like it gas, here doesn’t service, peak oil prices, on because refiners just get run our been

So been the here? expectation has that

Scott Rowe

when I savvier what Yeah, that about to getting and operators are doubt there mean, is no to spend spend it.

making you and productivity. when money, operations. stop off driving they’re reductions. they’re cost as good further back they don’t They’re so, driving And said, And

see And that we in did XXXX. so,

Deane, is It’s here Our there But for is right? such side. pump price the significantly a installed base large. largest the us, on

And to focused aftermarket. opportunities those team just gaining we’re and really that defining on so, need is make our sure we

through entitlement regardless program and think, our the I here. some other environment got we’ve on and of growing this getting to of the be the So focused we initiatives that have, intensity commercial

John Roueche

an showing clarifying this, FCD I’d the to as aftermarket point OE is other guess know, the people make, I but that’s impacting opposed up I you really Deane, an And as for booking know one MRO on booking. the phone,

Deane Dray

then a is jumps in Because as you look page. CapEx than That’s there some said, did at I just assumptions, kind well? XXXX conversion your a this and of And up? much catch just on planned. how Where when of that going? just of less as And you reflection considerations is you the cash off will weigh the this good a increased clarification. the XXXX And the follow-up,

Scott Rowe

Sure.

So just a couple of comments. grounding

expect to CapEx finished at out from we $XXX And been CapEx would we on judicious continue that at We’ll the out just upkeep the XXXX the a goes very was The been the themselves. say I the manufacturing good I on to that enterprise-wide put the enterprise-wide I’ve – $XX moving and here, money it’s just on year. million. operating XXXX then more changes safety that in range it the the little million spending to down entities. for productivity on gave into be million focuses and systems, guidance capital a – beginning nothing more and here. of that IT $XX scrutinize in bit incredibly the systems. guidance IT our this and facilities at of year range the So disciplined what it’s since it’s So our would is, in right? is We we’ve

quite clamped progressed And think, were much couple project of year, to good hadn’t in nothing’s million $XXX into really the at the I’d as end able programs we run is of because, kind years. rate just forward next changed us really the of our we before thinking, release frankly, But $XX to to the million last we down spending. we year, I just this say we the for as needed as

Deane Dray

on weighs And that just how on a comment conversion? your

Scott Rowe

Yeah.

conversion, XXX% I achievable factored flow into even think that range. think, we cash in that free still the we and

Deane Dray

Thank I what hear. you. to wanted That’s exactly

Operator

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

John Walsh

morning. good Hi,

John Roueche

John. Hey,

Scott Rowe

morning. good John, Hey,

John Walsh

down your K, more imply for just ship. backlog have you maybe with. clarification what It out the called have that the seem good is a year. But XXXX to book-and-burn from to of kind pretty shippable it you low-single-digits that to guess you the question at looking for of start you visibility would like looks in expect I

some the how of for and the kind timing You to math, distributor down going right? obviously partners one comments your look. would book-and-burn? made is give you are But of around that what that that seeing you channels low-single-digits And

Scott Rowe

our add it, I’ll revenue let Yeah, any Jay comment. conversion here, has him table got and take I’ll

John Roueche

revenue that of absolutely, XX%. convert With year-over-year would I by to expecting is Sure, John. backlog our XX the No, up about your during up from and XX% year-over-year math us be XX%, months will XX% right. of suggest that XXXX. with backlog

assuming we to X%. high flat guidance, then And clearly, a the X% of up we’re low-end our the MRO distributor type decline relatively the our us. if business provide to see work could guidance of return revenue of book-and-burn book-and-ship, could that for so end upside book-and-burn kind be our for in And work would guidance, that that at and

John Walsh

of Great. kind the of cadence the on And HX then versus the HX. called you the out year

just I a this about impact modeling any on you’d the about is finer quarter the all thinking the mean, put than quarter point to on perspective other that anything correct we’re first of so how coronavirus year. in to Just like dialed the from else, there phasing think and

John Roueche

I it, but how plays We’ll phasing XXXX’s average were about that of take out, difference if thinking and XXXX of would the and the year. kind actual Yeah. the see on year I probably throughout split the

John Walsh

you. Got

I sneak here… Okay. more could one if And in then just

Scott Rowe

yeah. like different A last way say QX this look a will lot it year year, to QX that is

John Walsh

you. Got

your the are opportunity restructuring what accelerate obviously, taking to then, competitors actions. And is in some the Okay. space

guys relative urgency You all of any of, cadence in do in to what plan doing feel the about as kind how the you goes, this out transformation. you and she to of of called thinking sense terms realignment Flowserve steady realignment But at kind were of year you’re X.X? or have accelerate

Scott Rowe

focused control we’re has – transformation here, we’ve growth been – cost it’s and John, the Yeah, cost initiatives. both on been and since I’ve

elegant anything. did see At releases, at But accelerating to what so And looking end in been were in to move What that XXXX. reduction from we’ve you voluntary to for dramatically was not U.S. close the select say, get the folks the at voluntary K this this the was them retirement to do some the I’d I’m and point, can company. and was a out. program. we going way age press say, win-win beginning. very our we’re for an it of It a specific it and a And

impacted that lot organizations. by in slowdown, But overall bit So the little side. that primarily were MRO last aftermarket of our a year, and actions in also we’ve done took then the we valve the facilities a at

that the say, of actions. add reductions the the I aggressive that slowdown But definitely and probably the – major following majority cost in were that’s realignment facility right in I’ll were headcount XXXX, than spending we So also moves. we pretty taking would – vast would XXXX word. any is be not rather

accelerate we’re going cost to improving structure position. not this overall and not on at down time, dramatically. we’re But cost slowing our our So

said, we’ve and to do so, to actions, more dramatic continue need to that And down. of take going if it transformation. take out we’ll rather plan good the the the back figuring as level And something identified drawing is an to you fully we of or And than really I feel acceleration we got cost about pretty within where quicker, the board and cost just organization. need the in now

John Walsh

it. appreciate you. Thank Great. I

Scott Rowe

You’re welcome.

Operator

go Pokrzywinski Our from Josh Morgan question from next Please Stanley. ahead. comes

Joshua Pokrzywinski

guys. Hi, morning, good

Scott Rowe

Josh. Hey,

John Roueche

Josh. morning, Good

Joshua Pokrzywinski

that Scott, looks of amount had be of what or back initiatives. gas of Flowserve for does volume million. just should leverage savings like leverage, discrete on X.X whether a of it’s – like of the if it’s question level that externally kind into or above $XX like beyond neighborhood you it XXXX, that but we Maybe the Is it or in being maybe and operating productivity, about something little first it type other of versus trying cost a numbers think XXXX? to could right of reductions number kind bit the were Or kind from looks similar the a for shrink? grow the restructuring it wrong,

Scott Rowe

a XXXX your mean, of we’ve we’re how of got other kind But versus things. right. level the much accurate, comment disclose don’t transformation we the think, from I XXXX Josh, of is So I on getting versus probably had same would very place again, year. keeping XXXX I And transformation savings that And for achieved this the XXXX. and as in full expect year last plan we we’re we that of level results for XXXX. for the levels similar

Joshua Pokrzywinski

is type Got it. about as good should are get the we are of come or terms your being of a of project you concentrated, guess, booked, being or funnels That’s product keep projects starting stuff any. strengths that and as of these Flowserve and helpful. on that now, I as light your a in feel kind are how of do heavy project? to booked, of And point probably starting some larger out is that in LNG Flowserve in that less more funnels projects mind the right then, kind anything exiting win rates, where categories

Scott Rowe

Sure.

for project reliable the period where On front, operators we severe do time products really when is a its of in long application. need well

the if pumps or a of application, large critical think control isolation midstream the of spec really on where anything refining, the that’s So service. is the efficiency the of higher pipeline, critical you kind LNG side

And do those lot we of have projects categories pumps so a important of these well. very really and big valves, and in

still XXXX, about on I XXXX. in refining the is the There excited based come We’re more downstream to side. regulation in say, would IMO work

so international to projects there. got good And visibility we’ve

XXXX chemical On the and side, petrochemical over XXXX. grows we believe

excited that. North and and we’re see so, about opportunities Asia-Pacific. And in America East in We the international, Middle there

the winning us, the and are FID XXXX. necessarily probably of a customers than We share with feel On pumps. front, good well our little But XXXX. pretty lighter we bit we with there valves don’t there. key where do LNG well in But opportunities, business about for key our do too

our in And X to and with customers It project discussions reasonably looks remain our optimistic drive last again, team change ability So healthy. the didn’t pipeline sales here. win growth months. the on and our overall,

Joshua Pokrzywinski

Perfect. Thanks, Scott.

Operator

ahead. Our Giordano from comes from next question Joe Cowen. Please go

Joseph Giordano

guys. Hey,

Scott Rowe

Hi, Joe.

Joseph Giordano

but here talk late hard want thought have – get about demand, big long of, like projects to sense even in how get and through how getting we’re maybe for haircut like numbers Just Scott, internally into us So to how if have we changes discount longer I don’t like coronavirus, you? bleeding us this so of we on for thought model? buckets numbers the you a have some shaped to you here taking not you our you hard how to suppliers the up can actual we that know getting through and can you this on kind

Scott Rowe

can sure. will two I help give Yeah, that for numbers you

our X% X% account So basis revenue Chinese a first all, for total of our revenue. of to operations kind on of

level it’s revenue. it’s huge, So of – not it’s but meaningful still

it’s the chain. importantly, supply More

the XX% our under global So chain. supply just is chain of supply

of kind confident returning about confident It’s I’m – I’m we and And disruption just the more think so, to as operations, through of recovery. where as normal the timing get we that not is this.

Our work. We’ve operations back as fully last about got to of our back people XX% are of week. to work

the of week. to due to work a The Not to scarce. quarantines all get expect that side number information suppliers this end of just supply are back chain up the We by – and has the bit our been the shutdown. little

got I’d timing a of bit of so, say in where the uncertainty recovery. we’ve more And that’s the terms little

and catch operations And all point, but to our for a be expect At bit suppliers the end up second the little I back. knowing what this that, – hang-up normal feel supply and of on have to by chain. don’t I they a more QX when would in on just come for just optimistic is of great fully the we then us know today, And love half. I by we’re the

Now, geographies un-impacted other our areas. we’re also aggressively looking and of into at how in product do we move that some

can it’s have of with it if our production ship range, it’s short-term We in is And terms global magnitude it’s in Whether confident operations. to to but three feel you that by can normal. gave a ship but needed, the impact months, six year, we’re and major. I here. so, to again saying numbers I we’re We suppliers. somewhere not the back of half the certainly second going

Joseph Giordano

So not on not... rocking XQ That’s having then, April fair internally, a X. what you’re doing normal things back to say are impact assume rolling and is and that to

Scott Rowe

side. is QX into mean, view chain it it’s and the now I right primarily our goes Yeah, supply

Joseph Giordano

Okay.

the assume that XQ guidance the is of per $X-billion-plus Okay. or streak now under current there risk of – that number? quarter Is kind slips That’s is that you the maintain right helpful. a bookings

Scott Rowe

still we were – a still we’re quarter. No, to $X driving billion

quarter. per $X-billion-plus that’s think I

that’s a now. think estimate right safe I

Joseph Giordano

Great. Thanks guys.

Scott Rowe

more coronavirus about And just now that we guidance as guidance on one the know everything into has the coronavirus, our well.

the impact does that we China. have anything in for would So anticipated account that with

Joseph Giordano

Thanks.

Scott Rowe

you. Thank

Operator

next Our from question comes Bank ahead. Obin from Please of America. go Andrew

Andrew Obin

Hey me fitting in. for guys. Thanks

Scott Rowe

Yeah. Good morning, Andy.

Andrew Obin

year. FCD just the margins Hey, a on question through

assume reasonable just that the is going of XXXX, margins half again incorporate in second you back to it as will the mix So comps fully the easier FCD of up sort as start change. – get

Scott Rowe

driving we’re on margins. what Obviously, at That’s so. to. low a mean hope point we’re sure I I FCD

doing this that’s comps, we’re moves not margins standpoint our from But labor sure lot year-over-year thing forward And the a impacting cost so, analysis of you as getting better. we productivity. look are should we anything to doing make at the mean and that a be or I

here OE showing OE big the little mix pointed earlier, in it up. MRO as so getting normalized – away aftermarket getting as you that see don’t But about, is and the Jay driver split. is OE, bit out the in shift business up from that the more big talked we’ve business the a MRO And

Andrew Obin

you. Got

that So growth is the OE on it’s what question just is versus MRO.

Scott Rowe

Yeah, yeah.

Andrew Obin

Longer in cash on is question buckets company? cash second cash. still left I would improve to levers the to The have continue the because conversion, what are term, the What big are you where big leadership. But think do say go? can what has but margins, the one here that is been most big else of along under your left the with and conversion – you changes

Scott Rowe

we’re I not the need where still Sure. capital, close progress is that we be. pleased working on capital. we made to working big to mean, I’m with And the driver but

And at, each kind quarter. so, we was endpoint And shifted reminder, the the as XX%. year a incentive plans the the to of on of our we finished focus average

driving every is year nice that we job this quarter year. capital sure did we what working the so, are at a did of making we And really down

year. well capital. were other QX, working progress And substantially and do every we QX December, QX historically, weren’t we better all the year, last in is than really happening in So was would in but month making what

pretty So improved a this has kind of flow But result, year cash a XX%. that. still did we’re at we our as And dramatically.

confident need that I’m steps significant forward progress. take And And there. so, we’re to we making

days. four by about Our improved inventory velocity

Our DSOs got number. improved. the Jay’s

John Roueche

Eight days.

Scott Rowe

gets continue make receivables DSO. visibility We’ll progress our and days systems and Eight to to inventory our better. on both as

move the going that’s driver probably one so, number that’s to continue And to cash.

We CapEx. will on remain disciplined

that. year-over-year. And cash margins flow not got expand growth if nice And we and about so, we’ve then, continue to worried I’m can

Andrew Obin

it where think a it capital specific little geography, working or stuck, is bit we a the it as a industry this buckets is And is about is specific of everything?

John Roueche

across in And everything, have the a bit much of in the much It’s Andy. inventory system. too It’s system. the globe. too we It’s little opportunities receivables

Scott Rowe

three Yeah, single said, or as we we’ve it but wish could now that at really. across just wish Jay it created attack, site are I we on there working is, areas the look two I every unfortunately, and this it is – capital. board.

we news made – location. the almost every nice really progress again, is good we in Now,

make But incremental progress some big I but it’s just been to firmly kind believe steps, of here. slow rather we progress continue than

You’ll see another and help nice movement in flow. on the XXXX that’s working us with cash capital to going

Andrew Obin

guys. Congrats. Good quarter,

John Roueche

Thanks.

Scott Rowe

you. Thank

Operator

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

Brett Linzey

guys. morning, good Hey,

John Roueche

Hey, Brett, are you? how

Brett Linzey

on to Good. in follow lost recoup into actually contemplating wanted you in the more slips or Are of coronavirus second-half it into the that And sale? simply China up you’re here. Hey, profit next just time and you then it there a some guide one near-term here? or assuming fully year is QX the QX that is pressure

Scott Rowe

as be expect we the second in the will to to the normal and a then, quarter And be make expect to our as that the half in headwind comments and running the did phasing the which prepared year, Brett first-half bit we’ve be no. able back little in up to lighter we press in than first normal. make said of the we of in year release, up. and the No,

Brett Linzey

pension contribution you so flow, up. cash free to in stepping expect that back just then And great. Okay, with back CapEx the

should working side? the you’re XX% this, the you level missed doing on given slightly we capital better than I this if the expect did conversion sorry, all year, And that

Scott Rowe

to publish focus where long-term we’re way already, set through out but metrics the is not new our much hitting targets. in didn’t all improvement continuous that we guidance I’m very our going XXXX to necessarily

Brett Linzey

Okay, Thanks. great. I’ll pass along.

Scott Rowe

Thank Great. you.

Operator

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

Flowserve (FLS) 18 Feb 202019 Q4 Earnings call transcript