FLS - Earnings call transcript Q1 2021

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Operator

Good day, and welcome to the Q1, 2021 Flowserve Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the call over to your host, Mr. of and President Vice Roueche, Investor Treasurer. Relations Jay go ahead, sir. Please

Jay Roueche

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

call and Executive President President and the Rowe, Senior Officer. Financial Amy Chief with are Officer; morning On Scott this Flowserve's Chief Schwetz, and Vice me

encourage replay forward-looking call Executive expectations Rowe, Please is company's will, both website President our include Harbor as and as well control. presentation Following Relations the the which flowserve.com accessible our statements. to Scott to press review as are a X, non-GAAP These And note reported information over beyond our for risks other of they on are being at and measures measures for Safe Officer, turn We comments. and management included to in disclosures earnings which non-GAAP are our reconciliation forecasts, and of and you call the webcast, questions. and materials release fully prepared available. upon and our of I comments, this many the May prepared of our to we to will would in section. contain the an our Chief XXXX, that are now based earnings audio and this his like call Investor Flowserve's also results, available as statements and will involve event be open do reminder, uncertainties,

Scott Rowe

joining call. everyone. and first good for quarter morning, Jay, Thanks, our you earnings Thank

average XX%, And three up last in bookings year's three EPS our Flowserve's with for the year's the XX% first were final of strong quarter. XXXX. pleased our adjusted We last of XXXX over to over $X.XX increased to to quarters. compared compared by first months are start

our lower. given results with especially first performance that are We encouraged quarter this are traditionally

our strong a this recovery. that indicated we saw calls, to are the And last two for end In are the earnings support we first a quarter off start well-positioned we in we in results belief. quarter, markets what we believe believe first XXXX. Given our that post-pandemic

various return pandemic. vaccinations, and we recovery, that countries mobility on overall terms rates, we emerge and making global infection the economies serve the different trajectories, to of are steady economic in is Although regions from progress, as world this confident are

result, see these a green of started As growth. bookings have to into translate activity, shoots we sequential

our MRO increased million were with substantial we roll out first subside Flowserve the to XXXX. $XXX and improving With was encouraged driven activity. aftermarket confident Assuming in COVID globally, year-over-year primarily bookings setbacks, new combined in over X.X without to vaccines to quarter, an growth growth environment, ability continue we which are XX% initiatives, issue represented growth deliver book and and sequentially, in our by

The market through As Coast. or bookings by In earlier improved, the by the was original bookings impacted inflection Gulf January March increased. we quarter, the exceeded our had severe growth slow, a expectations. February total, to our month but begun quarter weather in moved tracked cold steadily this quarter progress. anticipated. our than overall activity have And we seems pandemic was two

sequential increased America in delivered of the While levels, bookings served our we growth led all North regions. activity

a MRO-related awarded, the of XXXXs and were aftermarket of project get quarter. with projects of XX% increased bookings first that $XX the to to $XX addition number levels approximately million these In largest in saw approached activity, we range. smaller million pleased We

about to close a in Mexico winter Asia. plant end in estimated XX uniquely of regions, proximity projects work more incremental a markets getting operations us drove in QRC our refinery the impact footprint in million Central assist Texas chemical in pipeline Korea, replacement a to and and storm's experienced the nature the in February repair positioned see in our also impacted geographic good for of online our our which diversity of and aftermath, quickly repair customer an them installations America, the comprehensive included highlights back Flowserve's which But supported These upgrade reach week. as The us and We in in $XX than we offering. we storms nuclear Louisiana region. increased in efficiently. and didn't to a replacement forced a and business, customers

received they our a members should phone also associates reorder I'm of our markets, their through to continued personally. the very that services equipments customers, notes from this of variety necessary addition, our I in customers, recognize and Despite on weather to the future I proud in channel unplanned inventory impacted supporting focus operations. with difficult periods their and us restore their and want storm-related received team top of as again, power our and and own were extreme our number power, many region them their to, positions. partners our base our In and thank including calls customer associates from Flowserve damage for associates of distributors restore and our outages the providing water critical benefit business in and homes, committed and support thanking to time. for

in time customers Flowserve. done stronger at be March as bookings business still in that restore helping to saw anticipate the additional the February need of a operations and the There's level to about We and will for to facilities our relationships, second to work we increased in impact. future We quarter, same related confident continue their throughout at result conditions. some to are normal storm of customers our

are Turning and end booking outlook. markets now

increasing activity customers spending result XXXX. in should levels address utilization an optimism. maintain with pent-up industrial indicate in assets levels increase their and discussions that Rising throughout across deferred Our uptime, was to maintenance

this ago. and We increase the will period includes is compare of the as pick higher to expect a Currently, many the year project year to projects the the hold due of on pandemic. is early our were believe placed to in funnel MRO recovery progresses. than that And the we about continue activity throughout year. to the XX% that beginning their phases lead aftermarket Project also up,

economic We the across projects markets, leave in delayed end a apparent to in we conclusion, well-positioned to recovering a both return strong start economic from environment. all In quarters. growth financial to general funding our progress chemical year, and markets the expect but our projects it the many to in end We to coming bookings the believe was industry toward these remain in recovering expect environment. benefit Opportunities of are results.

bookings optimistic today, We're see delivered continued in And Transformation which to our some world Amy, with to adjusted margins the our SG&A ability last in with flare ongoing help benefit While like XXXX, seeing we and in Flowserve to I'll turn we what now reflect vaccinations, significantly the and growth. EPS in beginning that first in detail. increasing our the cost greater ultimately levels financial will year. the Program. of took X.X cover financial ups the our are results we pleased right to to regions, quarter, the was we're the move is expect our the to, decisive very to results up call in compared actions we COVID India support deliver direction, over

Amy Schwetz

good and morning, everyone. Scott, Thanks,

an we below $X.XX to basis, On versus EPS and first $X.XX nearly XX% $X.XX, delivered a $X.XX line FX prior included the of of EPS impact. reported including an of retirement currency $X.XX of of solid results of which quarter, costs debt, year. early of For realignment, adjusted increase represents related the

when including are on now As in quality of XXXX our expense transformation this earnings, out. focus a reminder, prior we adjusted the our years earnings, adjusted to was improving with costs in our contrast

was original to XXX in margins, On decline, both million first equipment, equipment First basis XX.X%, compared versus quarter points FPD's basis ongoing offset absorption XX contributing. and driven of primarily a the the to decreased decrease. operational both first the sequential margin FPD's basis performance XX% FCD's the mix X.X% of XX X% the $XXX year gross by in as revenue basis primarily aftermarket XXXX. by headwinds versus and increased as down partially by towards of prior We Adjusted we largely well quarter. modest see $XXX of middle gross by revenue, margin actions higher sales point prior were versus was to to XXXX, cost realignment increase, shift to XXXX absorption. quarter XX.X% improvements, took driven a driven with quarter, as quarter sales costs reported and point by flat increased of transformation-driven under including XX% roughly significant higher quarter our basis, due point FTD FPD XXX as million first and first margin offset revenue the Shifting aftermarket growth decline original pleased year, was

to largely million $XX on and decreased flat prior sequential SG&A a million adjusted quarter year, First basis. $XXX was versus

quarter we first basis adjusted sales, improvements. on declined points actions $XX year-over-year. mid-XXXX, We cost performance addition the a $XX to the of our adjusted ongoing quarter took a $XX of where in focus million decrease decreased in down percent considering quarter, items to Reported and SG&A versus first million The delivered the control operating in the XXX drove were year, SG&A increase prior million, in revenue. compared benefits, cost a strong decisive million action As XXXX. first $XX adjusted in income cost

the last XX.X% improved year mentioned by improved ongoing cost points FTD and driven adjusted points As progress XXX basis versus and XX higher FPD margin actions, previously respectively. products aftermarket mix and and shift XX.X%, margin to and result a operational operating XXX basis to the X.X%, services. to

year-over-year increased basis reduction quarter adjusted items. $XX First margin points reported million X.X%, the operating XXX including to of roughly

Our full in with first of year XX%. quarter XX.X% XX% line rate guidance of adjusted tax our is to

and cash liquidity. to now Turning

Our level. note. debt to of of year-end our decreased the cash payments with was for million the reduction, remaining the $XXX XXXX $XXX use portion first euro primary million million balance compared $XXX The to of cash retire quarter

Additionally, million and we share through returned over dividends repurchases. to shareholders $XX

gross first $XX million year's our up including debt of Compared at the Total to liquidity $X.X both is was shareholders last quarter-end million. to strong down compared focus at over is cash to on down Our allocation. strength our capital through billion, at and the availability creation undrawn under $X.X return sheet, ability while balance billion credit Flowserve's our $XXX $X.X quarter, $XX of value billion debt quarter-end and million, position over facility. underscores over senior cash pay balance over year-end. to debt remained

First quarter XX-years, management free time positive the in focus that flow last only in delivering our million, in Flowserve flow indication trend free cash on third and results. the was quarter. an second a approximately This row year cash the and is is the cash for delivered $XX first

working was I cash a a focused typical, first inventory, last in in payable quarter. and by million. a primarily capital driven capital drove top-line. pleased million, to accounts a quarter improved a sources working this use. primarily sequential look use XX.X%, reduction XXX liabilities as our the we a is $XX was primary that receivable was As of accounts Accounts a to processes control by percent use driven a Taking $XX contract of of saw points increase at working But year's also capital, sales, reduction Inventory of basis quarter first were versus again, XX% payable. lower and of cash and

Although, $XX our of fourth and we inventory, assets XXXX. million, when increased $X including pleased million were decreased versus liabilities, over that the contract backlog quarter

capital year. drive planning direct confident line conversion in working wide and consistent on the achieving excess we of cash enterprise sight XXX% business across in XXXX. to have utilization in flow the our we integration functions, metrics remain improvement of free in continue importantly, we of our And and operations throughout As systems

XXXX. from MRO we expect Based guidance now improving in for digits, increased and associated aftermarket market, and activity, Turning quarterly tightened EPS be million, XXXX, X%. as products, to range now of our continues now expenses first our guidance below remainder basis, end increase this may XXXX on quarter short our roughly expect original of target expect X% see year functional of the first effects range the to adjusted a versus the which strong full our where versus cycle to and discrete the shorter $XX the the $X.XX and we $X.XX our of through versus prior outlook realignment the and year. of the With expected bookings of down Flowserve X% We XXXX revenue guide its on XX% in EPS adjusted further program, bookings the range per potential all cycle course short cycle expected our recognized exclude X% transformation to the full over and other as increase increase low in in our elements reaffirmed expect flow expect and our we transformation impact as our digits a to expected year, activity. occur of other currency operations foreign Flowserve EPS expenses representing to revenue over and to of may X.X approximately the equipment to adjusted increase into occur now single and mid-single in The initial the to quarter $XX XXXX decline share, increase decline On in our million, benefit embedded majority we year. the of visibility of well bookings based outlook prior during for items, line themes, sequentially metrics.

EPS our in As are previously guidance. mentioned, we costs these including now adjusted

$XX expense XX%. tax between in and range XX% of to components Additional million interest the with an in remain net adjusted $XX and guidance million, expected unchanged rate

looking at to an case, cash, and cash year, shareholders in and repurchases. recently of flow is the include to historically this our year fourth retirement $XXX completed expectation cash euro over be the notes, return as the through largely Major the million the free planned usages expect of to dividends weighted we Lastly, second-half will quarter. share

more expenditures quarter which invest to to than to wide intend of ever includes improvements. IT our systems we based are the including Flowserve our we further program, to business also the in first transformation-driven spending We aspects $XX our support conclusion, in platform, ERP capital consolidate as opportunities XXXX. optimistic performance, our range, X.X million million $XX for our in the return about productivity on enterprise In and growth

strong, free generation, and cost grow. at revenues has our markets remains rapid are flow and end Our and likely cash a improving expansion our pace, discipline well-positioned operational for sheet us balance as margin

the return Scott. now me Let to call

Scott Rowe

comments to two I wrap some Thank strategic you, priorities. up Amy. key want around with today

ongoing Our and transformation, Flowserve transition. will Flowserve X.X support energy

transformation and accelerated provide the focus cost progress. we our We on year. update dictated X.X pandemic-driven aspects the Flowserve last first Let reduction. efforts an of transformation cost that on me downturn our In XXXX, heavily the shifted reduction

streamlining to our These rationalization IT continued overall wide and improving improve overall improvements operations, we our overall and to progress strategy systems. productivity. the enterprise our visibility, Additionally, improving are our our

All of new support X.X model. Flowserve these operating enhancements the

margin we productivity As expect our improvements to new operating the the throughout continue model to deliver throughout takes enterprise, hold business. and

embed end come. confident provide and that operations fully the am of our X.X customers to Flowserve XXXX, the look our we improvements to I years As transformation continue process our into by will Flowserve to benefit for to

place fully All of are in market the fundamentals now leverage expected the to recovery.

transition transition. During global coming primarily more An are we customer important by strengthened support in growth, the dynamics and and and The related our product years partnerships, These sector. urgency improved including are of innovation near-term penetration. investments of action. energy driven also the our We we transition, investment Energy energy Flowserve especially call acceleration last transformation pivotal the and industrial priorities year, integrate With XXXX to And much is changes. COVID, energy we driven the are resulting within carbon spending in an pursue goals. the energy market social, multi further accelerated reduction expect with current XXXX, customers, the benefit and in however, ability portfolio our value-added on by our to for will accelerating served an better-positioned efficiency confident two targets increased investments to acquisitions. model, growth increase expected at focused further in to from first across of with sector, is operating alternative to theme in to then this to as experience, been and rapidly play to strategy believe has of the Flowserve's well-positioned began political their achieve transition a aspect be decades, from increased and sources are real. potential our factor regulatory energy,

Our emerging in energy solutions value by uptime, second, markets flow systems, first: existing delivering our cycle transition supporting new approach efficiency includes, for and automation, through and to life scaling control we're chains to and gasification, a data our intelligence, energy customers energy viewpoint, and and capture, into by hydrogen, carbon utilizing using finally, flow launched evolving science platform. our RedRaven diagnose, incorrect monitor, recently storage, non-fossil autonomous And sources. built-in through fuel control energy flow

first we beginning. our biodiesel, of bookings, just quarter believe capture efficiency. part As this And related in participated is carbon to projects solar the power, and concentrated energy we that

new goals, received gas This see that quarter conversations of come. I I example, have us hydrogen the introduced to have other product, million $XX vapor ring XXXX, over growing we reduction The an our we customers can for a energy emission transition Since compressor, opportunities third specifically demand our we get greenhouse of carbon and capture. with about production designed As energy plans, the positions Flowserve. through already to offer recovery. in for the gas and customers product of blue support introduction, their flare excited years liquid the about the more for orders transition and more

We we working suite to how prove drive our a capabilities go-to-market and developing are and customers can currently select strategy, are to of emissions. help on reduce progress efficiency and them making closely our demonstrate good few with

to steel, food and current where believe across opportunities energy industrial we limited provide transition also customers, markets our will mining. like spectrum, the beverage, we scale, currently In and including addition have cement, end water,

forms to uniquely IoT customers believe that to is technology we Flowserve can expand and pumps, their grow control with We're seals, In can transition. consumption solar, capability the and lithium our launched pumps, hydrogen, business seals the our which with our actively we processing. and improve existing reduce and increase We to presence our for achieve a instrument and provide Flowserve and customers’ energy data-driven analytics Overall, help reduce including opportunities mining asset emissions. uptime energy, dramatically customers, energy our to enhanced other today, valves positioned consumption. further in across largest efficiency, developing operations, improve of to reduced approach and also data RedRaven emissions. helping on feel carbon valves energy assist be January, that flow the and through We expertise combined how offering, expect our customers near-term associated improved will our energy our

Since we week, market's per the installation We RedRaven, the are offerings. of of one been really interesting pleased IoT and or our new average awarded to response site contract parties rollout the with to pipeline build. on continues have

my remarks, As summary. I provide quick prepared conclude let me a

The level for provided a to us year guidance. first our year, the earlier with a our expected, start an the improved higher guidance. than assumed EPS inflecting in confident outlook and we of the quarter bookings we to initially better feel ability we in With February that remainder our adjusted previously at raise

confident We in believe execute. have to in market to downturn. are ability recovery the from improved our are firmly and visibility pandemic-driven We growth we

growth. questions. and call to Thank transition Additionally, significant we And on our flow see a significant on we we'll stakeholders. equipment. prepared I X.X many Flowserve. work we'd countries we're now energy around at our the transformation growth control and inevitably this open spending program, you. the as plans, well-positioned finally, and in shareholders years higher world Operator, like And are confident concludes transition create other a After three include hard to that ahead outlook our are longer-term our for us, value to infrastructure am are confident the announcing will and that now remarks. of capitalize of opportunity operating opportunities for level, Flowserve to

Operator

open. the ahead. Deane [Operator go Capital with line [Operator Instructions] of your comes from Our And RBC Deane, Instructions] Please line Dray Markets. question is first

Deane Dray

just of is Is quarter of orders us positively sooner. inflections mid a And difficulties. Yeah, sorry orders the there, rebound XXXX. is uncertainty? late here? less know how much on been this in the congratulations to the are how assuming Is a for backs, looks we of the that. much COVID start CEO here. Technical little at coming year? could it pricing factors a point And one this, to that are that just if And, about the you've really Hey, better? balance confidence, these I you of talking could you about to here, please? in oil vaccine, bit If inflecting factor

Scott Rowe

the could Thanks, thought is see quarter, us Deane, expected. had number mentality sentiment a look, a to it really than recovery, and join sequential it. just $XXX kind glad higher pleased certainly say what a we we number really and XX% of And of when you and didn't is, factors contributing Sure. really was there. QX, QX pop that it's expect here. We we're all little today. to for first we I'd the a the COVID. are million is good of and be But a with start is the One

America to of of North just as our their now there, are that begins other money. and And we then vaccines you customer and see case it's ability with so the support. industries COVID utilization assets the factor reductions, all the Europe progress subsides, spend different base in make And to across confident more then

And plants, of food a refining, petrochemical, higher it's any are so pharmaceuticals, chemical what they all those ago. beverage, year than and were whether

seeing before. we're far good good customer than growth confidence aftermarket. we're on And so then more just MRO, we're growth seeing on seeing And

more now. concerns, than starting was are struggling still Latin world, right that. the place a sure still are I there's in good the it past. to But out India's to Now, parts getting the There through in become path America think not far this that of that is other of

XXXX, $XXX in number. about And excited in of feel forward rest visibility the good got similar good we we for to And QX. million project so, a bookings as then that we've about number we're QX,

and level we XXXs we like we kind do year. be right this good the pretty low of we're customer to throughout say, with going but dramatically mid grow to feels wouldn't I from think now growing think this, of discussions when And don't move into that so, kind our we I forward, back basis. which quarterly begin to to 'XX, And to we're move start billion expect of start XXXX early is then a projects we we seeing. later grow that in bookings range larger and of plus $X where what on the But then

Deane Dray

as, helpful. my guys pretty be today are today? really your And relates What this well-positioned. of energy transition the are revenues mix what looks that's second Alright, is And there's characterize more whether knowing biodiesel that's But you where the in you energy there's It what question list? transition like pivot mix happening. percent it's you about leverage to gasification then interested I'd five And solar, long to to would the mix a talk ready a that or out to three today? to you what's would the timeframe? are year goal as see

Scott Rowe

say, We're Deane. space. I fast. this is incredibly about evolving Sure, what's happening really it excited in would

things And, it see so opportunity. ago, we saw tremendous a year And as changing. headwind, a and this as we are a now

percentage customers we'll talked $XX by share a percentage. flow and spending one a then a through numbers. it's relatively shape their to And we And But they're But, just and as incredibly strategy. you in you of big we trying that zero, up carbon we Investor evolving, publicly, at work at that in we energy what terms so to coming can when some to small really of And today, the a emissions are quickly. happen. out own about we reduction back a plans as out think also we put targets XXXX. quarters, come control, think stated of put small trying and our needed And in developing net did will achieve that and haven't was goals, trillion conferences, get number February the number target if I

flow trillion for on billion market So $XX a X.X% of control flow is potential control. $XX

figure that sharpening a are And, out, for us trying right and really can we our means pencil. where environment play. what so to it's And exactly We're we dynamic now.

sweet that operators different fit of be does really feel you've what across paths. a right. seals, And terms we And they're of part pumps, in believe in looking really will a do. our got they good so But big flow control we offering that valves different spot pursuing for, whatever

flow energies then largest seals we So on And and leaks, one a help reduction of consumers gas installation, fugitive the the optimization. the with in pumps large their can emissions energy of any and emission are part play on valves side, their around and any controlling significant really are of there. leaks control

today, make like strategy, we firms our a long-term feel to again, targets growing share set we're progress good and and And market small restart, here. this in goals on continue our up we'll quickly. but place, So relatively as some

Deane Dray

Great. Thank color. all for the you

Operator

Your the line go of comes next question with Citi. Kaplowitz ahead. Please from Andy

Andy Kaplowitz

morning. quarter. Good Nice

Amy Schwetz

Good morning, Andy.

Scott Rowe

Andy. Hey,

Andy Kaplowitz

amount know million kind have makes last sense. the that is we and your you And I has a you've that really in come many bookings? with back of projects rate the possible QX, But for that could do back start of the likely $XXX to mentioned, rest see How sustainably see March larger much continue past? to that's run years. you again, run billion in rate, one bookings? deferred to done do you if projects Scott, replacement over customers your $X expecting and that you number, it is come which similar half uptrend you're of of the book that to with larger any the Did year? need know of you to

Scott Rowe

Sure.

Let's just talk about the and the MRO side. aftermarket

we're installations just, on that And there would is some so for education and some we number new about MRO was demand of equipment. replacement. our seeing our maintenance And include talked as that in pent-up certainly what these everybody,

call but replacement valves, in replacement OE, categorize we it pumps, those and are MRO. these So we

there assets level. almost across we are think the And utilization of so customers, work happening that also, we higher lot what's a spectrum about rates, a at we're pent-up. all getting replacement then of as is believe And that's running our their

yet, in not commit projects got of we've the to QX, I balance now sustain move year. to really above move ready is that confidence back as and the up feel a can mid-XXXs number to start good a the lot Andy, creep again, a of the for going but does we billion that territory. But, think and number this of into good feel XXX the I'm throughout we $X then to about here half So year. of year, right and to do similar of kind starts in kind

Andy Kaplowitz

then, about it's help you've us of know And think can 'XX? stable. and now Scott. helpful, That's the while for continued to be SG&A a relatively you here, rest margin about talked debt I for expectation

you on sort price chance to XX% can grow quarter? for still again, SG&A? about as for this margin flattish you of decent margin? 'XX. think had both like impact the versus see you are And a do how segments, you're actually to start keep So, you cost detrimental I But first XX% in thinking expansion segment going you its to and of

Scott Rowe

Yeah, then cost Amy and I and kind what we hit margin and price of there. seeing can I'll SG&A talk about the let are side

Amy Schwetz

Yeah.

see I SG&A saw built tightly through year-over-year. we at that So the volume the in going into the we of think you really volume of course mix that's year. coming our way year-over-year volume of that through There in we're through, continue if as We're levels. to savings do in benefit the and still Andy, over that of we expand a opportunity that headcount second savings the business, the XXXX, some an of half see cost absorption with be through can. benefit to the we we shorter over to over Well as was our and of to And optimal in actually is XXXX. the sort at dealing see of reduction But under cycle make sequentially XXXX. with my there's remarks, opportunity coming couple grow earnings we particularly that going to of we the that as sub year, of indicated some came saw we look course things. control If and the margins a was lot quarter,

problem Now, some returns normal, costs a we're there'll to be nice back that creep frankly, have. travel but in to that as as viewing

really our supply that over chain done So And well. in, are well, has of we but know cost increases a we course where the costs. great And job inability year. a a the input currently, group mitigating SG&A the given we're that of hotspots of around then control terms generally, been some concern the more being in supply course of logistics, as seeing. really our some seeing chain we ability are overall, particularly made to the see you from quite There's over that XXXX offset COVID of creep a lot see some perspective, to the of

Scott Rowe

the Andy, prices. We're an side. I on add more a inflationary inflation environment commodity would in bit with little clearly

In QX. we surge in massive a fact, saw

that short-term and with this right view it's relatively is Our certainly is some that now speculation. peaked,

and just largest down and in our actually back-half we chain. the was so really this said, And to progress in We've efforts. one here been come settle But as see of to three years, of Flowserve supply for of want kind workstream the continue Amy working year. we the this I good chain see call X.X on on some supply out,

to feel about but spend, things in companies offset to we the as start was continuing net proactive that progress, things chain. we QX, And make some very us, positive more huge a to And suppliers, happening. that really lot we as a as it rationalize we able do so, wouldn't the supply move good on slight of were call we even to do win, were good it a of for the I

transportation difficult good the was see side, And that hit that is, customers. price the that if And us. And expect flow QX. negative logistics to a is our environment one service really behind feel I the is worst is this subsiding And for I I us And the now. we that XXXX and QX. pricing across then, on concerning, here that. as in So, Amy was in us then QX, the for a really about don't or said,

competitors I most our of are the of customers think seeing our most or activity. increased

pricing system. think so, to see side some still that And of have I to get I expect But worse. pricing on through you the our don't coming firm starts up. that

be we So at to imbalance we see much to and starting we'll saw book in that like up bit But the in here end feel pricing of better new position some as year. in work, our a we're here QX. little we'll move QX, headwinds we'll a the continue

Andy Kaplowitz

Appreciate the color.

Operator

Nathan question Please next of the with ahead. is from go line Stifel. Jones Your

Nathan Jones

everyone. morning, Good

Scott Rowe

Nathan. morning, Good

Nathan Jones

follow-ups actually here. A couple of

you under slowed say did increased bit. revenue a declined that the absorption On comment, little

first in So quarter. the I'm seeing you're little under surprised increased absorption that

costs you does that. to imply Or what more here? recovery? out if imply is returned about then carry And it for you And the for that need So could we that talk take does then those now that costs once margins incremental growth? to

Scott Rowe

Sure. in the with QX, there's I under revenue can number address see that. is certainly What you absorption. lower some

side driving roughly things move the And of revenue will bookings that feel worked this direct fixed think to our But down we And and at point, there said comes come actions the does that supporting down, discussion this down. backlog the QX the the move in continue cost workforce our this number. that down really and year that long this, big support have though, With and we're customers, on take I way really, we the are and the our we more on the a number, manufacturing given kind as as in is were as QX. sales QX. leaning QX morning, but into at don't some that. down XX% we've ability will that's and sites making you're come and out labor facilities, on aggressive growth cycle given up. to XX%, and assets the We aggressive already sure nature did of need that our into backlog And, our sequentially any we in out. capacity had more last costs to so And Amy said, the like

lead I and out times customers, our low And so about about taking more am of support additional keep ability now, I'm our than the costs right to system. concerned

about we roofline. do right, progress have over and overall, make still and to say will deliberately in we'll systematically opportunity we're I systematically earnings to that But, coming that going the overall We've on Now, calls, footprint. years. continue prior talked on manufacturing our

Nathan Jones

implies I on back good. And as this pretty growth next to we -- get if should you're mean year? that carrying would incrementals, what on then unabsorbed that comment overhead that any mean, I be think would

Amy Schwetz

couple a of think I Nathan. Yeah, things,

all first time absorption really of largely XXXX, we're see out the perspective, as expand, anticipating in the backlog I at that the we're OE And quarter an impact that is year. get on that very that the the that the to the year. we adjusted think really, And over seeing we margins that this course will on to build, that fourth this offset obviously, really, dependent continuing in mix, to is way But, mix quarter as point talked the change of side. point under through particular, we thing from even just particularly the of absorption. as is we the one move our about under by

So, as expand we backlog, to build should we have opportunity those nice a margins. that

Scott Rowe

than to And decremental on doing what happy we Yeah, year saw I'm as everything incrementals historical focused improved incrementals with about really last was better rather you X.X talk But, up. we're is having Flowserve decremental. come downturns. from

to so, work we're this good cycle. the model that have can we book we And some I'm to operating start good trying really incrementals confident through create that here. works And as

Nathan Jones

bids. specifically one have specifically pricing, I on on Thanks. and project

bids those How the Where the very on the book inflation, manage a that steep accepted? you bids adjust when inbuilt they costs might input inflation, then time from you're it rapid protect you how to from beXX, it's protect inflation? for Are XX-months that do ship? bid project maybe seeing costs mechanisms of some inflation. to submit from very bids contract bid? get those that You're there and seen the the from these but margins And time this you you you seeing do have rapid that

Scott Rowe

Yeah.

really to of order is work. our So, Nathan, lot really on engineer projects, the a that

but if I'm more to typically that. that the costs our And from when point to how time that than certainly towards And concern your that We put the so, really there's of changes will anything, is And drive we get time we're nice job work And get winning able award, will up come quota, quotes to overly as down I there. not think customer. quota we concerned to rather up. quotes. with teams or start those of a hard costs then much put some, work, we into do certainty our

concerned as part And with so, then we've overly pricing of I'm really are And good with long-term. the Flowserve just partnering supply now chain, contracts not thing our that that. I'd and got add X.X other

we buyouts. don't bid the at into what what ability got pretty our that what And cost incorporate do plus modeling the projects. historically, to see looks big as so, costing third-party we've a on the deliver to deviation like. big we good can we the on project some We from And,

cycle for not I a some So, have and much concerning while overly a others think concern, about it longer business, that be there. more that it's project a concerned could Flowserve. I'm for larger

Nathan Jones

helpful. really I'll Thanks. pass along. That's it

Operator

Giordano Your next question ahead. Please is line Joe Cowen. from the of go with

Joe Giordano

Hey, good afternoon, everyone.

Scott Rowe

Hey, Joe.

Joe Giordano

said you Scott, Hey, stuff I energy appreciate the transition today. about

human still future? foreseeable financial two which So your applications One, new going some on and you your balance legacy of like do I questions this, that. the capital finite like I pool towards and to existing are have massive base, servicing guess, applications and how for internally be

Scott Rowe

going transition. our energy our Sure. we're through support the today What to say kind customers tagline is in we of and

this that So, incredibly would Again, put we technology, I we where marketplace. quickly think and And marketing we our R&D fit, to really are products our evolving is a do and can teams an really what starting do is our effort more do this. say lot how do both. around

digitize. and the theme the doing decarbonize buckets. diversify, so we're all efforts fit our technology And those that in really within three is marketing of one today and And of

our these got with also but lot service contracts, you our around very with we've we're agreements so right, operations we that benefit big installations. uptime, on things can and installations, other And a productivity, then focused about metrics long-term these when benefit And and it agreements customers, of think Flowserve. call And very, lifecycle around that. around lifecycle

and energy energy this the to consumers efficiency control control then because And highest do transition, And electric got customers is energy with drive the positioned also to that, ability the we've our valves big we've and got actuators. our pumps. flow think the we our we help things of operation. one believe about their here we in we're So as how uniquely do

our add that think really energy we a efficiency is so, agreements. And lifecycle nice into

savings, and are with with we'd to those having partner say, lot this life to in so now approach willing a some And really agreement the select to the energy a you discussions cycle willing that contracts, share want customers hey, we put to to to if help we're this. upside. efficiency And deliver goals, our to in we take is your we're come like of we're performance-based

lifecycle well, and energy emissions around so we're can also our aligns a in point and with working we pull the in QRC network And our And efficiency, right. now doing exactly on as carbon at we with advantage. time, we're that it what also then, believe

well. okay, And believe And emissions that, on we Flowserve the transition. on we're would on aligned and we step aligned on uptime, we customers our accelerate can we reduction. if of help aligned saying, we look, benefits we're contracts, And long-term so next do as that their our kind carbon get our shareholders think part be also as then, aligned efficiency, now is productivity, of that energy we're can

Joe Giordano

no But, does new that like, about it then go were I applications, a you a back of then think by different cared Yeah, preface and long this people related basis, lot stuff when and for going a this ago, one time. crazy makes earths rare if I'll like about saying uranium sense. XX-years and time. feel of And that, on kind and

of through what really for capital? think that? we like, next do kind XX-years? we doing the want And where So dedicate you are like, do how And to

Scott Rowe

too, And, I, and around don't I when of And, is think No, changing. the this energy real the through see I political several think, have world, social just these. look you at pressure time. the I transition lived this

path and green so player takes how blue. hydrogen how a it is big it not sure is And versus exactly and how what we're

really driving a energy of efficiency are all believe their and that think the I on really over as I And, energy industry their But firm the also carbon up industrial, certainly down folks time. focused will result, emissions. consumption. So, down bringing energy that, driving and

I progress. so absolutely to are think two going those And

think and transition there's take control solution the and meaningful things them. we'll because of to But things I regardless, opportunity the that aspects green how flow all think time, these out. control some hydrogen will and flow I see of to other plays have for Flowserve

in think we participate We've way. is flow this in for in and many industries, different can energy we transition control opportunity us. big participate XXX-years in so, meaningful that solutions been for we And a doing think very a and

Joe Giordano

guys. Thanks,

Operator

Your ahead. the from Hinrichs of go Goldman next is Turner question line with Sachs. Please

Turner Hinrichs

quarter. on Hey, guys, a congrats solid

Scott Rowe

you. Thank

Turner Hinrichs

MRC's forward? seeing low the call about any on year. inventories noted And remainder you pretty restocking last to they are all So of for week, thinking how Are and going build you the inventory referred going on modest are restocking currently?

Scott Rowe

Sure.

is was their of MRC big level And a So customer inventory ours. surprised that very in I say, fell I'll QX. just

go point of right, times times, of a a irrelevant. quite as their if and company And we are confident will anything lead is steady model -- that much of logistics the so, some then frankly, pretty what And, when builds. location. services We're down I our you not say, than lead same I'm they're there. aggressive not the our look that a pretty rates seeing order seeing any any see distributor, through inventory role else. And, becomes at business further. And their providing would inventory But we're it's

actually think at they this can think about So as I to from that go, come point I they're forward. up they as start low

start we levels. the stocks. in to We in winter believe America to really Coast haven't other really their predominantly QX, just seen I’d thing Gulf is build QX deplete them that and inventory in the at the this point. North storm say did But I and see

think reduction spike -- I is are part can't going customer than they their some But the freeze they of that in of part that's today. a got build of that because demand, base. I of And the them as servicing lower see really in they the so,

point, tailwind significant a other QX orders And for so some into some we I pretty and think on this is OEMs. start transition putting as and Flowserve and actually beyond, us. stocking they'll at And

Turner Hinrichs

Asia regions And of that both mix, look double of what the Could different while, how down. describe I Europe geographic and North still normalize? forward I as about geographic like affect you America are see trajectory up going might that? and things Thanks. digits, could On impacts geographic is just Great. mix mean, sort the you're thinking

Scott Rowe

Sure.

business our out. So largely and aftermarket will incoming be and abatement MRO on COVID vaccine

the up. we'll business see mobility to And economic so our come to parts as start of returned world these then growth, and

And the of North good so, about and on I I about side, America, good Asia. good I I feel feel MRO parts about aftermarket about feel feel good Europe,

we're in Where facilities. good Asia I in South project the And start the come growth the think then concerns Middle the and think back on for there. are then, the be those healthy America the going there's pretty India going I where, to of projects, to so project couple or larger next in and got greenfield existing And And see of that don't quarters. has a I would see Latin and business through think Pacific to North expansions America the East the side side, aspects America list take back place projects, we or that's existing even half here primarily year.

worst situation I going be for on the America problematic few to so, concerns a geography the quarters, until around to is I more get they COVID. and any there. the think would through India And South think And really then be

Turner Hinrichs

Great. Thank the color. appreciate you. I

Operator

go with [Operator Your Instructions] from the ahead. question Please next [Indiscernible] is line Jefferies. of

Unidentified Analyst

fitting for thanks in. Hi, me

for this you actually of believe OE And the Do can bookings XXX, the of XXXX. be up the at level? since quarter if could were this bookings at least level FCD, in So, part highest business? remain fourth so, year-over-year sales

Scott Rowe

Yeah. Sure.

So again, think to around well. as Flowserve, were apply but I comments I they our FCD, largely overall think,

think of year. throughout so we And bookings can the level we carry this

had lot valves. a that MRO-based, we was replacement FCD. of So, even within geographic mix, And so just and good

about good to of at to within to certainly get realm and outlook we'd continue pretty we like rate, we're of close this bookings. good revenue really revenue if And possibility. point, year-over-year, feel having increase we to starting growth. can to see it's the So And FCD visibility your the

Unidentified Analyst

in you Great. business the that then margin benefit the parts from be of response Thanks. QRC you little to that my talked could there? but non-recurring call, And the just did last in beginning Texas, a question, about see a in

Amy Schwetz

show generally we an more our and I our and to those as generates So nice times their don't look enhance our with that based increase that, our sites. margins location our them to real aftermarket value we as on an it in and customers, with view deliver can business opportunity at opportunity We general, relationships would to margins. intimacy

other that see week the services. So, margin from would the necessarily generally aftermarket to a I from OE a shift, slight then see, we necessarily than don't we pricing not event mix expansion for had perhaps but that those in

Unidentified Analyst

for questions. Thanks my Great. taking

Operator

at questions time. your Thank and a Ladies this have day. showing participation, conference you today's call. this I'm does And wonderful for conclude gentlemen, further no and

You may disconnect. all

Flowserve (FLS) 4 May 212021 Q1 Earnings call transcript