FLS - Earnings call transcript Q2 2021

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

Operator

Good day and thank you for standing by. Welcome to the 2021 Flowserve Second Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. like Mike the Relations. Mullin, now your over I'd today, speaker Director Instructions] to conference hand to [Operator of Investor go ahead. Please

Mike Mullin

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

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

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

Scott Rowe

now quarter adjusted our by improvement. XX% is the our in encouraged earnings have operational our $XXX represents At which growth. confidence which Mike. level second our this to thank EPS call. sight inflected clear was provided pleased we were earnings progress. Great, year-over-year of performance level, bookings outlook continued have you sequential with Flowserve including Good us as second $X.XX, line a thank The our We for quarter and XX% results improved of reflects full for everyone year. solid bookings the and bookings It and million, transformation quarter our upward, you performance building We're nearly further, morning a joining the for of the and QX raise an higher improvement. momentum to of

Our fighting with EPS indicated COVID-XX. revised has we that is to guidance Since Each start the to a $X.XX end expected on different the for geography of our global at made being But markets adjusted in XXXX. progress in pandemic. emerged. with are pandemic, a directly country now stages correlated was clear recovery be the the pattern $X.XX and basis,

dramatically, As mobility then out vaccines consumption This of declined began turn our drives all COVID end to roll markets. customer countries spending and improve. nearly for cases and in

and continue to restore are factors pre-pandemic our confident to ability bookings Flowserve the are outlook. that in quarters. enterprise There in levels to We our ultimately several grow in to the confidence the contribute coming

to continue our to and we expect bookings. aftermarket First, MRO grow

and in utilization COVID, service which parts, activity. customers' facilities, increased from countries As units are emerge necessitates higher replacement rates we seeing our

inventory about levels inventory Additionally, rebuild just the our now of After replenish quarters. six over are to distribution coming partners to their these expecting their beginning now distributors quarters we are de-stocking, levels.

activity that of emerge good year. to will XXXX. into past Today, customers many improved several environment major back on capital the over of those our significant Second, very as the had and of has awarded dramatically economic visibility year, during and and with we're with were recover projects In put we activity believe increased was has project project both expected half their last the to operators same XXXX assessing amount those activity significantly Most as additionally, those a this of part of projects to in be budgets. EPCs we year. that begin hold early were reducing bring the COVID impact to the forward, months. spending And working

this to commitments the customers spending actual But still of and grow of this fast. our is costs is ahead this for Finally, the with very the opportunity in theme energy to as a the later I'll transition call. work. we are the significant emissions. quarters regulation growing to And that making Flowserve on from commitments customers well in further expected area for type substantially stranger date, as in based the with talk Flowserve, in years increased - no potential as our about market associated

Even with trends still our challenging. is timing predicting for Flowserve's causing and customers. operations The variant Delta is look as for promising outlook the associated exact the and these opportunities concerns

potential have office. in COVID cases return We in our our our most facilities have to pandemic on protocols successfully at we the to has focused upturn to quarter. safety variant and impacts global impact the diligent remained limited and Americas The the during of recent Delta due the

believe negatively the not COVID trends impact do we operations significant in we time. our that disruption Indian at our the did during will outlook growth and experience However, business Unfortunately, latest this quarter.

weeks, from have of As the operating XX% that India. about we XX% associate facilities, these manufacturing locations we facilities large several in The smaller for good XX% participation seen are we improvements news participation up currently the is past that to in over in three reminder tremendous and second quarter. experienced have at which several is we most

to were global supply modest also our Our headwinds impact quarter, leveraging us, done the minimize job for in suppliers a which but challenged disruptions. the team presented has good mitigating chain our based suppliers Indian and

increased turn quarter's now this very in Both grew aftermarket bookings. this range. quarter million aftermarket to to delivered bookings respectively. Pacific me XX%, negatively regional with market, which part COVID equipment across period. the On difficult the a exception awards markets original growth growth, and and to and the and year-over-year core brought by pre-pandemic bookings XX% with the resurgence compare delivered XX% levels for bookings biggest pleased in total returning of chemical, almost in oil which increase, XX% being a XXX saw to of of our have was solid more basis, XX.X% of We're Asia India's our pleased business. million. with year-over-year the the drivers to Each $XXX Let we impacted quarter this globe second We're which our gas

which this almost Our in by business, exclusively was bookings performance quarter volume MRO of a driven small our large aftermarket represented awards.

for a one that $XX secured is level America. $XX To growth. in the only we award fact, without projects nuclear sign bookings large order this million million in mix FPD any power an where In booked achieve North exceeded of future encouraging

to across MRO of and in work and project has in end we larger and project this are now spending lag later it into expected confident markets. XXXX our investment aftermarket year early We the return

from continues be customer we and and project gained up were discussions, compared insights nearly released delayed obtained XX% driven our bidding on funnel to which and Our the is feedback last in backlogs XXXX. from to interaction originally this expected grow time to by EPC year, projects, the

of XXXX the this We performance. financial year's quarters, higher this million would XXXX or should to anticipate in assuming next At level two position relative Delivering to Flowserve bookings deliver fourth see continue quarters bookings significant the with this to well COVID. growth bookings comparative periods. in these $XXX progress range a we third strong continued level, in and

half help results results for Our also drive first XXXX. strong quarter this

XX% driving cover was turn six We to for Our focused Flowserve adjusted while returns. over to improved market decremental first in margins Amy our now months the detail. our and call expansion just to on the remain increased outlook. returning with growth margin results greater financial I'll

Amy Schwetz

Thanks Scott and good morning everyone.

in results of greater EPS at $X.XX the quarter period. prior detail, Looking second year our significantly financial over increased Flowserve's reported

In declining period $XX this in to earnings addition, quarter. just $X prior year the the also tax improved with adjusted quality of items million our from after million

Our on Indian FX of expenses, including $X.XX from pleased $X.XX headwinds net $X.XX, of of sale as a impact of considering our were COVID We adjusted facilities excluded EPS with Scott the charges these business. particularly primarily below-the-line items, gain about related and realignment results, of discussed. the just

basis. X.X% due revenue quarter million decrease, original FCDs sales, XX% The XX% down to FPDs Second by a by in driven X.X% primarily offset $XXX was the decrease equipment constant but was or decline on currency X.X% increase. of partially

entered backlog last year. XX% tenths in sales resilient as composition the Aftermarket were at XX% of by but mostly relatively roughly reminder FPDs down start As three FPD was versus decline. increase OE a an offset with mixed X% of XXXX a percent, FPDs

related due quarter absorption, gross mix under our points Turning due shift primarily basis, realignment and we reported the Sequentially incremental to margin second to performance. early by increased decrease basis partially cost basis XXX aftermarket last million basis sales. COVID on solid $XX previously second significant primarily a increased X% towards year's to XX offset XXX charges XX% actions XX.X% points XX% quarter. to adjusted higher margin impacts, points gross Margin in gross a mentioned decline margin as adjusted sales margins, a took in including margin decreased to a On

SG&A adjusted benefits increased travel as prior cost $XX year $XX.X return. versus to such foreign where certain realized of million versus had versus XXX of that largely million to million as movements realignment Reported SG&A XXXX, $XX.X begun charges the well as million exchange decreased due quarter prior to year. the year, temporary Second return prior in declined absence

headwinds. decline. due by control, under basis partially margins points absorption to declined X.X% driven XX.X%, by increased SG&A operating of OE which revenue were tight XXX increased offset and margin to revenue XX related mix points basis XX adjusted growth FCDs operating increased points adjusted quarter basis FPDs Second sequentially, primarily but year-over-year, to year-over-year cost

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

globally resolutions Boren tax Our XX% the XX% rate year quarter. second income normalize in favorable is full of to at expected our adjusted The driven the low range. mix in quarter audits certain adjusted rate by was tax and

and free and $XX by capacity flow sequentially, quarter was credit billion, under repurchases. million million $XXX $XX million cash senior share shareholders dividends as million in more Flowserve's remained offset $XXX strong liquidity quarter second than our balance return liquidity, position of of nearly to $X.X to $XX solid undrawn million Turning including available facility. at of end cash our of decreased our cash

increase confident contract to versus been backlog first some We our increase year. at of the $XX XX in we're million seasonal COVID progress in DSO than a further course. of XX.X%, a related impacts resulted inventory issues, performance capital, flow the cash modest the proactive the of we million we to to items last by quarter, foundation net offset and timing The was payments, sales much COVID modest potential a cash when top and and chain quarter. certain $XX Turning pleased consecutive in from remains $X year's as partially working improvement priority Working primarily sequentially. related contract that delivering purchasing conversion XXX% the the bills cash assets look as in of to delays for accounts results payable, that inventory well Despite inventory a the the to as second inventory levels. second point our of in including basis a due this use it sales, in $XX and to of half assets Taking of of was year for second sequential further improvement receivable were supply decrease a capital mitigate due our and excess use decreased in has modest a day by certain income liabilities and accounts volumes saw million, driven us of for capital improved liabilities liabilities. including as remain a primary second committed accrued demand free laid million improvement of working reduction quarter higher four inventory, and primarily percent

visibility end to half aftermarket now outlook to of based activity, year on strong markets, adjusted was and combination MRO bookings, to our the driven improving by range the our shorter and pleased Flowserve for the $X.XX. Turning first increase for our mostly XXXX, to remainder full of cycle guidance EPS into $X.XX

quarter expect fourth increase third and deliver in seasonality. volumes to sequentially In terms our the cadence, of typical to quarter we

expenses as and effects realignment EPS the which well target foreign adjusted currency $XX may during as occur other discrete to items range expected of below line continues potential approximately of the million, impact the exclude Our year.

less of versus expect Beyond EPS, now we decline XXXX. revenue a adjusted

to revenues guidance now of prior for is versus to compared to X% be the year, Our X%. guidance down X% XXXX X% down last to

of outlook modestly XX% we guidance of to remains unchanged tax year million expense metrics, net In to From lowered $XX standpoint, full other interest growth. XXXX $XX previous rate excess And terms of XX%. digit we our versus now at to to in adjusted XX% year-over-year expect our bookings mid a our million. increase bookings guidance single

recognized original believe associated and shorter will revenue MRO majority from equipment where Additionally, increase aftermarket XXXX. our may cycle a be we of products, this the come in

major conclusion, million and line $XX expected in remaining in of realignment XXXX to improved dividends and look cash repurchases with remain capital well In modest including XXXX Our to and share drive and performance market programs. in our be of and expenditures solid the range prior outlook, $XX growth earnings first through positioned usages million continuing margin with in half the guidance, forward operating to half the million to funding expansion roughly second momentum $XXX our expect XXXX. we

return Let to call now the me Scott.

Scott Rowe

Thanks Amy.

for and close transition me energy an with year. update remainder our outlook strategy Let the on our the of

positioned energy is Flowserve I As earlier, for transition. well mentioned

of work, portfolio a our International commitments, them work. has solar clear of decade, reductions, estimate that the emissions growing Equally product the $XXX Energy Year-to-date, through In the offering including their process of for energy to existing have regulation processes increased conducting million million delivering a partner efficiency power Flowserve like capitalize Agency greenhouse and trillion on next more recent important, that friendly nearly gas supporting facilities, potential transition that friendly on a We over government industries. business. increased annually industries and equipment services But a will emissions, nearly in focused transition to opportunity among to decades a demonstrated even carbon in from increased booked metrics, manner. today public community's and individual us the and energy estimates continuation efficient almost $XX have with the efficiency committed environmental costs highest is last absolutely for energy customers related global and that energy transition The driven about financial Energy related that part it With activities substantial enhancements, few be awareness half transition, by opportunities ESG been retrofits, growth are and and journey. where pandemic that we we the lithium fact, upgrades, energy million valued on invested transition to this is have and essentially Flowserve. and and available before Flowserve foundation market. the hydrogen to areas energy de-carbonization a been $XXX energy is efficiency. transition focus company's $XXX bio the energy Renewable on in business of of environmentally we've represents into

last our We customers numerous and the held have support our validated which have discussions discussions our growth ambitions. confirmed approach, over our with offering year, these

conditions highlight make former supporting application the of petroleum biodiesel States Let to in to Flowserve large production our stories. refinery We're and a the now a transition energy success To United the upgrades me facility. new and customer recent operator's required a the to convert efficiency. number a pumps of support improve some

is in over $XXX,XXX control their the to save will project flow successfully de-carbonization tons customers XXXX expertise in our the valves, support equivalent pumps Leveraging plant of electricity over we and shift fuel COX. on renewable Flowserve's and work to efforts. Our solutions, annually, which

demand biodegradable use recent attributes non-degradable to example alternative a plastic comes from plastics decomposes on environment. China's over in the this several order single and water received or Flowserve biodegradable due Another succinate plastic With PBS preferred their XXX of our a carbon substantial harmful dry materials is Earlier the polybutylene and production vacuum plastics, to similar that other PBS, dioxide. impact year pumps China. which for cc naturally of without be types their will for

years next we roughly related transition trillion efficiency. investment earlier, energy on As energy the of we focused XX estimated over $XX I would mentioned that

offering Our RedRaven how their provide capability year, energy launched the on valves and a pumps, customers and uptime seal this our data with assist systems instruments, to IoT earlier to approach increase associated asset operations, the to reduce emissions. improve driven

average down one in additional predictive and believe our provide We coverage We advanced analytics the detected recent where capabilities. According levels who to over that the and the can was pump well our continue the expect as valves would functionality incorporate Red and We week. future. to spike across they continue RedRaven. removed support we order they critical after value downtime customers' RedRaven a the upgrade, operations. continue Raven This commissioned high estimates, a pumps the the increasing weeks the $XX to their interest our roughly clearly upgraded of alerted to Customer is grow meaningful to IoT quarter, detected we portfolio million. every cost our temperature early, for remain would have to RedRaven feeding. and offering flow to the had failed, from three damaged A resources the have and facility solution longtime a over example upwards our of monitoring installed motor we comes this replacement. had and customers. the recently aligns adding objectives the pump in refinery end and Shortly their deployed Flowserve of value to to operator's with serve refinery level solution shut to our to customer of pump

Let year. to shift me of focus the our remainder the now

our During resume schedule normal customers facilities these quarter, and of I more a US in visited was number our the regions. and a and travel to European many excited of

continue the number the expect metrics. encouraged our these improvement the came transformation in end in throughout year. reviews, path During driven operations and model transformation embed XXXX. work ownership, right be transformation validated performance operational key functions making fully fully to The X.X now taking the enterprise make confident the of daily to into we're progress, we our improvement our the by with of it to post business expect and being journey. continue we continuous by activities a And on remain we're I to the the I'm away to business highly processes. Flowserve The embedded operating is And we

a leverage improvements, Our value positioned to well to The improved would consistent the expected including strongly economics. confirm Flowserve of and model and The more right ongoing margin confidence to also our see deliver are ability the market which operating success integrate optimization productivity should position profile consistent a provides that capture me approach the we is to inorganic initiatives, and our opportunities. businesses in focus visits assets to and our and of transformation strategic shift we growth, acquired improved opportunities.

and this operational made significant ongoing questions. And required model. prepared have closing, began increasingly Flowserve customers X.X even market throughout support well stakeholders. and the processes to shareholders midcourse our now organizations Operator, journey And XXXX. operating Our our on create are capitalize our improved And now like we open approaching playbooks functional the to environment progress prepared call other In institutionalization in of our and and value journey. this as to do pandemic concludes we And positioned our for the adjustments, would we remarks. we're long-term the we're full more. the transformation of to

Operator

comes [Operator the line your John first from Instructions] of And question Credit Walsh with Suisse.

John Walsh

good morning. Hi,

Scott Rowe

Hey, John.

John Walsh

you mass in you'll zip implies that year fair to is and the appears billion say the quarter. plus confident it It continue backlog order by sound taking through that potentially exit $X our very trough backlog here, Obviously, go up to last trajectory forward we build the as code? in expectations. And

Scott Rowe

grew that. quarters have might two expect We in a we book-to-bill what higher as of higher fourth end ended come that next revenues and had well. to a expect - right, this to we expect quarter as up. have a over with our little at year, this out, of and last typically backlog now you different the quarter, pointed we've year to certainly, dynamic bit and continue certainly we year at the the continue than it But quarter Yeah, we as one,

John Walsh

bridge. a to of call corporate because know you some corporate you. of it think Okay, called that quarter? this to true called you spills of we allocate on But kind I the if around what all the just out items with I unallocated I'm a temporary and great. And those not out it impacted more some help us it's sure items. FX, you don't the businesses. not color and it's Thank of then maybe just relates the margin that walk kind could signer little items costs. out on as I you heard

Amy Schwetz

to we of it's corporate our you're allocation, about component the SG&A in that's totality John, that as think really piece right been not Sure. absolutely and out that platform. a allocated

FX $X it's factor of look million quarter austerity as the the it second between we and last a second impact design the either measures that mix certainly is the of million quarter. largest year-over-year, you've particularly indicated at And call in in $X really So necessity were actually and factor the year. bridge, in put or in that place as the then some is piece by by second

some activity So back, come travel second We see that obviously year. was quarter halted. started of to in this of the particularly

on our designed relation programs below business is in to levels That XXXX. targeted more and results based like coming move did we discretionary what out the forward. as incentive in back of they're pay business appropriate to to results to which Some target do, our significantly was

starting a perspective. where trough in I margin cycle margin we're from perspective, that although means improvement of business And you at nature to we're business bookings, to see a really we look at the we're that our of normal long those of as started point from right return some a see out So at the now, activities.

sequentially levels. volumes, make those as those margin and we the to we'll of the year so And start see sales improvement start see our benefit way through to higher in

Scott Rowe

we to John, there the the obviously, add right. of parts different different have cycle, parts business Just of in

cycle. cycle lower We're that got business, aftermarket got our to the the and of the business. that's And is part seal longer business, our recovery and we've seeing moving trough business through in the valve that so get up. shorter downturn that And has which pumps the

taking move of And that through beginning the longer cycle to end would in what the longer and pressures so year, saw the just of well. bit pricing the you we is this that piece that little at absorption then year But that's as a expect.

John Walsh

you. the pass I'll thank Great, baton.

Operator

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

Deane Dray

you. everyone. Thank Good morning,

Amy Schwetz

morning Good Deane.

Scott Rowe

Hey, Deane.

Deane Dray

if companies, cost, your you're all and number just admirable, price out you loudly about is about - also you because margin explain other don't - call, hit prepared stand we the which to Hey, you of big have as see the then complaining your margin remarks compare conference a other industrial just shortfall. a to the not

historically, price. been So always good about getting you've

could talk Scott, dynamics working So sides formal here of that there the hedge, a equation? about you capital your numbers. not bit or a was didn't in but some price Amy, was pre costs build working skew buy, the inventory some mention but build from that did both and maybe capital it you preparation

take half, where stand assumptions what just it second first us half? today, Thanks. your through does So price are for costs

Scott Rowe

Sure. business. complain it. is I it will certainly a impacting But Yeah, we didn't about our is impact say and it major

is was have it QX peak industrial that incredibly you of others an to a calls, listened and and And dynamic dynamics. at so know as landscape certainly the

we then so logistics. saw in continued And been across saw highest electronics, was the really for has globe. and us, inflation the in side. cost QX on we motors, that And inflation on what the But

was with really, it is most, us if in so those chain our was a the it we say can across did we we inflationary announce not we're side that's but would a say nice of suppliers. products weren't that certainly and doing increases all favorable I we in beginning our team for to that really was of have When really to best at price But price that it on net-net, a the area QX. substantial And the comes QX. supply mitigate not headwind, price job headwind doing a cost in the I'd to holistic - a of QX, the it accommodate was increase for pretty working pricing, portfolio. our those metrics.

in done that Now early that were we the our the really disruption China. price India, right, the electronics. benefit And - We we've was impact one until And be then disruption able India standpoint, but the to been lot A that disruptors second a second really other will quarter. be so mitigate area in went that in QX biggest increase XXXX, Europe this of devastated of has was with suppliers from year. offline. then backup won't the of logistics seeing and regionally and and suppliers to

logistics but significant also seeing providers. on significant side, to we're so delays And seeing the price the increase, and we're logistics ability get

or are don't this we us. headwind then RedRaven disruption I side, built an we significant major there, not control our that area electronic inventory just think ahead, expect where recently, we still a actuators. capacity. have be it's delays So for valves and purchased And is normalization delays electric dollar seeing some lack substantial item We've here or with our are I seeing portfolio, our on we of and QX. but that the in a will of And think

on like material. feel we're side challenge, side mitigate to able the the we've while reasonably we at the I'd So say has a something but negative been cost price, disruption not been cost a And well. slight

Deane Dray

cost? you then Do about what include and what's that price And included labor? freight the logistics, just to in clarify

Scott Rowe

logistics costs. there. price when put wouldn't Yeah, We we I'd labor talk in consider

Deane Dray

every good, company's different Alright, a twist. got

Scott Rowe

Yeah, that's a really good point.

there. labor the haven't a and major the on culture, a labor, you're today increase side we're But levels we right feeling say done Let's out labor a we've There's now - number jobs talking, right certainly side, done the reasonably of lot we're and we've good. turnover, lot making seen there. at work on on sure that a paying the lot of work with our of our

a and we with the talent, levels pretty of to attract of feel it But And thus good concerns. far. our so our ability us for there's disruption overall, areas hasn't workforce, been

Deane Dray

together. than this very larger is It's terrific. right, last second heard piece well. so funnel know question project have. customer more that as us bit discussions. of with clearly I And this, All precision from hearing Emerson And beginning is And you idea then the just we track the come that you labor maybe a side. share especially the to just like the that on I

bidding. You mentioned EPC the

So just together a pull as you? what you that this formalizes all indicator maybe leading that the for indicators are

Scott Rowe

Sure.

at it's for Deane, all of So a the first wide project, all beginning launched as transformation, together resource the our to me I'm think - the forecasts CRM running putting, CRM of into now customer of one putting but management, the trying around we year is the of enterprise beginning we're their our And and are IT and now of it the systems. essentially system. world salesmen was at

markets And it's So tool. we project and by that year-over-year, and DNA look process we look part opportunities that's and compare we going at forward. our good have got we've as of customers. good funnel our now and geography our visibility, quarter-over-quarter, a we our And metrics separate internal can at today end it so robust and we

what's funded. and FID of much everybody's many customers and think ability in more top of the globally, in our to quarter forward projects. that at so And on got last they saw complement then terms getting what you continues our releasing year those is time. sequentially, and in And this, increase what the quarter, I just right project customer more then now build we're up. if visited we're a that And with spending, positive we release discussions this with financed as And we've every from seeing projects through their into seen number that confidence move XX% and a our outlook funnel second getting is more happening personally what to that

you'd to not at it question prepared Do a see the do start I I end call. not to is Or more it that this - year an in see XXXX? here significant think But with happen? we Will projects in in think trickle timing. year? is of more the start and still here to make the I'm we're increase XXXX. uptick pretty

Deane Dray

Thank That's really helpful. you.

Operator

And your next the Kaplowitz question Citigroup. comes of line Andy from with

Andy Kaplowitz

morning Good guys?

Scott Rowe

Yeah. Hey, Andy.

Andy Kaplowitz

versus for sense half Scott, follow second in questioning relatively your in in up you I did gut flattish just says line QX. on to just basically of year wanted of orders that the what that the the

sort - XXX side, about quarter? of you when more so but component less not you You just it strong, rise do or expect And orders onetime think think in do of activity, you can million there very a then from project the each obviously is more say there? or kind the to guide sort has you that putting are of or deferral of very, you aftermarket

Scott Rowe

granular on hold for alright this, like that. I and me you're so accountable me and getting Yeah,

of then So happens half expect year. that obviously we QX a modest to and $XXX think there's that a number. XXX QX. back in the is if project the And that continue million QX, kind in there's quarter we to do upside and build aftermarket the included But in run MRO, significant rate and of this

XXX should exactly of So at say QX be projects If running come exactly I'd this we're not we higher we coming. above happen Does but and in it. it or slightly sure QX? flat back, they're into Not does we're level, know And essentially it XXXX? again, that at than kind sure, then in QX. it's happen

we But difficult. are occur these picking projects projects that And very of when is precise that feel the confident forward. moving time so

Andy Kaplowitz

then in growth. for to how are commercial it's remarks, or you of performing Scott term few aftermarket helpful, prepared as zone want at don't organic But that. want hopefully, growth It's bit programs X.X number? sort cycle? of they the hard out strike to, a come starting above of maybe industry I X% years measure bookings contribute say to did we're and sort of up how instance And start, the longer intensity such and look little how that a to you some follow your Very know, when assessment, I faring? order that but so you said ago, far you up, about we as to an talked Flowserve record for this in as

Scott Rowe

and No, plus worked those think is quarter so number intensity focused on really programs I commercial MRO, well and Sure. have a XXX really fantastic. and book to aftermarket is this

and And there at we that levels pre-pandemic don't now I intensity so program. we're business. aftermarket think MRO would without be for commercial

business some and I things side focused the other return intensity, we've done zone, product commercial the are of our that to absolutely on so us helping think And growth. this growth strike

that bookings we've thought other that at the into really that is go and to forward. institutionalized as I of drive really the hasn't continues back distribution this our so piece that happen And beginning channel progress. feel to year. that good And that as we made come organization we Its would deep the

- with But I category, work that helps our industries of from discussions are And expect year. those public in half but that to seen publicly financials, that of our it that haven't as comments fully that. distributors come well. general some second and report the made that bookings only do the MRO We distribution those in helps back the

Andy Kaplowitz

Appreciate Scott. it

Operator

with of from Your line comes next the Jones question Stifel. Nathan

Nathan Jones

Good morning, everyone.

Amy Schwetz

morning, Nathan. Good

Nathan Jones

or discussion incremental just like I'd decremental to margins. the margins on have a the

I could instructive in revenue one likely reasons second to the need the saying I which if to improve. order expectations improve full mix should revenue But increases FPDs those if to The FPD they XX%, up should likely what for in to as think improve. was the split decremental that have XXXX. I to in that probably of decremental second to declines decrementals it's are you're think think just we numbers is quarter why the FPD and the that going in likely year get you FCDs would see for half forward. and talk have about

Amy Schwetz

versus which I looking And we way that you're XXXX are taking full Sure. it is at think year versus the as a quarter-by-quarter. XXXX Nathan,

a healthy last So, significantly were took we the benefiting structure relatively we quarter still cost that some of lower from actions in the cost second in resulted of a backlog. year while

are absolutely is bookings half And strong we the to we that of year. the So half you're year anticipating really of the the mix benefiting incremental as that the first of margins at half the is from second that we've we're this that from in seeing second year, correct recorded sequentially a original get really the is is the not those and those year. absorption experiencing impacting of And is out, that really facilities pump But sales what it's is those cost volume there quarter under means equipment until where facilities hard that that are FPD headwind last at the to we that the year. back coming look us.

from really we we're we're sequentially as strong margins a see second we to better the think But in uptick our going through going in quarter we So way quarter, those back third that saw FPD volumes perspective, get to in in consolidated right shift our an benefiting we seeing we're fourth from in historical now. more as the and to mix levels make XXXX, that quarter. bookings margins the we're than see

Nathan Jones

quarter actions one to incremental that taken the improvement cost Thanks of you have the XXXX. just the But the do, what and can expected then talk has about in margins temporary if the cost lower margin at again, in FCD actions, than something back with in Maybe in for half in I would incremental bit was drives a year. XX%. that FCD the in

Amy Schwetz

Yeah.

even within half there to or get bookings - first we FCB that within space, margin I benefits increased is that continue we're think still MRO So going mix year. to in the from saw the of the that

mix continue So of good, to sort the the half of although in that looks we're going the our year. the in to see back wind sails

Nathan Jones

taking for thanks my Great, questions.

Operator

Cowen. Joe Giordano Your of next question line with comes from the

Joe Giordano

guys. Hey, good afternoon,

Scott Rowe

Joe. Hey,

Joe Giordano

orders. going EPS up, you're directionally guidance I so targets Hey, hear your raising on

pretty think guidance. those that Scott, clear. I is messaging you internally, So don't the give quarterly But - there

full three rate of months ago? kind on what relative three has the kind confidence ago? year, to does thought, you compare you months do how versus how delivering of your And XQ like, So that

Scott Rowe

is had Yeah, QX where essentially expected. we

always we're there's the And year, of we very our feel in just that came then with can back aftermarket And seasonality I'd think guidance overall, bookings. fully X.X the that the guidance there. with encourage can the puts range ability were I we to we've encouraged half largely Flowserve how expect of we we from improve And QX little execute that But provided it put And we to the you with here range EPS the and but so to bit takes to we're QX. continue there. say I'd And normal think say, activity, we about about encouraged good and as achieve anticipating. then program. out there, is the market

Joe Giordano

make value? for Like, customer. that's outcome of this able for - adequately and that's that And on is like shutdown then like price for a RedRaven How you a on you until do providing like, lot you sure So are a of you million how do sort savings being for that like big my stopped a leverage whether cover how to it's customer? $XX up you a at compensated - comment follow them? a an made -

Scott Rowe

a lot contracting different with so one on and the Yeah, that's work of a Flowserve And done Joe. a here great question, talk we've it's about that RedRaven. we lot models

revenue IoT sort now prototypes, put and recurring And so that would infrastructure. to we metrics the and originally some of we we of instrumenting of what the models. our some back that selling performance customer's get to moved from ultimately, and installing on to And across is subscription enabling want

a bit we that as pioneered evolving And think I with I is value from of add our see kind technology. which contracts, want customers, so the I this we've has uptick can go. we're can highly based thing to to But performance continuing great is then say adoption the And to as just focused extracting thing and and we're pushed more our and say, challenging other more absolutely this been to we direction much in that solution. out. are of little It as we a need their

contract said I XXXX in remarks, the every RedRaven. so book new to this we over prepared but with And And instrumented about we've installation one or assets new continue week. one now

how the can this are the continue And And our things data of that and get is, we how from more there we solution that track so monitoring. provide customers. forward then one we system many out we'll to better the that our many under move to assets continue and

that it got the we've lots the nearly of prepared remarks, that now using. example a we're that like we overheating the study. part in so how becomes the And case sell of examples I and provided failing with pump of It's that

offering we as studies case the show continue and expect the in to about to us to the years I continue so And come. different talk grow to significantly we've continue used deploy value this to we

Joe Giordano

Thanks, Perfect. guys.

Operator

next question of the from with Stanley. Josh Pokrzywinski Your comes line Morgan

Josh Pokrzywinski

Good morning, guys.

Amy Schwetz

Josh. Good morning,

Scott Rowe

Josh. Hey,

Josh Pokrzywinski

of what Scott, big more some you on relative the hear up normal clear to order guess about restocking. or that could contemplated XXX like the on we're and magnitude terms distributor look that on the you're the idea order of question maybe based there. inventories that on impression on I of and projects, of in cadence versus I guys versus stuff the in some seeing can I follow about? you guess talked kind have out guess just guys' think sell-in sell-out, What is do from Just, of go rate run your loud the Andy's earlier you a

Scott Rowe

of Sure, - in the we've embedded in I said what to embedded distributor similar kind our It's uptick is projects. numbers.

distribution upside restocking So we've some aftermarket and there numbers. our if significant to a program MRO got then see we

at our of good of I of public for revenue have had public business pumps some inventories uptick well. their as lot financials the And the they the you valve where bookings inventory second quarter expect I back distributors. for build strong looked and and essentially, out We discussions build flat growth with But a think down well. have in companies from was our with them to an I them talked the slightly are we've they very as what saw to were. And crazy us primarily that think about, inventory. see half products to don't there we go do all significant the year. and in in

uplift dollars, modest it's a of I something does go hundreds that's a the step us. but percentage be a it's We've for they're important got in And think to that of certainly revenue market going right of think I in it's distribution. direction. significant So us. through channels don't our large for millions

inventory their to increase on levels any they So positive is have Flowserve.

Josh Pokrzywinski

is involuntary? you see correlation do Or even the economic customers' sort this of back, as your and I of you kind we guys typical of a still you then measure guess having cycles? flows? of side from health? and do appreciate being Or kind over ESG just if more Like, decoupled with spending kind step to the it's transition, that view color own take kind of of it capital there. coming maybe of Got the cash I energy overall their some

Scott Rowe

outside - work, that coming specifically operational we've in in, get that forward, their we're and and I normal side, talking right their and we're those what couple and we're when of are the moving efficiency it their appears a of of pumps efficiency got spending. flow right, think that's seeing we loop, those entire the discussions that energy now, about

identified a of And making numbers to incredibly external organizations. the is coming size prepared it's they're we're something two across so reduction, having that about, do, dialogue we're consulting the and on the And showed commitments prize, we COX like reduction. that. and they're COX, remarks, see of when in those dollars want million they carbon with fund to our savings combined what finding example thinking nearly the we not And rich a it's intensity the we in really year when hard then on costs, collaborative

the plan. we've at is sell. right but sell it's think though very to again, consultative And operating got level, it's normal so outside what do their a of I And

heavily involved that that. really their So prize, engineers. But when hard working of to then with size and their we it's define data with looking ignore at the we're

forward. we that go And expect grow business of are several in And so our as we're ongoing. part discussions to this pretty substantially I

Amy Schwetz

part of I increase. are one as extent cycles, this costs there because versus large come spending to this is, become necessarily you there regulations that do place, additional that it spending revenues make the unlike would can And GDP something growth, that to business, spend comment to won't the do tied other be just into may what

that is think that versus past. cycles a in spending the we've distinction I So seen

Josh Pokrzywinski

luck Appreciate second best in Excellent. the detail half. of And there. the

Scott Rowe

thank you. Yeah,

Operator

line comes Goldman question the of Sachs. Ritchie from with Joe next Your

Joe Ritchie

Thanks, good everybody. morning,

Scott Rowe

Joe. Hi,

Amy Schwetz

Joe. morning Good

Joe Ritchie

China to proving given now, in Delta so supply supply the China. that was curious you and the curious, today. challenges had be particularly actually I'm about how right chain just faced color earlier quarter. Hey, I you the in a about some just a year disruption chain and I ago, appreciate this variant is perspective. I more from are past like, guys India remember challenging things

Scott Rowe

our in outside have what the we major you of have I on we it's watching news closely. region. say that We're did that we very that's but would do supply something China think to today, no Sure. issues, do India, good there I radar And similar chain is backup screen.

having so the impact operate a don't to that the and And back of to I half see material ability our in year. execute

Joe Ritchie

the I my good you your it. that's maybe to far, on you pretty know at the about guess I confident still talking relative about OE feel of look And issue I first less of in continue size I so I'm an kind follow you of it Scott. has longer margins. question. guess anything potential Okay, feel better low and hear the year, how inflexion. about if guys curious, fixed orders funnel just half order business the equipment been to And of know the right there come is to is absorption just you cost history. the to under takes can orders to for structure like, issue, under if absorption for an fact do original back? that such maybe

Scott Rowe

Sure.

it part one but we're there's So of And is what it really is important the I'd absorption. is an main here, say two incredibly doing. drivers

infrastructure ongoing as got so our we've And relates it out to to Flowserve. total an of program take roofline

activities, so and now of do two And XXXX continue we year-to-date, to completed that. will those we've

more to opportunities the do - exercises say it consolidate enterprise. can do that in point So productive, still continue and year-to-date. so three And would year, the comes and OE are continue take what every yeah, so only But fixed feel of I roofline that more we here lean out we low, and I continue get from to two up as continue absolute here the and XXXX, is reduce super important to we we now think the was we within our we to as have under those to believe continue we right or at to other transformation, costs and that activities, X.X 'XX and the really is, kind as volumes facilities important

Joe Ritchie

you. Okay, Thank great.

Operator

America. the Bank And your of from of question line comes last with Andrew Obin

Andrew Obin

morning. you Thank putting guess I good for in. me

Scott Rowe

Andrew. Hey, Yeah.

Andrew Obin

early question Hey, and the it be, I as improve, long-term as - kind this changes wondering, the Thank is was to cash talk right, industry I about consistently your the industry volumes you? a something carry throughout has changed your what just as how you Just which return generative, just you And that committed in to year the of of normalizes? cash will enable what are also to year. better capital working free to flow, the think Or pattern materially over used on from conversion can flow will was pattern to sort you. the past? need you've processes made maybe cash seasonal

Amy Schwetz

it Sure, against pleased to a we're we're with capital made pretty because fairly we've we the progress XXXX. challenging related that think backdrop. Particularly, that working in doing

look when changes, with step make times to it's - capital supply bookings, So disruptions. it's during chain times chain as supply during we working at increased of difficult

transformation. see really we've And sort of place improvements. so that as got things right to those I that's still on have a now. result put in going been And sequential part the the of that processes And all able we've think of been of

happening with of really we on started we in journey, And collections, terms drive quarter, was and focused then putting year-over-year. this and levels. to again place what cash which inventory down in that So sequentially DSO, on we improvements processes in driving did really

for operations taking hard we see inventory sales that planning we items that on so a on the us And that's weekly and place that our between to really to with need. cadence allow are get and focus

steps we proactive some that need in that we drive to to have to number demand, sure taking still down. the we're we're able items though even make so stock And that meet

our XXXX. make through we As way

going get to we're from help I think to that going some we're see that the denominator.

in closer our in start and come of see were we going mid movement the working primary we're what XXXX fourth quarter, to at capital is percentage those to goal as make a to some down volume increases PWC getting I's And sales into ultimately so from and sales Scott the and third to as I standpoint. where XXs of think a

I an back year anomaly. continue we've of be that look So second tenant free half of flow free we the year that year. forward, And a first rather to the half in our of flow row in as driven for to original going that needs we've a don't fact, first the in in questions, less look we're than It's to to seen to the cash conversion. the cash this think we more of kind think movement your in come seasonality,

Andrew Obin

follow a just great That's question. and up

cover how of not sort we're as well quality to as - shock the the As for to was good, at of Because once as bookings, probably of recovers at the starting costs. out And seems like large big And right, what's mix bottom I cycle light more the there. be the tend to need fixed as moving again still we're projects, sort cycle, the more clearly, is hand, to of so the end competition their cycle of think which system. but the see of right? with is the on there a other the of bookings, sort the the people lot is tunnel a competitive,

as long normal So terms? Thank things or takes to normalize how getting backlog pricing terms of you. for the whether sort quality business you to think think sort in do should of of it bidding how to we process? about And of back

Scott Rowe

Yeah.

competitors lot depths the and late was the in of of our down a lot there just a XXXX, uncertainty taking downturn obviously, price in of So significantly. just

still been OE where challenge forward. that and pricing. today is seals pump year as business, so to have stable. I'd we that was versus the There's the And the And say the keep are a pump, to ago follow for start biggest order gets we do and primarily that in position. to to projects better win I the to in we've did better our our a on And say valves a compete work, impact think suit. OE move I Flowserve or aftermarket, the the would and able - we're in relatively continue was much pricing

of an bookings do and we start as to side. activity, see I uptick think place start in pricing that the move positive - so we into to on those And that level

is from substantially it'll to And better a be, want I and lot think months so where not even better a than today. while it now than we're it's we be year ago, six

Andrew Obin

so has show thanks Cash Thanks much. lot. a how bookings the hard and team worked. No,

Scott Rowe

that. appreciate we Thank So you.

Operator

participating and no are you conference for call. time. concludes you further This disconnect. now questions There at today's may this Thank

Flowserve (FLS) 6 Aug 212021 Q2 Earnings call transcript