FLS - Earnings call 4 2023 | Flowserve Corporation

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Operator

Good day, and welcome to the Fourth Quarter 2023 Flowserve Corporation Earnings Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Jay Roueche, Vice President, Investor Relations and Treasurer. Please go ahead.

John Roueche

Thank you, Katie, and good morning, everybody. our year to XXXX joining quarter Flowserve's you full and financial appreciate call discuss today fourth We results.

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

prepared open the comments, questions. call will we our for Following

As an replay a is be will and this webcast event available. reminder, being audio

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

results, to reconciliation are included both well review you and harbor safe in as our encourage press of are would disclosures section. I measures the to non-GAAP release Chief as presentation comments. reported his of the our We our call now Rowe, earnings prepared like which on our Executive our Flowserve's and in over turn President and the to for Scott website Investors accessible Officer, to

Robert Rowe

Thanks, everyone. consistent quarter strong a progress. marked execution very Flowserve's of to Jay, a morning, performance finish solid and fourth year good and improved

operating EPS significantly expectations. full raising XXXX, throughout revenue and as year adjusted Our supported exceeded and guidance financial times performance different original X our we our

operational the year, while margins. higher improvement and by delivering year-over-year operating we backlog revenue achieved enhanced growth gross For conversion full driven of nearly XX%, adjusted and

time last drive compared increased positioned our XXXX. Bookings we since success, second earnings on our and way share improved are momentum our adjusted targets by communicated our importantly, strong for over cash September. achieving Flowserve result, per year-end billion Most and $X.X backlog entered supported which continued financial were towards XXXX just our exceeded by to that XX%, well well a XXXX million over flow As XXXX, operating of to billion. $X.XX $XXX the and

dedication and the associates to efforts for I world of their throughout all sincerely the our thank around year. want

results. to pleased critical commitment our and earnings our including in customers to of brought for results business I'm adjusted which $X.XX, very serving passion our quarter, are their year EPS financial $X.XX. with adjusted our fourth share per our Our exceptional driving to full the

the better impact conversion performance. model We operating higher are backlog our and of improved financial seeing significantly

drove improvements nearly These $X.X and to sales adjusted fourth our operating billion quarter sequential of XX.X%. expanded margins

capital of $XXX quarter, also We for clear operating our which chain flow was highlight a shorten. improvements deliver are by million normalize our to as primarily as the us lead working inventory delivered to our management was beginning performance. during cash earnings in and times supply driven This strong we and continues

Our over markets billion as the eighth in quarter. supportive $X delivered consecutive we for bookings remain

book-to-bill year entered billion healthy was While we XXXX a our remains as just backlog at $X.X very below our full X.Xx, XXXX.

world the all to roughly captured a which range, million the activity of $XX despite in project a aftermarket and totaled We awards our color levels now of me on to the bookings provide generated coupled Let remains we additional General quarter. bookings. high growth continued obtain million of million number and $X strategy, fourth around $X.XX award. MRO smaller in that due our achieved $XXX with this quarter market We and the XD success together of we of the across regions. level major activity did lack significant some high, billion industries

fourth million We project quarter. Our our disciplined project award on margin approach and was in only the remain largest $X pricing expectations.

create we may will we are this result ultimately confident in approach. that this incremental While lost selective bidding with value some more awards, strategy

water with awards. we our LNG, saw and Our particular XD during bookings the of nuclear where represented roughly awards total strength XX% quarter,

healthy projects the quarter and opportunities they fourth in during remain While awarded were be we delayed, some XXXX. expected viable of larger previously the for to Flowserve

billion. $X.X nearly were bookings our XXXX, year full For

of Turning to with aftermarket customers' high to continue business. our utilization our Most rates. operate facilities

and efficiency associated remains to their emissions are we reductions, work. aftermarket capture the positioned well While and with on this business MRO focus reliability, type of

the bookings. million aftermarket quarter, For generated we in over ninth $XXX consecutive

year, the $X.X billion, year-over-year. full nearly up our bookings were aftermarket which X% were For

our we turn importantly, see More aftermarket into elevated the XXXX. demand continuing higher-margin for quicker offerings

overall project will XXXX today. is spending outlook continue for energy very global believe we drive the to Our themes are and We market years and come. encouraging for to trends decarbonization of aftermarket the given opportunities seeing security

us XX% work versus At project remain year-end, the total project selective pursue. funnel our enabling and disciplined to prior increased new has year we in

year-over-year in Our we oil the East, activity the by well and investment primarily transition and gas significant to mid downstream is driven energy positioned in on where region. Furthermore, year-over-year, are Middle XX% the our up funnel by capitalize forward driven that clean secure project given pursuit funnel our We can believe activities bookings XX% in increased project energy. funnel. in of XXXX, visibility enhanced we in the decarbonization nearly also have the we

and support our beyond. projects, and XXXX at into remain our Beyond to we anticipate growth levels MRO aftermarket elevated and business

healthy see levels despite to are continue uncertainty and softening of We consumer some the publicized. trends that economic activity highly

areas we depressed seeing chemicals. like European signs of in stability XXXX were Additionally, that are in

global will our install centers and our opportunity that to aftermarket commitment high have as global quick of we aftermarket is to rates XXXX. speed with allow Overall, further we network serve go service grow customers base improve of Our combined franchise our further us our with capture response believe we incredibly in to forward. levels large and our

I will financial and our results to to call detail. the fourth full address now turn year Amy quarter greater in over

Amy Schwetz

and Scott, good everyone. you, Thank morning,

also by management momentum, saying results, cash am strong Let quarter pleased continued generation. fourth cost operational how me demonstrated and start with I our disciplined which

operating best adjusted the of and and year we XXXX, of the level since sales margin earnings XX.X%, $X.XX our our quarter, adjusted share. of achieved quarter highest quarterly For per fourth

XXXX in strong in results. year improvement full of sequential Our other quarter. operating improvement which results at quarterly to areas, our across with recent our also $XXX Starting quarter, details trend continued flow cash was a representing year-over-year million. the million led many outstanding These $XXX of the

adjusted comprised of which net FPDs FX and XX%, of $X.XX, revenues below-the-line drove charges. growth impacts share year, prior a per in expenses, and $X.XX increase operating included and realignment Improved respectively. FCD's XX% over of earnings XX% performance primarily reported Our were

also double-digit with XX%, contributed strong generated and revenue aftermarket, in both of and America growth respectively. our North XX% regions XX%, sales the improvement notable East X%, original to in increases of Middle growth line equipment as top of and We year-over-year Africa, and respectively. Europe, Many the with XX% and well,

particularly of to equipment. new and continued quarterly our to by prior see increase XXX shift mix and year's sales basis highest driven an Shifting from leverage, compensation the model improvement. representing increased was realize performance-based margins XX.X% gross a the its supply quarter, a despite to margin quarter modest improvement point XXX adjusted expense level, since the operational generated compared higher We FCD during pleased benefits a chain basis year-over-year with margins. gross operating The to traction margins XXXX. original XX.X%, point and excellence segment improving adjusted we are At initiatives environment. At fourth

On Fourth gross in million. a XXXX such $XXX in the increase in Despite realignment small higher margins XX on this to fourth year. benefits million. Despite some as settlement basis, $X.X was in and a solid million of SG&A increased On leverage $X reported increased these as write-downs basis, million adjusted The a SG&A an driven $X sale during compared did legal gain million the quarter due versus SG&A year. XX.X%, that as quarter. last to adjusted $XX XX.X%. bad increase not by to by of as points $XXX year, primarily basis $XX somewhat was the discrete prior and recur an compensation of operating to percent asset million debt items, million, and year-over-year quarter increased year-over-year of to consolidated quarter million performance-based a sales incentive $X million reported well asset net increase Fourth $XX

includes items items, in reported In just primarily expenses. our from addition also to net million a mentioned, increase the adjusted $X realignment amount

Adjusted operating just prior compared the XX.X%, quarter margin in year. lower basis to XX points was

to quarter points expanded that gross third I basis operating by adjusted a our of sequential the pleased adjusted margins were margins essentially sequential XXXX for incremental. XX% equivalent quarter, XXX the am those nearly very While this

basis onetime to incentive higher reported a a the adjusted margins previously realignment discussed in and points fourth to operating Due related On again year, actions. the items increase the decreased performance-based prior items compared XX SG&A to million year-over-year basis, discrete to compensation, $X quarter X.X%. primarily

adjusted valuation quarter tax primarily expected, was rate fourth of on allowance deferred notably tax Our of foreign lower than release X.X% to net the assets. certain due

as results. with well Our reported from our reflects impact associated which we adjusted realignment just the the as items X.X% tax rate excluded mentioned of charges,

above XX% this year-over-year. to XXXX midpoint October revised year delivered XX% year full our target share $X.XX time guidance performance a to $X.XX, a Turning we from results. The adjusted provided of $X.XX earnings our of of increase with ago. range exceeded and our nearly latest per range initial We the

nearly billion, full Our the cadence operational with year up our prior year performance. XX% improved conversion $X.X as our revenues significantly backlog compared XXXX were over to

level, sales we the gross our of XX.X% margins modestly expectations. generated adjusted prior year, this for exceeding On

to excellence of remain product initiatives by operational ability in management and confident Importantly, our our we further margins expand ongoing our accelerating portfolio.

our cost containment, performance cost-out line well sales Adjusted increasing since for top focus and XXXX. SG&A was recent lowest program as on of as from the level redesign year, including organizational benefits percentage by was This representing a driven XX.X% our our as the leverage.

work have we on date, better we front pleased is and are will never that with we made results. we this on While remain know the progress done, to driving even focused the

and X.X%, pace adjusted segment over XXX keeping respectively, year Both of FCD roughly the points, and a XXX XXXX meaningful margin basis basis FPD prior XX% significant increases margin XX.X%. XXX of and to was delivered solid in year. full adjusted points performance, Our operating with operating increase

adjusted Day of we towards our our September. shared target operating at XX% that in XXXX are well longer-term we ahead, Analyst Looking consolidated margin XX% to positioned

specific our believe net Our adjusted cash valuation full and financial of future the our driven primarily of previous realized release improving on the tax for tax assets below taxes. those mitigate we be allowances on benefits results based as help expectations, finished rate deferred foreign year now by will XX.X%

year Turning $XXX flow delivered year-over-year million a improvement. of now represented nearly million, outstanding to $XXX We cash full cash flow. which operating

In pleased compared by our our we million, roughly addition improved XX decreased cash that cycle days to working nearly very $XXX I'm conversion and XXXX. also earnings, higher to from capital by cash

of increase we attributed be prior to an year. $XXX strong $XXX the cash The of can capital million generated fourth quarter, million, largely working improvement the During our to compared flow performance. operating

represented source a but was modest compared of prior year. cash improvement despite our increased quarter receivable this revenues, a $XX million Accounts the to

are results all by been nearly sales Collections reduction But in fourth year. the outstanding year-over-year our the have days quarter. evidenced in notably robust X-day

of by XXXX. to full used the the $XX contributed working and million quarter year cash capital over periods the for the also compared to Inventory we've both progress reduced respective as fourth

quarter, were adjusted loan $XX and resulted flow -- of significant in term in As million XX% Other reducing million this This we capital percent primary by and million approximately to quarter improvement XX.X% dividends and million points during million. basis of Capital to investment working well. We us our as of will XXX area the capital uses $XXX flow to going major to for conversion a $XX year's fourth our our $XXX $XX expenditures to remain forward. a year year-end cash improved a a by strides points included basis sales, the and long-term made free bringing net improved this reduction. and focus income XX% target exceeds it XXX%. for sequentially cash working year-over-year cash towards XXX great free

to Turning XXXX outlook. our

provided to Analyst of between the operating both with our X% consistent September We adjusted with year qualitative to our earnings deliver expect growth to Day. full revenue at building share X%, to $X.XX we $X.XX, momentum per guidance continue on

roughly At over guidance our represents year. adjusted earnings the midpoint, XXXX last a XX% increase

to our mentioned, Xx, we full to over markets multiyear year a remain Scott active, backlog revenue book-to-bill to growth. spur expect As generate ratio and continue building

expect also tax range of an net expense and We $XX the million rate interest in adjusted to of million $XX XX%. approximately

effects currency Our of potential spending, $X.XX million may share. year, approximately be $X.XX expect such the items the during below-the-line other well our as in exclude $XX as to other realignment that expected occur to potential targets of per realignment and as expenses Including impact discrete reported the range items. EPS we adjusted foreign the of

with strongest. We allocation XXXX, last from the approach. Similar year, first our in would reduction being anticipate seasonality and quarter will year of of That quarter. will lowest earnings creation the our continue quarter the and general intend further we quarter of work move fourth minimize line said, the quarter sequentially to we capital drive we being year first to the to strong top trend value earnings through our the to as the last

by excess weigh created. we while allocate enduring we to return As capital, impartial to how remaining highest guided to framework long-term value opportunities the as is cash deploy our are to

to per Our to our authorized Board has $X.XX X% dividend increase a share.

our Additionally, million. the repurchase Board also capacity authorized $XXX replenished to share

we Analyst are the the business, share new As there ample can programs said, invest a at act offset in view the to we and growth. with Day, internal equity commitment the as capacity to repurchases inorganic opportunistically. also and indicated of both That plan, opportunities we believe we through compensation increased

expect capital are expand offerings of million expenditures accelerate opportunities and between M&A to to and well We better year, pursue further support this our we positioned million our $XX to flow $XX strategy. portfolio and XD control

with effectively targets in broader that the most our opportunity provide integrated are be and We to business. leverage scale can that our interested

table are stakes. economic returns discipline Financial and

proud of any cash So Through EPS rating, on and average journey. we to investment-grade capital the confident capital targets. of million expect shareholder the great loan by XXXX drive feel progress well our designed our our excess towards margin to during am growth, maintain and returns it $XX while foundation deploying fully to earnings continued accretive. our per XXXX this we share longer-term cost reduce allocation capital term approach to in our can and year. I established and is we as long-term as a we be that would all, acquisition margin be strong the intend deliver as start on value I of that

to Scott. call Let return the now me

Robert Rowe

Amy. Thank Great. you,

September the years now a offer with on as drive few strategy for is Day, at me directly come. our The strategy, aligned in see future. intended to today that our growth which, the we XD for comments Analyst to environment discussed is Let market Flowserve accelerated we and

well to to support offerings, today, are potential our service diverse suited in are product markets opportunities including the in portfolio build continuing invest we emerging base through that further customer inorganic serve sources energy. of While to new and we our

continue with Let portfolio start healthy markets to present apply me in diversify an our very profile. growth we as above-average remain bookings where our served end XXXX that into

the Our are of our a significant a and component vacuum great diversification of represent efforts products pump pillar. example

in Our general the delivered focus products to grow our has industrial over outsized applications several last vacuum years. growth

facility metric will a circular economy. quarter, tons solvents In electronics selected we green that and solvents the in support X,XXX fourth into vacuum other Europe for were state-of-the-art to of waste will dry biomass supply the be annually production nontoxic site applications. utilized convert pumps agrochemicals, The to in pharmaceuticals,

another by borders. and We quarter countries Moving nuclear the as outlook their to produced and are the awards. energy focused led providing decarbonize. of globe reliable strong LNG within about nuclear around clean on excited We bookings remain

XXXX. begin to that energy continue to be plans on We tripling as nuclear investment optimistic countries develop the have very outlook nuclear by output

nuclear building meet Asia Our positioned growing and strong portfolio of Europe. assets to on the of existing new and this well seals including nuclear pumps, facilities power are demand, life extensions valves in and

was energy of support decarbonized another is in hydrogen world's States. XX,XXX for ball hydrogen selected of behind Flowserve to are key liquid e-commerce the to our the one operations largest to This initiative. recently United valves to production enable tons nearly expected applications green specialty produce supply New project our companies. of driver the

have true will capabilities digitize we at better digitize. and point to for We ability believe to of leverage solutions to offering large new We inflection and visibility installations. believe our equipped installed customers. an enable on aftermarket base Lastly, significant be to our our solutions growth, our and our Flowserve is provide

We digital assets by our offering adding customers optimize RedRaven better and remain now valves almost and ultimately the instrumenting using flow predict committed value to to monitor, this XX with technology over have with loop. We pumps instrumented. full to customer X,XXX locations

Flowserve to recently with reliability technology. partnered increase efficiency facilities with and X European-based RedRaven petrochemical our

driving of to continue control solve to petrochemicals, in level an pleased an acceptance, where are and IoT with providing allowing are enhanced offer We XD an and extremely in Flowserve market help and us. in supports accountability further front with seeing I'm new opportunity speed. to allow pleased This the better our our with is new strategy is our we conclusion, improved to toughest us more execution, design presence portfolio challenges. In capabilities organization our XXXX. customers' our increasing in opportunities to expanding solutions of advantage design progress operate us securing flow our The of will industry

longer-term XXXX X% I'm confident EPS our adjusted goals midpoint maintain to begins XXXX improvements with driving The in in our and X% points our in adjusted XXXX roughly delivery trajectory our and operating than including the at improvement at of to basis ability to Analyst our of margin continue momentum and outlined the created financial XXX beyond. revenue the more guidance. growth, targets, growth Day XX%

to named Finally, organizations. as strategy recognized Forbes in we most one continue that by our I are by most XXXX. pleased responsible weeks, and of Newsweek list recent successful companies In efforts named third-party in and am companies was be Flowserve mid-cap of America's the

operational year improved into opportunities as a excited The our upon, improved confident ability carry results. to have and creates we for am XXXX substantially will Flowserve significant about that customers, this financial and delivered performance foundation build progress to our in expect and XXXX. we financial another to I'm deliver We and serve I of the last year solid execute

our our higher operational growth are further and focused outsized fully margins this on driven of backlog, billion through strategy, near-record by We continuing $X.X driving year XD improvements. profitably pursuit converting our operating

to customers driving shareholders. long-term associates, We remain committed our and value for

now prepared to we the to questions. and would remarks our concludes open this call Operator, like

Operator

We'll Instructions] Nathan to Jones first go [Operator Stifel. with

Nathan Jones

outlook. bookings the to I'm going with the on start questions

a X. growth your talked the in -- you about in talked prepared Amy, above book-to-bill Scott, about in pipeline. remarks, as your think, I you

bookings kind to high of book-to-bill mid- single-digit I above X implies growth. think the

color any how between projects convert orders projects out can more the of to aftermarket? this and What confidence are those the that and us give you just -- that will on in kind So splits pipeline year?

Robert Rowe

Sure. Yes. Nathan. It's good really a question,

start with I'll aftermarket projects and touch then me I'll markets, of to Let end kind on and as well. traditional go

tremendous side, growth saw to X% we Flowserve the in On delivered we continue. aftermarket that and We XXXX. full expect about the for

But an at as believe that, secondly, drive at happening and our continue will rates we And installations, see we up. look we We're have there. disclose don't so what's valve when Day, in we look that is what opportunities, do with of know there's I'll then customer we side. to forward. And the opportunities to that work we what of aftermarket go rate say utilization rate capture the on we ability kind -- we Analyst better and those the both the outlined side pump And some is. we

we market a say share very top we'll we've so on of for what believe constructive opportunities kind got environment aftermarket of rate capture business. is our And or

side So the XXXX of terms we to see of similar something that business. growing in

Day GDP-type look And again, showed like traditional then the X% growth the And results at at those our or talked more our we end Analyst Analyst markets. there. this nothing kind markets, when changed some end about Day, we to of has like within for we X% and model,

And so markets energy the end is on new traditional the reasonably board. where the see decarbonization And exciting the really growth side. then and we growth good we see across in

where we above to that's so of outsized X%. see that kind that And growth X%

terms with growth business exception large across year a projects. all in And our aspects XXXX of we of the really had bookings in good of

what project the at look our so is we XX%. And project see up overall we is funnel funnel, when

is and new up XX%. energy Our gas up of decarbonization that is funnel XX%, and oil

and that of gives awards outlook confidence our that sure that making a we on acquire so lot And sense our and creation. value us makes on margins can win and project

X% about X.X we the Day. we overall, put And our we that the above really book-to-bill we good And so of feel that we terms outlook. certainly believe Analyst say, where out point, overall are can growth and market target at the I in drive and think -- can I'd in to we this that deliver on

Nathan Jones

oil the your That's specifically, XX%. and and market. up pipeline obviously end orders on gas follow-up biggest being One still

the as include conversion X.X be they could the projects? that well. confidence where one Does and so probably above your of Or what's projects in large are And top that's on this the actually 'XX. And needle. those get gravy any that awarded of move would large kind

Robert Rowe

gas delivered X and and weeks primarily Middle Yes. stacked market oil I quite pretty spending was there has The and the I that's project primarily work -- It's -- that's And the amount up ago East. there frankly, happening. substantially. was of in overwhelmed or with the out in

things rest could the that Oman, but Now XXXX is in what region see with activity UAE, across Qatar, countries I like of say the vision substantial. we obviously, would -- with the change Saudi's Kuwait, the

of projections. But out in disciplined would in that directly, what growth a We've but X win. to about, very been embedded we good about to what creation in And are moderate again, sense we're terms those, be are there's talking going and would margin list large I so some very win want there. there from perspective. gravy we those projects to feel that question that or get a that but work, And our a value XXXX approach. I makes start win of We've we're perspective in your long If projects feel say more to that couple compare that really to good X to work of we selective, size been it. are of of specifically kind

Operator

Mike We'll Baird. next with Halloran go to

Michael Halloran

of competitor project behind competitive Maybe pricing describe by or logical some the you and thought a selection you follow little would you focus win you Certainly, the up it a right Any diligence we step more side? to more on just little diligence out the project? that how base now, pretty just bit Or mechanisms? given margins. the when overall there. on a landscape amount project made of take is the you want on understand comment opportunity there, bit see back, just where the from and But still

Robert Rowe

better folks let's were the ago that. participate The and is very is for But when substantially Sure. is environment very, work. go project If than bid I'll it say compare -- hungry to wants attractive. X it. Everybody environment always years what to to we in

remains so challenging. And it somewhat

selected our looking the that looking the customers so we're And we phase. we work bidding then can we the at for also . making we can with signed customers expectations approach, we where aftermarket in that sure what is bidding up can And through know deliver associated the work we're with, for we get that know there. margin

the And so or on want a I change for saw think the geographically, when then the also us with think substantially in but what what aftermarket. And probably in look X we landscape, we really capacity competitive at supporting that's years holistic than getting of more ago. customers is then that we work biggest work is about terms fuller we wanted what to to everybody

sure substantially, improve we'll somebody that margin the win surprise make that work stay on that's just but we in by now that discipline that get to expectations seeing every kind and and more we accept doesn't move can are We approach. that then, of and And pretty a suitable disciplined we'll deserve.

Michael Halloran

see Great. to intent do remarks with the around you good more cash be there expectations [indiscernible] layer And generation? there of well to Makes you the landscape it. And Could buyback the cash any quarter. talk the authorization 'XX certainly that maybe M&A Is how that see usage the generation it cash, sense. as this opportunistic? [indiscernible] to then

Amy Schwetz

Sure.

principal of guiding some and as kind at continue to a to XXX% slightly conversion, move XXXX. talked free the think or activities the Analyst about below that cash given XX% we of levels occur. that So start be At low end cash of just flow we generate or with in between to XXXX, expect into we I we'll nice I'd realignment continue Day, our expectations the -- continue

allocation, that capital have to recent the had of opportunity an what increase, of with I terms since our had done there. share Day, again, really just Modest of Board the that early had years. to that level think to most We've offset out dividend not Analyst last recommitted And this we we to do not dilution. increase at wanted acknowledging in with practice we set In in that buybacks increase the in we equity the dividend the action then XXXX. is couple

opportunity we do the So want able that. to be to

So bit this probably catch-up year. little that's a of

to be our EPS way I growth the either in overall, those grow and accretive bias, I line, that growth that to we the opportunities is suite are year, top make needs invest we or find to the with will our boost took say, an Board each opportunity as available really ultimately a our have tested internal we think to which have XXXX. time dollars this I and for margins of But earnings us to full shareholders. to options actions opportunity into that think have our inorganic

Operator

Bank Andrew to America. next go We'll of Obin with

Sabrina Abrams

have for Andrew. You Abrams Sabrina on

framework have for the to P&L? about shipping in competitors is Flowserve that your fair of some through XXX what's shipping P&L its So today. Is XXXX margin XXX seeing what talked a to relative bps of better backlog relative to

Amy Schwetz

definitely that that real But you pricing going on XXXX. see backlog margin a improvement tailwind currently I'd the have mix in that say of and into think backlog. as in some we us see that is obviously of we for dependent our backlog, our in I

Sabrina Abrams

I thinking Got margins. components the different it. a I'm of follow-up, And guess as the about

you mix better program. in the restructuring So aftermarket have benefit backlog. OE benefit pricing the incremental the from There's from and outgrowing some

guys So bad maybe good about the bridge and guys different and XXXX. components, the if you margin talk the could for

the want of understand the guiding expansion to? are guys components that Just XXX bps to you of

Amy Schwetz

Sure.

XXX that by XX% as range, about or that mean volume points in our volume our confident growth, ability growth So margin our expand And versus expansion of above I are would nearly in by start the range more. given high the likely XXXX. basis guidance margins ability saying towards that saw to move we think I'll basis points to we would end sales XXX we say of

to place respect of a redesign puts slightly the takes, a and the you've -- are savings put taking positive material in structural from with the as see backlog, shape a from on a in positive. in at neutral on do which we terms both org ops excellence. and the where So we're standpoint, cost that price touched have cost from margin to we inflation that And activities we already

of inflation the I working watching the closely going do the In that to in and project what's work that we margin with a terms although labor terms of start second we'll of up have us mix, to in I be year. be nice backlog and is And to XXXX. something of really take of the aftermarket mix is quarter would in in late first against something then quarter expectations of start show XXXX, hold think will monitoring in kind begin

of start has I'd as And months available than large a will us what more kind lower large those saw our Scott rate we of funnel ago, work. aftermarket project and run what XX margins in for than than still have XX, -- XXXX. we'll XX, what those we work that better FPD at be with described saw are And although

slide, time That XXX this FCD backlog was project year or the basis actually than on more about OE work that is points skewed than OE secondarily, it now at aftermarket. year. work is And this right backlog more towards last

project the at. other that's we're of mix piece looking that So

Operator

Joe to Giordano next with We'll TD go Cowen.

Joseph Giordano

be here? is you LNG the about somewhere saying where if to have lot terminals export on Like like do to do and Is fungible built? there? LNG, less On has President going a that things just what else care be Or it we Like globally obviously, with that. and to you'll are going been guys? you

Robert Rowe

our U.S. Yes. outside more the U.S. I LNG of in than work is the say would

a America, and opportunities the on expect. X that And so some Africa. got Canada East. round we've we bookings We've in got work for in the got books Latin Middle substantial We've

good think outlook of an is feel believe time source it's we come. a I get politics be still LNG. think and incredible to long we I into a the mix the of natural so for energy, but the this, of gas we about of transition won't going to part And

will U.S. U.S. but the and of on business, an XXXX approved. think work funded our have XXXX already exporting hold kind I has been already the potentially permit in impact been

into an cryogenic believers more impact applications the in XX we products to what our next to won't And it we're big to LNG this services migrate support over have so because we'll on of XXXX. years. continue in and XX And see

Joseph Giordano

on cryo, out. acquisition on work the Velan Just that didn't point obviously,

with -- still there? that, your from to do is technology now? like fundamentally you guys R&D bought there XD, you close? kind an to bought established gap is of more And you for in you as cryo there applications? where same need that Chart, a to kind related You maybe the on like are of Or more basically are -- pumping update Is is markets need margins -- there you

Robert Rowe

first because XD portfolio certainly, energy one rest The basically with back Yes, I'll easy. line more bow cryogenic And rounded and margin the expectations point. to this at say the the pumps it's that the applications, are is out I'd the transition in then answer portfolio. than of

got so And we've valves. control

their positioned technology that We have There with some substantially. isolation we that were. what can valves grow of products opportunities, we about pretty they both all LNG to And hydrogen. is and better cryogenic, and Velan were liked than do though, are

And that valves on portfolio continue so and in will work expanding beyond. happen continued to XXXX cryogenic M&A in

side, kind it we hydrogen X can that that technology the acquisition cryogenic imply applications. was and The of distribution, around know-how we've And got things. really then and take did into with we LNG but on pump Chart

cryogenic what is be the the we a that it stages offering. liquefaction so like about regas And used can in really very of transportation late into for And we're developing full and application. pump that,

cryogenic serve certainly, hydrogen that used we'll used but we And be of by potentially of in -- in well -- mid-year, so can in potentially have pumping LNG used late kind will by the -- as well. year, full kind solution a that

Operator

We'll to RBC Dray next Capital Markets. Deane go with

Deane Dray

kind of interesting back mix seeing, orders, no strong to big comments this quarter, that some gives I'd the of that the circle on to a like bookings really hear regarding the which you're would of demand love I underlying sense but commentary. you

delays some the selectivity. have orders minimum for of that versus how both kind just quarter, were I but the other size then And delays know out much called would us larger project give well maybe the as just of impact you as -- just selectivity. this of each. don't factors kept You any there's an if us Can to impact directionally a

Robert Rowe

Yes.

valve that we call side X let's in delayed. the had on X awards, or it, did QX, to, side visibility the So than pump more get

margins be of probably little Project is slightly QX whole it XXXX. off, half the deserve in long And they until be on the time. then go doing trend what on know, forward large we going we It's smaller, say wasn't say some back upfront putting some selectivity I'd and the not They for that in canceled. that you turned is of timing that bit the we resources but a that that just delays. opportunities is of business did those as different we predominantly something confident There also delayed our forward. And you get out as of off things the year. they side required think just I would was confident QX. might than these for get I and incredibly about hard to to to throughout major of And a that year. tenders. anticipated, kind the and reasons selectivity was delayed turning predict. more prepare the missed But into the we're that's right followed And will didn't we're deliver go given what work There's those a lots

life selective been it's XX resources of so our these. think asset. really their And There's that we customer through out, cycle on make just more are things And pulling to that we're anywhere people to usually comes we've the and the entire the support economically directing when team. sense from and end XX that can front something at working

again, good probably but slip we feel XXXX the on bit we're QX projects. being really say was than I'd a more So what seeing the about out selective, of in little

Deane Dray

installed the the balancing selectivity, act and aftermarket. is the these your great margin bigger curse ratchet winner's color. of look, then is pressure. kind capture what's And to on just And That's up to downside missed you higher there that base have the building when do you ability the you deals is that

just some the is there maybe but can us balancing you share a mechanics. of So act, with

Robert Rowe

a that we who division is with leads just pumps have biggest And delicate probably Duhon, and I'll say that's Amy single balancing and topic It Deane. Lamar our act, myself the between installed him business know base, service do pulling and because easy it's it's pulling you parts it's our through, the through. we seal through, And his pulling team. it's not when get

And so we are installed actively, pursuing we're base. actively

now same at a and we're returns that on modeling it At out the basis. time, looking

And about the out of in go won't. more much us and on is better some and so kind success do we base populate they we'll that so looks decisions the bid aftermarket? where like to that make can going model probability give installed that and And aftermarket? we we customer accurately what like can aftermarket Or predict, of of the where

improved to dramatically last robust say where pursue continuing we year continuing I'd what so should And to a have about the important. base is installed we've support but aftermarket and we in drive and shouldn't,

winning then And for win of would to franchise that and work with other continue we're there now speed our starting also we're in I to say business processes third-party improve the thing equipment. aftermarket is aftermarket our some on

with aftermarket. a see in steered manner, and competitive away We're to our necessarily openly presence But from that's going timely customers speed with and stuff starting our And original probably on X serve our so not ago. work that's we ability years X drive out more to or and our equipment. there not more targeting we're something our

Amy Schwetz

perspective an And is growth what long-term that of and volume expand margin from and -- in to we're of do those just base terms the within portfolio put we've might our exclamation on because targets revenue installed committed trying expansion expansion. I both to point And growth margin paradigm. a that constraints

imagine, Scott and But as been we're that. going capture business. person, a as finance higher pointed trying margin to I rate we've about more a as in that love be think to absolutely aftermarket I better do the out, strategy than aggressive So position ever you after can

Deane Dray

All right. that's other this all just impressive Amy, really one and question, I quarter. that insight. flow appreciate for free And it's cash

of I'd now Just on these gave bit of the releases buffer lots about whole of buffer now components where be in specifics of the about we're what normalizing. more on how interested you each of of inventory the supply much is hearing improved, working releasing a stand do seeing chain capital You with inventory?

much have there? So you go more how do to

Amy Schwetz

Yes.

So start. I'll

partially think wanted be. working a I we XXXX, strong. We to were was the the and year, from getting of to were collections opportunity me, still put terms, the way partially had up we're XXXX to saw with those ourselves that fourth the our with the volume, that inventory I think was it, them perspective the that throughout journey. this the, make end sure third or quite by reduction quarter pleased call reduction. collaborated I better. processes And we an to in we be excuse We XXXX got capital the that for inventory fourth of baseball in where set sales planning inning really, a and organization . If

and get planning planning in processes is role key -- that. our a can with and playing we smarter improvement continue think our to really of that I

on committed progress that make to to continue XXXX, to also clear to the that organization going we're think I we've made growth. within but we've it

about over be have where how time and we we do very and how we so reduce inventory smart to And that that.

methodically like we're that feel march capital to striking to right target. XX% working towards going the we're I balance, So but XX%

Operator

We'll Boroditsky go Jefferies. next Saree with to

Unknown Analyst

Saree. on James is for This

So wanted on to I margins in of go back just kind the the backlogs.

the are at at think So the margin not levels. are you I levels. But higher a margins the coming orders I think said XXXX you said still

that So here the stand demand where does seems the is what strong? since missing And now? gap

Amy Schwetz

Yes.

I we're probably So saying backlog. at that margin XXXX would of stop not in yet short levels

XXXX progress different at playing we operational at and smarter at We're along look the we're energy the markets way, markets. the an excellence XD transition those we than standpoint. we're did in I as in making growth working look And as our we facilities. from of think frankly,

us in up do ramping product the into XXXX. into in most margins really and around using excellence and facilities that that to each things the we the think convert have activities continue to lever. tailwind cost certainly that place going our embedding into going then processes. management for making we're I And the in do improve And So today our savings are as to going backlog to we every with need and of operational that one respect structural revenue. backlog that's really that But we as of a a to and

in be lever momentum area that a the it to way more half year. than build our an through the that and that as I in back think continue expect half, to of but the XX progress I becomes make we we is front

Unknown Analyst

FCD. on the Got And it. to ask wanted kind I of

segment. I here of the and nicely reached the think margins long-term the target expanded of kind

talk the kind into how add margin you And should about FCD drivers XXXX? here? more of we the think going about can of So for here, kind color

Amy Schwetz

from has line for XXXX. margin a standpoint how story year in was expansion were what a the And with they actually ended right in expectations great in been FCD them XXXX. Yes. our

their in backlog that mix. are aftermarket. project focused bit I they to that point think in in year now we'll a the first make backlog. terms There's is going that XXX the headwind around there XXXX, of in about quarter versus their have to makeup a sequentially of XXXX shift up as more towards basis move way we FCD and volume the with see of moderate into continue real again. is . The in

aftermarket talk really that occurring on in strength mix the FPD we side. is So about

would during I than initially imagine see XXXX, we'll So expansion more on the on that margin that side FPD FCD.

Robert Rowe

than to for We margins. We the striving overall year just gross the bit were And add had a portfolio. on XX% did that little earlier that get earlier Yes. communicated we to we I in margins expected.

go the And more the we trajectory nice our And the about as progression said, really trajection XXXX we still to than come good on so on on it's toward see we side, XXXX as very goals. pump much and side in feel but FCD margin alignment Amy that forward. forward going

Operator

the will will conclude our conclude fourth call. That also Q&A XXXX conference you. and Corporation it Thank quarter Flowserve portion,

may You now disconnect.

Flowserve (FLS) 21 Feb 242023 Q4 Earnings call transcript