Flowserve (FLS) 17 Feb 232022 Q4 Earnings call transcript

Good day, and welcome to the Q4 2022 Flowserve Corporation Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Jay Roueche, VP of IT and Treasurer. Please go ahead, sir.

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

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

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

and review As replay of materials Please earnings our measures section. the available. both our are of harbor earnings well on forward-looking will which as do, non-GAAP they of results, press include as Relations our release and and this safe this contain beyond note expectations is will, and presentation, involve the information in XXXX, available webcast many control. being statements of uncertainties, We upon event fully reminder, to These be are a disclosures reconciliation to and company's management audio in Investor our call which both and are as our flowserve.com an and the statements. forecasts, our measures XX, included website risks other reported at accessible encourage to that February non-GAAP based are and you

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

quarter, which I'd $X.XX. EPS significant fourth of our Thanks, dedication the aspects to and resilience our to led performance Jay, and associates start company. improvement good to adjusted world morning, In for their like well around all our and executed everyone. by the business and of across thanking our our we customers delivered

supply and the These strong. labor continuation year availability the of were results finished we achieved short, headwinds. despite chain some In

end solid XXXX. much $X.X exceeding representing of nearly consecutive despite billion and year-over-year $X now near of the four record ended of quarters markets bookings growth traditional enhanced a a the support were stronger continued to at time constant Additionally, of currency the from booking XD bookings, With billion, our with last dollar delivered activity. levels we XX% backlog billion with bookings we we in in compared impact $X.X year these

announced FCD into to Velan, enhances strategy nuclear agreement toward and will the valve our family Canadian complementary existing welcoming with markets. associates our of second be the to acquisition to and an We Flowserve incredibly business growth We're recently XD a service manufacturer. the severe looking forward the end acquire Velan quarter. in This

$X third of disruption. drove quarterly back quarter, quarter the total XXXX. our since on American constant fourth and ERP In we cadence, also which from roughly currency XX% in revenues shipping billion, the over levels daily improvement delivered the and was shipments we year-over-year North gap the which pre-system closed our that is growth that of business modest fourth highest level revenue resulted note seal exceeded conversion as significantly our track have system But quarter's sales

and improved we more favorable SG&A our million, around delivered reflects cost the importantly, productivity priority, $XXX a structure. below within a it focused adjusted management SG&A quarterly impact of containment remains included settlement, a and which but efforts overhead again

I quarter fourth finish on build robust backlog. momentum we and is well our a to am XXXX year, as for this strong With positioned the the confident deliver successful Flowserve

third billion. from provide $X.X benefited which of below some the in now Let be quarter our our continue fourth me slightly bookings. $XXX quarter million strong This additional to deferral level is bookings on fourth $X.X quarter color contract. Bookings the at billion,

chemical million, well end the projects contract and range did million this quarter, sized markets, number million in gas smaller oil primarily totaling as didn't awards our as the we we have secure a in and across of range, a $XX $XXX $XX $X million While similar to markets. over many in

provide an to billion solid nearly result which Importantly, FX-neutral our our to continued roughly XXXX had the on overall increased from higher-margin our basis, of for the all XX% year margin XX% the million as strong growth MRO regions, Full bookings despite $XX further expectations achieved $X.X expansion. supporting market in aftermarket in or market, XXXX typically and Russian from provided exit bookings We rebounded $XX prior nicely years. million range. a markets

which As steady after by a complemented year together we of growth the increase in in backlog XX.X% rate project highlighted for XXXX consecutive in full activity and years year. throughout our the returned of second was year, larger the several run delays businesses, drove

in performed transition pandemic-driven While spending. customers' we infrastructure global the had than expected to their we of intention and driven entered investment new given and energy XXXX, our ensure expected, energy lack better bookings healthy increased maintenance we securities growth as by

expect these aftermarket XXXX projects is in in we well new Flowserve will and believe both work. We continue positioned trends and

strong support provide bookings and bookings and year, up on fourth concerns quarter XX% security the in XX% themes, up the up quarter To up XX% of the our remained our power oil these energy gas and XX% awards year. for were with for also over

solid for supports market growth our macro to year current some believe We XXXX. Shifting for headwinds. outlook Flowserve bookings another of despite the for environment the potential

projects currently the don't size visibility in XXXX. of last we have do another year's a pipeline to award, robust we expect of project While deferral smaller-sized

last level at was In it year. roughly the project as fact, our time this funnel was same

its customers recent expect believe our we maintain to to XXXX continue momentum maintenance, business will as through we decarbonization. and and efficiency Additionally, invest aftermarket MRO in

on specific expect to growth the around XXXX Our efforts from and we continued XD world. is and in strategy capitalize diversify working, decarbonization efforts our

oil have These already drive beyond. believe infrastructure. levels energy plants this of investment energy in catalysts gas gas LNG, expect in capital regions all well will Europe We as and in nuclear, conditions security key will new has XXXX infrastructure. increase to activity driven in continue as world. continue the for significant and a trend driven regional power priorities energy supplies investment of well as as spending other oil fossil us We to of heightened energy in and growth energy and disruption secure reliable The be to

decarbonization by XXXX XX%, our occur anticipate initial expectations, growth of far we spending in while further bookings exceeded to growth delivering Additionally, XXXX.

This XX% government and better than regulations, to an pressure, is place. this in growth effort a funnel transition make public commitments year. by investments last versus time more world the creating ESG corporate planned supported energy up is Our

would as regions likely well where chemicals currencies. outlook significant factors and recession XXXX. include around incorporated as the in in inflationary moderating issues Europe, and the access delivered in costs of the in The prolonged impact markets growth GDP-driven primarily industries, A only markets, recessionary XX% a our risk, our potential the energy probability energy uncertainty environment driven environment general and including weakened by increased increase both

strong However, businesses. in from markets opportunities other overcome will softness we believe bookings continued experienced we any our GDP-based

quarter the results and overview, for and on greater that now positioning With expectations me XD detail. in I on comments Flowserve conclude will turn our XXXX. our our XXXX fourth let remarks over for Amy? strategy to address success in Amy the with to financial call call

good Scott, Thanks, morning, and everyone.

We level strong on to are pleased EPS since that highest basis year-over-year leverage cadence XXXX. We adjusted of our a our sales the improved over billion, XX% delivered quarter shipping operating drove and constant revenue revenue $X.XX. in fourth XX.X% or quarterly marking currency $X of performance, growth

for for offsetting of were benefits and primarily increase benefits result periods. of adjusted that On prior reversals charges below-the-line Russian the of a non-GAAP reversal were reported EPS, cost was these $X.XX the measures charges exit our the FX of in to former estimated Partially prior $X.XX expenses to business. to the quarter of tax above our as related the earnings $X.XX share allowance as adjusted our per $X.XX $X.XX, well valuation basis, well

the As quarter, we business fourth was our Scott mentioned, are a and in Seals pleased area this the with to solid earnings. contributor during operational especially performance our North American

As in with earnings traditionally many release. of press provide annual our quarterly SEC you know, filings the we conjunction and

to year-end, assessment our issues requirements internal controls. complete, recovery during have to the taken XX-K QX audit QX for additional and the for including our final However, relate in we of encountered our that ERP time

We this financial work results impact today. term work the near have our no on will expect reported fully to our and remaining complete believe in

increased our constant a mid-teens in X.X% and declines our was Partially Africa year low respectively. by with revenues the Year-over-year, growth XX.X% primarily up of growth in Pacific, at driven XXXX FPD America. XX% FPD's or equipment America original were also offsetting aftermarket increased perspective, In revenue basis. a Fourth sales respectively. total, contributing by increase revenues. X% regional were and growth, single-digit Middle Latin XX% due X% East Europe now on in Asia X.X% with offset partially currency the From FCD growth, North Looking quarter and decline. XX% growth and and XX% full sales FCD's to XX.X% nicely, this and

to due tougher XX labor XX by realization Turning is well and now actions in basis as adjusted decline, FCD as the booked respectively. decrease primarily The in margins. to which margin gross partially backlog Fourth points some pricing FPD of including XX.X%, and and our earlier we decreased to year. materials point basis XX quarter longer-dated inflation, times cost offset the

million margins assets. Russia our offset basis basis, exit charges a a partially quarter reported On to previously XX points on $X.X to down due XX.X%, of decreased written settlement million fourth including by gross $X.X

of sales cost higher control sales basis $XXX.X increased Fourth points million percentage a the of or to demonstrated additional exit quarter fourth the to a as down SG&A XX.X% ongoing of as adjusted basis, SG&A included quarter was that Russian compared to million On $X.X prior year, but roughly flat reported XX.X% revenues. and XXX we $X.X leverage charges. million

roughly legal than the gain to a which A on of sufficient previously year-over-year on included down and benefit. incentive the receipt prior increased cash benefit adjusted receivables were expenses a compensation reported written a on our SG&A period modest and million recovery accrual asset modest of comprised realignment gain $X of quarter. more offset the in an and of sale a Both

adjusted FX where highlighted Our profit more points, our and in basis fourth basis management XXX year-over-year adjusted roughly adjusted Fourth XXX million. $X cost points of FPD FCD quarter than margins were increased gross points of decline, XX.X%, the margin increased XXX an to and $X previously XX quarter increase year-over-year. reported operating the increase items million respectively. offset headwinds operating XX.X% and basis operating margins

and and the certain tax due execution quarter of mix rate of resolution items, XX.X% year profitability jurisdictional and expected strategies. were of XX.X% lower tax fourth discrete to primarily Our full than adjusted tax

including capital $XX strong which contract fourth cash the and chain included to We million Turning labor cash of cash seasonally remained flow generated cash albeit project operations net strongest longer through challenges. working million, million due bookings including conversion lead our and of flow assets from The generated liabilities improvement. quarter cycle, nearly from our factors supply impacted to by to and continuing availability inventory, due part in quarter, $XX times $XX lengthen flow. to

to million flow. critical use year $XXX cash and constant the materials. a lead by times capital increase growth support Turning to driven strong operating was XX.X% full our required year-over-year of bookings adjustments million, It usage certain as well for XX.X% backlog a to currency $XX of in working longer nearly as

However, bookings of and improvement. fourth growth, modest points XX.X%, working a sequentially increased percent the which sales for largely strong only capital XX again compensated quarter basis as reflecting sales our to backlog a

Additionally, XX.X% versus the prior contract while inventory, over $XXX backlog level year-end our years. quarterly the reaching percentage a and basis sequential five as of XXXX, year, our assets in reflecting since consecutive backlog to dropped million XXX ninth liabilities decline including and lowest increased points

and conversion in on and improved now we accelerate working cash progress as XXXX, the cycle. cash In we significant deliver processes place improved our leverage generation firmly to flow and capital tools backlog our expect

contributions significant other foreign XXXX and million In $XX pension investments, $XXX dividends, of in in approximately capital, payment million capital of addition expenditure million $XX investments to million cash to one-time $XX tax of Canadian roughly R&D working uses $XX included in our in plans. million a

Turning now to XXXX our outlook.

deliver off by building highlighted, and established we for continued strong the momentum fourth markets adjusted support year, expect backlog Scott this and of with EPS we operational As our near-record in to the end revenues expectations supported quarter. further

at we which $X.XX the our As midpoint. range would adjusted XXXX the weeks a a nearly targeting to of you EPS are likely EPS represent saw increase in a few adjusted and pre-release XX% year-over-year $X.XX year ago, full

to as XX% XXXX. ship XX% our roughly in due year, while to our just to to increase backlog supply lingering issues during backlog project typically impact return our backlog over beginning also expect range, our billion given some lead the times, awards we expect currently the to of We chain revenue XX% on X% we of recognize in as $X.X well of large any

well foreign As adjusted It below-the-line not target cetera. such acquisition items, effects previously of items year, such any during acquisitions, from EPS currency as expected the et divestitures, potential initiatives, discrete and expenses of approximately include may reform announced, that our impact the further laws, our of revenues special million, as expected do excludes realignment other tax as Velan. and occur $XX ranges the impact as

realignment expected at the stable and environment geopolitical to commodity supportive expectations range the to EPS to also rates, reasonably in end Both only, our remain current levels and foreign XXXX. the expected Excluding be for reported EPS target the prices, $X.XX similar to disruptions is assumes spending currency significant no adjusted range market of $X.XX.

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

around second almost and our In our quarter so first continue that of half or earnings cash year been terms representing weighted, and expect phasing, Seasonally, pattern XX% have we typically EPS. full Flowserve's to is of in flows traditionally lowest, adjusted XXXX. always

the than from probably margin points on depending sequential less into expect the XX basis around we XXX to XXXX, quarter into move final first, we contraction fourth As typical mix.

from levels will to that of quarter our lead occurs reduction traditionally less However, revenue the leverage in fourth SG&A.

generate generally full half, in earnings disproportionate the the earnings share is XX% particularly norm. year full to of we the a in a year of one-third quarter, Conversely, where second fourth

we make believe our our issues continue remain, and these labor expect course to over times lead of increase of gross on fully chain, and that availability better. reflect gross quarterly said, operating while expect supply progress on or will expect in cadence. XX% margins we Additionally, the the we both and to headwinds shipping to with expected logistics year XXXX exit margins That revenues

cash this expectations our major year. of for planned uses to Turning

the Velan combination close and using hand million. in $XXX revolver cash borrowings, a to quarter totaling second acquisition on expect We of roughly the of

IT the also million $XX strategy through continued improvements. the productivity to million million and in enterprise-wide We of our build-out plan to dividends capital over support to further return our to $XXX to XD shareholders range our $XX expenditures and support and expect systems operational growth

likely the excited second the close are of process quarter. the We transaction, to Flowserve integrating following the Velan the of begin organization into in sometime

The indicative accelerate and the accretive transition roughly capital believe demonstrating financial business FCD that of the our segment add strategy, discipline can XD steward of and a Flowserve type of management. $XXX revenue as of be we of our to Velan is our bolt-on will niche and also million complement gross while margin our transactions overall. will

supply the run rate $XX synergies offering cost overhead chain of and savings, product targeting are rationalization of through consolidation. reduction, We million combined footprint

existing of month, believe opportunities potential their thank we would QRC installed facility, will our Flowserve. addition, continued as banks well. revenue the credit our In their completed and to in network logical this earlier like our that with we result combination base our first synergies the and amendment for of we pull-through for to relationship Also revolving support pump

in Finally, and advance Scott technology, will development we as XD during significant product shortly, XXXX R&D, made partnerships highlight investments to strategy. our

energy capitalize support decarbonization on goals. and efficiency these in marketplace investments customers' as increased transition the we in opportunities well and expect XXXX We the areas our in as energy

Scott. Let me now return the call to

you, Great. Thank Amy.

drive we our made XD with in We beyond. to continued drive digitization even on confident is profitable for growth our and highlight and to strong technology with early our let is market XXXX me progress aligned strategy offering. the environment in developments diversification, on XD One the I expected our focused Flowserve higher closing rates XXXX intended products. year well XD which in growth the strategy, in incredibly have XXXX, markets outlook, product related to in decarbonization, current am which in, momentum and launched strategy Before more

that at significantly roughly grew XD Flowserve's rate broader bookings than of our XX% higher portfolio. XXXX, In year-over-year

exceeded growth, performance expected year ambitious last fully own to deliver strategy expectations. bookings While our accelerated our we our

partnerships new Flowserve's targeted products expand in position these and in further to we to Additionally, leadership continue markets. invest

each strategy awards. to of recent the Turning in leg

Let me begin Diversified. with

penetration focus provide our will more and The are believe water We growth. by to market markets specialty incremental products, cycles products Flowserve. and for and regions market, chemical accelerated through provide for to diversify markets vacuum opportunities targeting deliver particular key growing and stability

XX new including a plants goal plant diversification of the award significant seen for nuclear power. the bookings last nuclear burning have power compressors to construction nuclear growth of vacuum we the China across supporting coal supply replacing Over in the lane, country's the power months, critical recent with

to decarbonized -- to of Moving moving our decarbonize component the strategy.

grow opportunities over energy prior now to is transition significant versus continues should going forward. year, funnel up and the Our provide XX% which

Our loop conversions and product efficiency, carbon portfolio life investment well and increased and storage, positioned our flared flow global reduction nuclear installed new carbon have customers' efforts, base Flowserve and including to recovery, support extensions. capture biofuel gas

COX term. global Additionally, new decarbonization elements reduce growth the construction needed initiatives longer Flowserve's are represent recyclables the footprint. and hydrogen largest opportunities to These

recovery a compounds five organic the X,XXX as supplier U.S. Gulf these facilities Flowserve operable, air selected was the volatile Recently, annually. gas toxic along sole Coast. tonnes by for facilities reduce Once flare for systems in will

monitor it IoT efforts globe. base progress has includes analytics installed digitize, further to provide on on Flowserve's to Finally, deployments. good predictive and our instrument, continued offering, our with make around RedRaven, the

than our have Although than been now customer presence equipment. doubled slower than adoption expected, in at and of we XXXX originally more instrumented more pieces X,XXX has have sites

are instrument pumps, flow We operations. able and valves capabilities across seal enhanced and loop to systems, now predictive providing visibility

water learning to continue is we our and partnering more one data. and utility Flowserve through a In capabilities collect with algorithms enhance AI and recent region hundreds RedRaven Additionally, example, as these years. provide win smart customer of digital coming condition more expect is we customer XXXX. and We expected to the large of more flagship monitoring assets update consider The services. for to in the a awards across in add this and U.K.-based

of product and of Finally, Flowserve strategy a unparalleled a validating equipment to with and our in aftermarket Red position unique also our provider pump pull-through. provide digitization Flowserve for IoT capability enhance customers. our preferred holistic expectations our knowledge selected solutions combination Control, puts The of our Flow Raven as can was that

now launched redesigned Last me new technology, Virtually strategy. and were Flowserve to and development to of on offering. partnerships shift these XX enhance aligned our products. the growth Let XD product XD focus with new year, our all

partnership pump believe set growing for XXXX in technology We also a dispensing activity skill in-process the hydrogen the acquired can in more space. to areas this And area. significant we R&D for broaden we saw hydrogen applications. as result,

help challenging as for agreement also gases. formed address we technology such water hydrogen entered and the venture treatment. nonexclusive a most Gradient other And wastewater applications partnership a into industrial cryogenic and to We joint LNG, problems in with

is as to manufacturer close, highly We Velan, complementary industrial an is announced engineered acquire off which a anticipate our start which the agreement accelerate fast in supporting the is defense well. following further offering first cryogenic acquisition the to valves, growth. markets, by second XXXX would of and Velan's our XD to a of expected quarter. the full to accretive FCD end and be year adjusted to EPS segment, product the we nuclear,

We producing plastic Clariter is an flow Clariter plastic signed agreement clean tech operations. their provide also technology green with waste. recycling petrochemicals to sustainable upcycled from a control in company

a support around We to to plastic the pursuit partner world. be preferred waste and in are their excited to Clariter

acknowledging by XXXX that a close was me Let difficult year.

fourth However, the and proud and confident build challenges strong. dedication more the year on as work the we results company the in for of we team hard result. to solid finishing will XXXX I'm have nimble learned are their our I'm that forward. and going today resilient in quarter a from

this backlog to moving of am revenue to $X.X chain and us the supports growth position confident operations that delivery we adjustments improve future with significant challenges forward. year. and XXXX substantial earnings which navigate cadence the will we've a expect made our better I entered supply our billion, We and

communicated million end largely to we inflationary of To and the cost-out will progressing the track quarter headwinds, the committed and on call. year the actions drive expect of remain are areas. $XX the certain are improvement structural which We business out taking we of margin third on cost on inflation expected address offset by we

open ability teams shareholders. Operator, we'd to like call the XXXX performance to and drive our to progress prepared and confident our improved throughout customers now in questions. for remarks, Finally, this I'm our deliver our to value concludes and and

question Instructions] Josh from [Operator with Stanley. Morgan take And first Pokrzywinski we'll our

morning, the of some like It you I'm at Scott, on looks Hi, XQ touched end, happening. a that all. is that's the good put good to mile behind kind there 'XX you. markers challenges happy sure that of you're

would If bridge, things, the to you comp in year. the of easy core is the ERP the items earlier COVID at improvement? stuff the think add compared you end absenteeism the time, of and context guide, you had you nonrecurring of those up more passage had How Obviously, the had nonrecurring about in the the think of I what the some in to year. sort

obviously, And it it where and seemed Yes, the about you touched quarter question. was first think start help walk year. And over Josh, conversion build the you just good things, everywhere. it's third a then list. through a I'll then the the Amy COVID, on in kind to bridge. we had challenges you quarter to but of we had long a And let difficult And year me it us. last didn't hand the is And constraints, just through logistics some XXXX ERP of chain to supply kind had crazy the the of year.

we're nimble, than situation is remarks, what the significantly stable it of year. in than to how has is as I'll success been. we're and more ability it obviously with the how the far XXXX. the just our that in say now, more is place. the additionally, better QX, we perfect we operate started And that the said turn more is environment. this as What of We stable way company again, feel different lot. momentum the we I need we right I running this, say I'd a part very demonstrated in like very we're we're quicker prepared success supply different would build and we're a we've on is a respond corner but to And learned world organized operating isn't chain very, it But in much for to and And say the to this

don't of you bit why compared the little Amy, we do walk kind last through bridge don't, to how and think about a margins year. Why

Sure.

you fourth your in I mile well as kind us. for it quarter a because framed talked about marker you think the question, of being Josh,

so XXXX, really of say talking I year, into And we as midway about things, since we've say, and would do one the page terms how we turn the in been of I'll XXXX the through start really we the And one that as the that of QX in into move is year amount to we strong. that ways of we're from QX. limit the trying doing see margins contraction

And that me as move my that, a saying so as our expand targeting something or basis the we year seen at more expected to to XXX heard continue in you quarter-over-quarter exit contraction in to than better. margins we've at remarks XX from we're less And of Flowserve. we XX% then That's really from are point what margins typically quarter-to-quarter.

XXXX. As kind going the that some about into off them in faced we we think about how challenges thinking we're of XXXX, and I'll just rattle

that an enacted impact XXXX as So increases perspective, from move XXXX, keep through from inflationary to one to in we and we think that are going price our start XXXX. had we year the cost perspective, a in that we pricing us neutral the

our absorption we're year, we last impacted So good profitability. plants we volume, our whether and at lower productivity at really rates or standpoint. falling frictional they that not were from that issues loss costs about Clearly, of feel experienced where

that, of that partially of in reflects, coming mix. revenues going items. more and a in see today area. from X be see which market lower costs, means We're not going our from improvement to labor around the will that around burn. we're of really piece increase I labor our assumptions XX% say then that by a offset I And to is and in things we're our this lot is perspective. the One to to an guide We our see that's which of book second backlog, going X% increase and think, those year,

And those means come higher that at revenues margins. so generally

still below And And XXXX. rate turn in say page. line, higher XX% old see. mix flow of improvement that to into see XXXX. going the turn which interest higher anticipating now R&D as impact sequential are we'll I'll also profitability. our that see the we move margin kind we'll we're sequentially, that expansions the of we slightly to some off some have is page as We'll margin that tax also in leads the We higher gross to expense from a to going that so we and XX% see backlog slightly in range XXXX that's moderating

A lot probably I to anything. need of over really I that sure I go going to transcript make detail miss again, didn't the appreciate.

littler A answer than... longer

the a might anyone that to ever That said first be has on time call. me

it's appreciate No, correct. That's good I stuff. it.

projects going to for seeing you're specific inform Just looking wondering broader what the X hydrogen, that in those caused maybe rewon any kick some over it orders and we've to you that is order markets clear there's up view a market like this expect How some about your on bit is you how to how and would if off. IRA seems think year? kind of on rulemaking those the And on on go year? side. Scott, heard to where book-to-bill little more chatter

Sure, Josh.

Europe, start that feel U.S. really me market effort there's IRA overall then and in and to I'll hit in countries it, energy going whether forward, the lots going and we for about excited hydrogen, growth, Let or XXXX. We're growth hydrogen are and incentives be it's of the there. substantial incentivizing the you with hit hydrogen

we And flow a grows has element. control this and so significant Hydrogen think

market, Chart the very is a dispensing hydrogen this able around excited distribution. in booked there's and Arabia. you're And We flow work we're that where XXXX. in the orders our quarter of to pump opportunities that ability and the this the we'll be within acquisition and in or hydrogen distribution, into control third part about big then We booked booked transportation work technology our and creating electrolyzer hydrogen in it's whether Europe, that work to project also provide Saudi we've drive commercialize confident year. and value chain. the So United We're We States. a in to year booked start

partnerships continue lot value need and multiple make R&D and to of then about we're our and geared we've the chain seal as that are growth position to and We the portfolio sure for like and But toward that. talked within itself. got we we a to valve right that some pump market doing to additionally, that opportunities our things round hydrogen a ourselves out market, the of see substantial feel we hydrogen

year. And markets strategy. about all XXXX as but as the we let We the million. of be of growth our We back same and including pipeline. XD big reminder, started saw we XXXX. what just don't year. have in generally. strong growth step we have with significant $XXX the the And across we the same project substantial and Dyfera year end But pipeline will XXXX, value -- in is are a what was I a think I'll roughly XXXX project say for high me would I very then the kind as more bookings in talk Obviously, as don't the the what value expecting last had another is did growth at

level. which relatively and very the on the smaller, remains feel come margins so actually that spending They'll spending project well. this will the feel be secondly, through. elevated the more and us And side confident just we that at book then aftermarket we'll pretty of as we them And bookings in MRO good the helps

XD of is of in but said in catalysts we this strategy we I'll say see I'd the I energy and the And part think for this, then the the overall, I'd number security. remarks, one And reiterate it, areas are growth. say, prepared that kind

substantial we're and countries own that's gas, lessen dependence energy. then oil LNG. other some to are in work supplies And seeing moving seeing on driver. decarbonizing seeing secondly, clean And in secure to We're looking countries, it so We're their big in existing their nuclear. we energy and and it as think assets everyone a is the but to

as forward. And catalysts to so bookings we two the going drive continue big that will of see those kind

luck. of Best detail. Excellent

with Capital now take next our We'll Markets. Dray Deane question from RBC

This is on Deane RBC Kenny Sean [ph] today. for from

levels? the in expecting you expectations curious fourth what the free are can flow some of buffer quarter? maybe First, Are specifically on hockey sort of throughout on cash for inventory free stick year. And cadence your flow, the you remind us cash

Sure, flow to talk about kind about think little inventory we Kenny. with as Scott cash I'll XXXX. bit start cadence then and ask a of

So or we through into should that income first as of let we improved net I XXXX anticipating And say. start improve. really as by cash flow we -- piece move me we is are that significantly XXXX, move that biggest expect saying the

pointed as will is the the throughout And that but sequential in we starts year. first quarter out, be -- improvement

does we increase that the a portion and occur quarter. And the a so in third see in flow our expect of our cash as do fourth is would significant We generation traditionally case, significant backlog.

means So it factor capital is working move to a be as forward. we going

or of significantly XX% improving below a flow percentage were certainly it better. that investments That see And we really XXXX, opportunity percentage look see being of year as number free that first target of a at levels as of made pretty sales. said, sales we an at the it driving in the neutral in and as we cash to half the second half

cash is towards would And realignment our optimization would There last be of anticipate cost the last we then be outflows related item the that, that do ongoing. just free the cash will respect have program that flow more add to with will really I three to some I quarters is that year.

buffer And lead in of lot backlog up, been a is we've XXXX, inventory. and you've then addition supply And say normally driving we've I'd in we're inventory. touch the giving seen but buffer on I'll throughout ability our the building done supply additional put our bookings given surgically, that, Sure. this, substantially it. so inventory up One chain it, inventory. But challenges on as and that stock twofold. network, the to and call And I'll are it's we have operations to we And wouldn't within chain times the relatively that's longer do.

to making meeting like do. sure this internal prudent thing our we feel goes just and and And we that deliver back to can it's our to customers the commitments,

to any two would at move forward that buffer But good that next we And subside to expect go don't that, expect right into quarters. place. higher XXXX. inventory time I as at the say so I in level reasonably now don't a also is that I

buffer in as times inventory our lead And half that things then down supply with of come the so and to stabilize we'll hopefully, reduce start chain, back XXXX.

it's tough Thank on than it this feared you. in I better but this color. Europe, was quarter. the then left sector just comp, That's guess largely seems And region great across

maybe talk can you throughout see the basis? you quarter So like about there real-time a what conditions and the were for you on what

the said on closely. inflation currency, state Sure. Europe of economy just just that addressed there. energy are the this and in with remarks general the there watch this We the issues We given and concerns prepared the

big to chemical the that's chemicals run We rate business have and specialty markets. tied a more

run say, the roughly we that And fourth rate business. X% a what I'd about saw slowdown on quarter in

overall a a that Again, not of part so I'd And X% slowdown. huge something our say, seeing we carefully. about similar think of QX, as roughly watching but we're we're business, And kind

more of forward in actually the to as the return Europe, in back for and top saw As we on then just as subsides a that's XX% we to that normalized in region move we over expect and a year inflation XXXX. reminder, growth come that level. And

so this think is don't issue to I a going us. for be And major

I'm However, European security, decarbonization any it positives But we're the and before, overcome that think end continue the our to some the about we'll carefully, that I slowness of energy talked in markets, confident monitor. will on watching I side.

from now Damian with UBS. We'll next our take question Karas

pockets at progresses recessionary you visibility year to run quite this of stemming sales year? have relates everyone. morning, least it year just business good the continues as really this foresee any that to Hi, as hold steady grow you Could in and or that the billion clarify good assuming coming it backlog. don't bit $X.X from you a rate you're Obviously,

Yes.

going lot been rate think of is COVID. And beginning since high be I maintenance just one really very at that's run driven deferring or business a the and plant, refinery robust. running by X, levels really whether our is of chemical have a now a it's to assets, these

significant and see that shutdowns continue maintenance so into don't subsiding. turnarounds and see to we And XXXX. And I just

it's talked bit -- and we substantial, rate and with of be to that progress run that, of in Europe, moderate really about business would but business. run rate some growth as not little we our that aftermarket about outside good But going feel I situation through a the XXXX. impact

million us then wanted for benefit cost And there? realization the the And in this I an you how actions. your you assumed of $XX ask update Could Okay. on give you to year? Got about guidance much are you've it. how along far

and works do X to let some answer that say And with not things on the meet we're Sure. maybe it the through. is to But number converting cost bit priority and that it X want I'd say, and number are I'll critically of our our timing Amy little Flowserve analysts. really two about we're start internal a to a and to externally how then as talking program that ship backlog, ability commitments. our jeopardizes the our important, going is for customer and that get anything product I

secondly, to a taking about the what as driving simplify that really Flowserve. number accountability organization then call at about truly steps And program then relatively business I'll And complex is we've optimization launched one.

that so get on business X.X. And but progress, down working the on need we're We doubling made of now some to processes we've good Flowserve since simplified. been this

result $XX a forward. that's really basically that so million optimization reorganization the The we're going what's of cost this is And and happening.

about Amy, show to the when up in starts actions just some And don't why you the we've taken of it of talk and kind P&L.

Sure.

$XX those of worth date, about we've and range. kind our have exercised million guidance reflected to run Damian, rate of So been to in million $X savings

And that $XX inflationary the incremental we program experience rate that what we of we savings the out by guidance currently talk there the get amount the realistically, than year. or got more end that's really something the about we've today in exists to to event that we'll pressures guidance expect As that upside potential million run range. of range built have that we in the as

Great. Appreciate the of Best color. luck.

next Halloran Baird. take with now our We'll question from Mike

morning, Good everyone.

you I wondered, commentary in that context back think and want the your just is overall sound of to positive, bit positive So overall just to kind static about money with there. doesn't how pause that in Are you rate his question now? markets? refineries would business is you -- be don't are a commentary seems at markets. and being kind go Just to modestly want strong you go odds first that to how that, run When actually around are back those It you maybe know, comps, little something end because it right are any turnarounds great. if making that more seeing like gives of

in aftermarket, grow right Yes. think in significant right? just MRO not did I going not it's rate that just says would We year XXXX. I we grow at nothing that had in But growth so we're to there's to that say the probably and this saying prudent, we're now a and XXXX. the going it's seeing -- that not we're

Okay, That’s great. great context.

MRO. I'd In our addition to and -- aftermarket just and includes that backlog say

big well. to so backlog convert going on as And we're that

And revenue at bookings level. the higher if so the see even actually grow you'll weren't that

one. a And it. just quick then second Appreciate

the I'm XXXX maybe to on there you get margin some execute. that? higher rate, still as margins to being do the relative in guessing, the confidence would love Just and but that was aggregate levels you have to what able in backlog context would

I'll little in as take We but bit on XXXX did right, backlog, through that’s work questions, on its color. Sure. a cycle, about we the the of were it and Amy one point. work was And still way more margins and will that think XXXX the some in some the depressed touched our add out low XXXX.

there's significant is as go as booking projects, in facility basis. from backlog to on and say incremental are project the I'd certainly And then the point with forward, a this backwards year-over-year we're we now And think bookings to relatively on no we're reason full, awards. all XXXX margins the margins about

work going accretive side. on that's from our margins the there's to we going to And still But be there pricing some take competition so only standpoint, forward.

were so off than kick our margins last the backlog where to is in and feel about good backlog higher time substantially year. this I the really we year And

Yes. little And a color that. just more on bit for

in getting and as I inflationary place large done the the they traditionally by to much possible a price job can, equipment project POs quickly orders as under pressure around protection extent for has getting think it's contract. Flowserve that particularly protection nice around getting

were recoup absorption the in are costs frictional seeing, we expediting of COVID. an that was XXXX, we disruptions in in freight difficult really from where think to it levels I labor environment some of the terms those

the at the situation work much out seeing seeing last more year we that that backlog were And system year XXXX we margin versus in this as of our those their this in our gives us so this in we're time. the into make or year way way just confidence

Scott. that Amy, Now, makes sense, a thank Thanks lot and of you

We'll our Cowen. with question take Giordano from Joe next now

weeks changes a couple So of leadership you guys a announced of pre-announcement ago. with the couple

little you're So structure can led what how the organizing now. different different like maybe to the bit reporting talk bit those a and a structure you reporting through -- internally like little

Sure.

the optimization I that to this So discussed the question. goes in organization previous

it's so what about this, in as do again, we're about and at we deep drive simplify we're really the And accountability we thinking how Flowserve. how doing organization

how to is done now externally. organized we've we've that things the of one report so very And internally similar we

we've is thing life important other done the verticals creating then we're full for And that cycle delivery. product more

across rather and business. not over focused liked, seal have And the business, we're the regions as full maybe P&L here would I the our a having business vertical best single creating that as seal got think is now example we've and global distributed so seal I leadership

that's end-to-end our of the about within some well. But got changes accountability results our simplifying driving we as business with is We've some internal handovers again, all there kind say I'd in then so major business of historically. that in had this other the And change. and the

on faced to your the of some on mode you in in-process take gives into are then that kind issues that a this or moving R&D, of prepared you not, little All that complicated getting talked when makes feet it earlier of were And execution-wise. confidence what is you're like organizationally M&A something more bit about guys control, that which your under bought now some you Flowserve we right. XXXX, you're which the

Sure.

I think operational on question. a years business process we've and been here it's and long time. And been working a I've six surety now, for good

look like how we haven't Flowserve acquisitive real that We because just and playbook to were been what defining operate.

And ability to today, this. do team's our I'm confident in

to our call are how place functions terms got say, in we've what proven is team that I'll to so all I'll other And of our playbook, big put say I'd using process that. And systems in a none. in top then just discipline We've operational can second run on the improve IT to got quartile in companies.

the a in traded, have And but it's think that are XXXX their at successful And business. it Flowserve, the There is can we a integration. so publicly we I things facilities. look for some things Velan, family-run that when we're of within improvement opportunities some applying learned doing gives we process me of that confidence at the

a value And I'd and here. are just lots can the with that we But successful all business, we're very those creation, of there complementary very say, for if have previous of and and levers kind confident acquisition most, this integration hit in levers Amy hit a Q&A. of of some not on

X China. if on quickly could sneak And one just in last I

hard mentioned Chinese how you taking there on clarity there project a start a landscape us up, geopolitical is little give like competitive things company? local the you it from from critical You there. on ramp looks just as nuclear U.S. infrastructure Can what won to players a just the

I The difficult. was product, business Yes. And our It's some in award kind of in portfolio does say of niche We obviously we've we products. preferred get have are technology. a parts really because full of really broad spotlighted I'd got technology. other locked control and and a well just China, vacuum that really,

replicate so really, really we've hard technology do got to well. in we China, that's when And a

prevalent done and would more competitive Suzhou. got and year. despite we've the FCD the and the grown stuff, is it nicely is big that the really the in some well throughout local pump say a of -- I fact businesses, we've on valve becomes and preference that's with China Additionally, more operation on the

being And where really selective and we we're China. do in so what on

and China we'll reverses going see to policy investing China be there. return think start to to I as investment zero-COVID there's the in a

and to the done the then markets. then operations laser-focused in the that the got feel Chinese term, valves. tailor continue technology what to to in good preferred in work in certainly And some China growth we've work And applications We've near so we've get niche China about China, in to local support on do products our market. in to I got we've and pumps, again, more really in that right product continue nicely put to got

question We'll with Saree Jefferies. take our next from Boroditsky

Hi, of the line. thanks in. acquisition little for on a just Maybe me taking bit

million revenue maybe complementary product of about $XX the just the rate potential synergies thinking You talked about how run portfolio. a you're given little synergies and

got we cryogenic LNG a defense, severe and Again, got this great a They've really presence, nice nuclear they've offering. Sure. then and service, like business.

have believe we to the are today we so complementary Flowserve. within And products very what

and we're so our nuclear what now do There's about excited think combine overlap, And about we we with nuclear, together. we theirs. can very offering little

And we that into to what with hydrogen we're gaseous expand talked LNG is have offering and do. -- then earlier, cryogenic they about other -- on hydrogen. like applications we it the trying really well can that works then And

things with there do combined are really so the And portfolio. some interesting we can that

big. then in Amy not prepared mentioned presence her remarks, very And is as Velan aftermarket

the feel Velan on aftermarket with the we the so business start base And our focus the has. and network within Velan good installed installed -- and that MRO aftermarket our to capture to valve aftermarket with on QRC get really and really the the the products ability about

longer of of but time beyond Maybe bit color. it is the lead what that Thanks. the I currently gives XXXX? projects And in you about backlog. it's that and the about for the just a early, composition Thanks talked we're give little you visibility some know

at we system said works some the through to right, low Sure. It earlier, what margins. That work goes booked Amy XXXX. in XXXX throughout

And exit and in it's of But of XXXX, all here is gone. I'm -- XXXX, still we XXXX, were as or exit we system that XXXX in the out that so backlog we today. as sorry,

again, than discussed. margins about this XXXX. really booked on that And so feel replacing work higher-margin we're with like in progression we And what good Amy we that

don't drop we've traditionally big see And a like into so off QX we from seen. QX

margin exit then items much there's through position. gross some We year as the in at to throughout lead build And year then and really the better -- that XXXX backlog. lead long we allows a longer go the us

as our be can the would years. first roughly from And awards So of the is award span anywhere two Dyfera then backlog months years XX one the year upwards those well. nuclear to typically, to within three

us that's in stay that our in for And number and will that reasons out some remarks. those through. so And conversion backlog with of work slides prepared called lower the the we

Thanks. color. the Appreciate

our Nathan next take with question Jones Stifel. from We'll

to are million the on This little I morning. good wanted Farley Velan And the a after? Yes, on detail Could Nathan. up synergies? you in go is synergies there cost cost you for provide those is buckets can follow main Adam what long of more the on acquisition. maybe a $XX

Sure.

as bit expenses, public currently touched the highlighting really little But our trade a targeting or we synergies, on this So a cost remarks. in company. overhead-type with Velan we're does

I industrial to economies public of So The overhead lead can scale any around company chain. costs a that. are component supply and combination of two companies, think of

time through. will but way on rationalization over play product as well as footprint work portfolio complementary we into the about this our talked come rationalization as well We as

So we're Flowserve growth a but also as of through and here days Scott we're But and we early portfolio certainly there's around get think the definitely started. integration, lot product of opportunity portfolio for cost, in both this planning has indicated, a to for excited story that overall. is

what pipeline acquisition, of inorganic focus of How the expectations main the opportunities for Velan up? areas some of what Okay. for future growth? And And are M&A? the closure are then is post your shaping

So let I'll provide Scott start color. and some

a grow down to financial fairway we One, that makes this think is Velan Two, want example great of want future. we that is strategically, the that in we the really think focus I sense. type do. right XD the nuclear are pace we industries of transactions certainly it a how the going in of think and the other grow strategy within on and to terms to nice at strategically really

with put inorganic have what recent in that like. do period But and would -- financial strategy. we build trying on with enhancing pipeline an over the growth look to recent certainly, that intend eye effort our an discipline out to of of We

what strategy. be confidence think It summed our it have I it to We'll we're then essentially ability Amy to integrate. financially up. the got that's I Got disciplined, fit at. we've XD to looking mean in and got

your all And participation. telephone that, will We today's And there conference call. are this with you it further for appears no conclude questions. thank

You may now disconnect.