Core Insights - A progressive Indian miner and steelmaker has chosen FLS to supply a comprehensive flotation technology package for a new iron ore beneficiation plant, which is expected to be one of the largest and most efficient globally [1] - The plant will utilize domestic low-grade iron ore, which will be upgraded to a high-purity final product using FLS flotation systems [1] Group 1: Technology and Performance - FLS conducted extensive laboratory and on-site pilot testing to develop a beneficiation flowsheet that ensures high metallurgical performance and operational flexibility [2] - The selected technology includes FLS nextSTEP™ flotation cells, equipped with mechanical and process condition monitoring, along with KREBS millMAX pumps for froth and slurry transport [2] Group 2: Customer Relationship and Orders - This order marks the third consecutive purchase from the customer within six months, with the iron ore being processed from 18 vertical tower mills ordered from FLS for Q1 2025 [3] - The customer also ordered two high-pressure grinding rolls (HPGRs) from FLS in Q4 2024, along with additional KREBS pumps and hydrocyclones for the grinding circuits [3] Group 3: Installation Timeline and Impact - All FLS technologies are expected to be installed and commissioned during 2026/2027 [4] - The CEO of FLS emphasized the significance of this order as a testament to strong customer relations and confidence in FLS's market-leading technologies, which will lead to reductions in energy, water, and grinding media consumption [5] Group 4: Order Details - The order was booked in Q2 2025, although the value of the order has not been disclosed [6]

Core Viewpoint - Flowserve Corporation reported a strong performance in Q1 2025, highlighting growth in bookings and revenue, along with improved margins [4]. Financial Performance - Bookings increased by 18% year-over-year to $1.2 billion [5]. - Revenue rose by 5% compared to the previous year [5]. - Adjusted gross margins expanded by 180 basis points to 33.5% [5]. - Adjusted operating margins were reported at 12.8%, with incremental margins exceeding 50% for the quarter [5].

Core Viewpoint - Flowserve Corporation reported strong first-quarter 2025 results, with adjusted earnings per share of 72 cents, exceeding estimates and reflecting a 24.1% year-over-year increase, driven by higher revenues [1] Financial Performance - Total revenues for the quarter reached $1.14 billion, surpassing the consensus estimate of $1.11 billion, marking a 5.2% year-over-year increase [1] - Aftermarket sales rose by 5.1% year over year, while Original equipment sales increased by 5.4% year over year [1] Bookings and Backlog - Total bookings amounted to $1.23 billion, reflecting an 18.1% year-over-year increase [2] - The backlog at the end of the quarter was $2.9 billion, up 11.1% year over year [2] Segment Performance - Flowserve Pumps Division generated revenues of $783.1 million, up 1.8% year over year, with bookings increasing by 21.2% to $852.9 million [3] - Flow Control Division reported revenues of $364.1 million, a 13.6% year-over-year increase, with bookings of $376.0 million, up 10.2% [4] Margin Profile - Cost of sales increased by 3.6% year over year to $775.2 million, while gross profit rose by 9% to $369.3 million, resulting in a gross margin of 32.3% [5] - Operating income increased by 16.6% year over year to $131.9 million, with an operating margin of 11.5% [5] Balance Sheet and Cash Flow - Cash and cash equivalents at the end of the first quarter were $540.8 million, down from $675.4 million at the end of 2024 [6] - Long-term debt was $1.45 billion, slightly down from $1.46 billion reported at the end of 2024 [6] - The company used net cash of $49.9 million from operating activities, compared to $62.3 million generated in the same period last year [7] 2025 Guidance - Flowserve expects a revenue increase of 5-7% from the previous year and anticipates adjusted earnings per share between $3.10 and $3.30 [8] - The adjusted tax rate is projected to be approximately 21%, with net interest expense and capital expenditure forecasted at $70 million and $80-$90 million, respectively [8]

Financial Data and Key Metrics Changes - Bookings grew 18% year-over-year to $1,200 million, while revenue increased by 5% [6] - Adjusted gross margins expanded by 80 basis points to 33.5%, and adjusted operating margins were 12.8%, resulting in impressive incremental margins of over 50% [6][23] - Adjusted earnings per share was $0.72 for the quarter, an increase of nearly 25% compared to the prior year [6][23] Business Line Data and Key Metrics Changes - The aftermarket business saw record bookings of almost $690 million, marking the fourth consecutive quarter above $600 million [8][10] - FPD (Flowserve Pump Division) delivered bookings growth of 21% year-over-year, with adjusted gross margins of 34.7%, an increase of 180 basis points [25] - FCD (Flowserve Control Division) experienced bookings growth of 10% and sales growth of 14%, with aftermarket bookings increasing by 19% [27] Market Data and Key Metrics Changes - Nuclear bookings exceeded $100 million for the third consecutive quarter, with power bookings up more than 45% year-over-year [10] - The company reported strong asset utilization in large process industries, with maintenance spending continuing as expected [16] - April bookings remained healthy across both run rate and aftermarket business [17] Company Strategy and Development Direction - The company is focused on mitigating tariff impacts through regional manufacturing and supply chain optimization [12][14] - The Flowserve business system is being leveraged to drive consistency and results across the organization, with expectations of margin expansion from the portfolio excellence program by 2027 [20][21] - The company is maintaining a critical eye on M&A opportunities to create long-term value [31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic uncertainties but expressed confidence in the company's ability to navigate challenges and maintain strong performance [7][22] - The company reaffirmed its full-year guidance, expecting organic growth of 3% to 5% and adjusted earnings per share of $3.1 to $3.3 [33] - Management noted that while the end markets remain healthy, there is potential for a slowdown in the second half of 2025 due to tariff uncertainties [45] Other Important Information - The company repurchased $53 million of shares year-to-date at an average cost of $45 per share [31] - Cash from operations was a $50 million use of cash in the quarter, driven by higher temporary working capital requirements [29] Q&A Session Summary Question: Sustainability of bookings and outlook for the second half - Management indicated strong aftermarket bookings and a healthy project funnel, but acknowledged potential project deferrals due to macro uncertainties [39][46] Question: Guidance for Q2 and impact of tariffs - Management expects Q2 results to be similar or slightly better than Q1, with some mix headwinds anticipated [48][50] Question: Competitive footprint and pricing power - Management highlighted a competitive advantage in regional manufacturing and noted that pricing actions have been well-received [54][60] Question: Visibility into project pipeline - Management confirmed strong visibility into project orders, particularly in the nuclear sector, with limited project pushouts observed [88][93] Question: Mitigation of tariff impacts - Management outlined strategies to offset tariff impacts through pricing and supply chain initiatives, expecting to mitigate the full $90 to $100 million impact [96][100]

Financial Data and Key Metrics Changes - Bookings grew 18% year-over-year to $1,200 million, while revenue increased by 5% [4] - Adjusted gross margins expanded by 80 basis points to 33.5%, and adjusted operating margins reached 12.8%, resulting in incremental margins of over 50% [4] - Adjusted earnings per share was $0.72, reflecting a nearly 25% increase compared to the previous year [4][20] Business Line Data and Key Metrics Changes - Aftermarket bookings reached a record of almost $690 million, marking the fourth consecutive quarter above $600 million [6] - Nuclear bookings exceeded $100 million for the third consecutive quarter, with power bookings up more than 45% year-over-year [7] - FPD segment saw bookings growth of 21% and adjusted operating margin of 17.7%, while FCD segment experienced bookings growth of 10% and sales growth of 14% [22][24] Market Data and Key Metrics Changes - The company reported strong asset utilization in large process industries, with maintenance spending continuing as expected [14] - April bookings remained healthy across run rate and aftermarket business, with limited project deferrals observed in select industries [15] - The backlog stood at $2,900 million, providing a level of certainty for future revenues [16] Company Strategy and Development Direction - The company is focused on navigating the current tariff environment while building on strong first-quarter results [5] - Emphasis on the 8020 program to reduce complexity and improve margins, with expectations of 200 basis points of margin expansion by 2027 [18] - The company is leveraging its global footprint to optimize work locations and mitigate tariff impacts [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to execute at a high level despite macroeconomic uncertainties [5] - The company is monitoring customer behavior closely, with expectations of continued capital spending unless the macro environment worsens [42] - Overall visibility into project pipelines remains strong, particularly in the nuclear sector, which provides long-term revenue assurance [90][92] Other Important Information - The company repurchased $53 million of shares year-to-date at an average cost of $45 per share, viewing its share price as undervalued [27] - Adjusted primary working capital as a percentage of sales increased to 29.8%, with expectations for significant improvement in cash flow and working capital efficiency [26] Q&A Session Summary Question: Sustainability of bookings and outlook for the second half - Management noted strong aftermarket bookings and a healthy project funnel, but acknowledged potential uncertainties due to tariffs and macroeconomic conditions [36][42] Question: Guidance for Q2 and impact of tariffs - Management indicated that Q2 results are expected to be similar or slightly better than Q1, with some mix headwinds anticipated [45][48] Question: Competitive footprint and pricing power - The company highlighted its regional manufacturing advantages and noted that pricing actions have been well-received, with expectations for continued pricing power [52][60] Question: Visibility into project pipeline and potential pushouts - Management confirmed strong visibility into project pipelines, particularly in nuclear, with limited signs of project pushouts at this time [88][90] Question: Mitigation of tariff impacts - The company plans to offset tariff impacts through pricing actions and supply chain repositioning, with expectations to mitigate the full $90 to $100 million impact [94][96]

Q1 2025 Highlights - Total bookings reached $1.2 billion, with 3D bookings accounting for 31% of the total[8] - Sales amounted to $1.1 billion, representing a 5% increase compared to the previous year[8] - Adjusted gross margins improved to 33.5%, a 180 basis points increase year-over-year[8] - Adjusted EPS increased nearly 25% year-over-year to $0.72[8] - $49 million was returned to shareholders through dividends ($28 million) and share repurchases ($21 million)[8] Bookings Overview - Total bookings grew by 18% compared to the prior year, with a book-to-bill ratio of 1.07x[9] - Power bookings increased by more than 45%[9] - Aftermarket bookings reached a record of nearly $690 million[12] - Original equipment bookings were $557 million in Q1 2025 compared to $462 million in Q1 2024[10] Segment Performance - FPD segment bookings increased by 21.2% year-over-year to $852.9 million[29] - FPD segment revenue increased by 1.8% year-over-year to $783.1 million[29] - FCD segment bookings increased by 10.2% year-over-year to $376.0 million[30] - FCD segment revenue increased by 13.6% year-over-year to $364.1 million[30] Financial Outlook - The company reaffirmed its full-year 2025 guidance, expecting organic growth of 3.0% - 5.0% and total sales growth of 5.0% - 7.0%[41] - Adjusted EPS is projected to be between $3.10 and $3.30[41] - Net interest expense is estimated at approximately $70 million, with an adjusted tax rate of around 21%[41]

Core Insights - Flowserve reported revenue of $1.14 billion for the quarter ended March 2025, reflecting a 5.3% increase year-over-year and surpassing the Zacks Consensus Estimate of $1.11 billion by 3.35% [1] - The company's EPS was $0.72, up from $0.58 in the same quarter last year, resulting in an EPS surprise of 22.03% compared to the consensus estimate of $0.59 [1] Revenue Performance - Sales from FPD segment reached $783.10 million, exceeding the average estimate of $749.56 million, with a year-over-year change of 1.9% [4] - FCD segment sales were reported at $364.10 million, above the average estimate of $358.78 million, showing a significant year-over-year increase of 14.2% [4] - Intersegment sales reported a slight decline of -$2.70 million, compared to the average estimate of -$2.20 million, but still represented a year-over-year change of 10.8% [4] Operating Income - Adjusted Operating Income for the FPD segment was $138.60 million, surpassing the average estimate of $116.22 million [4] - Adjusted Operating Income for the FCD segment was $44.60 million, slightly above the average estimate of $42.93 million [4] Stock Performance - Flowserve's shares have returned -8.6% over the past month, contrasting with the Zacks S&P 500 composite's -0.8% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Company Performance - Flowserve reported quarterly earnings of $0.72 per share, exceeding the Zacks Consensus Estimate of $0.59 per share, and up from $0.58 per share a year ago, adjusted for non-recurring items [1] - The earnings surprise was 22.03%, while the previous quarter saw a negative surprise of -9.09% with actual earnings of $0.70 compared to an expected $0.77 [2] - The company achieved revenues of $1.14 billion for the quarter, surpassing the Zacks Consensus Estimate by 3.35%, and up from $1.09 billion year-over-year [3] Market Outlook - Flowserve shares have declined approximately 22.4% since the beginning of the year, contrasting with the S&P 500's decline of -6% [4] - The current consensus EPS estimate for the upcoming quarter is $0.83 on revenues of $1.22 billion, and for the current fiscal year, it is $3.11 on revenues of $4.76 billion [8] - The Zacks Industry Rank places Manufacturing - General Industrial in the bottom 40% of over 250 Zacks industries, indicating potential challenges for stock performance [9] Earnings Estimate Revisions - The trend for earnings estimate revisions for Flowserve is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market [7] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [6]

Financial Performance - First quarter bookings reached $1.2 billion, with record aftermarket bookings of nearly $690 million[5] - Power bookings increased over 45% year-over-year, including more than $100 million in nuclear awards for the third consecutive quarter[5] - Gross margin and adjusted gross margin were 32.3% and 33.5%, respectively, reflecting increases of 110 and 180 basis points compared to the prior year[5] - Operating income and adjusted operating income were $132 million and $147 million, representing increases of 17% and 24% year-over-year[5] - The backlog stood at $2.9 billion, an 11.1% increase from $2.6 billion in the previous year[6] - The Flowserve Pumps Division reported bookings of $852.9 million, up from $703.5 million in the previous year[19] - The Flow Control Division saw bookings increase to $376.0 million from $341.1 million year-over-year[19] - Flowserve's Pumps Division reported a gross profit of $268,462, representing 34.3% of sales for Q1 2025, an increase from 32.2% in Q1 2024[20] - The Flow Control Division achieved a gross profit of $100,187, which is 27.5% of sales, compared to 28.9% in the same quarter last year[21] - Total bookings for the Pumps Division were $852.9 million, up 21.2% year-over-year, while the Flow Control Division saw bookings of $376.0 million, a 10.2% increase[26] - The adjusted operating income for the Pumps Division was $138.6 million, reflecting a 20.6% increase compared to the previous year[26] - The company reported a net earnings of $79,457 thousand for Q1 2025, compared to $77,915 thousand in Q1 2024[28] - The operating income margin for the Pumps Division improved to 17.4%, up 300 basis points from the previous year[26] Guidance and Projections - The company reaffirmed its full-year 2025 guidance, targeting adjusted EPS in the range of $3.10 to $3.30[7] - Total sales growth is projected to be between 5% to 7% for 2025, with organic sales growth expected at 3% to 5%[8] Cash Flow and Assets - Cash from operations was reported at ($49.9 million), a decline of 180.2% compared to $62.3 million in the prior year[6] - Cash and cash equivalents decreased to $540,804 thousand from $675,441 thousand at the end of 2024[27] - The total assets of Flowserve as of March 31, 2025, were $5,483,298 thousand, slightly down from $5,500,821 thousand at the end of 2024[27] Risks and Challenges - Forward-looking statements are based on current expectations and are subject to numerous risks and uncertainties, including global supply chain disruptions and inflationary pressures[31] - The company faces risks related to the conversion of bookings into revenues and the potential for unexpected cancellations or delays in customer orders[31] - There is a substantial dependence on the success of the energy, chemical, power generation, and general industries for sales[31] - The company is exposed to fluctuations in foreign currency exchange rates, particularly in hyperinflationary countries like Argentina[31] - The company acknowledges potential adverse impacts from public health emergencies, such as pandemics, on its business operations[31] - Increased aging and slower collection of receivables are particularly noted in Latin America and other emerging markets[31] - The company is dependent on third-party suppliers, and their failure to perform could adversely affect business operations[31] Management and Strategy - Management emphasizes the importance of successfully developing and introducing new products and integrating new technologies, including artificial intelligence and machine learning, to maintain competitive position[31] - Management does not assume any obligation to update forward-looking statements based on information available as of the date of the release[32] - The company incurred realignment charges of $2,979 thousand in the Pumps Division during the quarter[20]

Financial Performance - Bookings for Q1 2025 increased by $188.1 million, or 18.1%, compared to Q1 2024, totaling $1,226.4 million[130] - Sales for Q1 2025 rose by $57.0 million, or 5.2%, compared to Q1 2024, reaching $1,144.5 million[131] - Gross profit for Q1 2025 increased by $30.3 million, or 8.9%, totaling $369.3 million, with a gross profit margin of 32.3%[133] - Operating income for Q1 2025 rose by $18.8 million, or 16.6%, with an operating margin of 11.5%[138] - Net earnings from affiliates for Q1 2025 increased by $3.2 million, or 128.0%, primarily due to higher earnings from FPD joint ventures in South Korea[137] - SG&A for Q1 2025 increased by $14.8 million, or 6.5%, compared to Q1 2024, with SG&A as a percentage of sales rising to 21.2%[136] - Interest expense for Q1 2025 increased by $3.9 million due to higher outstanding debt, while interest income rose by $0.5 million[139] - Other net expense for Q1 2025 increased by $16.4 million, primarily due to foreign exchange losses and a pension settlement loss of $1.5 million[140] - The effective tax rate for Q1 2025 decreased to 18.3% from 20.5% in Q1 2024[141] - Other comprehensive income for Q1 2025 increased by $74.8 million, resulting from foreign currency translation adjustments[142] Backlog and Future Expectations - Backlog as of March 31, 2025, was $2,902.9 million, an increase of $113.3 million, or 4.1%, from December 31, 2024[132] - The company expects to deliver annual revenue growth in 2025, supported by a strong backlog and improved execution[122] - Backlog increased by $19.8 million, or 2.3%, to $889.4 million at March 31, 2025, with currency effects contributing approximately $9 million[161] Segment Performance - FPD segment bookings for Q1 2025 increased by $149.4 million, or 21.2%, with significant growth in general industries and power generation[147] - FCD segment bookings for Q1 2025 increased by $34.9 million, or 10.2%, driven by orders in the energy and general industries[156] - Gross profit margin for FPD in Q1 2025 improved to 34.3%, while FCD's gross profit margin decreased to 27.5%[149][158] Cash Flow and Capital Management - Cash used by operating activities was $49.9 million for the three months ended March 31, 2025, compared to cash provided of $62.3 million for the same period in 2024[164] - Cash balance decreased by $134.6 million to $540.8 million at March 31, 2025, due to various cash outflows including $27.6 million in dividends and $21.1 million in share repurchases[163] - Capital expenditures for the three months ended March 31, 2025 were $11.7 million, a decrease of $1.9 million compared to the same period in 2024[169] - Cash flows used by financing activities were $84.2 million for the three months ended March 31, 2025, compared to $54.2 million for the same period in 2024[170] - As of March 31, 2025, the company had $662.2 million of available capacity under its Second Amended and Restated Credit Agreement[171] - The company has $258.8 million of remaining capacity for Board of Directors approved share repurchases as of March 31, 2025[174] Risks and Challenges - The company faces increased aging and slower collection of receivables, particularly in Latin America and other emerging markets[188] - Potential adverse effects from new tariffs and related retaliatory actions could impact business operations[188] - The company is exposed to fluctuations in foreign currency exchange rates, especially in hyperinflationary countries like Argentina[188] - The company may face adverse impacts from impairment in the carrying value of goodwill or other intangible assets[188] - The competitive nature of the markets in which the company operates poses challenges to maintaining its competitive position[188] - The company must successfully develop and introduce new products and integrate new technologies, including artificial intelligence and machine learning[188] - The company is dependent on third-party suppliers, whose failure to perform timely could adversely affect operations[188] - Ineffective internal controls could impact the accuracy and timely reporting of business and financial results[188] Acquisition and Investment - The company incurred $1.3 million in acquisition-related costs for the acquisition of MOGAS in Q1 2025[125] - The 2025 Realignment Programs are anticipated to require a total investment of approximately $23 million, with $8 million estimated to be non-cash[126]