Flowserve(FLS) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Results Overview Flowserve achieved sales and earnings growth, expanded margins, and raised full-year adjusted EPS guidance, driven by strategic execution and solid financial performance Management Commentary Flowserve's CEO, Scott Rowe, highlighted the successful execution of the 3D strategy and Flowserve Business System, leading to sales and earnings growth, margin expansion, and an increased full-year adjusted EPS guidance - Successful ongoing execution of the 3D strategy and the Flowserve Business System, driving sales and earnings growth while expanding margins[3] - Increased full-year 2025 Adjusted EPS guidance from $3.10-$3.30 to $3.25-$3.40, representing an increase of more than 25% at the midpoint versus last year[4] Key Financial Highlights The second quarter saw solid bookings, robust gross and adjusted gross margins, expanded operating and adjusted operating margins, and strong cash from operations, contributing to increased reported and adjusted earnings per share - Solid bookings of $1.1 billion, including $621 million of durable aftermarket bookings[4] Q2 2025 Key Financial Highlights | Metric | Value | Change vs. Prior Year | | :--- | :--- | :--- | | Gross Margin | 34.2% | +260 bps | | Adjusted Gross Margin | 34.9% | +260 bps | | Operating Margin | 12.3% | +180 bps | | Adjusted Operating Margin | 14.6% | +210 bps | | Reported EPS | $0.62 | +12.7% | | Adjusted EPS | $0.91 | +24.7% | | Cash From Operations | $154 million | Significant increase | Merger with Chart Industries, Inc. Termination Flowserve terminated its previously announced merger agreement with Chart Industries, Inc. after Chart's board determined an unsolicited proposal from Baker Hughes constituted a 'superior proposal', with Flowserve receiving a $266 million termination payment - Flowserve terminated its merger agreement with Chart Industries, Inc[5] - The termination followed Chart's Board of Directors determining a proposal from Baker Hughes was a 'superior proposal'[5] - Flowserve will receive a $266 million termination payment[5] Key Financial Figures & 2025 Guidance Flowserve reported increased backlog, sales growth, and expanded operating margins for Q2 and YTD 2025, leading to an upward revision of its full-year Adjusted EPS guidance Key Financial Figures (Q2 & YTD 2025 vs 2024) Flowserve reported a 6.3% increase in backlog for both Q2 and YTD 2025. While Q2 bookings decreased by 13.8%, YTD bookings saw a slight increase of 0.7%. Sales grew by 2.7% in Q2 and 3.9% YTD. Both reported and adjusted operating margins expanded, and adjusted EPS showed strong growth of 24.7% in Q2 and 24.4% YTD Key Financial Figures (Q2 & YTD 2025 vs 2024) | Metric | Q2 2025 | Q2 2024 | Q2 Change | YTD 2025 | YTD 2024 | YTD Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Backlog | $2,853.2M | $2,684.4M | 6.3% | $2,853.2M | $2,684.4M | 6.3% | | Bookings | $1,073.9M | $1,246.1M | (13.8%) | $2,299.4M | $2,283.8M | 0.7% | | Sales | $1,188.1M | $1,156.9M | 2.7% | $2,332.6M | $2,244.4M | 3.9% | | Operating Margin | 12.3% | 10.5% | 180 bps | 11.9% | 10.4% | 150 bps | | Adjusted Operating Margin | 14.6% | 12.5% | 210 bps | 13.8% | 11.7% | 210 bps | | Earnings Per Share | $0.62 | $0.55 | 12.7% | $1.18 | $1.11 | 6.3% | | Adjusted Earnings Per Share | $0.91 | $0.73 | 24.7% | $1.63 | $1.31 | 24.4% | | Cash From Operations | $154.1M | ($12.8M) | $166.9M | $104.2M | $49.5M | $54.7M | 2025 Guidance Update Flowserve updated its full-year 2025 guidance, increasing the Adjusted EPS target range and slightly narrowing the organic sales growth forecast, with the impact from acquisitions now expected to be lower and foreign exchange translation projected to be neutral - The Company updated its full-year 2025 guidance, including increasing its Adjusted EPS target range[7] Full-Year 2025 Guidance Comparison | Metric | Prior Range | Current Range | | :--- | :--- | :--- | | Organic sales growth | +3% to +5% | +3% to +4% | | Impact from acquisitions | Approx. +300 bps | Approx. +200 bps | | Impact from foreign exchange translation | Approx. (100) to 0 bps | Approx. 0 bps | | Total sales growth | +5% to +7% | +5% to +6% | | Adjusted EPS | $3.10 to $3.30 | $3.25 to $3.40 | | Net interest expense | Approx. $70 million | Approx. $70 million | | Adjusted tax rate | Approx. 21% | Approx. 20% | | Capital expenditures | $80 to $90 million | $80 to $90 million | Consolidated Financial Statements (Unaudited) The unaudited consolidated financial statements for Q2 and YTD 2025 show increased sales, gross profit, operating income, and net earnings, alongside growth in total assets and equity Condensed Consolidated Statements of Income (Three Months Ended June 30) For Q2 2025, Flowserve reported a 2.7% increase in sales to $1,188.1 million, with gross profit rising by 11.1% to $406.6 million, operating income grew by 20.8% to $146.6 million, and net earnings attributable to Flowserve Corporation increased by 12.6% to $81.8 million, resulting in a diluted EPS of $0.62 Q2 Consolidated Statements of Income (Amounts in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sales | $1,188,092 | $1,156,892 | | Cost of sales | $(781,510) | $(790,796) | | Gross profit | $406,582 | $366,096 | | Operating income | $146,590 | $121,304 | | Earnings before income taxes | $103,860 | $100,298 | | Net earnings attributable to Flowserve Corporation | $81,754 | $72,616 | | Diluted EPS | $0.62 | $0.55 | Condensed Consolidated Statements of Income (Six Months Ended June 30) For the first six months of 2025, sales increased by 3.9% to $2,332.6 million, with gross profit growing by 10.0% to $775.9 million, operating income rose by 18.8% to $278.5 million, and net earnings attributable to Flowserve Corporation increased by 6.0% to $155.7 million, resulting in a diluted EPS of $1.18 YTD Consolidated Statements of Income (Amounts in thousands) | Metric | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Sales | $2,332,635 | $2,244,371 | | Cost of sales | $(1,556,719) | $(1,539,307) | | Gross profit | $775,916 | $705,064 | | Operating income | $278,479 | $234,382 | | Earnings before income taxes | $201,060 | $198,355 | | Net earnings attributable to Flowserve Corporation | $155,659 | $146,836 | | Diluted EPS | $1.18 | $1.11 | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $5,682.5 million from $5,500.8 million at year-end 2024, driven by increases in accounts receivable, contract assets, and goodwill, while total equity also grew significantly to $2,279.0 million from $2,051.7 million, primarily due to higher retained earnings and a reduction in accumulated other comprehensive loss Consolidated Balance Sheets (Amounts in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $3,004,028 | $2,904,497 | | Property, plant and equipment, net | $558,345 | $539,703 | | Goodwill | $1,337,747 | $1,286,295 | | Total assets | $5,682,525 | $5,500,821 | | Total current liabilities | $1,430,382 | $1,468,084 | | Long-term debt due after one year | $1,440,676 | $1,460,132 | | Total equity | $2,279,002 | $2,051,712 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities more than doubled to $104.2 million from $49.5 million in the prior year, while net cash used in financing activities significantly increased to $154.4 million, primarily due to higher share repurchases and a contingent consideration payment related to an acquired business YTD Consolidated Statements of Cash Flows (Amounts in thousands) | Metric | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $104,212 | $49,475 | | Net cash flows (used) by investing activities | $(27,473) | $(30,090) | | Net cash flows (used) by financing activities | $(154,444) | $(36,683) | | Net change in cash and cash equivalents | $(46,238) | $(30,595) | | Cash and cash equivalents at end of period | $629,203 | $515,083 | Consolidated Non-GAAP Financial Measures Reconciliation (Unaudited) This section reconciles reported GAAP figures with non-GAAP measures for Q2 and YTD 2025 and 2024, highlighting adjustments for merger costs, realignment charges, and foreign exchange impacts to provide a clearer view of underlying performance Three Months Ended June 30, 2025 Reconciliation For Q2 2025, adjusted gross profit margin was 34.9% (vs. 34.2% reported) and adjusted operating margin was 14.6% (vs. 12.3% reported), with adjusted diluted EPS reaching $0.91 (vs. $0.62 reported), and key adjustments including merger transaction costs and below-the-line foreign exchange impacts Q2 2025 Consolidated Non-GAAP Reconciliation (Amounts in thousands) | Metric | Reported | Adjusted | | :--- | :--- | :--- | | Gross Profit | $406,582 | $415,124 | | Gross as % of sales | 34.2% | 34.9% | | Operating Income | $146,590 | $173,732 | | Operating as % of sales | 12.3% | 14.6% | | Net Earnings | $81,754 | $119,976 | | Diluted EPS | $0.62 | $0.91 | - Key adjustments included $15.5 million for merger transaction costs and $20.0 million for below-the-line foreign exchange impacts[12][14][15] Three Months Ended June 30, 2024 Reconciliation For Q2 2024, adjusted gross profit margin was 32.3% (vs. 31.6% reported) and adjusted operating margin was 12.5% (vs. 10.5% reported), with adjusted diluted EPS at $0.73 (vs. $0.55 reported), and significant adjustments for realignment charges and discrete asset write-downs Q2 2024 Consolidated Non-GAAP Reconciliation (Amounts in thousands) | Metric | Reported | Adjusted | | :--- | :--- | :--- | | Gross Profit | $366,096 | $373,617 | | Gross as % of sales | 31.6% | 32.3% | | Operating Income | $121,304 | $144,434 | | Operating as % of sales | 10.5% | 12.5% | | Net Earnings | $72,616 | $96,332 | | Diluted EPS | $0.55 | $0.73 | - Significant adjustments included $20.2 million for realignment charges and $4.0 million for discrete asset write-downs[16][17] Six Months Ended June 30, 2025 Reconciliation For YTD 2025, adjusted gross profit margin was 34.2% (vs. 33.3% reported) and adjusted operating margin was 13.8% (vs. 11.9% reported), with adjusted diluted EPS reaching $1.63 (vs. $1.18 reported), and major adjustments for merger transaction costs and below-the-line foreign exchange impacts YTD 2025 Consolidated Non-GAAP Reconciliation (Amounts in thousands) | Metric | Reported | Adjusted | | :--- | :--- | :--- | | Gross Profit | $775,916 | $797,981 | | Gross as % of sales | 33.3% | 34.2% | | Operating Income | $278,479 | $320,804 | | Operating as % of sales | 11.9% | 13.8% | | Net Earnings | $155,659 | $215,509 | | Diluted EPS | $1.18 | $1.63 | - Major adjustments included $15.5 million for merger transaction costs and $31.4 million for below-the-line foreign exchange impacts[27][28] Six Months Ended June 30, 2024 Reconciliation For YTD 2024, adjusted gross profit margin was 32.0% (vs. 31.4% reported) and adjusted operating margin was 11.7% (vs. 10.4% reported), with adjusted diluted EPS at $1.31 (vs. $1.11 reported), and significant adjustments for realignment charges and discrete asset write-downs YTD 2024 Consolidated Non-GAAP Reconciliation (Amounts in thousands) | Metric | Reported | Adjusted | | :--- | :--- | :--- | | Gross Profit | $705,064 | $718,258 | | Gross as % of sales | 31.4% | 32.0% | | Operating Income | $234,382 | $262,679 | | Operating as % of sales | 10.4% | 11.7% | | Net Earnings | $146,836 | $173,724 | | Diluted EPS | $1.11 | $1.31 | - Significant adjustments included $27.4 million for realignment charges and $4.0 million for discrete asset write-downs[29][31] Segment Information (Unaudited) This section details the Q2 and YTD 2025 performance of the Flowserve Pumps Division (FPD) and Flow Control Division (FCD), including bookings, sales, and margin analysis Flowserve Pumps Division (FPD) The Flowserve Pumps Division demonstrated strong margin expansion and operating income growth in Q2 and YTD 2025, despite a decrease in Q2 bookings FPD Q2 Reported Performance In Q2 2025, Flowserve Pumps Division's sales increased slightly by 0.8% to $818.9 million, despite a 19.5% decrease in bookings, while the division significantly improved its gross profit margin by 450 basis points to 36.5% and saw a 24.2% rise in segment operating income to $162.7 million, with operating margin expanding to 19.9% FPD Q2 Reported Performance (Amounts in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Bookings | $723.8 | $898.8 | (19.5%) | | Sales | $818.9 | $812.2 | 0.8% | | Gross profit margin | 36.5% | 32.0% | 450 bps | | Segment operating income | $162.7 | $131.0 | 24.2% | | Segment operating income as a percentage of sales | 19.9% | 16.1% | 380 bps | FPD Q2 Non-GAAP Reconciliation For Q2 2025, FPD's adjusted gross profit margin was 36.8% (vs. 36.5% reported) and adjusted operating margin was 20.3% (vs. 19.9% reported), reflecting adjustments primarily for realignment charges and discrete items FPD Q2 Non-GAAP Reconciliation (Amounts in thousands) | Metric | Reported (Q2 2025) | Adjusted (Q2 2025) | | :--- | :--- | :--- | | Gross Profit | $299,229 | $301,152 | | Gross as % of sales | 36.5% | 36.8% | | Operating Income | $162,745 | $166,516 | | Operating as % of sales | 19.9% | 20.3% | FPD YTD Reported Performance For the first six months of 2025, FPD's sales increased by 1.3% to $1,602.1 million, with bookings decreasing slightly by 1.6%, while gross profit margin improved by 330 basis points to 35.4%, and segment operating income grew by 23.7% to $299.3 million, with operating margin reaching 18.7% FPD YTD Reported Performance (Amounts in millions) | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | Bookings | $1,576.1 | $1,602.2 | (1.6%) | | Sales | $1,602.1 | $1,581.6 | 1.3% | | Gross profit margin | 35.4% | 32.1% | 330 bps | | Segment operating income | $299.3 | $241.9 | 23.7% | | Segment operating income as a percentage of sales | 18.7% | 15.3% | 340 bps | FPD YTD Non-GAAP Reconciliation For YTD 2025, FPD's adjusted gross profit margin was 35.7% (vs. 35.4% reported) and adjusted operating margin was 19.0% (vs. 18.7% reported), after accounting for realignment charges and discrete items FPD YTD Non-GAAP Reconciliation (Amounts in thousands) | Metric | Reported (YTD 2025) | Adjusted (YTD 2025) | | :--- | :--- | :--- | | Gross Profit | $567,691 | $572,621 | | Gross as % of sales | 35.4% | 35.7% | | Operating Income | $299,259 | $305,164 | | Operating as % of sales | 18.7% | 19.0% | Flow Control Division (FCD) The Flow Control Division achieved sales and operating income growth in Q2 and YTD 2025, though gross profit margins saw a slight decline in both periods FCD Q2 Reported Performance In Q2 2025, Flow Control Division's sales increased by 6.8% to $371.5 million, and bookings rose by 1.6% to $354.7 million, while gross profit margin decreased by 160 basis points to 29.0%, but segment operating income grew by 17.1% to $37.8 million, with operating margin at 10.2% FCD Q2 Reported Performance (Amounts in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Bookings | $354.7 | $349.2 | 1.6% | | Sales | $371.5 | $347.7 | 6.8% | | Gross profit margin | 29.0% | 30.6% | (160) bps | | Segment operating income | $37.8 | $32.3 | 17.1% | | Segment operating income as a percentage of sales | 10.2% | 9.3% | 90 bps | FCD Q2 Non-GAAP Reconciliation For Q2 2025, FCD's adjusted gross profit margin was 30.8% (vs. 29.0% reported) and adjusted operating margin was 12.2% (vs. 10.2% reported), with adjustments including realignment charges, acquisition-related costs, purchase accounting step-up, and discrete items FCD Q2 Non-GAAP Reconciliation (Amounts in thousands) | Metric | Reported (Q2 2025) | Adjusted (Q2 2025) | | :--- | :--- | :--- | | Gross Profit | $107,694 | $114,310 | | Gross as % of sales | 29.0% | 30.8% | | Operating Income | $37,771 | $45,472 | | Operating as % of sales | 10.2% | 12.2% | - Adjustments include $3.9 million for acquisition-related costs and $3.9 million for purchase accounting step-up and intangible asset amortization[21][24] FCD YTD Reported Performance For the first six months of 2025, FCD's sales increased by 10.1% to $735.6 million, and bookings grew by 5.9% to $730.4 million, while gross profit margin decreased by 150 basis points to 28.3%, and segment operating income rose by 3.4% to $69.3 million, with operating margin at 9.4% FCD YTD Reported Performance (Amounts in millions) | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | Bookings | $730.4 | $689.9 | 5.9% | | Sales | $735.6 | $668.2 | 10.1% | | Gross profit margin | 28.3% | 29.8% | (150) bps | | Segment operating income | $69.3 | $67.0 | 3.4% | | Segment operating income as a percentage of sales | 9.4% | 10.0% | (60) bps | FCD YTD Non-GAAP Reconciliation For YTD 2025, FCD's adjusted gross profit margin was 30.6% (vs. 28.3% reported) and adjusted operating margin was 12.2% (vs. 9.4% reported), with adjustments including realignment charges, acquisition-related costs, purchase accounting step-up, and discrete items FCD YTD Non-GAAP Reconciliation (Amounts in thousands) | Metric | Reported (YTD 2025) | Adjusted (YTD 2025) | | :--- | :--- | :--- | | Gross Profit | $207,881 | $225,078 | | Gross as % of sales | 28.3% | 30.6% | | Operating Income | $69,254 | $90,060 | | Operating as % of sales | 9.4% | 12.2% | - Adjustments include $5.2 million for acquisition-related costs and $8.7 million for purchase accounting step-up and intangible asset amortization[33][34] Second Quarter and Year-to-Date 2025—Segment Results Summary The Flowserve Pumps Division (FPD) showed strong margin expansion in Q2 and YTD 2025, despite a decrease in Q2 bookings, while the Flow Control Division (FCD) experienced sales growth in both periods but saw a decline in gross and adjusted operating margins in Q2, though YTD adjusted operating margin remained stable Segment Results Summary (Q2 & YTD 2025 vs 2024, Amounts in millions) | Metric | FPD Q2 2025 | FPD Q2 Change | FPD YTD 2025 | FPD YTD Change | FCD Q2 2025 | FCD Q2 Change | FCD YTD 2025 | FCD YTD Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Bookings | $723.8 | -19.5% | $1,576.1 | -1.6% | $354.7 | 1.6% | $730.4 | 5.9% | | Sales | $818.9 | 0.8% | $1,602.1 | 1.3% | $371.5 | 6.8% | $735.6 | 10.1% | | Gross Margin (% of sales) | 36.5% | 450 bps | 35.4% | 330 bps | 29.0% | (160) bps | 28.3% | (150) bps | | Operating Income | $162.7 | 24.2% | $299.3 | 23.7% | $37.8 | 17.1% | $69.3 | 3.4% | | Operating Margin (% of sales) | 19.9% | 380 bps | 18.7% | 340 bps | 10.2% | 90 bps | 9.4% | (60) bps | | Adjusted Operating Income | $166.5 | 21.0% | $305.2 | 20.8% | $45.5 | -2.2% | $90.1 | 9.7% | | Adj. Oper. Margin (% of sales) | 20.3% | 340 bps | 19.0% | 300 bps | 12.2% | (120) bps | 12.2% | (10) bps | Additional Information This section provides details on the upcoming conference call, an overview of Flowserve Corporation, contact information, a safe harbor statement, and an explanation of non-GAAP financial measures Webcast and Conference Call Instructions Flowserve will host a conference call on Wednesday, July 30, at 11:00 a.m. Eastern Time to discuss its second quarter results, with access available on the company's Investors page - Conference call to discuss Q2 results on Wednesday, July 30, at 11:00 a.m. Eastern Time[9] - Accessible by shareholders and interested parties on Flowserve's Investors page[9] About Flowserve Flowserve Corporation is a global leader in fluid motion and control products and services, operating in over 50 countries and providing engineered and industrial pumps, seals, valves, and related flow management services - Flowserve Corporation is one of the world's leading providers of fluid motion and control products and services[39] - Operates in more than 50 countries[39] - Produces engineered and industrial pumps, seals and valves as well as a range of related flow management services[39] Flowserve Contacts Contact information is provided for Investor Relations, including Brian Ezzell and Tarek Zeni, and for Media inquiries, David Mason - Investor Contacts: Brian Ezzell, Vice President, Investor Relations, Treasurer & Corporate Finance (469) 420-3222; Tarek Zeni, Director, Investor Relations (469) 420-4045[40] - Media Contact: David Mason, Senior Director, Communications (214) 500-9687[40] Safe Harbor Statement The news release contains forward-looking statements that are predictions, not guarantees, and are subject to numerous difficult-to-predict risks and uncertainties, including global supply chain disruptions, inflationary pressures, potential order cancellations, dependence on customer investments, volatile raw material prices, and various economic, political, and operational challenges associated with international business - Forward-looking statements are based on current expectations, projections, estimates, and assumptions, but are 'only predictions, not guarantees' and 'subject to numerous risks and uncertainties'[40][42] - Key risks include global supply chain disruptions, inflationary environment, potential for unexpected cancellations or delays of customer orders, dependence on customer capital investment, volatile raw materials prices, and economic, political, and other risks associated with international operations[42] - Other risks include public health emergencies, increased aging and slower collection of receivables, tariffs, foreign currency fluctuations, litigation (e.g., asbestos claims), acquisitions, goodwill impairment, dependence on third-party suppliers, competition, new product development, environmental compliance, labor matters, debt financing access, intellectual property protection, pension plans, internal control limitations, deferred tax asset valuation, and IT infrastructure security[42] Non-GAAP Financial Measures Explanation Flowserve uses non-GAAP financial measures to provide additional useful comparisons and a clearer view of underlying business trends by excluding certain non-recurring items, which are utilized for internal decision-making and performance evaluation but are not a substitute for GAAP results - Non-GAAP financial measures are used to present additional useful comparisons and provide a clearer view of underlying business trends by excluding certain non-recurring items[44] - Management uses these non-GAAP measures for financial, operating, planning, compensation decisions, and performance evaluation[44] - Non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with GAAP[44]