Flowserve(US:FLS)2022-05-03 19:17Financial Data and Key Metrics Changes - First quarter bookings reached $1.09 billion, a 15% increase year-over-year and an 18% increase on a constant currency basis, marking the highest bookings level since Q2 2019 [7] - Adjusted EPS for Q1 was $0.07, while reported loss per share was $0.12, impacted by a $0.16 charge related to exiting Russia [25][26] - First quarter revenue declined by 4.2% or 2% on a constant currency basis, primarily due to supply chain and logistics challenges [29] Business Line Data and Key Metrics Changes - Aftermarket bookings grew by 18.6% year-over-year, totaling $542 million, the highest quarterly bookings since 2014 [11] - Original equipment bookings increased by 11.5% to $544 million, driven by the return of a more normalized market environment [13] - FPD (Flow Control Division) saw over 20% growth in both original equipment and aftermarket orders, while FCD (Flowserve Control Division) contributed modest growth [28] Market Data and Key Metrics Changes - Oil and gas bookings increased over 36% year-over-year, with significant contributions from project bookings [15] - Power bookings rose over 65% compared to the prior year, including significant nuclear aftermarket and OE project awards [16] - Regional bookings growth was led by the Middle East and Africa (up 51%), Europe (up 45%), and North America (up 9%), while Latin America saw a decline of 12% [16] Company Strategy and Development Direction - The company is focused on its 3D growth strategy, which aims to diversify, decarbonize, and digitize its offerings [44] - Efforts are being made to capture opportunities in underserved markets, particularly in water and specialty chemicals [46] - The company is committed to supporting customers' decarbonization efforts and has secured contracts related to carbon capture and sustainable chemicals [49][50] Management's Comments on Operating Environment and Future Outlook - Management acknowledged significant challenges in Q1 due to supply chain constraints, inflation, and the impact of the Russia-Ukraine conflict [8][19] - The company expects to see strong demand in the second and third quarters, driven by a robust project pipeline and energy independence initiatives [53][55] - Future earnings are anticipated to be heavily weighted towards the second half of the year, with expectations for improved backlog conversion rates [37][42] Other Important Information - The company has ceased operations in Russia and is addressing the financial impacts of this decision [19][26] - Inflation expectations for the full year have increased by nearly 50%, with procurement costs expected to rise in the high single-digit range [21] - The company maintains a strong liquidity position with $576 million in cash and $384 million in available credit [36] Q&A Session Summary Question: Did the company gain market share with the recent order growth? - Management indicated that the competitive nature of the projects won suggests a gain in market share, particularly in aftermarket and MRO segments [64][66] Question: What are the current sourcing challenges? - The primary concern is related to supply chain disruptions in Asia, particularly China, affecting the ability to source and transport products [67][68] Question: What is the outlook for bookings growth in the second half of the year? - Management expressed optimism about continued strong demand and project visibility, particularly in LNG and nuclear sectors, despite potential inflationary pressures [72][74]