Flowserve Corp at Robert W Baird Global Industrial Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Halloran - Robert W. Baird - Analyst : And let's really dig into that, right. Why do you think this is the right time for the 80/20 piece? I have my own views, but they're here to hear from you, not from me. So what is it about the journey that you got to the starting point where you said the organization is now capable of handling some of the more advanced segmentation, quad work, et cetera that would come with an 80/20 approach?

Question: Michael Halloran - Robert W. Baird - Analyst : So this question that we just got kind of dovetails on that. What's -- what did you do in full serve 2.0 and what's different now? So I think you touched on a couple of things one day, get data integrity and the organizational structure were two of the core components of Flowserve 2.0. Anything else in there that you would want to point to? And then what is the difference today?

Question: Michael Halloran - Robert W. Baird - Analyst : So let's then talk through some of the -- what we're trying to accomplish here, right? So I think traditional 80/20 type platforms, it's about segmentation, which is what you're in the midst of right now. You said you did three of them this year --

Question: Michael Halloran - Robert W. Baird - Analyst : And so, then the implementation curve is what starts now. And when you look at, using the quad approach, however, you want to do it, how would you characterize the percentage of your portfolio that really doesn't fit from a the right pricing, the right customers, right? However, you want to define? How you want to go about that segmentation and definition?

Question: Michael Halloran - Robert W. Baird - Analyst : So, how do you get the right buy in from the teams culturally? Is this an incentive structure? Have you done any work on that side? Are there other factors that you're using to make sure the team gets that right buy in? And, frankly just executes effectively, right?

Question: Michael Halloran - Robert W. Baird - Analyst : Great. And then, let's use that just kind of wrap a bow on it. If I think about the 14% to 16% margin targets, you put out at the Analyst Day tracking very favorably relative to that range. Feels like these new initiatives give you incremental confidence. And I think the terminology used on the recent calls' disappointed if there wasn't some room in there. What are you looking at for benchmarks over the next couple of years relative to those targets or is it just execution kind of a smooth out quarter to quarter progression? What should we think about that?

Question: Michael Halloran - Robert W. Baird - Analyst : And then impact on free cash flow. And how do you think about capital velocity through the organization?

Question: Michael Halloran - Robert W. Baird - Analyst : So, let's transition to the revenue side of things, demand side of things. I'll just leave an open ended comment. How are you looking at the world state of the union from your perspective on the underlying demand trends? And I'm sure we'll have a bunch of questions --

Question: Michael Halloran - Robert W. Baird - Analyst : How do you think about the funnel of activity? How has that tracked? And the orders have been great, funnel seems to?

Question: Michael Halloran - Robert W. Baird - Analyst : And maybe just go through the 3D strategy quick before we go into any of the specific end markets?

Question: Michael Halloran - Robert W. Baird - Analyst : So, let's go on a couple of things here. If I think about the first two Ds, I mean, a lot of that's just taking your existing product portfolio and applying it to new, right. I mean, this isn't exactly like you're trying to introduce something drastically new, not saying there's not innovation along the way there is, but this is core to what you've done over the last chunk of years, right?

Question: Michael Halloran - Robert W. Baird - Analyst : And then the RedRaven, what's the customer feedback from those who've actually put it in part of their installed base and start to use a lot utilizing more aggressively? I know you just said we want to broaden that out, we want to get more people on it. But what's the initial feedback?

Question: Michael Halloran - Robert W. Baird - Analyst : And who has access to that data? Can you use that data and then transfer it to other application sets or is the customer? --

Question: Michael Halloran - Robert W. Baird - Analyst : So I've got a couple of questions on this, so I might as well transition to it before we go to the end markets. How are you thinking about the M&A side of your portfolio today? Maybe the second question would be on MOGAS and what that brings, but what's the intent with the portfolio? I mean, the pipeline of opportunity look like how actionable is it and how ready is the organization to absorbed?

Question: Michael Halloran - Robert W. Baird - Analyst : And it's the hope to be able to mix up the quality, mix up the technology and mix up the ultimately the margin entitlement (multiple speakers)

Question: Michael Halloran - Robert W. Baird - Analyst : Thanks for that. And then back to the end markets demand and the backdrop. Are you seeing any project delays? And I mean, this from two perspectives, both funnel conversion for whatever that reason might be, but also you've already won the bid, maybe EPCs, site readiness, some of the other things are pushing out the actual conversion of orders from revenue. Are you seeing any pressures on either side of those curves?

Question: Michael Halloran - Robert W. Baird - Analyst : So I'm going to start with power from an end market perspective, which I will say in my 15 years covering you has never been the first end market discussed on stage (multiple speakers)

Question: Michael Halloran - Robert W. Baird - Analyst : I mean, we for years talked about how you got the installed base. It would be great if the market came back, but the catalyst wasn't necessarily there, maybe talk about two fold things. One, what's the catalyst to how your products specifically can serve where this market might be heading?

Question: Michael Halloran - Robert W. Baird - Analyst : And the way to think about the impact on your portfolio. Next couple of years growth. But the opportunity set is you start actually getting the approvals and getting the growth and the recertification and then the incremental capacity because all these things take time (multiple speakers) I mean, there aren't a lot of people who have the certifications and the expertise in these areas that you have?

Question: Michael Halloran - Robert W. Baird - Analyst : Yeah. And frankly, some people can't wait for the seven plus years that it's going to take to (multiple speakers) get for some of the nuclear work. So, on the traditional -- more traditional oil and gas side of things, why the confidence in the resiliency of the cycle from here? I can probably point to a bunch of reasons but from your -- from where you sit, we've had a decent run. Why can the run continue?

Question: Michael Halloran - Robert W. Baird - Analyst : And then last one, you alluded to it a little bit earlier. But how do you think the prospect for this regime change matter for you more from a manufacturing footprint perspective, ability to manage the tariffs, nimbleness of the install of your manufacturing base or anything else that you might think is relevant.

Question: Michael Halloran - Robert W. Baird - Analyst : Great. Well, please join me in. Thanking Scott for his time today.