Flowserve Corp Q3 2024 Earnings Call Summary

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

Question: Andrew Kaplowitz - Citi Investment Research - Analyst : Good morning, everyone. Scott, can you give us more color into what you're seeing in terms of bookings? At least one of your competitors I think talked about some slowing in process, and I think there is some concern regarding slowed spending in the Middle East, both of which it doesn't seem like you're seeing. So, do you see continued strength in Middle East in your overall process markets? And I know you reiterated closer to bookings should exceed one times for the year, but you still believe your markets overall

Question: Andrew Kaplowitz - Citi Investment Research - Analyst : Very helpful, Scott. And then, Amy, maybe just in terms of the Q4 EPS guide. I think you guided decently under 30% of the year's EPS in Q4. Historically, I think you decently over 30%. And as you said, is that just kind of just throw one leading to much higher front end, and we know you purposely intending to balance your quarterly earnings, but is there anything else that's a little bit lower slower than you originally thought for Q4?

Question: Andrew Kaplowitz - Citi Investment Research - Analyst : Appreciate all the color. And my best (inaudible) and welcome, Brian. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 2:00PM, FLS.N - Q3 2024 Flowserve Corp Earnings Call

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc. - Analyst : Good morning, everyone. I wanted to talk a little bit about a comment you made Scott, on your opening remarks on a data-driven approach to portfolio review with products, customers, margins in the 100 to 200 basis points target by 2027. Sounds a lot like an

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc. - Analyst : Yeah, I don't want to get too far ahead of you on promising your target that -- Flowserve has over the years been a very complex organization with a lot of SKUs and different products in it that maybe could be rationalized out of it. And other companies who've gone through this kind of process, and delivered margin expansion that not only would be 100 basis points a year for the next few years, but on -- beyond that. It would seem Flowserve has probably a lot of raw material to work with this or any commentary you can give us on kind of the duration past the targets that you put out there to date or potential for you to outperform those targets over the next few years. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 2:00PM, FLS.N - Q3 2024 Flowserve Corp Earnings Call

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc. - Analyst : Awesome. Thanks very much for taking my questions.

Question: Deane Dray - RBC Capital Markets - Analyst : Thank you. Good morning, everyone, and I'm sure he's listening well. I wish Jay all the best and a welcome to Brian.

Question: Deane Dray - RBC Capital Markets - Analyst : Sure. All right. And for Amy, and I guess Scott too, I know you guys don't like to use the word specialist, but let's just confirm that that $0.07 non-cash charge is related to this, what we know as a routine annual accrual true-up to your 30-year undiscounted asbestos liability. Again, I'll emphasize the routine part of it, but that's what we're talking about, right?

Question: Deane Dray - RBC Capital Markets - Analyst : Got it. All right. I just want to make sure that was clear. And then can we talk about free cash flow, and it just -- [I love] the saying that you are so far above your typical third quarter conversion. And Amy, you talked about the day's improvement in the cycle because when I see change -- a structural change like this, it makes me think that that 85% target conversion eventually going to start inching up, and hopefully we'll get to that 100% threshold at some point. But just kind of take us through what structurally has changed. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 2:00PM, FLS.N - Q3 2024 Flowserve Corp Earnings Call

Question: Deane Dray - RBC Capital Markets - Analyst : All right. That's a great recap there and some good framework for us to monitor. And just as a follow-up for Scott. So you're now 11 quarters above $1 billion in orders. And just kind of reflect here in terms of the duration of the streak, the importance for the organization and just maybe some assurance that you're still being at using selectivity in terms of -- I wouldn't want the streak duration to compromise at all the selectivity that you've been exercising. So going to just take us through the importance of the streak and the importance of selectivity.

Question: Deane Dray - RBC Capital Markets - Analyst : Great to hear. Thank you.

Question: Michael Halloran - Robert W. Baird & Co. Incorporated - Analyst : Good morning, everyone. So just on the power side of things, obviously, the seculars are starting to move in closer, which is great. How do you see that playing out from a duration conversation? Starting to see some of the aftermarket pieces today, but you know, some of that refurb work can take time, the projects can take time, but obviously a ton of excitement, order books, good funnel, funnel is good. So maybe just frame up how that should play out over the next two years here?

Question: Michael Halloran - Robert W. Baird & Co. Incorporated - Analyst : Thanks for that. Makes a lot of sense there. And then obviously the recent acquisition, really good fit. How are you thinking about the funnel from a year of opportunities, the willingness for you to go after that funnel in light of MOGAS acquisition, bandwidth, anything along those lines, if you could just give some context for how aggressive the funnel looks and your willingness to go after it.

Question: Michael Halloran - Robert W. Baird & Co. Incorporated - Analyst : Great. Really appreciate it. Thank you.

Question: Andrew Obin - BofA Global Research - Analyst : Hi, guys. Good morning. Just a question on FCD. And not to take away from sort of great progress over the past year plus, but just maybe if you can give us more color on FCD, just margins, and also decline in [OE] bookings in the quarter and year to date, what gets this to inflect positive? And just maybe more color as to what's driving those decline? Thank you.

Question: Andrew Obin - BofA Global Research - Analyst : Excellent. And just a follow up question on power. I know people are focused on nuclear, but we're also hearing that people are likely to keep coal plants open for longer. And I was just wondering what are you hearing from your customers about that? And what's potential impact on earnings? I appreciate that nuclear is very profitable, but I would guess that coal is one of these legacy businesses that is profitable as well. Thank you.

Question: Andrew Obin - BofA Global Research - Analyst : That's exactly right. Really appreciate your comment. Thanks so much.

Question: Joe Giordano - TD Cowen - Analyst : Hey, guys. Thanks for taking my questions. I wanted to touch on nuclear, I know we spent a bunch of times in there already. But if you were to think a lot of stuff is being contemplated in that sector now in terms of how to bring on new capacity, whether it's SMRs or things like that. So how should we think about your opportunity set for some of these newer technologies versus like a restart of an old legacy type of nuclear plants? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 2:00PM, FLS.N - Q3 2024 Flowserve Corp Earnings Call

Question: Joe Giordano - TD Cowen - Analyst : Just to confirm on that, is there any reason to think that like on a gigawatt basis that you're like opportunity on something like that should be meaningfully different versus the traditional plant? And then I just had one follow-up on the (multiple speakers) is there a way like -- go ahead. Sorry.

Question: Joe Giordano - TD Cowen - Analyst : Perfect. And then just on the [assessment] side, how are you guys thinking about packaging that up and selling it to -- like any insurance company or something like that? We have seen competitors in other companies take advantage of that. How does the economics of that look currently?

Question: Joe Giordano - TD Cowen - Analyst : Thanks, guys.

Question: Damian Karas - UBS Securities LLC - Analyst : Hi, good morning, everyone. So sorry if I missed this, hopped in over a little late from another call, but just said the updated full year guidance, kind of on the both the sales guide and just EPS implies a pretty wide range of outcomes in the fourth quarter. Would you maybe just comment a little bit on that range and the swing factors from the low end to the high end?

Question: Damian Karas - UBS Securities LLC - Analyst : Okay. Got it. That's helpful. And then I want to ask you about the water end market, you have some pretty notable bookings strength there. Curious if there are any large project awards that stick out or you just seeing broad-based strength, and given some of the unfortunate damages caused from the hurricanes in the Southeast US, just curious if there's any such associated drivers there may be factoring in.

Question: Damian Karas - UBS Securities LLC - Analyst : Got it. Thanks for your thoughts. I'll pass it along.

Question: Saree Boroditsky - Jefferies - Analyst : Hi, thanks for squeezing me in. Just to clarify, the guidance doesn't include the impact from MOGAS, but given that you have closed, could you just update us on the contribution on the fourth quarter and then to start with it in 2025? Thank you.

Question: Saree Boroditsky - Jefferies - Analyst : Okay. That's helpful. And then just a follow-up, you have mentioned the election, but given that it's next week, one of the items that's come up as the impact of regulation on energy projects, can you just make a comment on if your customers have talked about the impact of regulation? And if this is decreased, would you expect to see higher activity levels and thus sales for you?

Question: Saree Boroditsky - Jefferies - Analyst : Appreciate the comments. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 2:00PM, FLS.N - Q3 2024 Flowserve Corp Earnings Call

Question: Joe Ritchie - Goldman Sachs & Company, Inc. - Analyst : Hi, good morning, everybody. I guess I work for Flowserve now. (laughter)

Question: Joe Ritchie - Goldman Sachs & Company, Inc. - Analyst : Okay. My first question, Scott, you mentioned, in terms of [FCD] and aftermarket bookings about 600 the last few quarters. You talked about the capture rate, both of the different segments. I'm curious like as you think about the runway to capture your installed base, I don't know if you want to use a baseball analogy or if you want to maybe just like give us a sense for how much room there is to continue to capture more of your installed base.

Question: Joe Ritchie - Goldman Sachs & Company, Inc. - Analyst : That's super helpful and encouraging. And I guess maybe the follow-on question. I don't know if you guys are willing to lay out any pieces yet on the 2025 framework, but to the extent you are, I would be curious a little bit just broad parameters for how you're thinking about next year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 2:00PM, FLS.N - Q3 2024 Flowserve Corp Earnings Call

Question: Joe Ritchie - Goldman Sachs & Company, Inc. - Analyst : Helpful. Thank you.

Question: Eric Look - Mizuho Securities USA, LLC. - Analyst : Hi, this is Eric Look on for Brett Linzey. Bookings growth appears to be broad-based from what it seems like [within chems], can you maybe double-click into that and the challenges there and when we should expect a rebound in Europe? Thanks.

Question: Eric Look - Mizuho Securities USA, LLC. - Analyst : Okay. I'll leave it at that.