Flowserve Corp Q4 2024 Earnings Call Summary

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

Question: Nathan Jones - Stifel Financial Corp. - Analyst : I guess I'll start with a question on the aftermarket bookings. They've certainly ramped up over the last few years and our two levels higher than they ever been historically. I wonder if you could just talk a little bit more about the strategies that you've deployed to really drive the aftermarket capture rates to drive the growth in bookings around aftermarket to start with.

Question: Nathan Jones - Stifel Financial Corp. - Analyst : Awesome. I guess my follow-up question is going to be around the 80/20 framework, your CORE initiatives. One of the -- with the comments are in the slide that I found interesting was that you don't expect it to really be a negative headwind on the sales side. Pretty much every company I have covered that has deployed this kind of system has always seen a headwind to revenue from getting out of products that aren't profitable or getting out of customers that aren't profitable it's accretive to EPS to see those headwinds in sales. I'm just wondering if you can comment on -- and maybe why you're not seeing a revenue headwind from these 80/20 initiative, is that something that we should expect in the future or just your approach to that?

Question: Deane Dray - RBC Capital Markets - Analyst : Maybe we'll start on the '25 guide with the expectation that you think you'll be above 1 on book-to-bill. Just how calibrated are you on that so far? I mean you do have some good earnings visibility on some of these longer-cycle projects. So is there a front log that's giving you that confidence that you'll be able to? And do you have confidence in maintaining the streak of over $1 billion of orders? And at some point, is that going to come to an end and maybe some observations there?

Question: Deane Dray - RBC Capital Markets - Analyst : That's really helpful. And Amy knows this would typically be the time I would ask about free cash flow, but it was really strong in the quarter. So that -- I think I'll leave that one there. But Scott, you mentioned the geopolitical side. Just is there anything as you see the businesses today that would be impacted on tariffs and just in terms of what headlines you've seen, any kind of preparation of playbook that you have that would -- that you need to have to put into play here?

Question: Michael Halloran - Baird - Analyst : Talking through a couple of things here. First, when you look at the 100 to 200 basis points plus you threw out on the slide on the 80/20 and then the commercial excellence program you're about to launch. I know you guys said on the prepared remarks like 200 plus. But when you think about those, just a reminder, how much of that is embedded in -- was previously embedded in the guidance for 2027? And then also a reminder, what is the volume component of that 2027 guidance as we sit here today or the revenue growth component and how much is firmly within your control versus market factors? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 3:00PM, FLS.N - Q4 2024 Flowserve Corp Earnings Call

Question: Michael Halloran - Baird - Analyst : And then maybe a question on the guidance then and making sure I understand the cadence thing. So if I heard the prepared remarks correctly, first-quarter revenue and earnings are roughly similar to last year. Just making sure on that. And then as you think about the year, is this cadencing expectation for relatively normal seasonality, relatively normal balance conversion on some of these -- some of the backlog through the year. Any other nuances we should think about through the year? And any thoughts on the corporate expense side?

Question: Joseph Giordano - TD Cowen - Analyst : I wanted to unpack that corporate expense a bit. You mentioned it's tied to like specific R&D and things like that. I mean it was definitely higher and now we're saying that 2025 is neutral. I just want to know what's kind of -- what's causing this ramp, how long does it kind of stay at that level? And when you say it's neutral in 2025, like the 2024 number had like $12 million of extra cost from asbestos. Is it like you're saying it's going to be equal to that inclusive of that extra $12 million and then we'll see what asbestos is for this year?

Question: Joseph Giordano - TD Cowen - Analyst : That's fair. And then just if I could follow up on some of the in-process R&D that you bought on the cryo side of things. Where are those today in terms of like commercial deployment?

Question: Brett Linzey - Mizuho Securities - Analyst : I wanted to come back to the SKU reduction. You noted the two business units are underway. I think commensurate 10% to 15% reduction there, two more being reviewed this year. Where do you see the reduction ultimately landing at the end of the program on a SKU basis? And should we think of potentially more benefit above just 80/20 practice as you get better throughput on what would be a more standardized simplified SKU count?

Question: Brett Linzey - Mizuho Securities - Analyst : That's very helpful. Maybe just one on inventory. So it still looks pretty lean to us. What's your assessment on inventories in the channels. And I guess if we're entering a modestly more favorable operating backdrop for just traditional energy deregulation, et REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 3:00PM, FLS.N - Q4 2024 Flowserve Corp Earnings Call cetera, should we look to the channel to maybe gain some comfort holding more inventory over the next couple of years or still stay pretty lean?