FLOWSERVE CORP Q4 FY2024 earnings call

• Delivered strong fourth quarter results with nearly $1.2 billion in bookings, adjusted gross margin expanded 300 basis points to 32.8% (eighth consecutive quarter of year-over-year margin expansion), adjusted operating margin 12.6%, book to bill 1.0, and near record backlog of $2.8 billion.
• 3D bookings represented 31% of total awards in Q4. Aftermarket bookings were $618 million for the third consecutive quarter above $600 million. Original equipment bookings grew 14% vs last year, with strength in traditional process industries and new energy markets, including over $110 million in nuclear awards over two consecutive quarters.
• Completed MoGas acquisition in fourth quarter, expanding offering to mining and minerals. Launched Closer Business System, an operational framework. Introduced eleven new products, including collaboration on molten hydroxide energy storage plant and gas pack ZE seal for emissions reduction.

FPD: Bookings increased 13% vs last year. Sales declined 5% in the quarter. Adjusted gross margin increased 450 basis points vs last year. Adjusted operating margin was 17.5%, a 570 basis point increase vs last year. FCD including Logus: Sales and booking growth of 15% and 11% respectively. Aftermarket bookings increased 20%, original equipment bookings up 8%. Adjusted gross margin 31.8%, adjusted operating margin 15.3% for the quarter.

• 2025 organic sales growth expected to be 3 to 5%. Reported net sales growth to benefit ~300 basis points from MoGas acquisition, with currency expected to negatively impact sales by ~100 basis points. Book to bill ratio expected to be over 1.0.
• Anticipate continuing to expand gross and operating margins via higher volumes and eighty twenty program. MoGas expected to drive profit growth in 2025, with adjusted earnings per share expected to be $3.10 to $3.30 (midpoint represents 22% increase vs prior year).

• Tariffs impacting supply chain, particularly importing castings and forgings. Foreign currency headwinds from stronger US dollar, which is expected to negatively impact sales growth by ~100 basis points.

Q: Where do you see SKU reduction ultimately landing in the eighty twenty program and what are the benefits beyond SKU reduction?

A: First two business units in eighty twenty are seeing 10-15% SKU reduction, with numbers expected to increase in subsequent years. Beyond SKU reduction, there are numerous knock-on benefits including simplified quoting, engineering, shop floor processes, supply chain simplification, and potential productivity uplift on the shop floor as complexity is reduced.