FLOWSERVE CORP Q1 FY2025 earnings call

• Strong first quarter performance: Bookings grew 18% to $1.2 billion, revenue increased 5%, adjusted gross margins expanded 180 basis points to 33.5%, adjusted operating margins 12.8%, adjusted earnings per share $0.72 (up nearly 25% vs prior year). - Book-to-bill ratio 1.07 times, with strong aftermarket bookings ($690 million, fourth consecutive quarter >$600 million) and nuclear bookings >$100 million for third consecutive quarter. - Tariff impact: Estimated annualized gross impact $90M-$100M, with mitigation actions including supply chain diversification, pricing actions, change orders on backlog. - Execution focus: Leveraging Flowserve Business System, 80-20 program accelerating, expecting gross margins to benefit by 50 basis points or more at Flowserve level, confident in 200+ basis points margin expansion from Portfolio Excellence Program by 2027.

FPD delivered exceptional bookings growth of 21% versus last year to $1.2 billion, with sales growth of 2% versus last year. FPD generated adjusted gross margins of 34.7%, an increase of 180 basis points versus last year, and an outstanding adjusted operating margin of 17.7%, a 280 basis point increase versus the prior year period. FCD delivered strong growth in the quarter with bookings growth of 10% and sales growth of 14%. MOGAS contributed 1,100 basis points of sales growth in the quarter. FCD adjusted operating margins were 12.2%, an increase of 110 basis points versus last year.

Reaffirming full-year guidance: Organic growth 3%-5%, adjusted earnings per share $3.10-$3.30 (18%-25% increase over 2024). Second quarter results similar or slightly better than first quarter, second half expected to contribute more to earnings due to backlog and synergies. Sales headwinds from currency translation expected to abate modestly for the rest of the year.

• Tariff environment uncertainty, with potential annualized gross impact $90M-$100M if not mitigated. - Macroeconomic uncertainty. - Potential project deferrals in some industries like mining and renewables.

Q: Andy Kaplowitz asked about the sustainability of bookings and second half.

A: Scott Rowe responded that Q1 bookings were strong, aftermarket has been holding at $600M, forward funnel is high, but tariff uncertainty could slow second half.

Q: Mike Halloran asked about footprint and pricing receptiveness.

A: Scott Rowe said manufacturing footprint is a competitive advantage, in line with peers on castings/forgings, and pricing is being managed with change orders and general price increases.

Q: Deane Dray asked about MOGAS integration.

A: Scott Rowe and Amy Schwetz discussed MOGAS integration progress, expectations on synergies and earnings contribution.

Q: Nathan Jones asked about project pipeline and tariffs.

A: Scott Rowe and Amy Schwetz talked about project visibility, nuclear funnel strength, and tariff mitigation through price and supply chain actions.

Q: Unidentified Analyst asked about distributor prebuy.

A: Scott Rowe said no material prebuy activity from distributors.

Q: Joe Giordano asked about 3D bookings and guidance.

A: Scott Rowe and Amy Schwetz discussed decarbonization activity and guidance considerations.

Q: James asked about 1Q-2Q conversion and margin expansion.

A: Amy Schwetz explained strong backlog conversion due to operational excellence and margin expansion differences between segments.