Flowserve Corporation Q4 FY2025 earnings call

• Thanked associates for their hard work and progress in 2025, achieving long-term margin targets 2 years ahead of plan. - Bookings for the quarter were $1.2 billion, with aftermarket bookings growing 10% to $682 million. - Total revenues grew 4% year-over-year to $1.2 billion, with adjusted gross margin at 36% and adjusted operating margin at 16.8%. - Advancement of the Flowserve Business System driving operational excellence, with 80-20 complexity reduction and cost performance improvements. - Announced acquisition of Trillium Flow Technologies' valve and actuation business, strengthening valve and actuation portfolio and expanding global reach in nuclear and other end markets. - Highlighted opportunities in nuclear, traditional power, general industries, and the benefits of the Flowserve Business System in integrating acquisitions like Mogas.

FPD delivered strong margin expansion with adjusted gross margin increasing 370 basis points to 37.1% and adjusted operating margin expanding 350 basis points to 21%. FPD bookings grew 8%, led by aftermarket growth of 12%, and sales grew 5% to $833 million. FCD saw margin performance improve with adjusted gross margin expanding 220 basis points to 34% and adjusted operating margin increasing 440 basis points to 19.7%. However, FCD bookings declined due to headwinds from the 80/20 program and lower original equipment awards from project delays, with aftermarket bookings roughly flat year-over-year.

• 2026 total reported sales growth expected to be 5% to 7%, with organic sales growth 1% to 3%, and adjusted operating margin expected to expand approximately 100 basis points. - Adjusted earnings per share expected to be $4 to $4.20. - Anticipated first half revenues impacted by 80/20 and backlog composition, with original equipment bookings expected to accelerate in the second half. - Capital expenditure investments in 2026 expected to be $90 million to $100 million, with focus on growth-enhancing opportunities. - Targeting mid-single-digit organic sales CAGR from 2025 to 2030 and 20% adjusted operating margin by 2030.

• Macro environment uncertainties that could impact business performance. - Supply chain delays and timing issues affecting original equipment revenues. - Dependence on specific end markets such as nuclear and power, where changes in market dynamics could impact results.

Q: Can we talk about the organic revenue growth being light this quarter and the guide for '26 on the organic side?

A: Amy Schwetz said fourth quarter revenue had headwinds from engineered projects on POC revenue pushed into first half, with backlog conversion in 2026 at ~76% due to mix of longer tenure nuclear projects and reduced OE energy projects, expecting margin expansion to continue even with muted revenue growth.

Q: Can you talk about the opportunity in Venezuela?

A: Robert Rowe said Flowserve had a meaningful presence in Venezuela before, has large installed base, 1 QRC operational, and would be prepared to support if operations resume, but not in 2026 numbers.

Q: Confidence in mid-single-digit order progression this year?

A: Robert Rowe cited strong aftermarket growth, power end market opportunities (nuclear, traditional power), general industries strength, and increase in project funnel as reasons for confidence in mid-single-digit organic order progression.

Q: With Trillium, momentum on order side and commercial/cost synergy opportunity?

A: Robert Rowe said Trillium has best-in-class valve assets, strong momentum in nuclear and traditional power bookings, and cost synergies expected through Flowserve Business System implementation, with confidence in leveraging nuclear relationships and growing the business.

Q: 2030 outlook and margin guide dependent on volume?

A: Robert Rowe said confident in driving margins through operational excellence 80/20 and other initiatives, with actions already in motion to deliver improved margins regardless of volume; Amy Schwetz added roof line actions accelerating and 80/20 program well established.

Q: Implications if power build-out is more gas turbines than nuclear?

A: Robert Rowe said Flowserve is well positioned for traditional power growth with products supporting various power generation forms, Trillium acquisition supports traditional power business, and well positioned for aftermarket work in both traditional and nuclear.

Q: Learnings from Mogas integration and bookings opportunities?

A: Robert Rowe said Mogas integration went well with Flowserve Business System implementation, project funnel for 2026 healthy; Amy Schwetz added technical training of sales force on Mogas valves for severe service applications.

Q: Tariffs and metal prices in 2026 guide?

A: Robert Rowe said tariffs fully mitigated in 2025, 2026 guide net of tariffs, supply chain team nimble in handling dynamic environment.

Q: Procurement issue in quarter and remedy actions?

A: Amy Schwetz said it was delays in timing of receipts, not procurement issue, with supply chain deploying expeditors to vendors to get back on track.

Q: Nuclear content opportunity expansion with Trillium?

A: Robert Rowe said historical content for new nuclear reactor ~$100M, with Trillium acquisition expanding it by 15%-20% to $115M-$120M, picking up new valve products and increasing content for new nuclear reactors.

Q: 80/20 successes and areas to improve?

A: Robert Rowe said 80/20 achieved success in complexity reduction, margin improvement, and growth in best products/customers, with examples like industrial pumps showing 150 basis points margin improvement, 45% SKU reduction, and 21% increase in target selling, expecting continued progress in 2026.

Q: Balance sheet focus on M&A and capital allocation?

A: Amy Schwetz said balance sheet healthy, M&A seen as important for growth, with acquisitions like Greenray and Trillium fitting strategy, financially making sense, and focus on accretion to margins and cash flow while protecting balance sheet.