Flowserve Corporation 2026 Conference Summary Company Overview - **Company**: Flowserve Corporation (NYSE: FLS) - **Industry**: Flow control products and services, including pumps and valves Key Points and Arguments Financial Performance and Targets - Flowserve achieved a **500 basis points margin improvement** over the last three years, exceeding the 2027 target framework set previously [4] - New long-range targets for 2030 include: - **Organic sales growth** of mid-single digits - **Margin expansion** of approximately **100 basis points per year**, aiming for **20% operating income** by 2030 - **Adjusted EPS growth** in double digits [5] Operational Excellence - The company has focused on **operational excellence** since 2018, enhancing productivity and reducing disruptive events that affect margins [11] - Significant training and competency improvements in manufacturing operations have been implemented [12] Portfolio Excellence - The **80/20 Program** was fully integrated across all product business units by 2025, focusing on high-potential products and customers [13] - The program aims to streamline operations and improve profitability while maintaining growth potential [31] Commercial Excellence - Flowserve is retraining its sales force to enhance commercial excellence, focusing on account segmentation and effective use of CRM systems [16][19] - Changes in incentive plans are designed to align sales efforts with strategic growth areas [20] Footprint Optimization - The company is actively consolidating manufacturing facilities, with plans for at least two consolidations each year [28] - This strategy aims to drive efficiencies and leverage existing capacity without significant new investments [30] Market Dynamics and Growth Areas - The company anticipates a **second half revenue acceleration** in 2026, driven by improved market conditions and project timing [40] - The aftermarket business is expected to grow at mid- to high-single digits, supported by a large installed base of pumps and valves [41][63] Nuclear and Power Markets - Flowserve has a strong position in the nuclear market, with equipment on **75% of all reactors** globally [96] - The company expects continued growth in nuclear bookings, particularly from life extensions and power re-rates [97] - Traditional power markets are also showing growth, with opportunities in coal and natural gas sectors [81] 3D Strategy: Diversify, Decarbonize, Digitize - The company has shifted its focus from upstream oil and gas to downstream and refining, reducing energy exposure from **40% to just over 30%** [84] - Flowserve is actively pursuing decarbonization projects and has seen success in carbon capture initiatives [88] - The **RedRaven** IoT technology is now profitable and expected to drive future growth through predictive maintenance and monitoring [120] Acquisition of Trillium - The acquisition of Trillium's valve division is expected to enhance Flowserve's nuclear offerings, increasing content per reactor by **15%-20%** [103] - This acquisition is anticipated to provide growth opportunities not only in nuclear but also in traditional power markets [111] Additional Important Insights - The company has reduced its supplier count by **50%**, improving supply chain efficiency and cost management [53] - Flowserve's focus on **selective bidding** for projects has led to improved margins, particularly in engineered pumps [56] - The company is optimistic about future growth in general industries, including water and mining applications [118] This summary encapsulates the key insights and strategic directions discussed during the Flowserve Corporation 2026 conference, highlighting the company's focus on operational and commercial excellence, market opportunities, and growth strategies.

Core Viewpoint - FLSmidth & Co. A/S plans to initiate a new share buy-back programme of up to DKK 1.0 billion following the release of its Q1 2026 financial results, supported by a solid balance sheet and expected cash proceeds from the sale of its former corporate headquarters totaling DKK 730 million [1][2]. Group 1: Share Buy-Back Programme Details - The share buy-back programme aims to adjust FLSmidth's capital structure, with repurchased shares intended for cancellation at a General Meeting after the programme's completion [3]. - The programme is subject to approval at the Annual General Meeting on 24 March 2026, which includes renewing the Board of Directors' authorization to acquire own shares [4]. - The execution of the share buy-back will comply with EU regulations on market abuse and safe harbour provisions [5]. Group 2: Financial Timeline and Impact - The share buy-back programme is expected to commence after the Q1 2026 Interim Financial Report, anticipated on 13 May 2026, and is expected to be completed before the Annual General Meeting in 2027 [6]. - The new share buy-back initiative does not affect the ongoing programme, which is expected to conclude before the next Annual General Meeting on 24 March 2026 [7].

Core Viewpoint - Flowserve Corporation has announced a quarterly cash dividend increase of 5% to $0.22 per share, reflecting the company's commitment to returning value to shareholders [1] Dividend Announcement - The Board of Directors of Flowserve Corporation has authorized a quarterly cash dividend of $0.22 per share on the outstanding shares of common stock [1] - This dividend represents a 5% increase from the company's most recent per share quarterly dividend [1] - The dividend is scheduled to be payable on April 10, 2026, to shareholders of record as of the close of business on March [1]

Core Insights - Flowserve reported strong financial performance for the fourth quarter and full year 2025, achieving long-term margin targets two years ahead of schedule [4][7][20] Group 1: Financial Performance - For the full year, Flowserve delivered $4.7 billion in bookings, including $400 million in nuclear awards [1][6] - Fourth-quarter bookings reached $1.2 billion, a 3% increase from the prior year, with aftermarket bookings growing 10% to $682 million [3][8] - Adjusted gross margin for Q4 rose to 36%, up 320 basis points year-over-year, while adjusted operating margin reached 16.8%, exceeding long-term targets [7][9] Group 2: Cash Flow and Shareholder Returns - Flowserve generated $199 million in operating cash for Q4, with a full-year operating cash flow of $506 million, up 19% from 2024 [5][15] - The company returned $365 million to shareholders in 2025, including $255 million in share repurchases [5][15] Group 3: Market Opportunities and Acquisitions - CEO Scott Rowe highlighted steady project activity with significant opportunities in nuclear and traditional power, including a $28 million power award as the largest booking in the quarter [2][4] - Flowserve announced a definitive agreement to acquire the valve and actuation business from Trillium Flow Technologies, which is expected to enhance its nuclear aftermarket offerings [16][17] Group 4: Guidance and Long-term Targets - For 2026, Flowserve guided sales growth of 5% to 7% and adjusted EPS of $4.00 to $4.20, implying a 13% increase from 2025 [18][19] - Long-term targets include a mid-single-digit organic sales CAGR from 2025 to 2030 and 20% adjusted operating margins by 2030 [20]

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Core Insights - Flowserve Corporation's fourth-quarter 2025 adjusted earnings per share (EPS) of $1.11 exceeded the Zacks Consensus Estimate of 94 cents, marking a 58.6% year-over-year increase driven by higher revenues [1][10] - Total revenues for the quarter were $1.22 billion, slightly below the consensus estimate of $1.26 billion, reflecting a 3.5% year-over-year growth [2][10] - The company reported a backlog of $2.9 billion, up 2.8% year over year, indicating a positive outlook for future revenue generation [2][10] Revenue and Earnings Summary - For the full year 2025, Flowserve generated revenues of $4.73 billion, a 3.7% increase from 2024, with adjusted earnings of $3.64 per share compared to $2.63 in 2024 [3] - In the fourth quarter, aftermarket bookings rose 10.4% year over year to $682.3 million, while original equipment bookings fell 5.5% to $526.6 million [2] Segment Performance - Flowserve's Pump Division reported revenues of $833 million, up 4.8% year over year, with bookings increasing 8.2% to $883.6 million and operating income rising 29.2% to $166.8 million [4] - The Flow Control Division generated revenues of $391.5 million, a 0.9% year-over-year increase, but bookings decreased 9.1% to $330.3 million, with operating income up 43.5% to $64 million [5] Margin and Cost Analysis - The cost of sales decreased by 1.4% year over year to $797 million, while gross profit increased by 14.3% to $425.2 million, resulting in a gross margin of 34.8%, up 330 basis points [6] - Operating income fell 66.2% year over year to $42.2 million, with an operating margin of 3.5%, down 710 basis points [6] Balance Sheet and Cash Flow - At the end of the fourth quarter, Flowserve had cash and cash equivalents of $760.2 million, up from $675.4 million at the end of 2024, while long-term debt increased to $1.53 billion [7] - The company generated net cash of $505.9 million from operating activities, an increase from $425.3 million in the previous year, with capital expenditures totaling $70.9 million, down 12.5% year over year [7][8] 2026 Guidance - Flowserve anticipates a revenue growth of 5-7% for 2026, with adjusted EPS projected between $4.00 and $4.20 [10][11] - The company expects an organic revenue growth of 1-3%, with a projected adjusted tax rate of approximately 21-22% and net interest expense of $80 million [11]

Financial Data and Key Metrics Changes - Total revenues for Q4 2025 grew 4% year-over-year to $1.2 billion, with organic sales growth of approximately 1% and a 240 basis point benefit from foreign currency translation [7][8] - Adjusted gross margin reached 36%, a 320 basis point improvement year-over-year, marking the 12th consecutive quarter of margin expansion [8] - Adjusted EPS was $1.11, reflecting a 59% increase compared to the prior year [8] Business Line Data and Key Metrics Changes - Aftermarket sales increased 8% in Q4, while original equipment revenues declined by 2% due to customer delays and material receipt timing [7][8] - FPD segment saw bookings grow 8%, with aftermarket growth of 12%, and adjusted operating margin expanded to 21% [9] - FCD segment's adjusted gross margin improved by 220 basis points to 34%, with adjusted operating margin increasing to 19.7% [10] Market Data and Key Metrics Changes - The company reported $2.6 billion in bookings for 2025, representing a 9% year-over-year growth, with a book-to-bill ratio of 1.0 times [12] - The nuclear market contributed significantly, with $400 million in nuclear awards during the year [15] - General industries showed strong growth, particularly in North America and the Middle East, driven by sectors like mining and pharmaceuticals [19] Company Strategy and Development Direction - The company is focused on advancing its 3D Strategy to drive growth and enhance operational excellence through the Flowserve Business System [3][5] - Strategic acquisitions, including Trillium Valves, are aimed at strengthening the valve and actuation portfolio and expanding market reach in nuclear and traditional power sectors [18][21] - The company anticipates mid-single-digit bookings growth in 2026, supported by strong aftermarket performance and increasing activity in the nuclear sector [21][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to drive growth and margin expansion despite potential short-term revenue headwinds [39] - The outlook for 2026 includes total reported sales growth of 5%-7%, with organic sales growth of 1%-3% [24] - The company is optimistic about the long-term growth potential in the nuclear sector, projecting it to become a more integral part of the business [22][60] Other Important Information - The company returned $365 million to shareholders in 2025, including $255 million in share repurchases [11] - The balance sheet remains healthy with net leverage of one time, providing flexibility for capital allocation [11] - The company has a disciplined approach to capital allocation, focusing on growth-enhancing opportunities while maintaining an investment-grade rating [27] Q&A Session Summary Question: Organic revenue growth was light this quarter; can you provide context? - Management noted that approximately 50 basis points of revenue headwinds were due to delays in engineered projects, which are expected to resolve in the first half of 2026 [37][39] Question: What is the opportunity in Venezuela? - Management indicated that while Venezuela was previously a significant market, they are prepared to support operations if investment resumes, although it is not included in the 2026 numbers [41][42] Question: Confidence in mid-single-digit order progression? - Management expressed confidence in mid-single-digit growth, driven by strong aftermarket performance and positive trends in the power in-market [48][50] Question: What are the implications of a shift towards gas turbines instead of nuclear? - Management believes nuclear will progress and emphasized their readiness to support traditional power growth if necessary, while still capturing aftermarket opportunities [76] Question: Insights on MOGUS integration and bookings opportunities? - Management reported successful integration of MOGUS, with a healthy project funnel for 2026, indicating confidence in future growth [84][86]

Financial Data and Key Metrics Changes - Bookings for Q4 2025 were $1.2 billion, growing approximately 3% year-over-year, with aftermarket bookings increasing 10% to $682 million [3][4] - Total revenues grew 4% year-over-year to $1.2 billion, with organic sales growth of roughly 1% and a 240 basis point benefit from foreign currency translation [7] - Adjusted gross margin reached 36%, a 320 basis point improvement versus last year, marking the 12th consecutive quarter of year-over-year margin expansion [8] - Adjusted EPS was $1.11, reflecting a 59% increase compared to the prior year [8] Business Line Data and Key Metrics Changes - FPD (Flowserve Pump Division) bookings grew 8%, with aftermarket growth of 12%, while original equipment bookings were up a modest 1% [9] - FCD (Flowserve Control Division) saw adjusted gross margin expand 220 basis points to 34%, and adjusted operating margin increased 440 basis points to 19.7% [10] - FCD bookings declined due to headwinds from project delays, with aftermarket bookings remaining roughly flat year-over-year [10] Market Data and Key Metrics Changes - The energy end-market showed robust maintenance activities, while the chemical sector represented the lowest growth end-market [19] - The general industries end-market benefited from sustained industrial expansion, particularly in mining, pharmaceuticals, and water, especially in North America and the Middle East [19] - The company anticipates mid-single-digit growth in bookings for 2026, assuming a generally consistent macroeconomic environment [21] Company Strategy and Development Direction - The company is focused on advancing its 3D Strategy to drive growth and leverage the Flowserve Business System for operational excellence [3][5] - Strategic acquisitions, including the recent agreement to acquire Trillium Valves, are aimed at enhancing the valve and actuation portfolio and expanding market reach in nuclear and traditional power sectors [18][21] - The company aims to maintain a disciplined approach to capital allocation, focusing on growth-enhancing opportunities while returning cash to shareholders [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic areas of focus to drive growth and deliver increasing shareholder value for years to come [5] - The company has built a more resilient supply chain, enabling quick responses to market shifts and macroeconomic changes [15] - Management highlighted the potential for nuclear energy to become an increasingly integral component of the business, with expectations for accelerated bookings growth [21][22] Other Important Information - The company returned $84 million in cash to shareholders in Q4 2025, including $57 million in share repurchases [11] - The balance sheet remains healthy, with net leverage of 1x, providing flexibility for capital allocation towards strategic growth opportunities [11] Q&A Session Summary Question: Organic revenue growth was light this quarter; can you provide context? - Management noted that about 50 basis points of revenue headwinds were due to delays in engineered projects, which are expected to resolve in the first half of 2026 [35][37] Question: What is the opportunity in Venezuela? - Management indicated that while Venezuela was once a significant market, they are prepared to support operations if investment resumes, but it is not included in the 2026 numbers [40][41] Question: Confidence in mid-single-digit order progression? - Management expressed confidence in mid-single-digit growth, driven by strong aftermarket performance and positive trends in the power end-market [45][48] Question: What are the implications of a shift towards gas turbines instead of nuclear? - Management believes nuclear will progress and emphasized their readiness to support traditional power growth if necessary [76][77] Question: How is the integration of MOGAS progressing? - Management reported successful integration of MOGAS, with significant margin improvements and a healthy project funnel for 2026 [84][86]

Financial Data and Key Metrics Changes - Total revenues for Q4 2025 grew 4% year-over-year to $1.2 billion, with organic sales growth of roughly 1% and a 240 basis point benefit from foreign currency translation [6][12] - Adjusted gross margin reached 36%, a 320 basis point improvement versus last year, marking the 12th consecutive quarter of year-over-year margin expansion [7] - Adjusted EPS was $1.11, a 59% increase compared to the prior year [8] Business Line Data and Key Metrics Changes - Aftermarket bookings grew 10% to $682 million, while original equipment revenues declined by 2% due to customer delays and material receipt timing [3][6] - FPD segment saw adjusted gross margin increase by 370 basis points to 37.1%, with bookings growing 8% [8][9] - FCD segment's adjusted gross margin expanded by 220 basis points to 34%, although bookings declined due to project delays [9][10] Market Data and Key Metrics Changes - The company reported $4.7 billion in total bookings for 2025, representing a 9% year-over-year growth, with a backlog of $2.9 billion at year-end [12][15] - The nuclear market contributed significantly, with $400 million in nuclear awards, highlighting strong market position [15][19] - General industries showed growth, particularly in North America and the Middle East, driven by sectors like mining and pharmaceuticals [19][62] Company Strategy and Development Direction - The company is focused on advancing its 3D Strategy to drive growth and enhance operational excellence through the Flowserve Business System [3][12] - Strategic acquisitions, including Trillium Valves, are aimed at expanding the valve and actuation portfolio and enhancing market reach in nuclear and traditional power sectors [18][20] - The company anticipates that nuclear energy will become increasingly integral to its business, with potential for accelerated bookings growth [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic areas of focus to drive growth and deliver shareholder value, despite some short-term revenue headwinds [5][12] - The company expects mid-single-digit bookings growth in 2026, supported by a healthy backlog and positive trends in key markets [24][45] - Management highlighted the importance of operational excellence and the 80/20 program in driving margin improvements and simplifying operations [22][30] Other Important Information - The company returned $365 million to shareholders in 2025, including $255 million in share repurchases [11][27] - The balance sheet remains healthy with net leverage of one time, providing flexibility for capital allocation [11][27] - The company has a disciplined approach to capital allocation, focusing on growth-enhancing opportunities while maintaining an investment-grade rating [27][30] Q&A Session Summary Question: Organic revenue growth was light this quarter; can you provide context? - Management noted that about 50 basis points of revenue headwinds were due to delays in engineered projects, which are expected to resolve in the first half of 2026 [35][36] Question: What is the opportunity in Venezuela? - Management indicated that while Venezuela was previously a significant market, they are prepared to support operations if investment resumes, but it is not included in the 2026 numbers [39][40] Question: Confidence in mid-single-digit order progression? - Management expressed confidence in mid-single-digit growth, driven by strong aftermarket performance and positive trends in the power in-market [44][46] Question: What are the implications of the Trillium acquisition? - Management highlighted that Trillium's strong position in nuclear and traditional power markets aligns well with their growth strategy, and they expect to leverage operational excellence for cost synergies [50][52] Question: How does the backlog conversion impact EPS cadence? - Management stated that approximately 40% of EPS is expected in the first half of the year, with the first quarter typically being the lowest [63][64]

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