SPX FLOW, Inc.

Thank you for standing by and welcome to the SPX Flow Q4 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. To ask a question during the session, you will need to press star 1 on your telephone keypad. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Scott Gaffner. Thank you. Please go ahead.

Thanks, Polly, and good morning, everyone. Thanks for joining us for our discussion of our fourth quarter 2020 financial highlights. This morning we issued a news release detailing our financial performance for the three months ending December 31, 2020. The news release along with the presentation to be used during today's webcast can be accessed on our website at spxflow.com. And a replay will also be available on our website later today. Joining me on the call are Mark Michael, President and CEO, and Jamie Easley, Vice President and Chief Financial Officer. Taking a quick look at today's agenda, Mark will highlight our accomplishments in 2020, discuss sequential order trends, and close with a view of 2021. Jamie will then walk through the details of the fourth quarter and full year results, provide some insights into the first quarter of the year, along with the discussion of both our long-term capital allocation framework and capital allocation accomplishments in 2020. And Mark's going to wrap up with an update on our strategic objectives. Following our prepared remarks, we'll open the call for questions. Before we begin, a brief reminder that elements of this presentation contain forward-looking statements. that are based on our current view of our business and markets. Those elements are subject to change, and we ask that you view them in that light. Principal risk factors that may impact our performance are identified in our most recent SEC filings. In the appendix of today's presentation, we have provided reconciliations for all non-GAAP and adjusted measures. And with that, I'll turn the call over to Mark.

Thanks for the introduction, Scott. Good morning, everyone, and thank you for joining us on the call. We navigated through many challenges in 2020 and I'm proud of the courage, compassion, and commitment demonstrated by our global team members throughout the year. Despite the many personal and operational difficulties caused by the COVID-19 pandemic, our people focused their efforts on what they control by creating an outstanding experience for our customers, improving our culture of belonging, and driving profitable growth in our key technologies and services. These outcomes are based on the foundation of 80-20, which we launched across the company at the start of the year. 80-20 is providing a framework to build future growth and profit acceleration by identifying those products and customers in our target markets that are most likely to generate the best results while simplifying how we do business. By focusing our attention and resources on high growth and margin business, We have also been able to identify areas where we can accelerate productivity actions and reduce cost. Our progress last year was significant and will continue to accelerate in 2021. We continue to invest in our people-first culture by prioritizing the safety, health, and well-being of all our team members. Last year, total recordable incident rates declined by 20%, reaching the lowest level in company history and team member engagement scores were up over 20%. Investors were made into our mission to create an outstanding experience for our customers through organizational alignment and new digital capabilities. In the face of a pandemic, we redefined our portfolio through the sale of power and energy, continued discipline on project selectivity, executed well, and sustained a focus on costs, which delivered a positive outcome. And we maintained a strong financial position and liquidity while systematically deploying capital to high-return organic investments and programmatically looking for value-creating acquisition opportunities. We entered 2021 in a position of strength, and I'm excited about the opportunities ahead of us. As we continue our journey to high performance, I would like to highlight the meaningful strides we made in 2020. The shift to a process solutions business serving essential markets is resulting in more resiliency with orders and revenue improving sequentially following the initial impacts of COVID-19. Orders ended the year better than we originally planned as demand continued to improve. Our emphasis on higher quality of revenue and focus on productivity and cost containment was evident in our gross margin expansion of nearly 20 points despite revenues being down 10%. Notably, decremental margins were just 20 percent, reflecting our agile operating structure. We executed on a more balanced capital deployment strategy, announcing two acquisitions, completing the buyout of our Korean JV, returning capital to shareholders with $20 million in share repurchases, and reducing our outstanding debt position by $300 million, resulting in $17 million of annual interest savings. During 2020, we generated strong adjusted free cash flow of $125 million, supported by approximately a $40 million reduction in working capital. We entered this year with the strongest balance sheet in company history at a net cash position with ample liquidity to support our strategic priorities. Sequentially, orders accelerated and were meaningfully better than we anticipated heading into the quarter with resiliency in both segments. Industrial orders were up 14% sequentially, which was ahead of expectations. Encouragingly, customers released funds for several large capital projects with concentration in North America. We also saw follow-through of sequential growth in our short cycle product categories, which was broad-based by technology and geography. In food and beverage, orders were up 24% sequentially, which was also well ahead of expectation across all categories. The outcome for the quarter reflects the ongoing market demand for essential products that utilize our food and beverage systems and equipment. In systems, we continue to see demand for our technology which provides solutions for producing specialty and plant-based beverages as well as fermented dairy products. And orders for component and aftermarket products were up double digits in the quarter, reaching one of the highest levels we've ever had for that part of the business. Overall, our orders results in Q4 exceeded our expectations across both segments, positioning us well as we enter 2021. As we enter the year, we're taking a balanced approach with our demand forecast. While it's encouraging that global economic outlook indicators have improved as demonstrated in our results exiting 2020, we are remaining prudent in our planning based on the potential for ongoing impacts from the pandemic. We're planning for revenues to grow low to mid single digits organically with operating margins showing sequential improvement as the year progresses. We made further progress on our objective to achieve a higher quality of revenue last year And 8020 is providing a foundation to continue this effort. With that as a backdrop, we'll continue to focus on those items that are under our control to create a high level of performance irrespective of market conditions. We've built an agile operating structure with a culture of productivity while instilling a profitability mindset throughout the organization. Our two to three percent cost out program is yielding the desired results but the opportunity remains high for the continued improvement. In 2021, we're actioning a $25 million productivity program that is focused on SG&A spending. But this is not just a cost-out program. Through our 80-20 initiative, we are simplifying how we do business and refining where we do business, which provides direction and allocation of resources to high-growth, high-margin revenue streams while creating productivity. We'll also plan to systematically invest CapEx into factory modernization and innovation above historical levels with disproportionate spending on those areas that have the potential to create the highest returns. Finally, our programmatic M&A process is yielding results, evidenced by the closing of PosiLog Pullers in 2020 and UTG Mixing Group in January. We're encouraged that an attractive pipeline of opportunities continues to build. And with that, I'll turn the call over to Jamie to cover our financials.