Flowserve Corporation

Jay Ruch, Vice President, Investor Relations and Treasurer. Please go ahead.

Thank you, Katie, and good morning, everybody. We appreciate you joining our call today to discuss FlowSurf's fourth quarter and full year 2023 financial results. On the call with me today are Scott Rowe, FlowSurf's President and Chief Executive Officer, and Amy Schwartz, Senior Vice President and Chief Financial Officer. Following our prepared comments, we will open the call for questions. As a reminder, this event has been webcast and an audio replay will be available. Please note that our earnings materials do, and this call will, include non-GAAP measures and contain forward-looking statements. These statements are based upon forecasts, expectations, and other information available to management as of February 21, 2024, and they involve risks and uncertainties, many of which are beyond the company's control. We encourage you to review our safe harbor disclosures, as well as the reconciliation of our non-GAAP measures to our reported results, both of which are included in our press release and earnings presentation and are accessible on our website in the Investors section. I would now like to turn the call over to Scott Rowe, Flood Service President and Chief Executive Officer, for his prepared comments.

Thanks, James. Good morning, everyone. Flood Service's fourth quarter performance marked a strong finish to a very solid year of improved execution and consistent progress. Our financial and operating performance throughout 2023 supported raising our full-year revenue and adjusted EPS guidance three different times, as we significantly exceeded our original expectations. For the full year, we achieved year-over-year revenue growth of nearly 20%, driven by enhanced backlog conversion and operational improvement, while delivering higher adjusted gross and operating margins. As a result, our adjusted earnings per share increased by over 90% and our operating cash flow improved by over $360 million compared to 2022. Bookings exceeded $4.25 billion for just the second time since 2016, which supported our strong year-end backlog of $2.7 billion. Most importantly, FlowServe entered 2024 well-positioned to drive continued momentum and success. and we are well on our way towards achieving our 2027 financial targets that were communicated last September. I want to sincerely thank all of our associates around the world for their efforts and dedication throughout the year. Their commitment to serving our customers and their passion for our business are critical to driving exceptional financial results. I am very pleased with our results in the fourth quarter, including our adjusted earnings per share of 68 cents which brought our full year adjusted EPS to $2.10. We are seeing the impact of our improved operating model, higher backlog conversion, and significantly better financial performance. These improvements drove fourth quarter sales of nearly $1.2 billion and expanded our sequential adjusted operating margins to 10.5%. We also delivered $195 million of operating cash flow during the quarter, which is driven primarily by our earnings and strong working capital performance. This was a clear highlight for us as we were beginning to deliver improvements in our inventory management as our supply chain continues to normalize and lead times shorten. Our markets remain supportive as we delivered over a billion dollars in bookings for the eighth consecutive quarter. While our full year 2023 book to bill was just below 1.0 times, our backlog remains at a very healthy $2.7 billion as we enter 2024. Let me now provide some additional color on our fourth quarter bookings. General market activity remains high, and we generated bookings of $1.04 billion in the quarter. We achieved this level due to the success of our 3D growth strategy coupled with continued high levels of aftermarket and MRO activity that we captured around the world despite the lack of a major project award. We did obtain a significant number of smaller awards in the $5 to $10 million range, which together totaled roughly $100 million across all industries and regions. Our largest project award was only $9 million in the fourth quarter. We remained disciplined on our project pricing approach and margin expectations. While this strategy may result in some lost incremental awards, we are confident that we'll ultimately create more value with this selective bidding approach. Our 3D bookings represented roughly 30% of our total awards during the quarter, where we saw particular strength with LNG, nuclear, and water awards. While some of the larger projects we previously expected to be awarded during the fourth quarter were delayed, they remained viable and healthy opportunities for CloseServe in 2024. For full year 2023, our bookings were nearly $4.3 billion. Turning to our aftermarket business, most of our customers' facilities continue to operate with high utilization rates. While their focus remains on reliability, efficiency, and emissions reductions, We are positioned well to capture the aftermarket and MRO business associated with this type of work. For the ninth consecutive quarter, we generated over $500 million in aftermarket bookings. For the full year, our aftermarket bookings were nearly $2.3 billion, which were up 5% year over year. More importantly, we see the elevated demand for our higher margin, quicker-turn aftermarket offerings continuing into 2024. Our overall market outlook for 2024 is very encouraging, given the project opportunities and aftermarket trends we are seeing today. We believe the themes of energy security and decarbonization will continue to drive global spending for years to come. At year end, our total project funnel has increased 13% versus prior year, enabling us to remain disciplined and selective in the new project work we pursue. Our oil and gas funnel is up 25% year over year, driven primarily by mid and downstream activity in the Middle East, where we are well positioned to capitalize on the significant investment in the region. Furthermore, our energy transition project funnel also increased nearly 25% year over year, driven by decarbonization activities in the pursuit of clean energy. We believe we can secure enhanced project bookings in 2024 given the visibility that we have in our forward funnel. Beyond projects, we anticipate our aftermarket and MRO business to remain at elevated levels and support our growth into 2024 and beyond. We continue to see healthy activity levels despite some of the softening consumer trends and economic uncertainty that are highly publicized. Additionally, we are seeing signs of stability in areas that were depressed in 2023, like European chemicals. Our global install base is incredibly large, and we have further opportunity to improve our aftermarket capture rates as we go forward. Overall, we believe that our global network of quick response centers, combined with our commitment to serve our customers with speed and high levels of service, will allow us to grow our aftermarket franchise further in 2024. I will now turn the call over to Amy to address our fourth quarter and full year financial results in greater detail.