Flowserve Corporation

2025 earnings call is being recorded. At this time, I'd like to turn the conference over to Brian Izzell, Vice President, Investor Relations, Treasurer, and Corporate Finance. Please go ahead.

Thank you, and good morning, everyone. Welcome to FlowSurf's third quarter 2025 business update. I'm joined by Scott Rowe, FlowSurf's President and Chief Executive Officer, and FlowSurf's Chief Financial Officer, Amy Schwetz. Following Scott and Amy's prepared remarks, we'll open the call for questions. Turning to slide two, our discussion will contain forward-looking statements that are based upon information available as of today. Actual results may differ due to risks and uncertainties. Refer to additional information, including our note on non-GAAP measures in our press release, earnings presentation, and SEC filings, which are available on our website. With that, I'll turn it over to Scott.

Thank you, Brian, and good morning, everyone. I'll start on slide three. The momentum we built in the first half of the year continued in the third quarter as we delivered exceptional results across bookings, margin expansion, earnings, and cash flow. We remain focused on driving growth while leveraging the closer business system to accelerate margin expansion. With three-quarters of the year now behind us, we have increased confidence in our ability to meet our 2025 objectives And we are raising our adjusted EPS guidance range for the second time this year to $3.40 to $3.50. The midpoint of our revised guidance represents a 31% increase from last year and an increase of more than 60% from 2023 and highlights consistent execution of our strategy and our confidence in the growth opportunities ahead. In the quarter, we delivered bookings of $1.2 billion and revenue growth of 4%. We also continued our enduring margin expansion journey with adjusted gross margins increasing 240 basis points to 34.8%, while adjusted operating margins were 14.8%, driven by incremental margins of 115% during the quarter. Adjusted earnings per share was 90 cents, an impressive increase of 45% compared to the prior year period. We also returned $173 million of cash to shareholders in the quarter, including $145 million of share repurchases. We have a healthy balance sheet, low leverage, and we continue to see improved cash flow performance from the business. This, coupled with what we viewed as a discounted share price relative to intrinsic value, makes repurchasing shares an attractive capital allocation decision. Later in the call, Amy will provide more detail on our full-year guidance and our approach to capital allocation. She will also provide more details on the separately announced divestment of our legacy asbestos liabilities, which will further enhance our capital allocation optionality on a go-forward basis. I'm proud of all the FlowServe associates for continuing to navigate a dynamic environment while driving relentless execution of the FlowServe business system to expand margins, drive growth, simplify our product portfolio, and ultimately deliver enhanced value for our customers and shareholders. Now to slide four. Bookings for the quarter were $1.2 billion, improving sequentially by over $130 million and growing 1% versus the prior year. Our strong aftermarket franchise continued to deliver, with Q3 representing the sixth consecutive quarter of bookings greater than $600 million. In fact, two of the last three quarters have seen aftermarket bookings above $650 million. I remain excited about the opportunity to leverage our capabilities to drive further aftermarket growth. Project activity in the quarter was steady and improved sequentially, with strong growth in the power markets in solid trends across most other in markets. For the quarter, we delivered over $140 million of nuclear bookings, a record for the company. Our two largest bookings in the quarter were both nuclear awards related to two separate new reactors in Europe. Each of these bookings was approximately $30 million. Many of the project delays we saw in the second quarter did come to market in the third quarter. However, we continue to see some slowness in project timing for larger engineered projects, primarily in the energy in market. Over the last five years, we have evolved closer into a more resilient business. 10 years ago, large engineered projects often represented 20 plus percent of our bookings, which naturally led to more cyclicality based on project investment cycles. Today, engineered projects remain an important part of our business, but this mix is typically around a mid single digit percentage of our bookings. The shift in mix is driving more consistency in our bookings and revenue, allowing us to manage more effectively through cycles. We have also sharpened our focus on capturing more aftermarket opportunities while selectively pursuing the most attractive engineered projects that deliver better margins and a healthy aftermarket entitlement. For the quarter, if we were to exclude engineered pump original equipment bookings, our bookings growth was an impressive 9% across the remaining portfolio. Turning to slide five, our end markets remain stable with strength in areas including traditional power and nuclear. Power demand continues to represent an exciting and significant opportunity, while general industries is benefiting from continued industrial build out in emerging areas of opportunities like pharmaceuticals, food and beverage. Mining has been an area of excitement for us, though project deferrals have hampered bookings over the past 12 months. In the third quarter, we saw mining project activity start to pick up, with overall mining increasing over 60% versus last year. Within energy, asset utilization for large process industries remains elevated, and maintenance spending has continued as expected. Chemical remains our lowest growth in market. However, we were encouraged by improvement in North America chemical in the quarter and the potential for an improved outlook in this space. With our year-to-date book-to-bill at 1.0 times and a strong project funnel, we are optimistic about delivering on a full year book-to-bill of approximately 1.0 times. Additionally, our commitment to the closer business system should drive growth in 2026 and beyond as we leverage commercial excellence and 80-20 principles to further grow our business. Moving to slide six, let me take a moment to highlight the significant opportunities we see ahead in the power space, and specifically nuclear. Our offering of pumps, valves, seals, and actuators play an important role across the nuclear spectrum. Today, we have content in over 75% of the roughly 400 nuclear reactors operating across the globe. Our main steam isolation valves and actuators play a critical safety role in the nuclear island with other types of valves used across the balance of the nuclear facility. Our pumps are often found in the turbine island, helping to ensure the cooling process runs as intended with additional legacy pumps within the containment zone itself. Importantly, We have the critical quality assurance certificates and customer approvals necessary to leverage our technology across the global nuclear landscape. We also maintain great relationships with key industrial partners and customers around the world as flow service nuclear equipment is essential to their operations. This set of key capabilities and domain expertise that we bring to the nuclear space makes us one of a few preferred vendors for pump, valve, seal, and actuation content worldwide, positioning Fullserve for leadership and nuclear flow control for decades to come. Moving to slide seven. Today, power represents roughly 7% of our revenue, with about half of that coming from traditional power and the other half coming from nuclear. Our bookings show an evolving picture with accelerating growth across all power and nuclear growing at the fastest rate. On a year-to-date basis, our total power booked to bill is 2.0 times. The expansion of artificial intelligence, cloud computing, data centers, and broad-scale electrification are creating significant growth for power broadly and specifically within nuclear power generation. Looking forward, we see the potential for 40 new large nuclear reactors to be under construction in the next 10 years across North America, Europe, and parts of Asia. In addition, technology for SMRs, or small modular reactors, continues to progress, and we believe this technology represents an additional growth driver as expansion for the global nuclear fleet begins to accelerate. While the technology still is in the development phase, many of our SMR partners are making significant progress, and industry data suggests as many as 30 SMRs could be under construction in the next five years. The existing fleet of nuclear reactors is also aging, and we expect almost all existing large reactors will go through life extension upgrades over the next decade, providing further opportunity for CloseRF. We are working very closely with nuclear power operators to refurbish and supply equipment to enable life extensions, power uprates, refurbishments, and restarts of reactors that have previously shut down. Turning to slide eight, power and nuclear represents one of the most compelling multi-year growth opportunities for FlowServe. With our strong market position, differentiated product portfolio, and decades of domain expertise, we are exceptionally well positioned to capitalize on the accelerating investment in this space. As global electrification advances and new nuclear capacity expands to meet AI, data center, and energy security demands, we see a sustained growth cycle emerging with nuclear becoming a larger contributor to our business over the next five to 10 years. Based on our current content opportunity of approximately $100 million plus per gigawatt, We believe that nuclear flow control opportunity set could be $10 billion plus over the next decade. Importantly, nuclear carries attractive accretive margins, offering the potential to drive substantial value creation for flow serve over the long term. With the potential for double-digit growth in the nuclear and power, and our non-power business benefiting from healthy demand and re-industrialization, we believe we are well positioned to continue driving long-term growth. Before I turn it over to Amy, I will conclude by saying that FlowServe is in a strategically advantaged position. We have a robust and expanding aftermarket franchise with additional upside and capture rates, balanced by a diverse mix of industries that includes both high-growth power demand opportunities and stable recurring end markets. The Fullserve business system is driving quantifiable improvement in execution and margin expansion, and we see significant runway ahead. Our cash flow generation continues to strengthen, enabling greater capital deployment and incremental returns to shareholders. We remain focused on driving sustainable growth, expanding margins, and enhancing cash flow. all with the goal of delivering superior value for our shareholders. With that, I'll turn the call over to Amy.