Flowserve Corporation

Good day and welcome to the FlowServe First Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brian Ezell, VP of Investor Relations. Please go ahead, sir.

Thank you and good morning, everyone. Welcome to FlowServe's First Quarter 2026 Business Update. I'm joined by Scott Rowe, FlowServe's President and Chief Executive Officer, and FlowServe 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 and our press release, earnings presentation, and SEC filings, which are available on our website. With that, I'll turn the call over to Scott.

Thank you, Brian, and good morning, everyone. I'd like to begin by thanking our associates around the world for their hard work, disciplined execution, and resilience in a highly dynamic environment. Our first quarter results reflect their continued focus on execution as we delivered strong adjusted operating margin expansion of 230 basis points and adjusted earnings per share growth of 18%, including the net benefit of tariffs and other unanticipated items in the quarter that Amy will discuss in more detail. While bookings and sales were impacted by events in the Middle East, We maintain our full year adjusted EPS outlook of $4 to $4.20, which at the midpoint represents 13% growth over 2025. We continue to advance our strategy and leverage the closer business system to unlock greater potential across the company. As we announced in late March, Matt Klopper, who formerly led our industrial pumps business unit, has been promoted to lead the FPD division. I'm excited to have Matt in this role where he can leverage his customer relationships, knowledge of the business system, and international experience to continue driving strong performance for the division. Let's turn to bookings on slide four. Bookings in the first quarter were $1.15 billion, down 6% from the prior year period. Our first quarter book to bill was 1.07 times. We delivered healthy aftermarket bookings of $680 million in the quarter. As anticipated, aftermarket was down modestly on a year-over-year basis against a very strong prior year comparison that included a large nuclear order. On a sequential basis, aftermarket bookings were in line and represented the eighth consecutive quarter above $600 million. Our focus on expanding the aftermarket business continues to deliver results as we drive higher capture rates across our installed base. Within our original equipment business, January and February started with softer than expected bookings, largely related to our run rate MRO business and some smaller projects pushing out to later in the year. We saw these trends improve in March back to levels we anticipated with strong commercial activity in the market. The softer start to the quarter coupled with dynamics in the Middle East resulted in lower original equipment bookings in the quarter. I'll provide more insight on the Middle East in a moment, though it's important to note that absent the estimated $50 million headwind related to customer delays in the region, bookings for the quarter were largely in line with our expectations. Our focus on diversification within the 3D strategy has positioned FlowServe to manage through a dynamic market conditions better than ever. In the quarter, we received more than $110 million of nuclear awards, including two projects larger than 20 million dollars each nuclear and traditional power continue to represent attractive strategic growth markets for us turning to slide five i'll provide an update on how we have been responding to the situation in the middle east our number one priority is employee safety in supporting our roughly 800 associates across manufacturing facilities and qrc locations in the region i'm proud of the resilience and focus our teams have displayed as they continue to deliver for our customers. We are taking the necessary actions to manage through the near-term disruption while positioning the business to respond effectively as we see incremental demand. First quarter sales and earnings were negatively impacted by disruptions in the region, largely driven by the shutdown of the logistics system and the inability to get to customer sites at the height of the conflict. Though conditions in the region remain dynamic, Our ability to operate has improved under the recent ceasefire, with temporary work pauses implemented as needed based on safety considerations. We are proactively adapting our supply chain to address transportation delays, inflationary pressures, and the potential for broader disruption. The progress we have made through the full-serve business system over the past several years has enabled us to operate with greater discipline, better visibility, and more flexibility across our global network. We are dynamically repositioning the supply chain, leveraging our broader supply base, and utilizing our regional and global footprint to respond quickly as conditions evolve. As we look forward, we have assumed that these disruptions seen in the first quarter continue for some period. Over time, we see significant opportunity to support our customers' critical infrastructure needs. We have a large installed base across the region and a legacy of strong customer relationships. We anticipate that asset restarts and rebuilding activity will begin later in the year with accelerated opportunities for additional infrastructure investment across the region. Energy security is also expected to be of increasing importance across the globe, and our teams are working diligently to assist customers as they plan for these incremental investments. Turning to slide six, I'll provide some perspective on the broader market outlook. Despite the disruption in the Middle East The underlying fundamentals across our end markets remain healthy and we continue to see meaningful growth opportunities for near and longer term. The outlook for power remains very favorable, with global electricity demand continuing to support significant investment in both traditional power and nuclear generation. In general industries, ongoing developments in sectors such as mining, pharmaceuticals, food and beverage, and water continue to represent a meaningful opportunity for growth. Within energy, utilization rates and maintenance activity across large process facilities have remained strong, with North American utilization increasing in March due to higher crack spreads. Our large installed base and ability to increase capture rates continues to support a constructive outlook for FlowServe, even as some larger project work has been slower to materialize given the geopolitical uncertainty. And while chemical remains our lowest growth in-market, we continue to expect modest improvement over the course of the year. Looking ahead, our 12-month project funnel remains robust and expanded across all in-markets both sequentially and year-over-year. We are encouraged by Booking's trends exiting the first quarter and by the awards we received in April. We have good visibility into commercial opportunities and believe mid-single digits bookings growth remains achievable for the full year. We also believe the current geopolitical environment could drive increased investment in energy security and diversification globally, providing another long-term tailwind for FlowServe. In addition, as one of the leading suppliers of flow control solutions in the Middle East, we expect to play an important role in reconstruction activities across industrial complexes as stability returns to the region. We are prepared to respond quickly and support our customers as these opportunities develop. Turning to slide seven, the FlowServe business system continues to be a key driver of our performance. The progress we have made across operational excellence in 8020 has helped us improve how we run the business, reduce complexity, and driven steady, sustainable margin expansion. Operational excellence continues to strengthen our core execution capabilities and improve performance across the organization. We have improved data and material flow, optimized inventory, and unlocked significant cash for the business. Increased supply chain reliability and enhanced delivery performance are also helping us better serve our customers. Furthermore, we continue to execute our footprint rationalization program, which further supports our efforts to reduce fixed costs, improve operational performance, and deliver further value for our customers. As we move into the third year of the 80-20 program, we continue to simplify our product offering across the business, including meaningful SKU and model reductions. We believe these actions will further sharpen our focus, improve efficiency, and strengthen our operating model. While we continue to advance our commercial excellence initiatives, we have now trained hundreds of employees and provided them with the tools and processes to build greater capability and consistency across our commercial organization, which we believe is creating the foundation for long-term sustainable growth. The business system is the key to delivering on our long-term financial targets, and I couldn't be more pleased with the progress that we are making and the impact it is having on growth and margin expansion. In summary, the fundamentals of our business and in markets remain robust, and I am pleased with our execution and the progress we made during the quarter. We are taking the necessary actions to successfully navigate the current environment, and we remain confident in the near and longer-term growth opportunities we see across the business. As we move through the year, we anticipate even stronger opportunities to deliver value for our customers and our shareholders, supported by our integral role in building and maintaining critical infrastructure around the world. With that, I'll turn the call over to Amy.