Good day and welcome to the Fourth Quarter 2023 Flowserve Corporation Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jay Roueche, 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 Flowserve's fourth quarter and full Year 2023 financial results. On the call with me today are Scott Rowe, Flowserve's President and Chief Executive Officer, and Amy Schwetz, Senior Vice President and Chief Financial Officer. Following our prepared comments, we will open the call for questions. As a reminder, this event is being 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 21st, 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, Flowserve's President and Chief Executive Officer, for his prepared comments. Thanks, Jay, and good morning, everyone. Flowserve'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 $0.68, 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 was 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 remained supportive as we delivered over $1 billion in bookings for the eighth consecutive quarter. While our full year 2023 book-to-bill was just below 1.0x, our backlog remains at a very healthy $2.7 billion as we entered 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-$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 remain disciplined on our project pricing approach and margin expectations. While this strategy may result in some lost incremental awards, we are confident that we will 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 Flowserve 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 and 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 installed 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. Thank you, Scott, and good morning, everyone. Let me also start by saying how pleased I am with our fourth quarter results, which demonstrated continued operational momentum, disciplined cost management, and strong cash generation. For the fourth quarter, we achieved our best quarterly sales level since 2015, an adjusted operating margin of 10.5%, our highest quarter of the year, and $0.68 of adjusted earnings per share. Our operating cash flow was also strong at $195 million in the quarter, representing a year-over-year improvement of $125 million. These results continued our recent trend of sequential quarterly improvement across many areas, which led to our outstanding full year 2023 results. Starting with other details in the quarter, our reported earnings per share were $0.47, which included $0.21 of net adjusted expenses, primarily below the line FX impacts and realignment charges. Improved operating performance drove a 12% increase in revenues over prior year, comprised of FPD and FCD growth of 13 and 11%, respectively. We also generated strong top-line growth in both original equipment and aftermarket, with revenue increases of 15% and 9%, respectively. Many of our regions contributed to the double-digit sales growth as well, with notable year-over-year improvement in the Middle East and Africa, North America, and Europe of 27%, 14%, and 13%, respectively. Shifting to margins, we generated adjusted gross margins of 29.8% during the quarter, a 100 basis point increase compared to the prior year's fourth quarter, despite higher performance-based compensation expense and the modest mix shift to original equipment. The margin improvement was driven by increased sales leverage, benefits from our new operating model, and continued traction with operational excellence initiatives and an improving supply chain environment. At a segment level, we are particularly pleased to see FCD realize its highest quarterly adjusted gross margins since 2019 at 32.2%, representing a 310 basis point year-over-year improvement. On a reported basis, fourth quarter consolidated gross margins increased 70 basis points to 29.1%, despite the net increase in realignment and asset write-downs of $4.1 million versus prior year. Fourth quarter adjusted SG&A increased $39 million to $230 million compared to last year. The increase was primarily due to $13 million in higher year-over-year performance-based incentive compensation and an increase in bad debt of $6 million, as well as some benefits in 2022 that did not recur this year, such as a $9 million legal settlement and a small gain on an asset sale of $4 million. Despite these somewhat discrete items, adjusted SG&A as a percent of sales was 19.7%, driven by solid operating leverage during the quarter. On a reported basis, fourth quarter SG&A increased year-over-year by $41 million to $235 million. In addition to the items just mentioned, our reported amount also includes a net $2 million increase in adjusted items, primarily from realignment expenses. Adjusted operating margin in the quarter was 10.5%, just 30 basis points lower compared to prior year. While our adjusted gross margins this quarter were essentially equivalent to those of the 2023 third quarter, I am very pleased that the sequential adjusted operating margins expanded by 180 basis points for a nearly 40% sequential incremental. On a reported basis, fourth quarter operating margins decreased 70 basis points year-over-year to 9.4%. Due to higher performance-based incentive compensation, the one-time discrete SG&A items previously discussed, and a $6 million increase in adjusted items compared to the prior year, again primarily related to the realignment actions. Our fourth quarter adjusted tax rate of 7.8% was notably lower than expected, primarily due to the release valuation allowance on certain net foreign deferred tax assets. Our reported rate of 5.6% reflects the items just mentioned, as well as the tax impact associated with realignment charges, which we excluded from our adjusted results. Turning to our full year results, we delivered adjusted earnings per share of $2.10, a 91% increase year-over-year. The performance exceeded our latest revised guidance range from October of $1.95-$2.05 and was nearly 30% above the midpoint of our initial 2023 target range we provided this time a year ago. Our full year 2023 revenues were over $4.3 billion, up nearly 20% compared to the prior year, as our backlog conversion cadence significantly improved with our operational performance. On this sales level, we generated adjusted gross margins of 30.1% for the year, modestly exceeding our prior expectations. Importantly, we remain confident in our ability to expand margins further by accelerating our operational excellence initiatives and the ongoing product management of our portfolio. Adjusted SG&A as a percentage of sales was 20.9% for the year, representing our lowest level since 2015. This performance was driven by our focus on cost containment, including the benefits from our recent cost-out program and organizational redesign, as well as increasing top-line leverage. While we are pleased with the progress we have made to date, we know that the work on this front is never done, and we will remain focused on driving even better results. Our full year adjusted operating margin was 9.5%, a meaningful increase of 330 basis points over the prior year. Both FCD and FPD delivered solid 2023 performance, keeping pace with significant increases in adjusted segment operating margin of roughly 320 and 330 basis points, respectively, to 14% and 12.4%. Looking ahead, we are well-positioned towards our longer-term 2027 consolidated adjusted operating margin target of 14%-16% that we shared at our Analyst Day in September. Our adjusted tax rate of 15.1% for the full year finished below our previous expectations, primarily driven by the release of valuation allowances on specific foreign net deferred tax assets, as we believe those benefits will now be realized based on our improving financial results and help mitigate future cash taxes. Turning now to cash flow, we delivered outstanding full year operating cash flow of $326 million, which represented a nearly $366 million year-over-year improvement. In addition to our higher earnings, I am also very pleased that we improved cash from working capital by nearly $240 million, and our cash conversion cycle decreased by roughly 10 days compared to 2022. During the fourth quarter, we generated operating cash flow of $195 million, an increase of $125 million compared to the prior year. The improvement can largely be attributed to our strong working capital performance. Accounts receivable was a modest source of cash this quarter, despite our increased revenues, but represented a $77 million improvement compared to the prior year. Collections results have been robust all year, but notably are evidenced by the nearly seven-day reduction in our days sales outstanding year-over-year in the fourth quarter. Inventory also contributed to working capital progress, as we've reduced the cash used by over $50 million for both the fourth quarter and the full year compared to the respective periods of 2022. As a percent of sales, we improved our year-end primary working capital by approximately 450 basis points to 27.9% and improved sequentially by 260 basis points as well. We made great strides towards reducing our working capital and investment to our 25%-27% long-term target, and it will remain a major focus area for us going forward. Capital expenditures were $20 million during the quarter, bringing this year's free cash flow to $175 million. This year-over-year improvement exceeds $100 million and resulted in a free cash flow to adjusted net income conversion of 194%. Other significant uses of cash in the fourth quarter included $26 million for dividends and a $10 million term loan reduction. Turning to our 2024 outlook, we expect to continue building on our operating momentum to deliver full-year revenue growth of 4%-6% with adjusted earnings per share between $2.40-$2.60, both consistent with the qualitative guidance we provided at our September analyst day. At the midpoint, our 2024 adjusted earnings guidance represents a roughly 20% increase over last year. As Scott mentioned, our markets continue to remain active, and we expect to generate a full-year book-to-bill ratio over 1x, building backlog to spur multi-year revenue growth. We also expect net interest expense in the range of $60-$65 million and an adjusted tax rate of approximately 20%. Our adjusted targets exclude expected realignment expenses of approximately $30 million, as well as other potential items that may occur during the year, such as below-the-line foreign currency effects and the impact of other discrete items. Including the potential realignment spending, we expect our reported EPS to be in the range of 225-245 per share. Similar to last year, we will work to minimize top-line reduction as we move from the sequentially strong last quarter of the year to the first quarter. That said, we would anticipate our general trend of seasonality in earnings will continue in 2024, with the first quarter being our lowest earnings quarter of the year and the fourth quarter being the strongest. We intend to further drive value creation through our capital allocation approach. As we weigh opportunities to allocate capital, we are guided by our enduring framework to deploy excess cash to the highest long-term return while remaining impartial as to how value is created. Our board has authorized a 5% increase to our dividend to $0.21 per share. Additionally, the board also replenished our authorized share repurchase capacity to $300 million. As we indicated at the Analyst Day, we view share repurchases to offset equity compensation as a commitment, and with the increased capacity of the new plan, we also can act opportunistically. That said, we believe there are ample opportunities to invest in the business both through internal programs and in organic growth. We expect capital expenditures between $75-$85 million this year, and we are well-positioned to pursue M&A opportunities to further expand our portfolio of flow control offerings to better support and accelerate our 3D Strategy. We are most interested in targets that provide the opportunity to leverage our scale and that can be effectively integrated with our broader business. Financial discipline and economic returns are table stakes, so the returns on any acquisition would be in excess of our average cost of capital, as well as the margin and cash EPS accretive. Through it all, our capital allocation approach is designed to maintain our investment-grade rating, and we intend to reduce our term loan by $60 million this year. I am proud of the strong foundation we established during 2023 and feel confident that we can drive continued margin and earnings per share growth while deploying capital to deliver long-term shareholder value as we progress towards our longer-term targets. I fully expect 2024 to be a great start on that journey. Let me now return the call to Scott. Great. Thank you, Amy. Let me now offer a few comments on our 3D Strategy, which, as we discussed at our September Analyst Day, is directly aligned with the market environment that we see today and in the future. The strategy is intended to drive accelerated growth for Flowserve for years to come. While we are well-suited to serve our customer base today, we are continuing to invest in product and service offerings, including through potential inorganic opportunities that further build our portfolio to support diverse markets and the new emerging sources of energy. Let me start with diversify, where our bookings remain very healthy in 2023 as we continue to apply our portfolio into served-in markets that present an above-average growth profile. Our vacuum pump products are a great example of our efforts and represent a significant component of the diversification pillar. Our focus to grow our vacuum products in general industrial applications has delivered outsized growth over the last several years. In the fourth quarter, we were selected to supply dry vacuum pumps for a state-of-the-art green solvents production facility in Europe that will support the circular economy. The site will convert biomass waste into 1,000 metric tons of non-toxic solvents annually to be utilized in pharmaceuticals, agrochemicals, electronics, and other applications. Moving to decarbonize, we produced another quarter of strong bookings led by nuclear and LNG awards. We remain excited about the nuclear outlook as countries around the globe are focused on providing clean and reliable energy within their borders. We continue to be very optimistic on the nuclear outlook as countries begin to develop investment plans that have nuclear energy output tripling by 2050. Our strong portfolio of nuclear pumps, valves, and seals are well-positioned to meet this growing demand, including life extensions on existing assets and the building of new nuclear power facilities in Asia and Europe. New energy applications are another key driver behind our decarbonize initiative. Flowserve was recently selected to supply our specialty ball valves to support the production of liquid green hydrogen in the United States. This project is expected to produce nearly 11,000 tons of hydrogen to enable operations for one of the world's largest e-commerce companies. Lastly, on digitize, we believe our ability to digitize our solutions and leverage our large install base and aftermarket capabilities will enable Flowserve to be better equipped to provide true solutions for our customers. We believe our offering is at an inflection point of growth, and we have significant visibility to new installations. We now have over 80 customer locations using RedRaven technology with almost 2,100 assets instrumented. We remain committed to adding value to our customers with this digital offering by instrumenting pumps and valves to monitor, predict, and ultimately better optimize the full flow loop. Flowserve recently partnered with three European-based petrochemical facilities to increase reliability and efficiency with our RedRaven technology. We are pleased to continue expanding our IoT presence in petrochemicals, an industry where we are seeing an increasing level of acceptance, providing us with an opportunity to offer more of our solutions portfolio and capabilities to help solve our customers' toughest flow control challenges. In conclusion, I'm extremely pleased with our progress in 2023. The new organization design is driving enhanced execution, improved accountability, and is allowing us to operate with speed. This new design better supports our 3D Strategy and will allow Flowserve to further our advantage in securing the market opportunities in front of us. I'm confident in our ability to maintain the momentum created in 2023 and continue driving improvements in 2024 and beyond. The trajectory to our longer-term financial goals outlined at our Analyst Day begins with the delivery of our 2024 targets, including 4%-6% revenue growth, more than 100 basis points adjusted operating margin improvement, and roughly 20% adjusted EPS growth at the midpoint of our guidance. Finally, I am pleased that our efforts and strategy continue to be recognized by third-party organizations. In recent weeks, Flowserve was named by Newsweek as one of America's most responsible companies, and we are named in Forbes' list of most successful mid-cap companies in 2024. The financial and operational performance we delivered last year creates a solid foundation to build upon, and I am excited about the opportunities for Flowserve in 2024. We have substantially improved our ability to execute and serve our customers, and I'm confident that this progress will carry into 2024 as we expect to deliver another significant year of improved financial results. We are fully focused this year on profitably converting our near-record $2.7 billion backlog, continuing our pursuit of outsized growth driven by our 3D strategy, and driving higher operating margins through further operational improvements. We remain committed to driving long-term value for our associates, customers, and shareholders. Operator, this concludes our prepared remarks, and we would now like to open the call to questions. Thank you. If you would like to ask a question, you may signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star one for questions. We'll go first to Nathan Jones with Stifel. Good morning, everyone. Hello, Nathan. I'm going to start with questions on the bookings outlook. I think, Amy, in your prepared remarks, you talked about a book-to-bill above one. Scott, in yours, you talked about growth in the pipeline. I think the book-to-bill above one kind of implies mid to high single-digit bookings growth. So just any more color you can give us on how that splits out between projects and aftermarket, what kind of projects are in the pipeline, and the confidence that those will convert to orders this year. Sure. Yeah, it's a really good question, Nathan. Let me start with aftermarket, and then I'll go to kind of traditional end markets, and I'll touch on projects as well. On the aftermarket side, we saw tremendous growth in 2023. We delivered about 5% for the full Flowserve, and we expect that to continue. And so when we look at utilization rates and we look at kind of what's happening with the customer installations, we see that that aftermarket work will continue as we go forward. And then secondly, we believe there's an ability to drive our capture rate up. We don't disclose what that rate is, but what I'll say is we know we have opportunities to do better there. And in the Analyst Day, we outlined some of those opportunities both in the pump side and the valve side. And so we believe we've got kind of market share or capture rate opportunities on top of what we'll say is a very constructive environment for our aftermarket business. So we see something similar to 2023 in terms of growing that side of the business. And then, like the analyst day or within the Analyst Day, we talked about our traditional end markets, and we showed kind of some more GDP-type results at this 3%-5% growth for those end markets. And again, when we look at our model, nothing's changed there. And so we see reasonably good growth on the traditional end markets across the board. And then where we see really exciting growth is in the new energy and the decarbonization side. And so that's where we see that outsized growth above that kind of 3%-5%. We had a really good year in 2023 across all aspects of our business in terms of bookings growth, with the exception of large projects. So when we look at our project funnel, what we see is the project funnel overall is up 13%. Our oil and gas funnel is up 25%, and that decarbonization and new energy is up 25%. So that gives us a lot of confidence on our project outlook in making sure that we can acquire and win awards that make sense on our margins and value creation. So I'd say overall, we feel really good about where we are in terms of the overall market and the outlook. I think we can at this point, we believe that we can deliver certainly above 1.0 on our book-to-bill and drive to that 5% growth target that we put out in the Analyst Day. One follow-up on orders, and specifically the oil and gas pipeline being up 25%. That's obviously still your biggest end market, and so that's one that could move the needle and probably where the large projects are as well. Does this above 1.0 include the conversion of any large projects, or would those be kind of gravy on top? And what's your confidence that they actually get awarded in 2024? Yeah, the project market in oil and gas has stacked up pretty substantially. It's primarily delivered or primarily in the Middle East. I was there three weeks ago, and quite frankly, I was overwhelmed with the amount of work that's out there and the spending that's happening. Now, obviously, things could change that, but I would say with Saudi's 2030 vision, with what we see in the rest of the region across countries like the UAE, Kuwait, Qatar, Oman, the activity is substantial. And so to your question directly, there's a long list of large projects out there. If we get two or three of those, that would be gravy to compare to what we're talking about. But I would say there are a couple of those projects that are kind of more moderate-sized that are embedded in our growth projections. But again, we feel good about it. We've been very selective, specifically in 2023, in terms of what we want to win. We've been very disciplined in that approach, and I feel really good that we're going to start to win some work, but win work that makes sense from a margin perspective and value creation perspective. Great. Thanks very much for taking the questions. Thank you. We'll go next to Mike Halloran with Baird. Great. Thank you. Good morning, everyone. Good morning. Maybe, Scott, just maybe we just follow up on the comment you just made there. Certainly understand the diligence behind project selection and where you want to win and focus on the margins. But when you take a step back, how would you describe the overall competitive landscape right now? Given the amount of opportunity out there, are you seeing a little bit more diligence from some of the competitor base or just a little bit more logical pricing mechanisms, or is it still pretty project by project? Any thought on that side? S ure. If we compare it to, let's go to two years ago when folks were very, very hungry for work. The environment's substantially better than that. But what I'll say is the project environment is always attractive. Everybody wants to bid and participate in it, and so it remains somewhat challenging. And so through our selective bidding approach, what we're looking at is customers we know we can work with, customers where we know that we can deliver the margin expectations that we signed up for in the bidding phase. And then we're also looking for making sure that we can get the aftermarket associated with the work there. And so I think that's probably the biggest change for us is really getting a more holistic look at what we want to work or what we want to work on geographically, but then also with the customers and supporting that aftermarket. And then when we think about the competitive landscape, everybody is substantially fuller in terms of capacity than what we saw two years ago. We are seeing discipline improve pretty substantially, but every now and then, we'll get a surprise by somebody that doesn't kind of stay in that disciplined approach. And we'll just accept that and move on and make sure that we can win work that's more suitable to the margin expectations that we deserve. Great. It makes sense. And then good to see the cash generation this quarter. Could you maybe talk to the 2024 expectations, but layer in as well usage of that cash, the buyback authorization? I've certainly heard Amy's remarks around it. Is there any more intent there to be opportunistic, and how do you see the M&A landscape with the cash generation? Sure. So I'd start with our expectations are to continue to generate nice levels of cash as we move into as we move into 2024. At the Analyst Day, we talked about kind of a guiding principle between 80%-100% free cash flow conversion. I think we'll be at the low end or slightly below that in 2024, just given some of the realignment activities that we expect to continue to occur. In terms of capital allocation, I think that what we wanted to do with this most recent action with the board is to really just increase the opportunity set that we have out there, modest dividend increase, acknowledging that we had not had an increase in our dividend level since early in 2020. Then again, at the Analyst Day, we had recommitted to the practice of share buybacks to offset equity dilution. We've not done that the last couple of years, so we want the opportunity to be able to do that, plus probably a little bit of catch-up this year. I will say overall, I think that our bias, which needs to be tested each time we have the opportunity, is to invest those dollars either in internal growth or in organic growth to boost really our top line, find opportunities that are creative to margins and EPS, and ultimately grow earnings for our shareholders. But I think that with the actions the board took this year, we have an opportunity to have a full suite of options available to us as we make our way into 2024. Great. Thanks, Scott. Thanks, Amy. Thank you. We'll go next to Andrew Obin with Bank of America. Hey, good morning. You have Sabrina Abrams on for Andrew. Hi, Sabrina. So some of your competitors have talked about seeing 100-200 bips of better margin backlog relative to what's shipping through the P&L today. Is that a fair framework for what Flowserve is shipping in 2024 relative to its P&L? I'd say we definitely see improvement in the pricing of our backlog, and some of that is obviously dependent on mix that you currently have in our backlog. But I think that we see that margin in backlog as a real tailwind for us going into 2024. Got it. And as a follow-up, I guess I'm thinking about the different components of the margins. So you have better pricing in the backlog. There's the mixed benefit from aftermarket outgrowing OE and some incremental benefit from the restructuring program. So if you could talk about maybe the different components of the good guys and bad guys and the margin bridge for 2024, just want to understand the components of the 100 basis points of expansion that you guys are guiding to. Sure. So I'll start by saying we are confident in our ability to expand margins by the 100 basis points or more. And as we think about our guidance range, I would say our ability to move towards the high end of that range would likely mean margin expansion above that 100 basis points versus volume growth, given that we saw sales volume growth of nearly 20% in 2023. So where we're at in terms of puts and takes, neutral to slightly positive on price-cost from a material inflation standpoint. You've already touched on the margin and backlog, which we see as a positive. And we do have the structural cost savings from both the org redesign that we put in place and the activities that are taking shape with respect to ops excellence. In terms of what's working against us in 2024, I would start with labor inflation as something that will begin to take hold kind of late in the first quarter and really start to show up in the second quarter of the year. And then although we do have a nice backlog of aftermarket mix, I think the mix of project work is going to be something that we'll be monitoring and watching closely in terms of margin expectations in 2024. And I'd start with what Scott has described as a large funnel of FPD, large project work that we'll have available for us in 2024. And although those will be at margins better than what we saw kind of 2018, 2024, 36 months ago, those are still lower than our aftermarket more run-rate work. Secondarily, on the FCD slide, that backlog is actually right now skewed more towards project work or OE work than aftermarket. That backlog is about 300 basis points more OE this year at this time than it was last year. So that's the other piece of project mix that we're looking at. Thank you. Thank you. We'll go next to Joe Giordano of TD Cowen Good morning, guys. Hey, Joe. Good morning. Hey. On LNG, obviously, a lot going on with what the president's been saying about LNG export and things like that. Is that globally fungible to you guys? Do you care where terminals are built? If we do less here, is it just going to have to be somewhere else and you'll be there? Yeah. I would say our LNG work is more outside of the U.S. than in the U.S. And so we've got substantial bookings and opportunities in the Middle East. We've got some work on the books for Latin America, Africa. We've got a round two in Canada that we expect. And so I think we still feel good about the outlook of LNG. I won't get into the politics of this, but we think natural gas is an incredible transition source of energy, and we believe it's going to be a part of the mix for a long time to come. I think the U.S. exporting permit hold will potentially have an impact on our kind of 2025 business, but 2024 work in the U.S. has already been funded and already been approved, and so it won't have an impact on what we see in 2024. And we'll continue to migrate more of our products and services into cryogenic applications to support LNG because we're big believers in this over the next 10-15 years. Just on that point on cryo, obviously, the Velan acquisition didn't work out. You bought technology. You bought R&D from Chart. Where are you with cryo kind of pumping applications? Is there more you need to do, maybe an update there? And kind of related to that, on your 3D, is there fundamentally are margins basically the same there as in more established markets for you guys now, or is that a gap you still need to close? Thanks. Yeah. I'll answer that one first because it's easy. The 3D and certainly the energy transition margin expectations are basically in line with the rest of the portfolio. Then back to cryogenic applications, I'd say the valve portfolio is more rounded out than the pumps at this point. So we've got control valves. We have isolation valves that can all do cryogenic, both LNG and hydrogen. There are opportunities, though, to grow that pretty substantially. What we liked about Velan is they were better positioned with some of their technology and products than we were. So continued M&A work on expanding that cryogenic portfolio and valves will continue to happen in 2024 and beyond. Then on the pump side, we've got kind of two things. The acquisition that we did with Chart was really around hydrogen distribution, but we can take that technology and know-how and apply it into LNG and cryogenic applications. So we're in the very late stages of developing a full cryogenic pump offering. And what we really like about that is it can be used for liquefaction, transportation, and into the regas application. And so by the end certainly, by kind of mid-year, late year, we'll have a full kind of cryogenic pumping solution that can be potentially used in well, we'll be used in LNG but potentially used in hydrogen as well. Thanks, guys. Thank you. We'll go next to Deane Dray with RBC Capital Markets. Thank you. Good morning, everyone. Morning, Deane. Hey, I'd like to circle back on the comments regarding the mix of bookings this quarter. Really interesting that no big orders, which kind of gives you a strong sense of the underlying demand that you're seeing. But I'd love to hear some commentary. You called out both some project delays as well as selectivity. Can you just kind of give us directionally how much of an impact were the delays versus selectivity? And maybe just, I don't know, if there's any other factors that would have kept the larger orders to a minimum this quarter, but just size for us the impact of each. Sure. Yeah. So in Q4, we had visibility to, let's call it, two or three awards, more on the pump side than the valve side, that did get delayed. And some of that was delayed into Q1, and some of it is going to be delayed till probably the back half of the year. And as you know, you've followed our business a long time. There's lots of reasons for delays. Project timing is incredibly hard to predict. But what I would say is those opportunities did not get canceled. They didn't get turned off. They might be slightly smaller, a little bit different than what we anticipated, but we're confident that they go forward in 2024. We're also confident, given the selectivity, that those will deliver the margins that we deserve as we go forward. Then I'd just say on the selectivity side and turning things off, I think that was a trend predominantly throughout the whole year. There wasn't something major that we kind of missed out on in Q4. It's more about just putting the right resources upfront and doing the work that's required to prepare for these large tenders. So when something comes out, we're pulling the entire team. There's usually anywhere from 10-30 people that are working on these. And we've just been really selective at the front end in directing our resources to things that we think make more sense economically and can support that customer through the lifecycle of their asset. So I'd say the Q4 was probably more a little bit of slip-out than being selective. But again, we feel really good about what we're seeing in 2024 on the projects. That's a great color. And just what's the balancing act that you have to do when the higher you ratchet up selectivity, then the downside is you miss kind of building the installed base and your ability to capture aftermarket? And look, the winner's curse on these bigger deals is that there's margin pressure. So there is a balancing act, but maybe you can just share with us some of the mechanics. It is a delicate balancing act, Deane. And I'll just say between Amy and myself and Lamar Duhon who leads our pumps division, that's probably the single biggest topic that we have with him and his team. And it's not easy because we do know when you get the installed base, it's pulling our seal business through. It's pulling parts through. It's pulling service through. And so we are actively pursuing installed base. At the same time, we're now modeling that out and looking at it on a returns basis. And so we can more accurately predict, is that customer going to give us the aftermarket, or do they go out and bid some of that aftermarket? And so we can kind of model in what that probability of success looks like on the aftermarket and make much better decisions about where we'll populate the installed base and where we won't. And so I'd say we've improved dramatically in the last year about what we should pursue and where we shouldn't. But continuing to have a robust installed base and continuing to drive aftermarket support is important. And then the other thing I would say is we're also now, with our aftermarket franchise and some of our business processes there that continue to improve on speed and winning, we're starting to win aftermarket work for third-party equipment. And so that's something we steered away from probably four or five years ago. We're not openly going out and targeting our competitors' aftermarket, but with our presence there, with our ability to drive speed and serve our customers in a timely manner, we're starting to see more and more work on stuff that's not necessarily our original equipment. Yeah. And I might just put an exclamation point on that from a portfolio perspective because we've committed to long-term targets in terms of both revenue growth and margin expansion. And what we're trying to do is expand our installed base within the constraints of that margin expansion and volume growth paradigm. So I think, as Scott's pointed out, we're in a better position than we've ever been to do that. But as you can imagine, as a finance person, I absolutely love the aftermarket capture rate strategy and trying to be more aggressive about going after that higher-margin business. All right. I appreciate all that insight. And just one other question, and it's for Amy. That's really impressive free cash flow this quarter. Just where do you stand now on the whole releasing of buffer inventory? You gave lots of specifics about how much of each of the components of working capital improved. I'd be interested in hearing a bit more about what we're seeing on these releases of buffer inventory now with the supply chain as normalizing. So how much more do you have to go there? Thanks. Yeah. So I'll start. I think that 2024, from a working capital perspective, was a journey. We saw collections throughout 2024 or 2023, excuse me, be quite strong. We were pleased with the way the organization collaborated with that to make sure that we got those where we wanted them to be. Really, the third and the fourth quarter, we had an opportunity to set ourselves up for inventory reduction by the end of the year. And that was partially sales volume, partially our planning processes getting better. If I were to put this in baseball terms, I think we're still in the, call it, the fourth inning of inventory reduction. I think we can continue to get smarter with that. Our planning and our improvement of planning processes is really playing a key role in that. I think we're going to continue to make progress on that within 2024. But we've made it clear to the organization that we've also committed to growth. So we have to be very smart about how we reduce that inventory over time and where and how we do that. So I feel like we're striking the right balance, but we're going to march methodically towards that 25%-27% working capital target. Thank you. Thank you. We'll go next to Saree Boroditzky with Jefferies. Hi there. This is James for Saree. Thanks for taking questions. So I just wanted to kind of go back on the margins in the backlogs. So I think you said the margins are coming at higher levels, but I think you said the orders are still not at the 2019 margin levels. So where does that stand now, and what is the missing gap here since the demand seems strong? Thank you. Yeah. So I would probably stop short of saying that we're not at 2019 margin levels yet in backlog. I think along the way, we're making progress from an operational excellence standpoint. We're working smarter at our facilities. And frankly, we're playing in different markets than we did in 2019 as we look at the growth of those 3D and energy transition markets. So I certainly think that the margins in backlog today are a tailwind for us going into 2024. But we're going to continue to do the things that we need to do to improve that as we convert backlog into revenue. And that's really around making the most of these structural cost savings that we have in place and embedding operational excellence into each and every one of our facilities and processes, and then really ramping up our activities with respect to product management and using that as a lever. I think that becomes a lever more in the back half of 2024 than it is in the front half. But I expect that to be an area that we continue to progress and build momentum as we make our way through the year. Got it. Thanks for the color. And I kind of wanted to ask on the FCD. I think the margins here expanded nicely and kind of reached the long-term target of the segment. So can you kind of talk about the drivers here, kind of add more color here, and how should we think about the margin for FCD going into 2024? Thank you. Yeah. FCD has been a great story from a margin expansion standpoint in 2023. And how they ended the year was actually right in line with what our expectations were for them in 2023. I think as we move into 2024, we'll see that moderate a bit with volume in the first quarter of the year and continue to make their way up sequentially again. The real headwind that FCD is going to have in 2024 is around mix in that they are now more focused in their backlog towards project versus aftermarket. There's about a 300 basis point shift there in terms of the makeup of backlog. So that aftermarket strength we talk about in mix is really occurring on the FPD side. So I would imagine that initially during 2024, we'll see that margin expansion more on the FPD side than on FCD. Yeah. And I'd just add overall on margins. We had communicated early in the year that we were striving to get to 30% gross margins for the portfolio. We did that a little bit earlier than we expected. And so we feel really good about that margin trajectory as we go forward. And as Amy said, it's going to come more on the pump side in 2024 than on the FCD side. But we still see nice progression forward and very much on the trajectory alignment toward our 2027 goals. Great. Thank you. Thank you. That will conclude our Q&A portion, and it also will conclude the Flowserve Corporation fourth quarter 2023 conference call. You may now disconnect.