Afternoon, everyone. Welcome to the 19th annual Oppenheimer Industrial Growth Conference. Next up, we have Flowserve. Very happy to have CEO Scott Rowe with us today. Thank you for your time, Scott. Yeah, great, Brian. Thanks for having me. We appreciate the opportunity to be a participant at today's Oppenheimer Conference. Absolutely. Very happy to have you. I think you wanted to kick things off with a quick recap about the first quarter. Feel free. Sure. Yeah, we were, as you know, we released our results last week, and so it'd be I just wanted to just give a short overview of what we did. So we had a really strong Q1, probably a little better than what our internal expectations were. We delivered $0.58 EPS on the back of really strong gross margins and operating income margin. And so we were very pleased with the results. It allowed us to raise our full-year guidance. And so the full-year guidance now is at $2.50-$2.70 EPS, and that's roughly 24% year-over-year growth on the EPS line year-over-year to the midpoint of the new guidance. Then on the booking side, we booked $1.04 billion in the quarter, but we had some very large awards that happened in the first week of April that we weren't able to get in the first quarter, about $150 million worth of awards. So if you factor that in with the Q1 bookings, we're looking really good for the year. We feel confident in our ability to be greater than 1.0 on our book-to-bill ratio for the year. And we're lined up nicely to deliver a very strong year-over-year growth for Flowserve. Excellent. Yeah, obviously a strong start to the year. I think your team will be forgiven for the timing of the bookings that came through. Well, our customers are pretty savvy. They wanted us to do this at the beginning of the quarter, but we would have to compromise something to get it done, and we weren't going to do that. So we held our ground. We got the margin level that we deserved, and some of the terms and conditions that we needed to, by waiting the extra week. So well worth it. Very good. Alright. So Scott, you've led Flowserve for about 7 years now. And I guess for those newer to the story, maybe it'd be helpful to recap some of the challenges that the team was facing in the early going. I recall being an analyst in New York in 2018. You were quite open in saying there were some fill-in-the-blank moments that occurred in the early days. Not asking you to dive too deep into those, but just the overall challenges faced by the team. And how you prioritize the efforts of the Flowserve team in the early days in establishing Flowserve 2.0. Sure. Yeah, no, it's a great question, and it's good grounding for some of our new people that might be interested in the stock. So seven years in, I'd say when I started, let me start with the good, and then I'll talk about some of the opportunities. What we found, or what I found, was incredibly good people, a passion for flow control, a passion for serving our customers. And we had this amazing presence. So we have these QRCs all over the world, the quick response centers. We've got manufacturing all over the world, and so we were very close to proximity to where our products ultimately win, and that was a big plus. And then the other thing was just really good brands and a great kind of reputation in the industry for providing quality flow control products. All of that was very positive, and it gives us a lot to work with. On the opportunity side, there was a very long list. I'll hit a couple of the highlights. The company was run incredibly decentralized. In about 26 years ago, two larger companies came together to form the publicly traded Flowserve as we know it today. But both those companies were a collection of integrations or acquisitions. And I would just say that the level of integration depended on the leadership at the time, and it wasn't what I was used to. And so the company was run very decentrally. Every manufacturing center had a general manager. They had their own P&L. Typically, they had their own ERP system, and they had their own process in ways of doing things. That's not necessarily bad, and a lot of companies can operate very much as a holding company. But when you have 50 of these all over the world, and then they start competing with each other for the same pumps or the same valves, it just isn't a great way to run the organization. We had lots of decentralization. We had fragmented ERP in different IT systems. Then we had a lack of standard process. Flowserve 2.0, which we launched in that session at the end of 2018, was really around about how do we change the way we operate the company and really start to put process discipline in place and run it more as an operating company than a holding company. With that came a lot of good things. We made significant progress on ERP consolidation. Today, over 80% of our revenue is on three ERP systems. We've got incredible visibility at all of our manufacturing now across all the important data points to run the business. We didn't have that visibility at the beginning. Our plant leaders are now plant managers. They're very focused on safety, quality, delivery, and cost. And then what we've been working on as well as some commercial excellence things where we're just segmenting our market, making sure we have the right products and getting the organization in place. And so the 2.0 early days were really just about rewiring how we ran the company and getting it more centrally run from a very highly fragmented and decentralized operation. I understood that. I hope I'm not making this up. I recall the stat that there were 200-something ERP systems across the organization. Yeah, it was a lot. A lot of those were supporting small amounts of revenue, but it was a long tail. So that's gotten cleaned up substantially. I don't want to give the exact number where we're at now, but it's somewhere in the 30. But again, 80%+ of the revenue on 3 systems all aggregated into an SAP financial consolidation system. And so we're in such a better place from our IT infrastructure and just the ability to get data. The ability to have, we have strong visibility across all the manufacturing locations, and it's a much better place to be in. Understood. Yeah. Kind of night and day in terms of the insight that you'll have now. So the streamlining and standardization work of Flowserve 2.0. How did those initiatives then help? If we fast forward a bit, the unfortunate conditions of the pandemic, everything with that. How did Flowserve 2.0 better position the company to navigate the pandemic in terms of initial demand shock that was quite severe than the super supply constrained recovery period and everything they're in, and then ultimately kind of inform the newest iteration of your strategy and evolution in 3D coming into play in more recent depth? Yeah. So again, rolled out that Flowserve 2.0, it kind of really about, I mean, we started internally in 2017, at the end of 2017, beginning of 2018. And then we had two really good years, 2018 and 2019, we made a lot of progress. You can see it in the financial results, the margin expansion, working capital reduction, revenue conversion, all of those things going in the right direction. We went really, really hard on culture. We went hard on people and safety, and then back to that kind of process discipline. I would say, I don't know what would have happened had we not done that. We still experienced a bunch of pain in COVID. Our bookings came down pretty substantially, certainly on the oil and gas side. In our long cycle nature of our business, that revenue showed up, or that revenue decline showed up really in 2021. Then we went through that whole supply chain gyration. So had we not done the things that we did, I don't know. It would have been worse than what we went through, but it was still painful, even where we're at. But I think what we learned in this whole process is that we needed to double down even more on the process discipline, and then making sure that we were a more nimble company in terms of decision making and ability to move with speed. So at the beginning of last year, as a result of some of the things we went through in 2022, we launched a whole new org design, and the concept of the org design was really around speed and accountability. There are some costs that came out, but the whole focus was making sure that given the work and that given what the changes that we made in Flowserve 2.0, we can now organize to capitalize on that and move with speed and accountability. And so it's been a painful journey in my 7 years, but I feel like now in the last 18 months, we've really made tremendous progress. The process disciplines in place. We've got a new org design that goes to market with 7 business units. We've pushed the, we went hard on centralization of corporate resources. We've now pushed that down into the divisions while maintaining the process discipline. And we're in a really good position to work through a growth cycle, a potential pullback at some point, or whatever the market throws our way. We're in a much better position today than ever before as an organization. Understood. Yeah, the proof has certainly been there in recent quarters for the 3D strategy. Maybe introduce that high level and then to make it tangible. What are some key examples of each of the respective Ds? And how has Flowserve's participation in its markets applications evolved over recent past, and where do you see the most attractive opportunities looking forward? Yeah, so just as a reminder for folks, we have a 3D strategy. It's diversify, decarbonize, and digitize. We launched that internally at the end of 2020 into 2021. We started talking about it publicly in 2021. But essentially the whole premise there is to make sure that we're doing the right things in the attractive markets and supporting our customers in the best way. And so diversify is continuing to move the portfolio into kind of non-oil and gas, less cyclical, more attractive growth markets. So think water, chemicals, and things like that where we've got big flow control presence, but maybe not, or big flow control presence, but we don't have as big a market share as we would like. And then on the decarbonization side, it's about helping our customers work through the energy transition. And so whether that's new energy with hydrogen and concentrated solar power and other stuff, or it's helping a bigger international oil and gas player to decarbonize an existing asset like a refinery where they're going to put carbon capture on the backside or they need to drive their energy down as a feedstock. And so we're helping them have more efficient flow loop and pump operations. And then on the digitized side, it's just this following the trend of everything gets instrumented. Data becomes incredibly important to drive optimized flow loops and optimized operations. And so we're now well down the path of instrumenting both pumps and valves to make sure that we can help our customers drive better productivity. And then, Brian, your question was maybe a couple of examples. I'll just hit the ones that we spotlighted last week in the earnings call. On the diversify side, we spotlighted a project in control valves and isolation valves on that. It's a partner that we've been working with for, gosh, decades and decades. We've got great experience with them. We've got preferred valve technology. We do pumps and seals with them as well. But our valve relationship is really good. And so that project in culmination is probably $50 million + of valves. And we're working very closely with them on the front end design of that project. Through the procurement phase, and now we're going to help them with operability and uptime and then their maintenance program as well. So that's a pretty exciting one for us, flagship greenfield facility in China and a customer we've worked with for a long, long time. On the decarbonization side, we spotlighted a carbon capture and sequestration project. This is a big project in Europe. We were able to put pumps, valves, and seals into the project. And essentially what they're doing is in one of the major ports in Europe. They're capturing carbon from the different emitters and the big industry that's participating there. And so these are big name operators that are running refinery and chemical plants. They're capturing the carbon and the CO2 coming from those facilities. Running a pipeline in the North Sea to basically a depleted natural gas reservoir off the coast and then injecting that CO2 into that reservoir. And so we have pumps and valves across the whole process. And we're very excited to partner with this very complicated, complex project, but something that's doing a lot of good for Europe right now. And the exciting thing on CO2 is we're seeing more and more. Well, one, we're seeing more and more regulation. I don't know if that's exciting, but the needing and the desire to incentivize around carbon capture. But we're seeing more and more companies starting to work together because it truly is a consortium of partners. You need somebody that's going to aggregate the whole thing, but then you've got to have 1 or 2 emitters that are saying, okay, look, why don't we leverage our CO2? Then you need some form of pipeline that's crossing, could potentially be a state or a country, or going from on land to offshore. And then you've got to have a reservoir for storage. And so then that's when you get into some of the big oil and gas players that have these reservoirs and knows the geology enough to understand how you can put CO2 back into that reservoir. And so these are complex projects. But we're seeing a lot of these start to move forward now. So we're seeing it in North America and Europe. We've participated in 3 of the biggest ones to date, and I'm confident that we can continue to participate in these as we go forward. And then finally on digitize, we spotlighted a pretty cool project. It's an offshore wind farm, and we are instrumenting our electric actuators that go on the steam or on the power generation side of the wind turbines. And so that's a pretty cool one. It's an offshore project. We're pulling all of that data from the electric actuators back into the cloud. We'll run our analytics and AI on that and then help them with basically monitoring, but more importantly, making sure that we can support unplanned maintenance and downtime so they can run their operations fluidly. All great, color. I appreciate that. Especially on the decarbonized side. I mean, those examples are powerful. There's a ton of flow control. Anytime your team discusses. Yeah, absolutely. You get it on the capture side at the installation. You get it on the pipeline side, and then there's flow control as you're injecting back into the well as well. Understood. Just to quickly level set on 3D progression and traction. If we think of 2021, 2022, 2023, what was the percentage of bookings from 3D and aggregate? I think you would call that 30% or so in Q1. Yeah, it's been roughly 30% for 3 years. I don't have the exact number in 2021. I think it was a little less than 30%. But 2022 and 2023 were right at that 30%-32%, and then we're 30% again in Q1. It's a good news, bad news story. I think the good news is we're growing the 3D bookings, which is fantastic. And they're growing at about the same place as our traditional markets, which right now the outsize growth is coming from our oil and gas. And so this has always been kind of an additive concept that the 3D bookings are additive to what we're seeing with the traditional markets. And right now the traditional markets are really good. I do think over time you'll start to see that 3D start to move up into that 35%, potentially 40%, as we project forward into 2025 and 2026. Okay, understood. That's a good segue into more traditional market exposures. Maybe speak to what your team's seeing in oil and gas, chemical, general industry kind of applications. Obviously, bookings have been quite robust for a while. Excuse me, there seems to be pretty good momentum, sustaining. Yeah, our bookings have been incredibly solid. A lot of that has been on the MRO and aftermarket side. And so we're seeing the existing operations, whether it's a refinery, a power facility, a chemical plant. Those existing assets are getting run really, really hard, which is driving a lot of incremental pumps, seals, pump parts, seals, and then valve replacement or repair. And so our aftermarket franchise has been doing incredibly well. We've seen a nice consistent trend over the last three years. And then you start to think projects in the traditional markets on top of that, and we've seen some really strong activity in oil and gas, particularly in the Middle East. But we're also seeing project activity across some of the other industries as well. Chemicals was pretty strong last year as we saw some nice build out there. Again, the project that I mentioned in the first quarter with the diversify example. But I'd say overall that the end markets look pretty strong. Our project funnels up 10% year-over-year right now. A lot of that project work is driven by the traditional markets. And so the one soft spot has been Europe as a region, and we've seen a little bit of green shoot activity here in Q1, and we're hopeful that that will just continue to incrementally move up as we go forward. But overall, traditional markets look really good. And then maybe if I could kind of skip forward to power, I didn't talk about that. But the power markets were very excited about. And so Flowserve has historically about a $450 million business a year within the power segment. And what we're seeing today is a renewed need for power in all parts of the world. And so if you take the U.S. and Europe as an example, power and electricity demand has been essentially flat for the last 2 decades. And a lot of that is driven by just being more efficient with the things that consume a lot of electricity, like a manufacturing location or a big office building or something like that. But now with the continued growth of electric vehicles, the continued trend of electrifying almost everything. And now this kind of new mega trend with data centers, which are consuming just enormous amounts of energy. We actually are predicting a pretty substantial growth in our power business as we go forward. At the Investor Day last year, we kind of showed a number of this, like I think we showed a 3.2% CAGR on the forward look. What we're seeing now is that's understated pretty significantly. Our forward project funnel is up about 25% year-on-year for power projects alone. And as a reminder, we've got equipment in almost all forms of power generation. And so nuclear, we're a big player. We play in the United States, in Europe, Asia Pacific as well. That has incredibly high margins and great aftermarket. So all new nuclear or life extensions and nuclear facilities is great work for Flowserve. We also do a lot on just traditional hydrocarbon-based power. And so we've got pumps, valves, and seals in almost all power generation facilities. And then some of the new power we do extremely well also. So think like concentrated solar power. Some of the hydrogen stuff that's coming down the chute. We've got full control equipment there. And so our outlook is really good for power, and we'll continue to talk more and more about the power segment as we learn more as the year plays out. We'll have a better expectation in terms of growth rate going forward. Understood. Yeah, the kind of flatline demand for such a prolonged period and having project funnel spike as much as you have. Pretty good indication of what's to come. Yeah, no, we're excited about what's coming in the power market for sure. Absolutely. As you've made some pretty good progress on cost reductions and streamlining cost structure over the years, including $50 million+ in recent tests. At this point, given the growth prospects that you have and kind of broadening growth prospects, how do you balance the investment required to pursue these opportunities with further cost streamlining, focus on margins, ultimately getting to the mid-teens kind of level that your team is targeting? Yeah. The $50 million target that came out last year was aligned to this reorganization that I talked about previously. And so again, that reorganization, the focus really was around speed of decision making, driving accountability. And we put a cost target out there because we knew as part of that reorganization, part of some of the corporate stuff getting pushed down to the divisions, that there was definitely going to be cost savings. And so I would say we're happy that the costs followed as expected, but that really wasn't the driver. And back to some of the growth and the outlook, we still feel that we're in a really good position to grow. And so I would say our focus today is more about supporting growth than really focusing on different areas of cost. With that said, though, we know that we're not as efficient as we need to be. We know that there's opportunities more on the roofline in our operations. And we know we can always do a little bit more with our back office support. And so at this point, we've got kind of three very specific initiatives where we know that there's ways that we could be more streamlined and drive some efficiencies there. And so we're working that throughout this year. You'll see some additional cost out actions from us. And then the other thing I'd just say is we continue to drive operational excellence. By definition, the more productive we get, the more capacity we start to unlock and free up. And so we've done a really nice job with the operational excellence program this year. We're starting to get really good visibility on areas where we have excess capacity, which will drive us to roofline consolidation. And so we've got 1 program that's been announced and moving forward right now in Europe that's making good progress. And ultimately we'll have some pretty substantial savings. And then before the end of the year, we'll probably announce 1 more program that's reasonably sized that will drive efficiencies and savings as well. And I just say, yeah, I've said this before, every year we're always looking at ways to optimize our roofline. Every year we do kind of 1 or 2 different programs. They vary in size. Sometimes it's smaller QRCs or small manufacturing locations. This year they'll be a little bit bigger in size as we go forward. And then every year we'll continue to relook the portfolio. We'll look at where we've got productivity, where we need the capacity additions. We'll continue to do that. So I'd say you will see cost savings opportunities. Probably some margin expansion coming out of that operational excellence program of roofline consolidation. Okay, understood. And thinking about your current margin trajectory, you seem to be on a solid path to be above 11% this year per your guidance. The path to mid-teens, you call that operational excellence, product and portfolio management. Is a focus as well. How do we think about those levers? The tie-in of just higher margin backlog that you're now enjoying more and more. General operating leverage. What is that path to get to the mid-teens by 2027? Sure. Yeah, so that's what we laid out last year at the Investor Day. And then we attributed kind of 100 basis points-200 basis points to operational excellence. And then another 100 basis points-200 basis points on product management and portfolio optimization. And then the rest, as you said, would be kind of just leverage and good blocking and tackling on cost, price, and things like that. I think the Q1 results are demonstrating that we're making incredible progress. I'm very much optimistic that we can get to those targets before 2027. We're going to keep working to that and hopefully declare success and set some new targets. But before we get too far ahead of ourselves, right now the results have been primarily driven by our operational excellence program. We're seeing productivity uplift within the facilities. We're seeing frictional costs come out. And then we're just seeing better revenue conversion, meaning less time in our factories is less cost overall. And so there's still some gas in that tank, so we're not done. We know what we need to do. And then back to some of the roofline consolidation will also help us on the margin expansion through the operational excellence program. And then on product management and portfolio optimization, this is one that I would say has been a little elusive for me in terms of getting the full leverage and benefit out of that program in my seven years. So we were doing some of that work in the Flowserve 2.0 in the early days. I would say we pulled back from it a little bit during the COVID and some of the turmoil with supply chain. But at the beginning of last year, we doubled down on the importance of product management. So we created a full structure at the business unit level. We've got product families fully defined, and we've got product management presence now over all of the major product lines. Then we've got a playbook and a process now for the first time ever saying, here's clear roles and responsibilities for product managers. Here's what the expectation is, and here's what we need to be doing to drive growth and margin expansion. Then on portfolio optimization, we feel like there's still a big prize as we look through all of the different pump configurations, the seals, the valves. We've been in business for over 200 years, and the proliferation of designs and products is pretty substantial within Flowserve. And so we're really looking at how do we rationalize, how do we upsell, how do we make sure that we're putting the right products in front of our customers? We've now defined that process, and we're starting to move forward literally at we launched this program about a month ago. And so I feel like there's going to be some real nice margin expansion work that's going to happen in the next six months. That we should start to see show up in the back half of this year, but certainly into 2025 and 2026. So again, operational excellence, we're making really good progress, a little more gas in the tank there. We'll keep moving forward. But the product management portfolio optimization, we begin to see those results at the end of this year. Into next year, and then as that revenue continues to move up, we'll get some economies of scale. We'll start to leverage the overhead cost. So we've got a really good path to continuing margin expansion. With our business, there's always a little bit of mixed issues that we've got to worry about between our quarters. We see Q2 is kind of a relatively stable margin progression there. But we've got good visibility to margins moving up in the back half of the year. Yeah, I appreciate all the code. It's very encouraging. As a final topic, how are you feeling about your team's readiness to deploy more capital? Obviously, you've had a deal that unfortunately didn't go through given regulatory issues that arose in the. Yeah, I'll just say it was unfortunate. I agree. Unfortunately. How are you feeling about the current deal funnel? What assets are of greatest interest to your team? How are you prioritizing M&A versus share purchases in today's market? That program was just turned back up. Yeah. Yeah, I'd say Amy does a really good job articulating this, certainly in the Investor Day and on our earnings call. So I'll try to do it justice as well here. So essentially, as we look at all of the options for capital allocation, we're really looking at what is the highest return for Flowserve and for our shareholders. And we've been pretty disciplined about that, and we'll continue to be disciplined as we go forward. At the beginning of this year on the fourth quarter earnings call, we did talk about going back to the market or back into the market and repurchasing shares. We've done some of that really to offset equity dilution with our incentive compensation program. And so I think you'll see us use that as a lever that we continue to pull as we go forward. Then we'll look at bigger and outsized share repurchase when we feel like the price is at the right level and the returns there might be better than some of our other options. We also modestly raised our dividend at the beginning of the year, and so we believe the dividend is always going to be a part of the equation for us. We'll keep every year we'll look at that as a nice, steady potential way to keep moving up. And again, if we've got a better way to redeploy capital, then we'll hold the dividend flat and we'll put it more into M&A or more into the share repurchase. And then on the mergers and acquisitions, we feel like that we're in a really good place, and it's probably for the first time since I've been a Flowserve, I feel really confident in our ability to be someone that can acquire companies and integrate them well. And so as we look at that landscape of things that are out there, it has to fit the 3D strategies. It has to have good financial returns. And it's got to be something that we know we can integrate and be successful with. With that said, our funnel of opportunities is relatively full right now. We're looking at more things than ever before. As you mentioned, we were close on the Velan transaction last year. Sadly, it got held up with regulatory approval in France. But we felt really good about that. We knew we could generate returns. We had good synergy numbers, and we felt confident in our ability to integrate. And so I feel like we're in a great place to be an acquirer and to be somebody that can consolidate a very fragmented flow control space. And again, we're not going to do anything crazy. We're going to follow the 3D strategy. We'll make sure that the returns are commensurate with what the risk is we're getting into. And then again, I feel really good about our team and our ability to integrate. And so I just say stay tuned. Ideally, we'd be doing kind of one of these deals every year in a more programmatic fashion. The balance sheet's in a relatively good place. The margin performance looks good, and we're starting to generate some nice cash flow, which we did in the first quarter as well. All encouraging. Excellent color throughout, Scott. I really do appreciate you spending the time with us today. We've covered a lot. Anything? We have a couple of minutes left. Anything you'd like to leave the audience with? No, I just say, yeah, we did cover a lot of ground. I just say it's an exciting time for Flowserve. We've got a great team. We've done a lot of hard work. We had some painful years there in late 2021 into 2022. But we're now into kind of 18 months of very strong continued momentum in our operations. Strong performance across the board, and the Q1 results speak for themselves. And so we feel good about our ability to keep that momentum going. The markets look good. There's some mega trends out there that will continue to drive growth for us with the decarbonization side, some of that electrification that we talked about and the power demand. And then there's just this regionalization and kind of nearshoring on the general industry side is also a nice boost for us. So we feel good about the markets. We feel good about our ability to execute, and I think you can see just continued improvements in our operating metrics and our financial results as we go forward. Understood. A lot to like that. All right, thanks again, Scott. Yep, thank you, Brian.