Good morning. Andrew Obin, BofA's Multi-Industrial Analyst. For our next presentation, we are gonna chat with Amy Schwetz. She's the Senior Vice President and CFO of Flowserve. Thank you for being here, and Amy, thanks so much. Thanks for having us, Andrew. Of course. maybe to start, I know you reported only a couple of weeks ago, but any macro data points, customer conversations that have stood out to you over the past couple of weeks? Yeah. I think we, you know, when, as we looked at the first quarter, what happened in the first quarter, and thinking about the rest of the full year, we remain constructive on the environment and our space. I think a few things going on, and I know we'll dive into some of these markets in a bit more detail. Very excited about the power space. It is a long-tenured piece of our business, but one that we're getting increasing interest in, and is benefiting from some pretty substantial tailwinds in the space. I think as we look at areas of our business that we're focused on growing, aftermarket has been a large focus for us over the past several years. We just completed our eighth consecutive quarter at over $600 million of aftermarket bookings. We continue to work on ways that we can serve our customers better, serve them faster, continue to grow that business to be first in mind to our customers in that space. A couple of areas that, you know, that we saw some headwinds in the quarter, and I'll start with, you know, maybe the not so obvious. Our MRO business, which is maintenance, repairs and piece of the business, started the year a little bit slow. As we looked at our January and February numbers, it impacted our revenue conversion in the first quarter of the year. We saw that business tick up to our expected levels in March of this year. Actually, the data points that we've seen in April have been quite constructive in that space as well. It gave us a lot of conviction around still guiding to sort of mid-single digit growth from a bookings perspective over the course of 2026, and gives us a lot of optimism going into the back half of the year. I think the big question in everybody's mind is the Middle East. It's an area that we were obviously impacted by in the first quarter of the year. We're anticipating we could see that continue into the second quarter of the year. At a certain point in time, we think that we'll start to see projects that were slated to begin either move forward in the second half of the year, or we may see some opportunities arise in the form of sort of rebuild, repair, and redundancy that's necessary out of that region to deal with the current conflict. Overall, a constructive environment, but one with a lot of moving parts. Excellent. Thanks so much. Just to dig in a little bit more into the first quarter, you sort of highlighted MRO, you know, some Middle East disruptions. Beyond that, what went better than expected and what disappointed? Yeah. I think the things that continued to go well for us are around what we saw on the nuclear side of the business. $110 million of nuclear orders in Q1. Two of those orders were sort of life cycle or life extensions at more than $20 million in orders. That continues to be an area that our focus is paying off, and we continue to see our backlog build with respect to nuclear bookings. I pointed out aftermarket as a real focus area for us. I think what we knew coming into the quarter and maybe focusing a little bit more on revenue conversion rather than just bookings, is we knew that our engineered project backlog was lighter entering the quarter. We'd anticipated between 100 basis points and 150 basis points of headwinds from that. We'd anticipated about 200 basis points of headwinds from 80/20 actions that we'd taken specifically in the valves organization. What we had not anticipated entering the quarter was kind of that slow start from an MRO perspective, which was probably 300 basis points to 400 basis points of dissipation from a sales perspective. The Middle Eastern conflict, which was about $25 million of revenue. Maybe sort of MRO. Am I correct to assume it was mostly downstream? That's I mean, I think that's a good way to classify it. Some of that business is obviously going through distribution. It's primarily our expectations for North America downstream versus where they landed for the quarter. Can we just get more granularity on what happened? You know, I understand. Some of the comments we've heard is that, right, Middle East is just there was a bit of a decision paralysis, but this was before Middle East. Yeah, what do you think? Was it weather? Like, what do you think happened? Yeah, it's hard to say. I think, you know, absent the strong March and April. Right. We would have real concerns about this market. As things move through distribution, I would say you're, you know, you're sort of one level removed from the end customer there. You're dealing with, you know, behavior that is, that is not necessarily just end user related. Right. Can be, but can be how distributors are measuring their business. The best that we can do is continue to stay in contact with those customers. Right. Both on the distribution side and end user side, and continue to work the numbers going forward. Excellent. When do you see the benefit of higher oil prices in your businesses? You know, I would imagine, I think a sort of talk that sort of takes a while for the decision, but I would imagine if you're a refiner, you wanna sort of pump out as much, you know, gasoline, right? You know, you wanna do as much as you can while the oil prices are high. When do you see the benefit of that? I think that we'll see it first in the aftermarket piece of our business. Our install base, which is, you know, working around the world, is gonna continue to need to work around the world, and that means that the Flowserve aftermarket business is gonna stand ready to support those customers, help them keep everything running, be on site as much as possible, make sure that break/fix issues are resolved as quickly as possible, and ultimately help our customers over time with how do they improve uptime, how do they continue to make those assets as effective as usual. I think that the oil prices and the continued demand for product is gonna make the rebuild a priority out of the Middle East as well, and I think that that could happen both in terms of the installations themselves in terms of refineries, but also infrastructure that may be in place, to get the product to its ultimate users. Yeah, right. How do you think about the disruption in the Middle East? I think there are two parts of it. A, catch up to sort of what you've missed, and second maybe benefits of rebuild or even changes to infrastructure. I think folks were talking about quite a bit of activity on, you know, sort of I guess pipelines versus terminals. Like, maybe talk about what you're hearing. Yeah. I'd start with the disruption that we saw in the first quarter I think is kind of twofold. You mentioned sort of decision paralysis and it is hard to make decisions in that type of environment. In addition to that, for safety reasons, obviously, we weren't necessarily traveling to customer sites. In some instances, those customer sites were not accessible over that period of time. There's an element of that you can't sell what you don't see. There's also the fact that over that period of time, our customers couldn't travel to inspect equipment that was ready to be shipped. As the supply chain has reopened and shipments into the region are now possible, equipment is flowing into the region, albeit a little bit slower than it was pre-conflict, and our access to sites, customer sites is largely restored. I think that that barrier is certainly has been at least partially removed or partially and maybe, you know, tentatively removed as we wait to see what will ultimately happen with the ceasefire. I think the rebuild, and what I call kind of redundancy discussions, they are starting to happen with customers already. We do need to reach some level of stabilization in the region in terms of ultimately making those investment decisions for our customers to make sure that it's a good investment, and I think that that will likely play out in the region in different areas geographically on different timeframes. Gotcha. Thank you. Maybe also before we sort of move on, you sort of talked about 80/20 in valves. Can you just remind us, what are you doing? I think it is also related to Middle East, right? Partially at least. Not all Middle East, actually. It was something that we talked about a fair amount last year. The biggest piece of the 80/20 reduction in our valves portfolio that we're feeling in the first half of the year is around a fabricated business that MOGAS had. Yeah. In modules, that was supplying, some of that work was going into the Middle East. That business contributed a fair amount to revenue in the first half of the year at dilutive margins. Right. Last year. That's a business that we discontinued. As we get into the second half of the year, that dissipates. I would just say overall our valves business started the 80/20 journey a little bit later than we did in FPD. We've seen a great deal of benefit roll through the FPD results from 80/20 already. I think we're gonna see the impact of 80/20 accelerate over the course of 2026 in the FCD portfolio. We're really pleased at the speed and the decisiveness that organization is showing with respect to 80/20 and other operational moves in 2026. Thank you. I would imagine events in the Middle East have renewed concerns about energy security. How real are the conversations that are taking place right now? You know, we are reading about people reconsidering, you know, where, which feedstocks to use. You know, obviously a lot of these people are your customers. I think that, you know, I would say those conversations are in early stages. I think that, you know, they could go in a lot of different directions over time. I think that the most obvious that will occur quickly is different transportation routes. Out of the, out of the Middle East I think is gonna be a focus going forward, and it's something that, you know, I think, KSA has benefited from in the conflict. That's something that we'll see over time. I think that right now this is really about trying to keep up with demand. We're not necessarily seeing new CapEx that are being put into the system or contemplated on large scale yet. Thank you. Can we just go over, I've been a bit confused as to what's happening in the chemicals industry year to date. I guess mixed data points, you know, from your peers in the process automation space. What are you seeing, and what's your take? Yeah. For us, in 2025, I would say we reached a point in the chemical space for us that we saw sort of stabilization. Right. We, we've seen that continue over the course of so far in 2026. That strength, or what I would call the relative strengths, 'cause we actually saw growth in bookings and chemicals in the first quarter, is primarily coming from North America. Okay. It's a North American aftermarket benefit that we're seeing in the space. We're seeing Europe still operate at lower levels than historically, but relatively stable, and we're keeping an eye on Asia, you know, as there could be some ongoing implications of the Middle Eastern conflict that could play out with feedstock, as you've indicated, potentially being in short supply, which could have ramifications. Right. Around the globe. Perhaps maybe less activity in Asia, but more activity in the U.S. Yes. Net net, is that a positive for you? Neutral? I would say overall our install base is a little bit stronger as we look at North America. Net net, probably a positive. Thank you. Maybe we can talk about, sort of, what do bookings look like from your perspective into second half of 2026? Just thinking about our opportunity funnel, which we define as we talk publicly what that looks like over the next 12 months, we've seen sequential growth in that opportunity funnel. That does not contemplate what we're seeing, you know, kind of out of the Middle East right now in terms of rebuild activity. We remain confident in that power space, both within what we're seeing within life extensions and traditional aftermarket work. You know, there may be an opportunity in the back half of the year to start to see some more activity around new construction with respect to nuclear. I think that in addition to that, we're excited that we'll be welcoming Trillium to the portfolio in the back half of the year as well. I continue to mention the aftermarket, but it's a space that we're really focused on continuing to grow. In addition to kind of that project funnel work that we're seeing, we're gonna continue to work to improve and solidify those relationships with customers around aftermarket capture. Excellent. We started talking, sort of 80/20 and valves. Can you just talk about your 80/20 evolution? Where did you start? How has it evolved, and where are you now? I'll say we started first in the business where we thought could benefit the most from SKU reduction, and that was in our industrial pumps business unit. We put out some statistics with respect to that last year. You know, in the, in the first couple of rounds of 80/20, running the quads, we saw about a 40% reduction in SKUs in that business. It allowed us to make decisions around the portfolio. We did a small divestiture over in 2025 in that business as well. I'm talking about that because that's the most mature business unit that we have operating under the 80/20 framework. You know, we started first with obviously the product decisions that we're making. We then started to see how that translated onto the shop floor. The space that we were freeing up through leaning out the SKUs, leaning out that inventory, started to see the demarcation around the plants in terms of, A, customers and that product flow through the facilities. Started to see that lingo pop up in shop floor daily management in terms of what that looks like. How is plant, how's the facility leadership talking about what needs to happen on a daily basis in terms of production flow? I think the last thing that we're really seeing with respect to 80/20 is really this lean in to target customers and to our largest customers in terms of trying to grow that business. We talked some about headwinds that we see from a revenue perspective from 80/20, but ultimately the idea behind this is freeing up resources so you're selling your best products and you're selling to your best customers over time and actually growing the business around those product lines and customers. I think that journey that we've seen the industrial pumps business unit go on is essentially what we want to see happen across all of our product units, where you see the focus on complexity reduction in SKUs and what that means on the shop floor. See it in the way that we're living and breathing at a facility level, and then ultimately see the commercial organization really embrace this and go after and sell those customers and sell to those customers the right products. It sounds, you know, as you implement 80/20, growth is a key focus for you, right? Absolutely. Thank you. Maybe you can talk about 20% target in 2030. How did you come up with 20% and the timeline, and what's the opportunity to accelerate the timeline or to hit a higher range? I think, you know, the, we back all of our long-term targets with internal plans. That is, and that was something that was important when we laid out our 2023 targets, that extended through 2027, which we ultimately hit, last year and reestablished targets, in the current year. I think that, the idea is to have multiple avenues for success behind those targets. As we look at margin expansion, we're really focused on the two things that we've spent. Okay. A lot of time talking about today, which is really around what we're doing with 80/20. Yep. How we're and how we're leaning out those facilities, and I call it a crossover between 80/20 and really what we're doing operationally, which is how are we simplifying our footprint around the globe and making sure that we're serving our customers as we do so. I think that we've got a growth element embedded in this as well, and I think that that is the wild card, and that is the piece that could help us accelerate those targets. We've got plans in place to grow the business as well through our commercial excellence initiatives. I think to the extent that we're able to front-load some of that, some of that growth. Yep. That margin expansion, will follow on an expedited path. Well, on that note, how does nuclear figure into hitting the long-term targets? Yeah. Nuclear is a benefit to us. You know, it's from an OE perspective, it's from an end market perspective, it's accretive to our overall margin performance. You know, that's on a blended basis between OE and aftermarket. I will say that we're building long-dated backlog with that nuclear business. I kinda laugh that some of that revenue growth from 2030 is already embedded in our backlog today, more likely than not in terms of what we're doing. The life extension and the continued aftermarket annuity is helping us grow revenue today. Thank you. In terms of nuclear, what are your latest thoughts on the pace of nuclear, and what are the near-term developments we should keep track of? I think that, you know, where we're really tracking the nuclear work that's being done right now in the U.S. is really exciting, and we'll see, you know, that moves forward. What we're looking at right now is, you know, the opportunity that up to 40 new reactors are built outside of China and Russia over the next decade. That's a tremendous opportunity for Flowserve over time in addition to the life extensions that we're seeing. I think the other piece of this that is really embedded in that $10 billion opportunity that we have over the next decade is around SMRs. The goal with SMRs is to continue to talk to as many developers as we can serve in the way that we want to to make sure that as that technology moves forward that we're involved. What opportunities are the most actionable over the next two, three years? Maybe we can start with conventional first. Yeah. Conventional nuclear. I think the most obvious is the life extensions and the continued aftermarket annuity that we see there. That's, you know, what we saw in our bookings in the first quarter was largely either aftermarket or life extension, so about $40 million of life extensions that are in that number. The second piece of that is around the new build orders that we're gonna be executing on nearer term. Our backlog includes orders for plants that are being constructed in the U.K. and France today. That backlog could be added to over certainly over the next 12-24 months with new announcements in Europe and the U.S. if they occur. I'd say that right now that feels like the most actionable elements that are out there. In terms of SMRs, could you remind us who you're aligned with, and what's the difference in content for you between conventional SMRs? Yeah. It sort of depends on the technology that is being deployed within SMRs. We're working about 10 to a dozen of the developers that are in the space, so I won't call out any in particular. We have started to actually book orders in this space for prototypes. Last year somewhere between $5 million and $10 million of orders that are going into SMR prototypes, that's primarily on the pump side of the business that we're seeing that in terms of primary coolant pumps. The SMR technology that's being deployed in certain instances will be more or less flow control heavy. So that tends to be also how we align who we're working with. For timeline for SMRs, for the industry, when do you think the volumes really start picking up then? I think it's probably in the back half of this decade, so kind of five years plus out. The prototype work that's being done now is pretty important, and I think that those customer relationships that we're building over this period of time are gonna be helpful in playing in that. How does the time when you build a nuclear reactor just, can you remind us when do you start seeing orders? Yeah. When does it become revenue? Well past final investment decision, I think, you know, one key element, we generally tend to see our orders after investment decision has been made. It plays out normally over a three to five- year timeframe. The first 12 months really light on revenue recognition. It's primarily engineering work that's being done. You start to order long lead time items, all of this on the percentage of completion. It does play out over a multi-year timeframe. Excellent. Maybe just to round up the nuclear, how is U.S. different? U.S. outlook versus global nuclear outlook? How are the timelines different, or what's happening is different? Yeah. I think, you know, the nuclear ambitions in the U.S. are substantial in terms of what we're talking about doing. The timeline I would say at this point in time is fluid as you have both engineering firms, the government and ultimately utilities that have an interest in how this plays out. We continue to try and strengthen our relationships with all three of those groups to try and get an understanding of the capacity that's necessary to position ourselves in the right way to serve those orders when they come in, understanding that timeline can and will change from what we expect. Excellent. Thank you. maybe just talk about your power gen exposure ex nuclear and what are you seeing? Specifically, do you benefit from the current gas power cycle? Are you benefiting from extensions of coal plants? Yes. traditional power is about half of our half of our utility or our power exposure in the mix. I would say, you know, the content in gas plants, in combined cycle gas plants, is less than... Right. ...what we would see in a nuclear plant. We do benefit from it. Coal-fired life extensions do benefit us probably less than what we would see on the gas side and maybe with a shorter tail in terms of what that could look like. One of the things we're actually excited about with once again kind of bringing up Trillium, is actually 70% of that business today is power. You know, if we look at, if we look at that, 40% of the total is nuclear, but that remaining 30% is coming from traditional power. The majority of that business is aftermarket, so it's a nice way that we see to supplement our current power business as well. Maybe, you know, because you are talking about Trillium, maybe you can talk about sort of Trillium as a case study in terms of your approach to M&A and other Trilliums. It is a good case study, so thanks for bringing that up. It kind of fits the criteria of what we're looking for in organic growth. One, fits the strategy. Obviously an end market that we're interested in terms of power, actually continues to help us balance our exposure to end markets as we move forward. It's accretive to our margins. We wanna continue to use M&A as a way to help move us to our margin targets as quickly as possible. Also accretive to cash flow over that period of time, which helps create a virtuous cycle. The last thing that I would say with respect to it is we were able to, you know, this is a transaction that we're able to easily finance them and absorb onto the balance sheet in a way that helps us protect our investment grade rating. Just maybe talk about just general how you think about capital allocations, what's the M&A pipeline looks like, and what are the other capital allocation priorities for you? I think we try and take a pretty balanced approach related to capital allocation and make sure that we're, you know, being intellectually honest in terms of options that we have out there to weigh. I'll, you know, throw out there, last fall we saw a dislocation in our share price following the breakup with Chart Industries. We deployed a pretty substantial amount of cash into share repurchases in the back half of the year. It made sense to us based on where we were at and the cash that we had on the balance sheet. We continue to work on our M&A pipeline internally, and that means not just what we're receiving inbound, but what our teams on the ground are seeing, products that are interesting to us, markets that are interesting to us over time, and continuing to build up that M&A pipeline. For us, you know, we've maintained a pretty stable dividend over the last several years. We view that as a commitment to our shareholders. It's in a good place. We're more focused on continuing to balance between inorganic growth and the potential to repurchase our own shares. Gotcha. Which markets just going forward, outside of nuclear, which markets do you see as key growth vectors over the next three to five years? Yeah, we really like areas within kind of our general industries basket, and are focused on kinda looking for areas within there to grow more. That would include it would include food and bev, pharma, which is an area that we saw some nice bookings last year as we look at sort of regionalization around the pharmaceutical industry. We like areas of water and continue to look at ways that we can be successful in that market. MOGAS gave us a stronger foothold serving areas of the mining industry, and as we look at trends around electrification, it's another area that we could like. I think as we look at sort of what might be attractive areas to grow, that general industries bucket is an important one for us to look at. How should we think Flowserve and inflation and, you know, what price is embedded in your forecast, and how should we think about price cost? Yeah, I think that, you know, we always look for opportunities, when we've got the ability to increase prices that we are. Generally our goal, you know, our base level goal or the table stakes is price cost neutral. Yep. From an inflation perspective, there are some areas around the business where there are opportunities to do more than that over time, and I think that, you know, the tariff example is one where we were able to really overcome a lot of the headwinds that we saw from Liberation Day over the course of 2025 through price increases. Beyond that, what are you seeing in terms of inflation environment in the second half? You know, I think that is, that's probably a, you know, the area that we're watching carefully in terms of what we're seeing, with fuel prices and what that means, for the, for the supply chain at. It's not a problem. It's not a problem today. It's something that we continue to try and be very flexible and nimble with our supply chain, particularly, geographically, where we're supplying goods from around the world and make sure that depending on, you know, whether or not that's, you know, that's energy costs, transportation costs, whether or not it's, you know, the, the lift around tariffs, that we're maintaining some redundancy in our supply chain and some options where we can source materials from. Well, this is great. We're right on time. Amy, thanks so much for being here. Yeah, thanks for having me, Andrew. Of course.