Q1 2026 Flowserve Corp Earnings Call

April 30, 2026

Speaker #1: Good day and welcome to the Flow Center First Quarter 2026 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brian Ezell, VP of Investor Relations.

Speaker #1: Please go ahead, sir.

Speaker #2: Thank you. And good morning, everyone. Welcome to the Flow Service First Quarter 2026 business update. I'm joined by Scott Rowe, Flow Service President and Chief Executive Officer, and Flow Service Chief Financial Officer, Amy Schwartz.

Speaker #2: Following Scott and Amy's prepared remarks, we'll open the call for questions. Turning to slide two, our discussion will contain forward-looking statements that are based upon information available as of today.

Speaker #2: Actual results may differ due to risks and uncertainties. Refer to additional information, including our note on non-GAAP measures and our press release earnings presentation and SEC filings, which are available on our website.

Speaker #1: Good day and welcome to the Flowserve, First Quarter 2026 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brian Ezzell, VP of Investor Relations.

Speaker #1: Please go ahead,

Speaker #2: With that, I'll turn the call over to Scott.

Speaker #3: Thank you, Brian, and good morning, everyone. I'd like to begin by thanking our associates around the world for their hard work, discipline, execution, and resilience in a highly dynamic environment.

Speaker #2: officer, and Flowserve chief financial officer,

Speaker #3: Our first quarter results reflect their continued focus on execution, as we delivered strong adjusted operating margin expansion of 230 basis points and adjusted earnings per share growth of 18%, including the net benefit of tariffs and other unanticipated items in the quarter that Amy will discuss in more detail.

Speaker #3: While bookings and sales were impacted by events in the Middle East, we maintain our full-year adjusted EPS outlook of $4 to $4.20, which at the midpoint represents 13% growth over 2025.

Speaker #3: We continue to advance our strategy and leverage the Flow Service business system to unlock greater potential across the company. As we announced in late March, Matt Copper, who formerly led our industrial pumps business unit, has been promoted to lead the FPD division.

Speaker #4: on

Speaker #3: I'm excited to have Matt in this role, where he can leverage his customer relationships, knowledge of the business system, and international experience to continue driving strong performance for the division.

Speaker #3: Let's turn to bookings on slide four. Bookings in the first quarter were 1.15 billion, down 6% from the prior year period. Our first quarter book-to-bill was 1.07 times.

Speaker #3: We delivered healthy aftermarket bookings of 680 million, in the quarter. As anticipated, aftermarket was down modestly on a year-over-year basis against a very strong prior-year comparison that included a large nuclear order.

Speaker #3: On a sequential basis, aftermarket bookings were in line and represented the eighth consecutive quarter above 600 million. Our focus on expanding the aftermarket business continues to deliver results.

Speaker #3: As we drive higher capture rates across our installed base, within our original equipment business, January and February started with softer-than-expected bookings. Largely related to our run rate MRO business and some smaller projects pushing out to later in the year.

Bookings in the first quarter were 1.15 billion.

Down 6% from the prior year, period.

Our first quarter book, the bill was 1.07 times.

Speaker #3: We saw these trends improve in March back to levels we anticipated. With strong commercial activity in the market, the softer start to the quarter, coupled with dynamics in the Middle East, resulted in lower original equipment bookings in the quarter.

We delivered healthy aftermarket, bookings of 600 million 6, 680 million in the quarter.

As anticipated, aftermarket was down modestly on a year-over-year basis against a very strong prior year comparison, that included a large nuclear order.

Speaker #3: I'll provide more insight on the Middle East in a moment, though it's important to note that absent the estimated 50 million headwind related to customer delays in the region, bookings for the quarter were largely in line with our expectations.

On a sequential basis. Aftermarket bookings were in line and represented the eighth consecutive quarter of million dollars.

Our focus on expanding the aftermarket business continues to deliver results.

as we drive higher capture rates across our installed base,

Speaker #3: Our focus on diversification within the 3D strategy has positioned Flow Service to manage through a dynamic market conditions better than ever. In the quarter, we received more than 110 million of nuclear awards, including two projects larger than 20 million each.

Within our original equipment, business January, and February started with softer than expected bookings. Largely related to our run rate mro business and some smaller projects pushing out to later in the year.

We saw these Trends improve in March, back to levels. We anticipated.

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

Speaker #3: Nuclear and traditional power continue to represent attractive strategic growth markets for us. Turning to slide five, I'll provide an update on how we have been responding to the situation in the Middle East.

With strong commercial activity in the market.

The softer start to the quarter, coupled with dynamics in the Middle East, resulted in lower original equipment bookings in the quarter.

Brian Ezzell: Thank you. Good morning, everyone. Welcome to Flowserve's Q1 2026 Business Update. I'm joined by Scott Rowe, Flowserve's President and Chief Executive Officer, and Flowserve Chief Financial Officer, Amy Schwetz. Following Scott and Amy's prepared remarks, we'll open the call for questions. Turning to slide 2. Our discussion will contain forward-looking statements that are based upon information available as of today. Actual results may differ due to risks and uncertainties. Refer to additional information, including our note on non-GAAP measures and our press release, earnings presentation, and SEC filings, which are available on our website. With that, I'll turn the call over to Scott.

Speaker #3: Our number one priority is employee safety and supporting our roughly 800 associates across manufacturing facilities and QRC locations in the region. I'm proud of the resilience and focus our teams have displayed as they continue to deliver for our customers.

I'll provide more insight on the Middle East a moment though. It's important to note that absent. The estimated 50 million headwind related to customer delays in the region.

Bookings for the quarter were largely in line with our expectations.

Speaker #3: We are taking the necessary actions to manage through the near-term disruption while positioning the business to respond effectively as we see incremental demand. First quarter sales and earnings were negatively impacted by disruptions in the region.

Our focus on diversification within the 3D strategy has positioned flow serve to manage through a dynamic market conditions better than ever.

In the quarter, we received more than 110 million dollars of nuclear Awards, including 2 projects larger than 20 million each.

Speaker #3: Largely driven by the shutdown of the logistics system and the inability to get to customer sites at the height of the conflict. Though conditions in the region remain dynamic, our ability to operate has improved under the recent ceasefire, with temporary work pauses implemented as needed based on safety considerations.

Nuclear and traditional power continued to represent attractive, strategic growth markets for us.

Turning to slide 5.

R. Scott Rowe: Thank you, Brian. Good morning, everyone. I'd like to begin by thanking our associates around the world for their hard work, disciplined execution, and resilience in a highly dynamic environment. Our first quarter results reflect their continued focus on execution as we delivered strong adjusted operating margin expansion of 230 basis points and adjusted EPS growth of 18%, including the net benefit of tariffs and other unanticipated items in the quarter that Amy will discuss in more detail. While bookings and sales were impacted by events in the Middle East, we maintain our full-year adjusted EPS outlook of $4.00 to $4.20, which at the midpoint represents 13% growth over 2025. We continue to advance our strategy and leverage the Flowserve Business System to unlock greater potential across the company.

Scott Rowe: Thank you, Brian. Good morning, everyone. I'd like to begin by thanking our associates around the world for their hard work, disciplined execution, and resilience in a highly dynamic environment. Our first quarter results reflect their continued focus on execution as we delivered strong adjusted operating margin expansion of 230 basis points and adjusted EPS growth of 18%, including the net benefit of tariffs and other unanticipated items in the quarter that Amy will discuss in more detail. While bookings and sales were impacted by events in the Middle East, we maintain our full-year adjusted EPS outlook of $4.00 to $4.20, which at the midpoint represents 13% growth over 2025. We continue to advance our strategy and leverage the Flowserve Business System to unlock greater potential across the company.

I'll provide an update on how we have been responding to the situation in the Middle East.

Our number 1, priority is employee safety and supporting, our roughly 800 Associates across manufacturing facilities and QRC locations in the region.

Speaker #3: We are proactively adapting our supply chain to address transportation delays, inflationary pressures, and the potential for broader disruption. The progress we have made through the Flow Service business system over the past several years has enabled us to operate with greater discipline, better visibility, and more flexibility across our global network.

I'm proud of the result teams have displayed has continued to deliver for our customers.

We are taking the necessary actions to manage through the near-term, disruption, while positioning the business to respond effectively. As we see incremental, demand,

First quarter sales and earnings were negatively impacted by disruptions in the region.

Speaker #3: We are dynamically repositioning the supply chain, leveraging our broader supply base and utilizing our regional and global footprint to respond quickly as conditions evolve.

Largely driven by the shutdown of the logistics system and the inability to get to customer sites at the height of the conflict.

Speaker #3: As we look forward, we have assumed that these disruptions seen in the first quarter continue for some period. Over time, we see significant opportunity to support our customers' critical infrastructure needs.

R. Scott Rowe: As we announced in late March, Matt Hopper, who formerly led our industrial pumps business unit, has been promoted to lead the FPD division. I'm excited to have Matt in this role where he can leverage his customer relationships, knowledge of the business system, and international experience to continue driving strong performance for the division. Let's turn to bookings on slide 4. Bookings in Q1 were $1.15 billion, down 6% from the prior year period. Our Q1 book-to-bill was 1.07 times. We delivered healthy aftermarket bookings of $680 million in the quarter. As anticipated, aftermarket was down modestly on a year-over-year basis against a very strong prior year comparison that included a large nuclear order.

Scott Rowe: As we announced in late March, Matt Hopper, who formerly led our industrial pumps business unit, has been promoted to lead the FPD division. I'm excited to have Matt in this role where he can leverage his customer relationships, knowledge of the business system, and international experience to continue driving strong performance for the division. Let's turn to bookings on slide 4. Bookings in Q1 were $1.15 billion, down 6% from the prior year period. Our Q1 book-to-bill was 1.07 times. We delivered healthy aftermarket bookings of $680 million in the quarter. As anticipated, aftermarket was down modestly on a year-over-year basis against a very strong prior year comparison that included a large nuclear order.

No conditions in the region remain Dynamic. Our ability to operate has improved under the recent ceasefire with temporary work. Pauses implemented as needed, based on safety, considerations.

Speaker #3: We have a large installed base across the region and a legacy of strong customer relationships. We anticipate that asset restarts and rebuilding activity will begin later in the year with accelerated opportunities for additional infrastructure investment across the region.

We are proactively adapting our supply chain to address Transportation, delays, inflationary pressures, and the potential for broader disruption.

Speaker #3: Energy security is also expected to be of increasing importance across the globe, and our teams are working diligently to assist customers as they plan for these incremental investments.

To the posture of business system, over the past several years, has enabled us to operate with greater discipline better visibility and more flexibility across our Global Network.

We are dynamically repositioning, the supply chain leveraging, our broader Supply base and utilizing our regional and Global footprint to respond quickly as conditions evolve.

Speaker #3: Turning to slide six, I'll provide some perspective on the broader market outlook. Despite the disruption in the Middle East, the underlying fundamentals across our in-markets remain healthy, and we continue to see meaningful growth opportunities for near and longer term.

As we look forward, we have assumed that these disruptions seen in the first quarter continue for some period.

Over time, we see significant opportunity to support our customers' critical infrastructure needs.

Speaker #3: Asset restarts and rebuilding activity will begin later in the year, with accelerated opportunities for additional infrastructure investment across the region. Energy security is also expected to be of increasing importance across the globe, and our teams are working diligently to assist customers as they plan for these incremental investments.

R. Scott Rowe: On a sequential basis, aftermarket bookings were in line and represented the eighth consecutive quarter above $600 million. Our focus on expanding the aftermarket business continues to deliver results as we drive higher capture rates across our installed base. Within our original equipment business, January and February started with softer than expected bookings, largely related to our run rate MRO business and some smaller projects pushing out to later in the year. We saw these trends improve in March back to levels we anticipated, with strong commercial activity in the market. The softer start to the quarter, coupled with dynamics in the Middle East, resulted in lower original equipment bookings in the quarter.

Scott Rowe: On a sequential basis, aftermarket bookings were in line and represented the eighth consecutive quarter above $600 million. Our focus on expanding the aftermarket business continues to deliver results as we drive higher capture rates across our installed base. Within our original equipment business, January and February started with softer than expected bookings, largely related to our run rate MRO business and some smaller projects pushing out to later in the year. We saw these trends improve in March back to levels we anticipated, with strong commercial activity in the market. The softer start to the quarter, coupled with dynamics in the Middle East, resulted in lower original equipment bookings in the quarter.

Speaker #3: The outlook for power remains very favorable, with global electricity demand continuing to support significant investment in both traditional power and nuclear generation. In general industries, ongoing developments in sectors such as mining, pharmaceuticals, food and beverage, and water continue to represent a meaningful opportunity for growth.

We have a large installed base across the region in a legacy of strong customer relationships.

Speaker #3: Within energy, utilization rates and maintenance activity across large process facilities have remained strong, with North American utilization increasing in March due to higher crack spreads.

Speaker #3: Our large installed base and ability to increase capture rates continues to support a constructive outlook for Flow Service. Even as some larger project work has been slower to materialize given the geopolitical uncertainty, and while chemical remains our lowest growth in market, we continue to expect modest improvement over the course of the year.

R. Scott Rowe: I'll provide more insight on the Middle East in a moment, though it's important to note that absent the estimated $50 million headwind related to customer delays in the region, bookings for the quarter were largely in line with our expectations. Our focus on diversification within the 3D strategy has positioned Flowserve to manage through our dynamic market conditions better than ever. In the quarter, we received more than $110 million of nuclear awards, including two projects larger than $20 million each. Nuclear and traditional power continue to represent attractive strategic growth markets for us. Turning to slide five, I'll provide an update on how we have been responding to the situation in the Middle East. Our number 1 priority is employee safety and supporting our roughly 800 associates across manufacturing facilities and QRC locations in the region.

Scott Rowe: I'll provide more insight on the Middle East in a moment, though it's important to note that absent the estimated $50 million headwind related to customer delays in the region, bookings for the quarter were largely in line with our expectations. Our focus on diversification within the 3D strategy has positioned Flowserve to manage through our dynamic market conditions better than ever. In the quarter, we received more than $110 million of nuclear awards, including two projects larger than $20 million each. Nuclear and traditional power continue to represent attractive strategic growth markets for us. Turning to slide five, I'll provide an update on how we have been responding to the situation in the Middle East. Our number 1 priority is employee safety and supporting our roughly 800 associates across manufacturing facilities and QRC locations in the region.

Speaker #3: Looking ahead, our 12-month project funnel remains robust and expanded across all in-markets, both sequentially and year-over-year. We are encouraged by bookings trends exiting the first quarter and by the awards we received in April.

Speaker #3: Our large installed base and ability to increase capture rates continues to support a constructive outlook for Flowserve. Even as some larger project work has been slower to materialize given the geopolitical uncertainty.

Speaker #3: We have good believe mid-single digits bookings growth remains achievable for the full year. We also believe the current geopolitical environment could drive increased investment in energy security and diversification globally, providing another long-term tailwind for Flow Service.

Speaker #3: And while chemical remains our lowest growth in-market, we continue to expect modest improvement over the course of the year. Looking ahead, our 12-month project funnel remains robust and expanded across all in-markets, both sequentially and year-over-year.

Speaker #3: In addition, as one of the leading suppliers of flow control solutions in the Middle East, we expect to play an important role in reconstruction activities across industrial complexes as stability returns to the region.

Speaker #3: We are encouraged by bookings trends exiting the first quarter and by the awards we received in April. We have good visibility into commercial opportunities and believe mid-single digits bookings growth remains achievable for the full year.

R. Scott Rowe: I'm proud of the resilience and focus our teams have displayed as they continue to deliver for our customers. We are taking the necessary actions to manage through the near term disruption while positioning the business to respond effectively as we see incremental demand. Q1 sales and earnings were negatively impacted by disruptions in the region, largely driven by the shutdown of the logistics system and the inability to get to customer sites at the height of the conflict. Though conditions in the region remain dynamic, our ability to operate has improved under the recent ceasefire, with temporary work pauses implemented as needed based on safety considerations. We are proactively adapting our supply chain to address transportation delays, inflationary pressures, and the potential for broader disruption.

Scott Rowe: I'm proud of the resilience and focus our teams have displayed as they continue to deliver for our customers. We are taking the necessary actions to manage through the near term disruption while positioning the business to respond effectively as we see incremental demand. Q1 sales and earnings were negatively impacted by disruptions in the region, largely driven by the shutdown of the logistics system and the inability to get to customer sites at the height of the conflict. Though conditions in the region remain dynamic, our ability to operate has improved under the recent ceasefire, with temporary work pauses implemented as needed based on safety considerations. We are proactively adapting our supply chain to address transportation delays, inflationary pressures, and the potential for broader disruption.

Speaker #3: We are prepared to respond quickly and support our customers as these opportunities develop. Turning to slide seven, the Flow Service business system continues to be a key driver of our performance.

Speaker #3: We also believe the current geopolitical environment could drive increased investment in energy security and diversification globally, providing another long-term tailwind for Flowserve. In addition, as one of the leading suppliers of flow control solutions in the Middle East, we expect to play an important role in reconstruction activities across industrial complexes as stability returns to the region.

Speaker #3: The progress we have made across operational excellence in 80/20 has helped us improve how we run the business, reduce complexity, and drive steady, sustainable margin expansion.

Speaker #3: Operational excellence continues to strengthen our core execution capabilities and improve performance across the organization. We have improved data, material flow, optimized inventory, and unlocked significant cash for the business.

Speaker #3: We are prepared to respond quickly and support our customers as these opportunities develop. Turning to slide seven, the Flowserve business system continues to be a key driver of our performance.

Speaker #3: Increased supply chain reliability and enhanced delivery performance are also helping us better serve our customers. Furthermore, we continue to execute our footprint rationalization program.

R. Scott Rowe: The progress we have made through the Flowserve Business System over the past several years has enabled us to operate with greater discipline, better visibility, and more flexibility across our global network. We are dynamically repositioning the supply chain, leveraging our broader supply base, and utilizing our regional and global footprint to respond quickly as conditions evolve. As we look forward, we have assumed that these disruptions seen in Q1 continue for some period. Over time, we see significant opportunity to support our customers' critical infrastructure needs. We have a large installed base across the region and a legacy of strong customer relationships. We anticipate that asset restarts and rebuilding activity will begin later in the year, with accelerated opportunities for additional infrastructure investment across the region.

Scott Rowe: The progress we have made through the Flowserve Business System over the past several years has enabled us to operate with greater discipline, better visibility, and more flexibility across our global network. We are dynamically repositioning the supply chain, leveraging our broader supply base, and utilizing our regional and global footprint to respond quickly as conditions evolve. As we look forward, we have assumed that these disruptions seen in Q1 continue for some period. Over time, we see significant opportunity to support our customers' critical infrastructure needs. We have a large installed base across the region and a legacy of strong customer relationships. We anticipate that asset restarts and rebuilding activity will begin later in the year, with accelerated opportunities for additional infrastructure investment across the region.

Speaker #3: The progress we have made across operational excellence in 80/20 has helped us improve how we run the business, reduce complexity, and drive steady, sustainable margin expansion.

Speaker #3: With further support, which further supports our efforts to reduce fixed costs, improve operational performance, and deliver further value for our customers. As we move into the third year of the 80/20 program, we continue to simplify our product offering across the business.

Speaker #3: Operational excellence continues to strengthen our core execution capabilities and improve performance across the organization. We have improved data, and material flow, optimized inventory, and unlocked significant cash for the business.

Speaker #3: Including meaningful SKU and model reductions, we believe these actions will further sharpen our focus and improve efficiency and strengthen our operating model. While we continue to advance our commercial excellence initiatives, we have now trained hundreds of employees and provided them with the tools and processes to build greater capability and consistency across our commercial organization, which we believe is creating the foundation for long-term sustainable growth.

Speaker #3: The business system is the key to delivering on our long-term financial targets. And I couldn't be more pleased with the progress that we are making in the impact it is having on growth and margin expansion.

R. Scott Rowe: Energy security is also expected to be of increasing importance across the globe. Our teams are working diligently to assist customers as they plan for these incremental investments. Turning to slide 6, I'll provide some perspective on the broader market outlook. Despite the disruption in the Middle East, the underlying fundamentals across our end markets remain healthy, and we continue to see meaningful growth opportunities for near and longer term. The outlook for power remains very favorable, with global electricity demand continuing to support significant investment in both traditional power and nuclear generation. In general industries, ongoing developments in sectors such as mining, pharmaceuticals, food and beverage, and water continue to represent a meaningful opportunity for growth. Within energy, utilization rates and maintenance activity across large process facilities have remained strong, with North American utilization increasing in March due to higher crack spreads.

Scott Rowe: Energy security is also expected to be of increasing importance across the globe. Our teams are working diligently to assist customers as they plan for these incremental investments. Turning to slide 6, I'll provide some perspective on the broader market outlook. Despite the disruption in the Middle East, the underlying fundamentals across our end markets remain healthy, and we continue to see meaningful growth opportunities for near and longer term. The outlook for power remains very favorable, with global electricity demand continuing to support significant investment in both traditional power and nuclear generation. In general industries, ongoing developments in sectors such as mining, pharmaceuticals, food and beverage, and water continue to represent a meaningful opportunity for growth. Within energy, utilization rates and maintenance activity across large process facilities have remained strong, with North American utilization increasing in March due to higher crack spreads.

Speaker #3: Including meaningful SKU and model reductions, we believe these actions will further sharpen our focus, improve efficiency, and strengthen our operating model. While we continue to advance our commercial excellence initiatives, we have now trained hundreds of employees and provided them with the tools and processes to build greater capability and consistency across our commercial organization.

Speaker #3: In summary, the fundamentals of our business and in-markets remain robust, and I am pleased with our execution and the progress we made during the quarter.

Speaker #3: We are taking the necessary actions to successfully navigate the current environment, and we remain confident in the near and longer-term growth opportunities we see across the business.

Speaker #3: Which we believe is creating the foundation for long-term, sustainable growth. The business system is the key to delivering on our long-term financial targets, and I couldn't be more pleased with the progress that we are making and the impact it is having on growth and margin expansion.

Speaker #3: As we move through the year, we anticipate even stronger opportunities to deliver value for our customers and our shareholders supported by our integral role in building and maintaining critical infrastructure around the world.

Speaker #3: With that, I'll turn the call over to Amy.

Speaker #1: Thank you, Scott, and good morning, everyone. Turning to slide eight, we delivered a solid first quarter performance in a complex operating environment. Our results demonstrate Flow Service durable business model and the disciplined execution of our associates.

Speaker #3: In summary, the fundamentals of our business and in-markets remain robust, and I am pleased with our execution and the progress we made during the quarter.

R. Scott Rowe: Our large installed base and ability to increase capture rates continues to support a constructive outlook for Flowserve, even as some larger project work has been slower to materialize given the geopolitical uncertainty. While chemical remains our lowest growth end market, we continue to expect modest improvement over the course of the year. Looking ahead, our 12-month project funnel remains robust and expanded across all end markets, both sequentially and year over year. We are encouraged by bookings trends exiting Q1 and by the awards we received in April. We have good visibility into commercial opportunities and believe mid-single digits bookings growth remains achievable for the full year. We also believe the current geopolitical environment could drive increased investment in energy security and diversification globally, providing another long-term tailwind for Flowserve.

Scott Rowe: Our large installed base and ability to increase capture rates continues to support a constructive outlook for Flowserve, even as some larger project work has been slower to materialize given the geopolitical uncertainty. While chemical remains our lowest growth end market, we continue to expect modest improvement over the course of the year. Looking ahead, our 12-month project funnel remains robust and expanded across all end markets, both sequentially and year over year. We are encouraged by bookings trends exiting Q1 and by the awards we received in April. We have good visibility into commercial opportunities and believe mid-single digits bookings growth remains achievable for the full year. We also believe the current geopolitical environment could drive increased investment in energy security and diversification globally, providing another long-term tailwind for Flowserve.

Speaker #1: We continue to make progress on our stated margin expansion objectives, adjusted gross margin increase 370 basis points to 37.2%, marking our 13th consecutive quarter of year-over-year adjusted gross margin expansion.

Speaker #3: With that, I'll turn the call over to Amy.

Speaker #1: Adjusted operating margin was 15.1%, up 230 basis points from the prior year period. With positive incrementals on lower sales. These results drove adjusted EPS of 85 cents and 18% increase versus the first quarter of 2025.

Speaker #1: Thank you, Scott, and good morning, everyone. Turning to slide eight, we delivered a solid first quarter performance in a complex operating environment. Our results demonstrate Flowserve's durable business model and the disciplined execution of our associates.

Speaker #1: We continue to make progress on our stated margin expansion objectives. Adjusted gross margin increased 370 basis points to 37.2%, marking our 13th consecutive quarter of year-over-year adjusted gross margin expansion.

Speaker #1: First quarter results, both reported and adjusted, were impacted by three items not originally anticipated when we provided guidance in February. First, EPS included a 19-cent benefit from NAIBA tariffs for which we have filed for refunds following the US Supreme Court's decision in February.

Operator: Good day, and welcome to the Flowserve Q1 2026 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brian Ezzell, VP of Investor Relations. Please go ahead, sir.

Speaker #1: Adjusted operating margin was 15.1%, up 230 basis points from the prior year period. With positive incrementals on lower sales. These results drove adjusted EPS of $85 and 18% increase versus the first quarter of 2025.

R. Scott Rowe: In addition, as one of the leading suppliers of flow control solutions in the Middle East, we expect to play an important role in reconstruction activities across industrial complexes as stability returns to the region. We are prepared to respond quickly and support our customers as these opportunities develop. Turning to slide 7. The Flowserve Business System continues to be a key driver of our performance. The progress we have made across operational excellence in 80/20 has helped us improve how we run the business, reduce complexity, and driven steady, sustainable margin expansion. Operational excellence continues to strengthen our core execution capabilities and improve performance across the organization. We have improved data and material flow, optimized inventory, and unlocked significant cash for the business. Increased supply chain reliability and enhanced delivery performance are also helping us better serve our customers. We continue to execute our footprint rationalization program.

Scott Rowe: In addition, as one of the leading suppliers of flow control solutions in the Middle East, we expect to play an important role in reconstruction activities across industrial complexes as stability returns to the region. We are prepared to respond quickly and support our customers as these opportunities develop. Turning to slide 7. The Flowserve Business System continues to be a key driver of our performance. The progress we have made across operational excellence in 80/20 has helped us improve how we run the business, reduce complexity, and driven steady, sustainable margin expansion. Operational excellence continues to strengthen our core execution capabilities and improve performance across the organization. We have improved data and material flow, optimized inventory, and unlocked significant cash for the business. Increased supply chain reliability and enhanced delivery performance are also helping us better serve our customers. We continue to execute our footprint rationalization program.

Brian Ezzell: Thank you, and good morning, everyone. Welcome to Flowserve's Q1 2026 business update. I'm joined by Scott Rowe, Flowserve's President and Chief Executive Officer, and Flowserve Chief Financial Officer, Amy Schwetz. Following Scott and Amy's prepared remarks, we'll open the call for questions. Turning to slide 2, our discussion will contain forward-looking statements that are based upon information available as of today. Actual results may differ due to risks and uncertainties. Refer to additional information, including our note on non-GAAP measures and our press release, earnings presentation, and SEC filings, which are available on our website. With that, I'll turn the call over to Scott.

Speaker #1: This benefit was partially offset by the 6-cent negative impact of an item arising from a taxing authority in Latin America related to prior years.

Speaker #1: In addition, we estimate that the disruption in the Middle East negatively impacted reported and adjusted EPS by approximately 6 cents. Altogether, these unanticipated items resulted in a net 7-cent benefit included in the first quarter results.

Speaker #1: First quarter results, both reported and adjusted, were impacted by three items not originally anticipated when we provided guidance in February. First, EPS included a 19-cent benefit from IEPA tariffs for which we have filed for refunds following the US Supreme Court's decision in February.

Speaker #1: Turning to sales, first quarter revenue was 1.1 billion dollars, down 7% versus the prior year period, with a 360 basis point foreign currency translation benefit and a 20 basis point contribution from acquisitions.

Speaker #1: This benefit was partially offset by the 6-cent negative impact of an item arising from a taxing authority in Latin America related to prior years.

R. Scott Rowe: Thank you, Brian Ezzell, and good morning, everyone. I'd like to begin by thanking our associates around the world for their hard work, disciplined execution and resilience in a highly dynamic environment. Our first quarter results reflect their continued focus on execution as we delivered strong adjusted operating margin expansion of 230 basis points. Adjusted earnings per share growth of 18%, including the net benefit of tariffs and other unanticipated items in the quarter that Amy will discuss in more detail. While bookings and sales were impacted by events in the Middle East, we maintain our full-year adjusted EPS outlook of $4.00 to $4.20, which at the midpoint represents 13% growth over 2025. We continue to advance our strategy and leverage the Flowserve Business System to unlock greater potential across the company.

Speaker #1: We anticipated a modest sales decline in the quarter, which was further hampered by an estimated 200 basis points from the disruption in the Middle East.

Speaker #1: Sales were also impacted by the slower start in January and February run-rate bookings that Scott mentioned earlier. Aftermarket sales grew 4% in the quarter, driven by the continued momentum in capturing more business from our large installed base.

R. Scott Rowe: Which further supports our efforts to reduce fixed costs, improve operational performance, and deliver further value for our customers. As we move into the third year of the 80/20 program, we continue to simplify our product offering across the business, including meaningful SKU and model reductions. We believe these actions will further sharpen our focus, improve efficiency, and strengthen our operating model. While we continue to advance our commercial excellence initiatives, we have now trained hundreds of employees and provided them with the tools and processes to build greater capability and consistency across our commercial organization, which we believe is creating the foundation for long-term sustainable growth. The business system is the key to delivering on our long-term financial targets. I couldn't be more pleased with the progress that we are making and the impact it is having on growth and margin expansion.

Scott Rowe: Which further supports our efforts to reduce fixed costs, improve operational performance, and deliver further value for our customers. As we move into the third year of the 80/20 program, we continue to simplify our product offering across the business, including meaningful SKU and model reductions. We believe these actions will further sharpen our focus, improve efficiency, and strengthen our operating model. While we continue to advance our commercial excellence initiatives, we have now trained hundreds of employees and provided them with the tools and processes to build greater capability and consistency across our commercial organization, which we believe is creating the foundation for long-term sustainable growth. The business system is the key to delivering on our long-term financial targets. I couldn't be more pleased with the progress that we are making and the impact it is having on growth and margin expansion.

Speaker #1: Turning to sales, first quarter revenue was $1.1 billion, down 7% versus the prior year period, with a 360 basis point foreign currency translation benefit and a 20 basis point contribution from acquisitions.

Speaker #1: The aftermarket strength was offset by an 18% decline in original equipment revenue, which was largely expected given the difficult year-over-year comparison in the first quarter as well as slower backlog conversion as nuclear becomes a larger mix of our portfolio.

Speaker #1: We anticipated a modest sales decline in the quarter. Which was further hampered by an estimated 200 basis points from the disruption in the Middle East.

R. Scott Rowe: As we announced in late March, Matthew Klopfer, who formerly led our industrial pumps business unit, has been promoted to lead the FPD division. I'm excited to have Matthew in this role where he can leverage his customer relationships, knowledge of the Flowserve Business System, and international experience to continue driving strong performance for the division. Let's turn to bookings on slide 4. Bookings in Q1 were $1.15 billion, down 6% from the prior year period. Our Q1 book-to-bill was 1.07 times. We delivered healthy aftermarket bookings of $680 million in the quarter. As anticipated, aftermarket was down modestly on a year-over-year basis against a very strong prior year comparison that included a large nuclear order.

Speaker #1: Turning to slide nine, both segments benefited from strong execution under the Flow Service business system, and we continue to see tangible improvement from our 80/20 and operational excellence initiatives.

Speaker #1: In FPV, we delivered another quarter of strong margin expansion with adjusted gross margin up 300 basis points year-over-year to 37.7%, and adjusted operating margin up 140 basis points to 19.1%.

R. Scott Rowe: In summary, the fundamentals of our business and end markets remain robust, and I am pleased with our execution and the progress we made during the quarter. We are taking the necessary actions to successfully navigate the current environment, and we remain confident in the near and longer term growth opportunities we see across the business. As we move through the year, we anticipate even stronger opportunities to deliver value for our customers and our shareholders, supported by our integral role in building and maintaining critical infrastructure around the world. With that, I'll turn the call over to Amy.

Scott Rowe: In summary, the fundamentals of our business and end markets remain robust, and I am pleased with our execution and the progress we made during the quarter. We are taking the necessary actions to successfully navigate the current environment, and we remain confident in the near and longer term growth opportunities we see across the business. As we move through the year, we anticipate even stronger opportunities to deliver value for our customers and our shareholders, supported by our integral role in building and maintaining critical infrastructure around the world. With that, I'll turn the call over to Amy.

Speaker #1: FPV bookings were 774 million dollars, down 9% versus the prior year. Revenue was 745 million dollars, down 5%, as lower shippable original equipment backlog more than offset the 5% growth in aftermarket.

Speaker #1: Turning to slide nine, both segments benefited from strong execution under the Flowserve business system. And we continue to see tangible improvement from our 80/20 and operational excellence initiatives.

R. Scott Rowe: On a sequential basis, aftermarket bookings were in line and represented the eighth consecutive quarter above $600 million. Our focus on expanding the aftermarket business continues to deliver results as we drive higher capture rates across our installed base. Within our original equipment business, January and February started with softer than expected bookings, largely related to our run rate MRO business and some smaller projects pushing out to later in the year. We saw these trends improve in March back to levels we anticipated with strong commercial activity in the market. The softer start to the quarter, coupled with dynamics in the Middle East, resulted in lower original equipment bookings in the quarter.

Speaker #1: In FPD, we delivered another quarter of strong margin expansion with adjusted gross margin up 300 basis points year-over-year to 37.7%, and adjusted operating margin up 140 basis points to 19.1%.

Speaker #1: FPV exited the quarter with a book-to-bill of 1.04 times. In FCD, adjusted gross margin was 35.2%. Up 480 basis points year-over-year. And adjusted operating margin was 15.9%, an increase of 370 basis points.

Amy Schwetz: Thank you, Scott. Good morning, everyone. Turning to slide 8. We delivered a solid Q1 performance in a complex operating environment. Our results demonstrate Flowserve's durable business model and the disciplined execution of our associates. We continue to make progress on our stated margin expansion objectives. Adjusted gross margin increased 370 basis points to 37.2%, marking our 13th consecutive quarter of year-over-year adjusted gross margin expansion. Adjusted operating margin was 15.1%, up 230 basis points from the prior year period, with positive incrementals on lower sales. These results drove adjusted EPS of $0.85, an 18% increase versus the Q1 of 2025. Q1 results, both reported and adjusted, were impacted by 3 items not originally anticipated when we provided guidance in February.

Speaker #1: FPD bookings were 774 million dollars, down 9% versus the prior year. Revenue was 745 million dollars, down 5%, as lower shippable original equipment backlog more than offset the 5% growth in aftermarket.

Speaker #1: FCD remains focused on margin improvement with the first quarter profitability highlighting continued progress. FCD bookings were 374 million dollars, roughly flat with the prior year, as 10% growth in aftermarket bookings was offset by a declining decline in original equipment awards.

Speaker #1: FPD exited the quarter with a book-to-bill of 1.04 times. In FCD, adjusted gross margin was 35.2%. Up 480 basis points year-over-year. And adjusted operating margin was 15.9%, an increase of 370 basis points.

R. Scott Rowe: I'll provide more insight on the Middle East in a moment, though it's important to note that absent the estimated $50 million headwind related to customer delays in the region, bookings for the quarter were largely in line with our expectations. Our focus on diversification within the 3D strategy has positioned Flowserve to manage through dynamic market conditions better than ever. In the quarter, we received more than $110 million of nuclear awards, including 2 projects larger than $20 million each. Nuclear and traditional power continue to represent attractive strategic growth markets for us. Turning to Slide 5. I'll provide an update on how we have been responding to the situation in the Middle East. Our number one priority is employee safety and supporting our roughly 800 associates across manufacturing facilities and QRC locations in the region.

Speaker #1: FCD revenue was 328 million dollars, down 10% versus the prior year period, with the majority driven by 80/20 activities. FCD ended the quarter with a book-to-bill of 1.14 times.

Speaker #1: Turning to cash flow on slide 10, cash from operations was a use of 43 million dollars in the first quarter. This result was in line with our expectations and consistent with 2025 performance, and was primarily driven by temporary seasonal working capital requirements along with modest headwinds from the Middle East.

Amy Schwetz: First, EPS included a $0.19 benefit from IEEPA tariffs, for which we have filed for refunds following the U.S. Supreme Court's decision in February. This benefit was partially offset by the -$0.06 impact of an item arising from a taxing authority in Latin America related to prior years. In addition, we estimate that the disruption in the Middle East negatively impacted reported and adjusted EPS by approximately -$0.06. Altogether, these unanticipated items resulted in a net $0.07 benefit included in the Q1 results. Turning to sales. Q1 revenue was $1.1 billion, down 7% versus the prior year period, with a 360 basis point foreign currency translation benefit and a 20 basis point contribution from acquisitions.

Speaker #1: FCD revenue was 328 million dollars, down 10% versus the prior year period, with the majority driven by 80/20 activities. FCD ended the quarter with a book-to-bill of 1.14 times.

Speaker #1: First quarter cash flow is typically our lowest quarter of the year, and we expect improvement through the balance of 2026. We remain focused on working capital management and expect full-year free cash flow conversion of 90% or more of a adjusted net earnings.

R. Scott Rowe: I'm proud of the resilience and focus our teams have displayed as they continue to deliver for our customers. We are taking the necessary actions to manage through the near-term disruption while positioning the business to respond effectively as we see incremental demand. Q1 sales and earnings were -impacted by disruptions in the region, largely driven by the shutdown of the logistics system and the inability to get to customer sites at the height of the conflict. Conditions in the region remain dynamic, our ability to operate has improved under the recent ceasefire, with temporary work pauses implemented as needed based on safety considerations. We are proactively adapting our supply chain to address transportation delays, inflationary pressures, and the potential for broader disruption.

Speaker #1: Our balance sheet remains very healthy, with net leverage of approximately 1.2 times at quarter end and improvement versus the year-ago comparison providing significant flexibility for capital allocation.

Speaker #1: Along with modest headwinds from the Middle East. First quarter cash flow is typically our lowest quarter of the year, and we expect improvement through the balance of 2026.

Speaker #1: In addition, in April, we amended our credit agreement, extending the maturity by five years and increasing revolver capacity to further enhance our financial flexibility.

Speaker #1: We remain focused on working capital management and expect full-year free cash flow conversion of 90% or more of a adjusted net earnings. Our balance sheet remains very healthy, with net leverage of approximately 1.2 times at quarter end and improvement versus the year-ago comparison providing significant flexibility for capital allocation.

Speaker #1: Turning to slide 11, we remain confident in our ability to expand profits and create value for our shareholders in an evolving environment. Our end markets remain robust overall, and while the Middle East conflict may cause some short-term fluctuations, ongoing investment in the region along with rebuild activity creates meaningful opportunity.

Amy Schwetz: We anticipated a modest sales decline in the quarter, which was further hampered by an estimated 200 basis points from the disruption in the Middle East. Sales were also impacted by the slower start in January and February run rate bookings that Scott mentioned earlier. Aftermarket sales grew 4% in the quarter, driven by the continued momentum in capturing more business from our large installed base. The aftermarket strength was offset by an 18% decline in original equipment revenue, which was largely expected given the difficult year-over-year comparison in the first quarter, as well as slower backlog conversion as nuclear becomes a larger mix of our portfolio. Turning to slide 9. Both segments benefited from strong execution under the Flowserve Business System. We continued to see tangible improvement from our 80/20 and operational excellence initiatives.

R. Scott Rowe: The progress we have made through the Flowserve Business System over the past several years has enabled us to operate with greater discipline, better visibility, and more flexibility across our global network. We are dynamically repositioning the supply chain, leveraging our broader supply base and utilizing our regional and global footprint to respond quickly as conditions evolve. As we look forward, we have assumed that these disruptions seen in Q1 continue for some period. Over time, we see significant opportunity to support our customers' critical infrastructure needs. We have a large installed base across the region and a legacy of strong customer relationships. We anticipate that asset restarts and rebuilding activity will begin later in the year, with accelerated opportunities for additional infrastructure investment across the region.

Speaker #1: In addition, in April, we amended our credit agreement, extending the maturity by five years and increasing revolver capacity to further enhance our financial flexibility.

Speaker #1: As it relates to our full-year outlook, our guidance assumes the current Middle East situation continues, with the key assumptions including that military operations do not materially escalate, that we are able to maintain operations and that the flow of materials into our Middle East operations continues albeit with some delays.

Speaker #1: Turning to slide 11, we remain confident in our ability to expand profits and create value for our shareholders in an evolving environment. Our end markets remain robust overall.

Speaker #1: And while the Middle East conflict may cause some short-term fluctuations, ongoing investment in the region, along with rebuild activity, creates meaningful opportunity. As it relates to our full-year outlook, our guidance assumes the current Middle East situation continues.

Speaker #1: And that secondary supply chain disruptions do not materialize. We recognize the potential for a much wider range of outcomes from the conflict that could have implications on our business and our organization expects to remain nimble as we navigate the coming weeks and months.

Amy Schwetz: In FPD, we delivered another quarter of strong margin expansion with adjusted gross margin up 300 basis points year over year to 37.7% and adjusted operating margin up 140 basis points to 19.1%. FPD bookings were $774 million, down 9% versus the prior year. Revenue was $745 million, down 5%, as lower shippable original equipment backlog more than offset the 5% growth in aftermarket. FPD exited the quarter with a book-to-bill of 1.04 times. In FCD, adjusted gross margin was 35.2%, up 480 basis points year over year, and adjusted operating margin was 15.9%, an increase of 370 basis points.

Speaker #1: With the key assumptions including that military operations do not materially escalate, that we are able to maintain operations and that the flow of materials into our Middle East operations continues, albeit with some delays.

Speaker #1: With this backdrop, we now expect organic sales to range from a 1% decline to a 2% increase resulting in our total sales growth outlook of 3% to 6%.

R. Scott Rowe: Energy security is also expected to be of increasing importance across the globe. Our teams are working diligently to assist customers as they plan for these incremental investments. Turning to slide six, I'll provide some perspective on the broader market outlook. Despite the disruption in the Middle East, the underlying fundamentals across our end markets remain healthy. We continue to see meaningful growth opportunities for near and longer term. The outlook for power remains very favorable, with global electricity demand continuing to support significant investment in both traditional power and nuclear generation. In general industries, ongoing developments in sectors such as mining, pharmaceuticals, food and beverage, and water continue to represent a meaningful opportunity for growth. Within energy, utilization rates and maintenance activity across large process facilities have remained strong, with North American utilization increasing in March due to higher crack spreads.

Speaker #1: As a reminder, total sales growth includes approximately 300 basis points of benefit from acquisitions including the anticipated mid-year closure of the trillium valves acquisition.

Speaker #1: At the same time, despite a more challenging Middle East outlook, we are reaffirming our expectation for approximately 100 basis points of adjusted operating margin expansion as well as our adjusted EPS guidance of 4 to 420 per share for the full year.

Speaker #1: With this backdrop, we now expect organic sales to range from a 1% decline to a 2% increase resulting in our total sales growth outlook of 3% to 6%.

Speaker #1: Our EPS guidance reflects the net impact of the first quarter unanticipated items that I referenced earlier. In addition, our outlook for the balance of the year also includes roughly 7 cents of expected impact from the ongoing conflict in the Middle East contemplating modestly lower bookings while the conflict continues and some modest delay in logistics timelines potentially offset by rebuild activity.

Speaker #1: As a reminder, total sales growth includes approximately 300 basis points of benefit from acquisitions including the anticipated mid-year closure of the Trillium Valves acquisition.

Amy Schwetz: FCD remains focused on margin improvement, with the Q1 profitability highlighting continued progress. FCD bookings were $374 million, roughly flat with the prior year, as 10% growth in aftermarket bookings was offset by a decline in original equipment awards. FCD revenue was $328 million, down 10% versus the prior year period, with the majority driven by 80/20 activities. FCD ended the Q1 with a book-to-bill of 1.14 times. Turning to cash flow on slide 10. Cash from operations was a use of -$43 million in the Q1. This result was in line with our expectations and consistent with 2025 performance, and was primarily driven by temporary seasonal working capital requirements, along with modest headwinds from the Middle East.

R. Scott Rowe: Our large installed base and ability to increase capture rates continues to support a constructive outlook for Flowserve, even as some larger project work has been slower to materialize given the geopolitical uncertainty. While chemical remains our lowest growth end market, we continue to expect modest improvement over the course of the year. Looking ahead, our 12-month project funnel remains robust and expanded across all end markets, both sequentially and year-over-year. We are encouraged by bookings trends exiting Q1 and by the awards we received in April. We have good visibility into commercial opportunities and believe mid-single-digit bookings growth remains achievable for the full year. We also believe the current geopolitical environment could drive increased investment in energy security and diversification globally, providing another long-term tailwind for Flowserve.

Speaker #1: At the midpoint, our guidance represents another year of double-digit growth versus prior year's adjusted EPS. In terms of quarterly phasing, we expect original equipment bookings to accelerate in the second half of the year.

Speaker #1: Our EPS guidance reflects the net impact of the first quarter unanticipated items that I referenced earlier. In addition, our outlook for the balance of the year also includes roughly 7 cents of expected impact from the ongoing conflict in the Middle East, contemplating modestly lower bookings while the conflict continues, and some modest delay in logistics timelines potentially offset by rebuild activity.

Speaker #1: Driven by increased project activity and rising nuclear investment. And the potential for rebuild activity in the Middle East. And we remain confident in our ability to expand aftermarket capture.

Speaker #1: As Scott noted, we came into the year anticipating increased Middle East project bookings in the second half of 2026. It's too early to know exactly how the conflict in the Middle East could impact these assumptions.

Speaker #1: To date, customers have indicated projects are expected to move forward, though we know some projects could slip to 2027. That said, we believe rebuild activity could provide more momentum through the balance of the year.

Amy Schwetz: Q1 cash flow is typically our lowest quarter of the year, and we expect improvement through the balance of 2026. We remain focused on working capital management and expect full year free cash flow conversion of 90% or more of adjusted net earnings. Our balance sheet remains very healthy, with net leverage of approximately 1.2 times at quarter end, an improvement versus the year ago comparison, providing significant flexibility for capital allocation. In addition, in April, we amended our credit agreement, extending the maturity by 5 years and increasing revolver capacity to further enhance our financial flexibility. Turning to slide 11. We remain confident in our ability to expand profits and create value for our shareholders in an evolving environment.

R. Scott Rowe: In addition, as one of the leading suppliers of flow control solutions in the Middle East, we expect to play an important role in reconstruction activities across industrial complexes as stability returns to the region. We are prepared to respond quickly and support our customers as these opportunities develop. Turning to slide seven. The Flowserve Business System continues to be a key driver of our performance. The progress we have made across operational excellence in 80/20 has helped us improve how we run the business, reduce complexity, and driven steady, sustainable margin expansion. Operational excellence continues to strengthen our core execution capabilities and improve performance across the organization. We have improved data and material flow, optimized inventory, and unlocked significant cash for the business. Increased supply chain reliability and enhanced delivery performance are also helping us better serve our customers. We continue to execute our footprint rationalization program.

Speaker #1: Importantly, we view any disruption as relatively short-term in nature with no anticipated impact to the underlying demand environment or the opportunity to deliver on our 2030 growth and earnings targets.

Speaker #1: As Scott noted, we came into the year anticipating increased Middle East project bookings in the second half of 2026. A too early to know exactly how the conflict in the Middle East could impact these assumptions.

Speaker #1: Quarterly, year-over-year performance will accelerate as we move through the year, and we estimate the previously announced trillium acquisition will close near mid-year. We continue to anticipate first-half revenue will be more impacted by headwinds from 80/20 and backlog composition.

Speaker #1: Each of which will begin to abate in the second half. Given the headwind from the Middle East, Q2 sales are expected to be down low to mid-single digits in comparison to prior year.

Amy Schwetz: Our end markets remain robust overall, and while the Middle East conflict may cause some short-term fluctuations, ongoing investment in the region, along with rebuild activity, creates meaningful opportunity. As it relates to our full-year outlook, our guidance assumes the current Middle East situation continues, with the key assumptions including that military operations do not materially escalate, that we are able to maintain operations, and that the flow of materials into our Middle East operations continues, albeit with some delays, and that secondary supply chain disruptions do not materialize. We recognize the potential for a much wider range of outcomes from the conflict that could have implications on our business, and our organization expects to remain nimble as we navigate the coming weeks and months.

Speaker #1: Quarterly, year-over-year performance will accelerate as we move through the year. And we estimate the previously announced Trillium acquisition will close near mid-year. We continue to anticipate first-half revenue will be more impacted by headwinds from 80/20 and backlog composition.

Speaker #1: And second quarter earnings are expected to be similar to the first quarter. Let's turn to slide 12 to close out the prepared remarks. We delivered strong execution in the first quarter in a dynamic operating environment.

R. Scott Rowe: Which further supports our efforts to reduce fixed costs, improve operational performance, and deliver further value for our customers. As we move into the third year of the 80/20 program, we continue to simplify our product offering across the business, including meaningful SKU and model reductions. We believe these actions will further sharpen our focus, improve efficiency, and strengthen our operating model. While we continue to advance our commercial excellence initiatives, we have now trained hundreds of employees and provided them with the tools and processes to build greater capability and consistency across our commercial organization, which we believe is creating the foundation for long-term sustainable growth. The business system is the key to delivering on our long-term financial targets, and I couldn't be more pleased with the progress that we are making and the impact it is having on growth and margin expansion.

Speaker #1: We are continuing to build on the momentum of the flow-served business system, with the growth strategy aligned to powerful global megatrends that we believe support long-term demand for our products and solutions.

Speaker #1: Each of which will begin to be in the second half. Given the headwinds from the Middle East, Q2 sales are expected to be down low to mid-single digits in comparison to prior year.

Speaker #1: At the same time, we are proactively managing the situation in the Middle East while remaining focused on serving our customers and executing with discipline across the 2026 outlook calls for double-digit adjusted EPS growth, and we are continuing to make meaningful progress towards our 2030 financial targets.

Amy Schwetz: With this backdrop, we now expect organic sales to range from a 1% decline to a 2% increase, resulting in our to-total sales growth outlook of 3% to 6%. As a reminder, total sales growth includes approximately 300 basis points of benefit from acquisitions, including the anticipated mid-year closure of the Trillium Valves acquisition. At the same time, despite a more challenging Middle East outlook, we are reaffirming our expectation for approximately 100 basis points of adjusted operating margin expansion, as well as our adjusted EPS guidance of $4 to 4.20 per share for the full year. Our EPS guidance reflects the net impact of the Q1 unanticipated items I referenced earlier.

Speaker #1: We are continuing to build on the momentum of the Flowserve business system, with the growth strategy aligned to powerful global megatrends that we believe support long-term demand for our products and solution.

Speaker #1: With that, I'll turn the call back to the operator for Q&A.

Speaker #2: Thank you. And if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

R. Scott Rowe: In summary, the fundamentals of our business and end markets remain robust, and I am pleased with our execution and the progress we made during the quarter. We are taking the necessary actions to successfully navigate the current environment, and we remain confident in the near and longer-term growth opportunities we see across the business. As we move through the year, we anticipate even stronger opportunities to deliver value for our customers and our shareholders, supported by our integral role in building and maintaining critical infrastructure around the world. With that, I'll turn the call over to Amy.

Speaker #1: At the same time, we are proactively managing the situation in the Middle East, where we focus on serving our customers and executing with discipline across the business.

Speaker #2: Once again, that is star one if you would like to ask a question. We'll take our first question from Mike Holleran with Baird. And Mikey might be on mute.

Speaker #1: Looking ahead, our 2026 outlook calls for double-digit adjusted EPS growth, and we are continuing to make meaningful progress towards our 2030 financial targets. With that, I'll turn the call back to the operator for Q&A.

Speaker #3: Hello. Oh, sorry about that. Apologies. Hey, thanks for taking the questions here. So a couple ones. First, the wholesale channel versus retail channel. Maybe talk a little bit about the dynamic a little more detail about the dynamic going on there, how you feel your position.

Speaker #2: Yes, we can hear you.

Speaker #2: Thank you. And if you would like to ask a question, please signal by pressing star. On your telephone keypad. If you are using a speakerphone, make sure the function is turned off to allow your signal to reach our equipment.

Amy Schwetz: Thank you, Scott, and good morning, everyone. Turning to slide 8. We delivered a solid Q1 performance in a complex operating environment. Our results demonstrate Flowserve's durable business model and the disciplined execution of our associates. We continue to make progress on our stated margin expansion objectives. Adjusted gross margin increased 370 basis points to 37.2%, marking our 13th consecutive quarter of year-over-year adjusted gross margin expansion. Adjusted operating margin was 15.1%, up 230 basis points from the prior year period, with positive incrementals on lower sales. These results drove adjusted EPS of $0.85, an 18% increase versus the Q1 of 2025. Q1 results, both reported and adjusted, were impacted by three items not originally anticipated when we provided guidance in February.

Amy Schwetz: In addition, our outlook for the balance of the year also includes roughly $0.07 of expected impact from the ongoing conflict in the Middle East, contemplating modestly lower bookings while the conflict continues and some modest delay in logistics timelines, potentially offset by rebuild activity. At the midpoint, our guidance represents another year of double-digit growth versus prior year's adjusted EPS. In terms of quarterly phasing, we expect original equipment bookings to accelerate in the H2 of the year, driven by increased project activity and rising nuclear investment and the potential for rebuild activity in the Middle East. We remain confident in our ability to expand aftermarket capture. As Scott noted, we came into the year anticipating increased Middle East project bookings in the H2 of 2026. It is too early to know exactly how the conflict in the Middle East could impact these assumptions.

Speaker #2: Once again, that is star one if you would like to ask a question. We'll take our first question from Mike Holleran with Baird. And Mike, you might be on mute.

Speaker #3: And I know you referenced potentially doing a little bit more work on that side. What does that entail and how do you think you can make sure you're capitalizing on the ongoing trend?

Speaker #2: Yes, we can hear you.

Speaker #4: Yeah, Mike, I think you broke up at the beginning of that question. Can you say that again?

Speaker #3: Oh, sorry about that. Apologies. Hey, thanks for taking the questions here. So a couple of ones. First, the wholesale channel versus retail channel. Maybe talk a little bit about the dynamic a little more detail about the dynamic going on there, how you feel your position.

Speaker #3: Yeah, sorry. Apologies. Apologies. Let me reframe the question. Orders, mid-single digit for the year. How do you get comfortable with that uptick in the back half of the year?

Speaker #3: And I know you referenced potentially doing a little bit more work on that side. What does that entail and how do you think you can make sure you're capitalizing on the ongoing trend?

Speaker #3: All else equal.

Speaker #4: Yeah, no, that's a really good question.

Speaker #3: Yeah, more importantly, is it as simple as if you strip out first quarter, second quarter, first two months of the year? Just strip those out?

Speaker #4: Yeah, Mike, I think you broke up at the beginning of that question. Can you say that again?

Speaker #3: Yeah. Sorry. Apologies. Apologies. Let me reframe the question. Orders, mid-single digit for the year. How do you get comfortable with that uptick in the back half of the year?

Speaker #3: You're kind of on trend outside of Middle East. Given what you saw in my paper.

Amy Schwetz: EPS included a $0.19 benefit from IEEPA tariffs, for which we have filed for refunds following the Supreme Court of the United States' decision in February. This benefit was partially offset by the -$0.06 impact of an item arising from a taxing authority in Latin America related to prior years. We estimate that the disruption in the Middle East negatively impacted reported and adjusted EPS by approximately $0.06. These unanticipated items resulted in a net $0.07 benefit included in the Q1 results. Turning to sales. Q1 revenue was $1.1 billion, down 7% versus the prior year period, with a 360 basis point foreign currency translation benefit and a 20 basis point contribution from acquisitions.

Amy Schwetz: To date, customers have indicated projects are expected to move forward, though we know some projects could slip to 2027. That said, we believe rebuild activity could provide more momentum through the balance of the year. Importantly, we view any disruption as relatively short term in nature with no anticipated impact to the underlying demand environment or the opportunity to deliver on our 2030 growth and earnings targets. Quarterly, year-over-year performance will accelerate as we move through the year, and we estimate the previously announced Trillium acquisition will close near mid-year. We continue to anticipate H1 revenue will be more impacted by headwinds from 80/20 and backlog composition, each of which will begin to abate in the H2.

Speaker #4: Yeah, so I can absolutely talk through that. And it's a great question. And we talked about January and February being a little bit soft on the book and ship, but I think on a very positive note, our March numbers were in line in expectations.

Speaker #3: All else equal.

Speaker #4: Yeah. No, that's a really good question.

Speaker #3: Yeah. More importantly, is it as simple as if you strip out first quarter, second quarter, first two months of the year? Just strip those out.

Speaker #4: And in the prepared remarks, I talked about that we had a nice we're seeing nice activity in that kind of in-and-out business in April.

Speaker #4: And so that gives us a lot of confidence as we kind of continue through the year here that we think we have slightly elevated bookings.

Speaker #3: You're kind of on trend outside of Middle East. Given what you saw in March, April.

Speaker #4: And then the other aspect here that's super important is our project funnel. And in my prepared remarks, I talked about the project funnel being up year-on-year and sequentially.

Speaker #4: Yeah, so I can absolutely talk through that. And it's a great question. We talked about January and February being a little bit soft on the book and ship, but I think, on a very positive note, our March numbers were in line with expectations.

Speaker #4: And that project funnel is across all of our in-markets. Now, obviously, it is an incredibly dynamic situation. And I would say on the project timing, there is so much uncertainty in terms of what could happen here.

Speaker #4: And in the prepared remarks, I talked about that we had a nice we're seeing nice activity in that kind of in-and-out business in April.

Speaker #4: And so that gives us a lot of confidence as we kind of continue through the year here that we think we have slightly elevated bookings.

Speaker #4: But I would say we're seeing projects move forward. We're not seeing them get canceled. And our teams, when we talk about a bottoms-up roll-up, are very confident in the customer discussions that these go forward at some point in the year.

Amy Schwetz: We anticipated a modest sales decline in the quarter, which was further hampered by an estimated 200 basis points from the disruption in the Middle East. Sales were also impacted by the slower start in January and February run rate bookings that Scott mentioned earlier. Aftermarket sales grew 4% in the quarter, driven by the continued momentum in capturing more business from our large installed base. The aftermarket strength was offset by an 18% decline in original equipment revenue, which was largely expected given the difficult year-over-year comparison in the Q1, as well as slower backlog conversion as nuclear becomes a larger mix of our portfolio. Turning to slide 9. Both segments benefited from strong execution under the Flowserve Business System, and we continued to see tangible improvement from our 80/20 and operational excellence initiatives.

Amy Schwetz: Given the headwind from the Middle East, Q2 sales are expected to be down low to mid-single digits in comparison to prior year, and Q2 earnings are expected to be similar to Q1. Let's turn to slide 12 to close out the prepared remarks. We delivered strong execution in Q1 in a dynamic operating environment. We are continuing to build on the momentum of the Flowserve Business System with a growth strategy aligned to powerful global mega trends that we believe support long-term demand for our products and solutions. At the same time, we are proactively managing the situation in the Middle East while remaining focused on serving our customers and executing with discipline across the business.

Speaker #4: And then the other aspect here that's super important is our project funnel. In my prepared remarks, I talked about the project funnel being up year on year and sequentially.

Speaker #4: And so I would expect more of a back half-weighted project year for us, which is what we talked about in the fourth quarter earnings call.

Speaker #4: But overall, today, we continue to feel confident in the mid-single digits bookings growth year over year.

Speaker #3: So the follow-up is maybe frame that in terms of next year. Now, obviously, it's still early. I'm not trying to give guidance for next year.

Speaker #3: But I think the loose question is when you sit here today and you compare yourself to three months ago, four months ago, how do you feel about 27, 28 today relative to before?

Speaker #4: And so I would expect more of a back half weighted project year for us, which is what we talked about in the fourth quarter earnings call.

Speaker #4: But in single digits bookings growth year over year.

Speaker #3: I mean, it seems like you were thinking about this as maybe some incremental opportunity once the dust settles. Plus, incremental confidence in what you're doing internally.

Speaker #3: So the follow-up is maybe frame that in terms of next year. Now, obviously, it's still early. I'm not trying to give guidance for next year.

R. Scott Rowe: Looking ahead, our 2026 outlook calls for double-digit adjusted EPS growth, and we are continuing to make meaningful progress towards our 2030 financial targets. With that, I'll turn the call back to the operator for Q&A.

Amy Schwetz: Looking ahead, our 2026 outlook calls for double-digit adjusted EPS growth, and we are continuing to make meaningful progress towards our 2030 financial targets. With that, I'll turn the call back to the operator for Q&A.

Speaker #3: But I'd like to understand because obviously, lots of puts and takes this year, lots of moving pieces. As we get through this, how does this all bounce out?

Speaker #3: But I think the loose question is when you compare yourself to three months ago or four months ago, how do you feel about 2027, 2028 today relative to before?

Speaker #4: Yeah, sure. It was obviously a very noisy quarter with the Middle East disruption and some of the geopolitical activities. With that said, resolution in the Middle East is important to all of my comments here.

Operator: Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one if you would like to ask a question. We'll take our first question from Michael Halloran with Baird.

Speaker #3: I mean, it seems like you were thinking about this as maybe some incremental opportunity once the dust settles, plus incremental confidence in what you're doing internally.

Speaker #4: And so Amy talked about our assumption that we'll be impacted in Q2, but at some point, we return to somewhat of a more normal environment.

Speaker #3: But I understand because obviously, lots of puts and takes this year, lots of moving pieces. As we get through this, how does this all bounce out?

Speaker #4: When and if that happens, then we feel really good about our continued progress toward our long-term 2030 targets that we put out at the end of Q4.

Speaker #4: Yeah. Sure. It was obviously a very noisy quarter with the Middle East disruption and some of the geopolitical activities. With that said, resolution in the Middle East is important to all of my comments here.

Speaker #4: And that included mid-single digit growth. It included continued margin expansion every year. And so today, despite all of the dynamics in Q1, I would say the year is shaping up to position us very nicely into 2027 and on a nice trajectory and path to achieve our 2030 goals.

Michael Halloran: Hello?

Mike Halloran: Hello?

Operator: Be on mute. Yes, we can hear you.

Michael Halloran: Oh, sorry about that. Apologies. Hey, thanks for taking the questions here. A couple ones. First, the wholesale channel versus retail channel. You know, maybe talk a little bit about the dynamic, a little more detail about the dynamic going on there, how you feel your position. And I know you referenced, you know, potentially doing a little bit more work on that side. What does that entail, and how do you think you can make sure you're capitalizing on the ongoing trend?

Mike Halloran: Oh, sorry about that. Apologies. Hey, thanks for taking the questions here. A couple ones. First, the wholesale channel versus retail channel. You know, maybe talk a little bit about the dynamic, a little more detail about the dynamic going on there, how you feel your position. And I know you referenced, you know, potentially doing a little bit more work on that side. What does that entail, and how do you think you can make sure you're capitalizing on the ongoing trend?

Speaker #4: And so Amy talked about our assumption that we'll be impacted in Q2, but at some point, we return to somewhat of a more normal environment.

Speaker #4: When, and if that happens, then we'll know about our continued progress or our long-term targets that we set out at the end of Q4.

Amy Schwetz: FCD remains focused on margin improvement, with Q1 profitability highlighting continued progress. FCD bookings were $374 million, roughly flat with the prior year, as 10% growth in aftermarket booking was offset by a decline in original equipment awards. FCD revenue was $328 million, down 10% versus the prior year period, with the majority driven by 80/20 activities. FCD ended Q1 with a book-to-bill of 1.14 times. Turning to cash flow on slide 10. Cash from operations was a use of -$43 million in Q1. This result was in line with our expectations and consistent with 2025 performance, was primarily driven by temporary seasonal working capital requirements, along with modest headwinds from the Middle East.

Speaker #5: Yeah, and the other thing just to add to that, Mike, a little bit is muted in the numbers because of original equipment in the first quarter.

Speaker #4: And that included single-digit growth, included continued margin expansion every year. And today, despite all of the dynamics, the year is shaping up to position us very nicely in 2027.

Speaker #5: We saw really nice bookings growth in both segments on the aftermarket side. And our continuing to push that aftermarket business and gaining strength there only serves us as we look out into future years.

R. Scott Rowe: Yeah, Mike, I think you broke up at the beginning of that question. Can you say that again?

Scott Rowe: Yeah, Mike, I think you broke up at the beginning of that question. Can you say that again?

Michael Halloran: Yeah, sorry. Apologies. Apologies. Let me reframe the question. Orders mid-single digit for the year. How do you get comfortable with that uptick in the back half of the year, all else equal?

Mike Halloran: Yeah, sorry. Apologies. Apologies. Let me reframe the question. Orders mid-single digit for the year. How do you get comfortable with that uptick in the back half of the year, all else equal?

Speaker #4: And on a nice trajectory and path.

Speaker #3: Thank you. Appreciate it.

Speaker #5: And the other thing, just to add to that, Mike, is fit in the numbers because of the original equipment this quarter. We saw really nice growth in both segments on the aftermarket side.

Speaker #4: Thanks, Mike.

Speaker #2: We'll now take our next question from Andy Kaplowitz with Citi.

Speaker #6: Hey, good morning, everyone. This is Jose Ahn for Andy. Good morning.

R. Scott Rowe: Yeah. No, that's a really good question.

Scott Rowe: Yeah. No, that's a really good question.

Speaker #5: And our continuing to push that aftermarket business and gaining strength are only served us as we look out into future years.

Michael Halloran: Yeah, more importantly, is it as simple as if you strip out Q1, Q2, first 2 months of the year, just strip those out, you're kind of on trend outside of Middle East, given what you saw in March?

Mike Halloran: Yeah, more importantly, is it as simple as if you strip out Q1, Q2, first 2 months of the year, just strip those out, you're kind of on trend outside of Middle East, given what you saw in March?

Speaker #3: Good morning, Jose.

Speaker #6: Good morning. Maybe to start, with the 10% organic revenue decline in the quarter, that was a larger drop than we were forecasting. On the slide, you mentioned that Middle East disruptions impacted Q1 sales by 2%.

Speaker #3: Got it.

Speaker #2: We'll take our next question from Andy Capital.

R. Scott Rowe: Yeah. I can absolutely talk through that, you know, it's a great question. You know, we talked about January and February being a little bit soft on the book and ship, but I think on a very positive note, our March numbers were in line in expectations. In the prepared remarks, I talked about that we had a nice, you know, we're seeing nice activity in that kind of in and out business in April. That gives us a lot of confidence as we kind of continue through the year here that we think we have slightly elevated bookings. The other aspect here that's super important is our project funnel. In my prepared remarks, I talked about the project funnel being up year on year and sequentially, and that project funnels across all of our end markets.

Scott Rowe: Yeah. I can absolutely talk through that, you know, it's a great question. You know, we talked about January and February being a little bit soft on the book and ship, but I think on a very positive note, our March numbers were in line in expectations. In the prepared remarks, I talked about that we had a nice, you know, we're seeing nice activity in that kind of in and out business in April. That gives us a lot of confidence as we kind of continue through the year here that we think we have slightly elevated bookings. The other aspect here that's super important is our project funnel. In my prepared remarks, I talked about the project funnel being up year on year and sequentially, and that project funnels across all of our end markets.

Amy Schwetz: Q1 cash flow is typically our lowest quarter of the year, and we expect improvement through the balance of 2026. We remain focused on working capital management and expect full-year free cash flow conversion of 90% or more of adjusted net earnings. Our balance sheet remains very healthy, with net leverage of approximately 1.2x at quarter end, an improvement versus the year ago comparison, providing significant flexibility for capital allocation. In addition, in April, we amended our credit agreement, extending the maturity by 5 years and increasing revolver capacity to further enhance our financial flexibility. Turning to slide 11. We remain confident in our ability to expand profits and create value for our shareholders in an evolving environment.

Speaker #6: Hey, everyone. This is Leon.

Speaker #6: And I think, Amy, you talked about some lower book-to-ship impacts in January, February, as well as some 80/20 walk-away impacts. But it'd be helpful if you guys could walk through each of those to bridge the decline in the quarter as well as how you're thinking about those dynamics carrying over into Q2.

Speaker #4: Okay. Great.

Speaker #3: Good morning, Jose.

Speaker #6: Good morning. Maybe to start with the 10% organic revenue decline in the quarter, that was a larger drop than we were forecasting. On the slide, you mentioned that Middle East disruptions impact Q1 sales by 2%.

Speaker #5: Yeah, so maybe just to start, a modest decline was expected for us in the quarter. We knew that kind of coming into the year.

Speaker #6: And I think, Amy, you talked about some slower book-to-ship impacts in January, February, as well as some 80/20 walk-away impacts. But it'd be helpful if you guys could walk through each of those to bridge the quarter.

Speaker #5: But we were further impacted by the couple of things that you mentioned, the Middle East disruption and a softer start to our run rate MRO business that was that occurred in January and February, primarily in North America.

R. Scott Rowe: Obviously, it is an incredibly dynamic situation. I would say on the project timing, there's so much uncertainty in terms of what could happen here. I would say we're seeing projects move forward. We're not seeing them get canceled. You know, our teams, when we talk about a bottoms up roll up, are very confident in the customer discussions that these go forward at some point in the year. You know, I would expect more of a back half-weighted project year for us, which is what we talked about in the Q4 earnings call. Overall, today, we continue to feel confident in the mid-single digits bookings growth year over year.

Scott Rowe: Obviously, it is an incredibly dynamic situation. I would say on the project timing, there's so much uncertainty in terms of what could happen here. I would say we're seeing projects move forward. We're not seeing them get canceled. You know, our teams, when we talk about a bottoms up roll up, are very confident in the customer discussions that these go forward at some point in the year. You know, I would expect more of a back half-weighted project year for us, which is what we talked about in the Q4 earnings call. Overall, today, we continue to feel confident in the mid-single digits bookings growth year over year.

Speaker #6: Tell us what you're thinking about those dynamics carrying over into Q2.

Speaker #5: And so the Middle East disruption was approximately 2% or 200 basis points year over year. And I'll just comment that as we look at the North American MRO run rate, we normalized in the month of March, which gives us some comfort going into the second quarter.

Speaker #1: Yeah. So maybe just to start, a modest decline was expected for us in the quarter. We knew that kind of coming into the year.

Amy Schwetz: Our end markets remain robust overall, while the Middle East conflict may cause some short-term fluctuations, ongoing investment in the region, along with rebuild activity, creates meaningful opportunity. As it relates to our full-year outlook, our guidance assumes the current Middle East situation continues, with the key assumptions including that military operations do not materially escalate, that we are able to maintain operations, and that the flow of materials into our Middle East operations continues, albeit with some delays, and that secondary supply chain disruptions do not materialize. We recognize the potential for a much wider range of outcomes from the conflict that could have implications on our business, our organization expects to remain nimble as we navigate the coming weeks and months.

Speaker #1: But we were further impacted by the couple of things that you mentioned, the Middle East disruption, and a softer start to our run rate MRO business that was that occurred in January and February.

Speaker #5: That we're better positioned. And original equipment was also up against a pretty strong comp, particularly if you look at the large engineer-to-order projects that we had included in the first quarter of last year.

Speaker #1: And so the Middle East disruption was approximately 2% or 200 basis points year over year. And I'll just comment that as we look at American quarter, that we're better positioned.

Michael Halloran: The follow-up is maybe frame that in terms of next year. Now, obviously, it's still early. I'm not trying to give guidance for next year. I think the loose question is when you sit here today and you compare yourself to three months ago, four months ago, how do you feel about 2027, 2028 today relative to before? I mean, it seems like you were thinking about this as maybe some incremental opportunity once the dust settles, plus incremental confidence in what you're doing internally. I'd like to understand because obviously lots of puts and takes this year, lots of moving pieces. As we get through this, how does this all balance out?

Mike Halloran: The follow-up is maybe frame that in terms of next year. Now, obviously, it's still early. I'm not trying to give guidance for next year. I think the loose question is when you sit here today and you compare yourself to three months ago, four months ago, how do you feel about 2027, 2028 today relative to before? I mean, it seems like you were thinking about this as maybe some incremental opportunity once the dust settles, plus incremental confidence in what you're doing internally. I'd like to understand because obviously lots of puts and takes this year, lots of moving pieces. As we get through this, how does this all balance out?

Speaker #5: So backlog conversion was lower because of the nuclear component of the business. And as a reminder, conversion of our year-end backlog was expected to be around 76% entering the year versus historical levels in the mid-'80s.

Speaker #1: And original equipment was all up against a pretty strong in the first quarter of last year. So backlog conversion was lower because of the nuclear component of the business.

Speaker #5: Or higher due to that nuclear component. So I think we're feeling good about the way we ended the quarter and about the opportunities that are out there on the book-to-ship business, which gives us some comfort going into the second quarter.

Speaker #1: And as a reminder, conversion of our year-end backlog was expected to be around 76%, entering the year versus historical levels in the mid-'80s. Or higher due to that nuclear component.

Amy Schwetz: With this backdrop, we now expect organic sales to range from a 1% decline to a 2% increase, resulting in our total sales growth outlook of 3% to 6%. As a reminder, total sales growth includes approximately 300 basis points of benefit from acquisitions, including the anticipated mid-year closure of the Trillium Valves acquisition. At the same time, despite a more challenging Middle East outlook, we are reaffirming our expectation for approximately 100 basis points of adjusted operating margin expansion, as well as our adjusted EPS guidance of $4.00 to $4.20 per share for the full year. Our EPS guidance reflects the net impact of the Q1 unanticipated items I referenced earlier.

Speaker #4: And I'll just add that the teams are incredibly focused on winning works that can ship in a relatively shorter period of time. And as you know, those nuclear awards are fantastic.

R. Scott Rowe: Yeah, sure. It was a, you know, obviously a noisy quarter with the Middle East disruption and some of the geopolitical activities. With that said, you know, resolution in the Middle East is important to all of my comments here. You know, Amy talked about our assumption that we'll be impacted in Q2, but at some point we return to somewhat of a more normal environment. When and if that happens, we feel really good about our continued progress toward our long-term 2030 targets that we put out at the end of Q4. You know, that included mid-single digit growth. It included continued margin expansion every year.

Scott Rowe: Yeah, sure. It was a, you know, obviously a noisy quarter with the Middle East disruption and some of the geopolitical activities. With that said, you know, resolution in the Middle East is important to all of my comments here. You know, Amy talked about our assumption that we'll be impacted in Q2, but at some point we return to somewhat of a more normal environment. When and if that happens, we feel really good about our continued progress toward our long-term 2030 targets that we put out at the end of Q4. You know, that included mid-single digit growth. It included continued margin expansion every year.

Speaker #1: So I think we're feeling good about the way we ended the quarter and about the opportunities to ship business, which gives us some comfort going into the second quarter.

Speaker #4: And we'll get great revenue and margin on those. But typically, they won't show up in the first year. And so the teams are really focused through the commercial excellence process of winning work that drives revenue and continues our progress towards growth.

Speaker #4: And I'll just add that the teams are incredibly focused on winning work that can ship in a relatively shorter period of time. And as you know, those nuclear awards are fantastic.

Speaker #3: Very helpful. Appreciate the color there. And then maybe as a follow-up, maybe we can spend a couple of minutes on FCD. I think if we remove the tariff recovery from the quarter, it does seem like margins were weaker.

Speaker #4: And we'll get great revenue and margin on those. But typically, they won't show up in the first year. And so the teams are really focused through the commercial assets process of driving revenue and very helpful.

R. Scott Rowe: Today, you know, despite all of the dynamics in Q1, I would say the year is shaping up to position us very nicely into 2027 and on a nice trajectory and path to achieve our 2030 goals.

Scott Rowe: Today, you know, despite all of the dynamics in Q1, I would say the year is shaping up to position us very nicely into 2027 and on a nice trajectory and path to achieve our 2030 goals.

Speaker #3: Year over year, I understand there's elements of fixed price and lower volumes in the quarter. But was there anything else in the quarter that you'd call out?

Speaker #4: Appreciate the color there. And maybe as a follow-up, maybe we can spend a couple of minutes on CD. I think if we move the tariff recovery from the quarter, it does seem like margins were weaker.

Speaker #3: Or maybe you can also give some more color on what 80/20 actions you guys are implementing and how you're expecting that to show up for the FCD margin?

Amy Schwetz: In addition, our outlook for the balance of the year also includes roughly $0.07 of expected impact from the ongoing conflict in the Middle East, contemplating modestly lower bookings while the conflict continues and some modest delay in logistics timelines, potentially offset by rebuild activity. At the midpoint, our guidance represents another year of double-digit growth versus prior year's adjusted EPS. In terms of quarterly phasing, we expect original equipment bookings to accelerate in the H2 of the year, driven by increased project activity and rising nuclear investment and the potential for rebuild activity in the Middle East, and we remain confident in our ability to expand aftermarket capture. As Scott Rowe noted, we came into the year anticipating increased Middle East project bookings in the H2 of 2026. It's too early to know exactly how the conflict in the Middle East could impact these assumptions.

Amy Schwetz: Yeah. The other thing, just to add to that, Mike, a little bit, is muted in the numbers because of original equipment in Q1. We saw really nice bookings growth in both segments on the aftermarket side and are continuing to push that aftermarket business and gaining strength there only serves us as we look out into future years.

Speaker #5: Yeah. So, Jose, you hit on it with respect to the volumes, which we're expected to be lower in Q1 due to 80/20 impacts. And if you'll recall, FCD started the journey on 80/20 a little bit later.

Speaker #5: And so we anticipated seeing some headwinds in the first half of the year from 80/20. Gross margins were basically flat with lower volume in the first quarter of the year, which we took as a very positive sign given the impact of the reduced volume.

Michael Halloran: Thank you. Appreciate it.

Mike Halloran: Thank you. Appreciate it.

R. Scott Rowe: Thanks, Mike.

Scott Rowe: Thanks, Mike.

Operator: We'll now take our next question from Andy Kaplowitz with Citi.

José: Hey, good morning, everyone. This is Jose on for Andy.

[Analyst] (Citi): Hey, good morning, everyone. This is Jose on for Andy.

R. Scott Rowe: Okay, great.

Scott Rowe: Okay, great.

Amy Schwetz: Good morning.

R. Scott Rowe: Good morning, José.

Scott Rowe: Good morning, José.

José: Morning. To start with the 10% organic revenue decline in the quarter. That was a larger drop than we were forecasting. On the slide, you mentioned that Middle East disruptions impacted Q1 sales by 2%. I think, Amy, you talked about some lower book-to-bill impacts in January and February, as well as some 80/20 walk away impacts. It'd be helpful if you guys could walk through each of those to bridge the decline in the quarter, as well as how you're thinking about those dynamics carrying over into Q2.

[Analyst] (Citi): Morning. To start with the 10% organic revenue decline in the quarter. That was a larger drop than we were forecasting. On the slide, you mentioned that Middle East disruptions impacted Q1 sales by 2%. I think, Amy, you talked about some lower book-to-bill impacts in January and February, as well as some 80/20 walk away impacts. It'd be helpful if you guys could walk through each of those to bridge the decline in the quarter, as well as how you're thinking about those dynamics carrying over into Q2.

Speaker #5: I think that if we look at where bookings were in the quarter, sequentially stronger than Q4. And so we feel good about that volume challenge abating as we go into the second quarter of the year.

Speaker #5: And we're confident for the full year that we'll be at 100 basis points or more in terms of margin expansion at the operating margin line.

Amy Schwetz: To date, customers have indicated projects are expected to move forward, though we know some projects could slip to 2027. That said, we believe rebuild activity could provide more momentum through the balance of the year. Importantly, we view any disruption as relatively short term in nature, with no anticipated impact to the underlying demand environment or the opportunity to deliver on our 2030 growth and earnings targets. Quarterly, year-over-year performance will accelerate as we move through the year, and we estimate the previously announced Trillium acquisition will close near mid-year. We continue to anticipate H1 revenue will be more impacted by headwinds from 80/20 and backlog composition, each of which will begin to abate in the H2. Given the headwind from the Middle East, Q2 sales are expected to be down low to mid-single digits in comparison to prior year.

Speaker #5: So the business is fundamentally healthy. We're continuing to improve efficiency and reduce complexity. And we think there's further opportunity with operational excellence and roofline consolidation and I'll say that these actions related to operational excellence and roofline have only accelerated since the beginning of the year.

Amy Schwetz: Yeah. maybe just to start, a modest decline, was expected for us in the quarter. We knew that kind of coming into the year. We were further impacted by the couple of things that you mentioned, the Middle East disruption and a softer start to our run rate MRO business that was that occurred in January and February, primarily in North America. The Middle East disruption was approximately 2% or 200 basis points, year-over-year. I'll just comment that as we look at the North American MRO run rate, we normalized in the month of March, which gives us some comfort going into Q2, that we're better positioned.

Speaker #3: Appreciate the time.

Speaker #2: And we'll now take our next question from Nathan Jones with Stifel.

Speaker #6: Good morning, everyone. I guess I'll start.

Speaker #3: Hey, Nathan. Good morning.

Speaker #6: I guess I'll start off with following up on the margin side of it. It looks like if you take out the IEPA recoveries, FPD down 20 basis points on a 10% revenue decline, which is really very good, I think.

Speaker #6: And the FCD margins down 110 basis points on an over 10% revenue decline, which is probably also pretty good. So maybe you can talk about the impacts on margins or what was the volume impact, the deleveraging that you would have got from lower volume on that versus the improvements that you've made to get to that?

Amy Schwetz: Q2 earnings are expected to be similar to Q1. Let's turn to slide 12 to close out the prepared remarks. We delivered strong execution in Q1 in a dynamic operating environment. We are continuing to build on the momentum of the Flowserve Business System with a growth strategy aligned to powerful global mega trends that we believe support long-term demand for our products and solutions. At the same time, we are proactively managing the situation in the Middle East while remaining focused on serving our customers and executing with discipline across the business. Looking ahead, our 2026 outlook calls for double-digit adjusted EPS growth, and we are continuing to make meaningful progress towards our 2030 financial targets. With that, I'll turn the call back to the operator for Q&A.

Amy Schwetz: Original equipment was also up against a pretty strong comp, particularly if you look at the large engineer-to-order projects that we had included in Q1 2023. Backlog conversion was lower because of the nuclear component of the business. As a reminder, conversion of our year-end backlog was expected to be around 76% entering the year versus historical levels in the mid-80s or higher due to that nuclear component. I think we're feeling good about the way we ended the quarter and about the opportunities that are out there on the book-to-bill business, which gives us some comfort going into Q2.

Speaker #6: If we exclude the IEPA tariff recoveries, which are really a one-time item.

Speaker #4: Sure. Yeah, I would say I'll start, and Amy can jump in here. I think we'll exclude tariffs. I think the Mexico tax thing because it wasn't in the year is also excluded there.

Speaker #4: And if you take both those out and but keep the Middle East disruption in there and what I'll call the things that the team is working on, right, your FPD margins actually expand in the year versus last year to roughly kind of 70 to 100 basis points.

R. Scott Rowe: I'll just add that, you know, the teams are incredibly focused on winning works that can ship in a relatively shorter period of time. As you know, those nuclear awards are fantastic, and we'll get great revenue and margin on those, but typically they won't show up in the first year. So the teams are really focused through the commercial excellence process of winning work that drives revenue and continues our progress towards growth.

Scott Rowe: I'll just add that, you know, the teams are incredibly focused on winning works that can ship in a relatively shorter period of time. As you know, those nuclear awards are fantastic, and we'll get great revenue and margin on those, but typically they won't show up in the first year. So the teams are really focused through the commercial excellence process of winning work that drives revenue and continues our progress towards growth.

Speaker #4: And then as we talked about with FCD, you're a little bit lower on the decline of about 100 basis points. And but if you take that to the gross margin line, we're very confident on the 80/20 and the operational excellence coming through and continuing to drive margin expansion.

Operator: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 if you would like to ask a question. We'll take our first question from Mike Halloran with Baird. Mike, you might be on mute.

Speaker #4: And so in the organic business, we're not backing away from our ability to expand margins at that 100 basis points this year. And I'll say that's organically excluding those kind of one-time items.

José: That's very helpful. Appreciate the color there. Then maybe as a follow-up, maybe we can spend a couple minutes on FCD. I think if we remove the tariff recovery from the quarter, it does seem like margins were weaker year-over-year. I understand there's elements of fixed price and lower volumes in the quarter, was there anything else in the quarter that you'd call out? Maybe you can also give some more color on what 80/20 actions you guys are implementing and how you're expecting that to show up for the FCD margin.

[Analyst] (Citi): That's very helpful. Appreciate the color there. Then maybe as a follow-up, maybe we can spend a couple minutes on FCD. I think if we remove the tariff recovery from the quarter, it does seem like margins were weaker year-over-year. I understand there's elements of fixed price and lower volumes in the quarter, was there anything else in the quarter that you'd call out? Maybe you can also give some more color on what 80/20 actions you guys are implementing and how you're expecting that to show up for the FCD margin.

Speaker #4: And Amy hit this with the FCD side, but it's really the whole business, right? We've got the operational excellence moving. We're driving great results from just a productivity standpoint and how we're running the different manufacturing sites.

Michael Halloran: Hello.

Operator: Yes, we can hear you.

Speaker #4: But it's also allowing us to move quicker to our roofline consolidation program. And so we've got several activities that happened last year. And some that are in progress this year as well.

Speaker #4: And those activities continue to accelerate. And then the 80/20 program is now in the third year. And we're seeing tremendous results there. And so there's definitely tailwinds from the 80/20 program as we continue to work through that methodology and do the right things on skew reduction.

Amy Schwetz: Yeah. Jose, you hit on it with respect to the volumes, which were expected to be lower in Q1 due to 80/20 impacts. If you'll recall, FCD started the journey on 80/20 a little bit later, and so we anticipated seeing some headwinds in H1 of the year from 80/20. Gross margins were basically flat with lower volume in Q1 of the year, which we took as a very positive sign, given the impact of the reduced volume. I think that, you know, if we look at where bookings were in the quarter, sequentially stronger than Q4. We feel good about that volume challenge abating as we go into the Q2 of the year.

Speaker #4: But also on the pricing side. And so we've been very selective on where do we price and making sure that we're pricing in accordance with that philosophy and driving the right things to expand margins.

R. Scott Rowe: Yeah, Mike, I think you broke up at the beginning of that question. Can you say that again?

Michael Halloran: Sorry. Apologies. Let me reframe the question. Orders mid-single digit for the year. How do you get comfortable with that uptick in the back half of the year, all else equal?

Speaker #4: So I just say net-net, we feel good about our margin progression, the continuation here as we go throughout the year.

Speaker #5: Yeah. And the only thing I'll add there, Nathan, is that the FPD was more impacted by the Middle East conflict in terms of revenues and operating income.

R. Scott Rowe: Yeah. No, Mike, that's a really good question.

Michael Halloran: Yeah. More importantly, is it as simple as if you strip out Q1, Q2, 2 months of the year, just strip those out, you're kind of on trend outside the Middle East, given what you saw in March?

Speaker #5: And although the run rate business was a little bit softer to begin the year, I think that the team was anticipating the lower volume just based on the shippable backlog.

Speaker #5: And so I think had planned really well to adapt to that situation and be in a position to maintain or grow margins in the first quarter.

Amy Schwetz: We're confident for the full year that we'll be at 100 basis points or more in terms of margin expansion at the operating margin line. The business is fundamentally healthy. We're continuing to improve efficiency and reduce complexity, and we think there's further opportunity with operational excellence and roofline consolidation. I'll say that these actions related to operational excellence and roofline have only accelerated since the beginning of the year.

R. Scott Rowe: Yeah. I can, I can absolutely talk through that and, you know, it's a great question. You know, we talked about January and February being a little bit soft on the book-and-ship, but I think on a very positive note, our March numbers were in line in expectations. In the prepared remarks, I talked about that we had a nice, you know, we're seeing nice activity in that kinda in and out business in April. That gives us a lot of confidence as we kinda continue through the year here that we think we have slightly elevated bookings. The other aspect here that's super important is our project funnel. In my prepared remarks, I talked about the project funnel being up year-on-year and sequentially, and that project funnels across all of our end markets.

Speaker #5: It's got indicated.

Speaker #6: Just to confirm, you said that the tax items actually in the segment income?

Speaker #5: It is.

Speaker #4: It is. It's in the FPD segment. And again, kind of an outer period and something the FPD team really doesn't control.

Speaker #6: Got it. Can you talk about the potential here for improving demand in the Middle East from the reconstruction of things whenever we get around to that?

José: Appreciate the time.

[Analyst] (Citi): Appreciate the time.

Speaker #6: And if you have any ideas or thoughts on when we might see that demand begin to impact close those results?

Operator: We'll now take our next question from Nathan Jones with Stifel.

R. Scott Rowe: Now, obviously, it is an incredibly dynamic situation. I would say on the project timing, there is so much uncertainty in terms of what could happen here. I would say we're seeing projects move forward. We're not seeing them get canceled. You know, our teams, when we talk about a bottoms up roll up, are very confident in the customer discussions that these go forward at some point in the year. You know, I would expect more of a back half-weighted project year for us, which is what we talked about in the Q4 earnings call. Overall, today, in mid-single digits bookings growth year-over-year.

Nathan Jones: Good morning, everyone. I guess I'll start.

Speaker #4: Absolutely. I can talk about the first part of the question. The second part's a little bit harder on timing. On the first part, as you know, Nathan, we have an unbelievable installed base in the Middle East.

R. Scott Rowe: Hey, Nathan. Good morning.

Scott Rowe: Hey, Nathan. Good morning.

Nathan Jones: I guess I'll start with following up on the margin side of it. It looks like if you take out the IEEPA recoveries, FPD down 20 basis points on a 10% revenue decline, which is really very good, I think. And the FCD margins down 110 basis points on an over 10% revenue decline, which is probably also pretty good. Maybe you can talk about the impacts on margins or, you know, what was the volume impact, the deleveraging that you would have got from lower volume on that versus the improvements that you've made to get to that if we exclude the, you know, the IEEPA tariff recoveries, which are really a one-time item?

Speaker #4: And so we've got probably more pumps than any other provider in the world that across the various countries in the region, including pumps installed in Iran.

Speaker #4: And then on the valve side, a massive presence across the facilities there. And so inevitably, anything that you see on the news in terms of damaged equipment and assets, flow service has been impacted or involved in that.

Speaker #4: And so the teams are working incredibly closely with our customers. And I said in the prepared remarks, I'd say first and foremost is making sure our associates are safe and we're keeping them out of harm's way.

Michael Halloran: The follow-up is maybe frame that in terms of next year. Obviously, it's still early. I'm not trying to get you to give guidance for next year. I think the loose question is when you sit here today and you compare yourself to 3 months ago, 4 months ago, how do you feel about 2027, 2028 today relative to before? I mean, it seems like you were thinking about this as maybe some incremental opportunity once the dust settles, plus incremental confidence in what you're doing internally. I'd like to understand because obviously lots of puts and takes this year, lots of moving pieces. As we get through this, how does this all balance out?

Speaker #4: But the second priority is making sure that our customers can continue to operate. And we're involved in critical infrastructure that's supporting their economy and supporting commodity prices.

R. Scott Rowe: Sure. Yeah, I would say I'll start, and Amy can jump in here. I think, you know, we'll exclude tariffs. I think the Mexico tax thing, because it wasn't in the year, is also excluded there. If you, if you take both those out and, like, keep the Middle East disruption in there and what I'll call the things that the team is working on, right? Your, your FPD margins actually expand in the year versus last year to, you know, roughly kind of 70 to 100 basis points. Then as we talked about with FCD, you're a little bit lower on the decline of about 100 basis points. If you take that to the gross margin line, like we're very confident on the 80/20 and the operational excellence coming through and continuing to drive margin expansion.

Scott Rowe: Sure. Yeah, I would say I'll start, and Amy can jump in here. I think, you know, we'll exclude tariffs. I think the Mexico tax thing, because it wasn't in the year, is also excluded there. If you, if you take both those out and, like, keep the Middle East disruption in there and what I'll call the things that the team is working on, right? Your, your FPD margins actually expand in the year versus last year to, you know, roughly kind of 70 to 100 basis points. Then as we talked about with FCD, you're a little bit lower on the decline of about 100 basis points. If you take that to the gross margin line, like we're very confident on the 80/20 and the operational excellence coming through and continuing to drive margin expansion.

Speaker #4: And we're doing some things that would be a little bit different than the normal day-to-day business to make sure that we're 100% supporting that work.

Speaker #4: And so right now, it's about emergencies. It's about call-offs. It's being incredibly responsive. At some point, you move to reconstruction activities. And today, I would say the damage assessments are different depending on the level of damage.

R. Scott Rowe: Yeah, sure. It was a, you know, obviously a noisy quarter with the Middle East disruption and some of the geopolitical activities. With that said, you know, resolution in the Middle East is important to all of my comments here. you know, Amy talked about our assumption that we'll be impacted in Q2, but at some point, we return to somewhat of a more normal environment. When and if that happens, we feel really good about our continued progress toward our long-term 2030 targets that we put out at the end of Q4. you know, that included mid-single digit growth. It included continued margin expansion every year.

Speaker #4: We're already preparing some quotes to help customers on rebuild activities. The timing of that is just not known right now. And it depends on when they get comfortable to bring people back into the region, when do they get comfortable about bringing people onto site, and then again, everyone's concerned about individual safety.

R. Scott Rowe: In the organic business, we're not backing away from our ability to expand margins at that 100 basis points this year. You know, I'll say that's, you know, organically excluding those kind of one-time items. You know, Amy hit this with the FCD side, but it's really the whole business, right? We've got the operational excellence moving. We're driving great results from just a productivity standpoint and how we're running the different manufacturing sites, but it's also allowing us to move quicker to our roofline consolidation program. We've got several activities that happened last year and some that are in progress this year as well, and those activities continue to accelerate. The 80/20 program is now in the third year, and we're seeing tremendous results there.

Scott Rowe: In the organic business, we're not backing away from our ability to expand margins at that 100 basis points this year. You know, I'll say that's, you know, organically excluding those kind of one-time items. You know, Amy hit this with the FCD side, but it's really the whole business, right? We've got the operational excellence moving. We're driving great results from just a productivity standpoint and how we're running the different manufacturing sites, but it's also allowing us to move quicker to our roofline consolidation program. We've got several activities that happened last year and some that are in progress this year as well, and those activities continue to accelerate. The 80/20 program is now in the third year, and we're seeing tremendous results there.

Speaker #4: And so I think if the ceasefire prevails and things start to settle down, then that rebuilding activity obviously happens a little bit sooner. And then I think there's a third category here on just what's the future of the Middle East and the role of the different countries there providing further energy assurance around the world, but also assurance and security within their country.

Speaker #4: And so I believe that you'll see more projects ultimately come into the Middle East. And as we talked about in the fourth quarter, we thought the Middle East bookings were going to be a very positive year for us, mostly back half weighted.

Amy Schwetz: Yeah, the other thing, just to add to that, Mike, a little bit, is muted in the numbers because of original equipment in Q1. We saw really nice bookings growth in both segments on the aftermarket side and are continuing to push that aftermarket business and gaining strength there only serves us as we look out into future years.

R. Scott Rowe: There's definitely tailwinds from the 80/20 program as we continue to work through that methodology and do the right things on SKU reduction, but also on the pricing side. We've been very selective on where do we price and making sure that we're pricing in accordance with that philosophy and driving the right things to expand margins. I'd just say net-net, you know, we feel good about our margin progression, the continuation here as we go throughout the year.

Scott Rowe: There's definitely tailwinds from the 80/20 program as we continue to work through that methodology and do the right things on SKU reduction, but also on the pricing side. We've been very selective on where do we price and making sure that we're pricing in accordance with that philosophy and driving the right things to expand margins. I'd just say net-net, you know, we feel good about our margin progression, the continuation here as we go throughout the year.

Speaker #4: I still think that is the case. I think we're going to get some restoration activity. We'll get some of the work that we had planned on.

Speaker #4: I think some of that may get reprioritized. But I think net-net, Middle East is a benefit for us for the full year bookings.

Michael Halloran: Thank you. Appreciate it.

R. Scott Rowe: Thanks.

Amy Schwetz: Yeah. The only thing I'll add there, Nathan, is that FPD was more impacted by the Middle East conflict in terms of revenues and operating income. Although the run rate business was a little bit softer to begin the year, I think that the team was anticipating the lower volume just based on the shippable backlog. So I think had planned really well to adapt to that situation and be in a position to maintain or grow margins in Q1, as Scott indicated.

Speaker #6: Seems like there should be some pipeline activity. Thanks very much for taking my questions.

Operator: We'll now take our next question from Andrew Kaplowitz with Citi.

Speaker #4: Yeah.

[Analyst] (Citi): Hey, good morning, everyone. This is Jose on for Andy.

Speaker #3: We'll now take our next question from Joe Jordano with T-Day I'm sorry, T-D Cowan.

R. Scott Rowe: Okay, great. Good morning, Jose.

[Analyst] (Citi): Morning. Maybe to start with the 10% organic revenue decline in the quarter. That was a larger drop than we were forecasting. On the slide, you mentioned that Middle East disruptions impacted Q1 sales by 2%, and I think, Amy, you talked about some lower book-to-ship impacts in January and February, as well as some 80/20 walkaway impacts. It'd be helpful if you guys could walk through each of those to bridge the decline in the quarter, as well as how you're thinking about those dynamics carrying over into Q2.

Speaker #6: Hey, guys. Good morning.

Speaker #4: Good morning.

Speaker #6: Before I get into the real questions, just quick confirmation, clarification type stuff. When you say mid-single-digit bookings growth, I just want to understand you're not adjusting for Mid-East headwinds, right?

Speaker #6: That's a inclusive of Mid-East. We still think that. And when you talk about margins up 100 bips, that's stripping out the tariff benefit and the tax thing.

Nathan Jones: Just to confirm, you said that the tax item's actually in the segment income?

Speaker #6: And not adjusting for Mid-East, right? So that's inclusive of Mid-East. Just want to confirm those two things.

Amy Schwetz: It is.

R. Scott Rowe: It is. It's in the FPD segment.

Scott Rowe: It is. It's in the FPD segment.

Speaker #4: Correct. Well, we'll confirm both. So the Middle East disruption would be in my comments on mid-single-digit growth. So year on year, without all things in, we still believe that we can grow those bookings.

Nathan Jones: Got it.

R. Scott Rowe: An out of period and something the FPD team really doesn't control.

Nathan Jones: Got it.

Scott Rowe: An out of period and something the FPD team really doesn't control.

Nathan Jones: Got it. Can you talk about the potential here for improving demand in the Middle East from the reconstruction of things whenever, you know, we get around to that? If you have any ideas or thoughts on when we might see that demand begin to impact Flowserve's results?

Amy Schwetz: Maybe just to start, a modest decline was expected for us in the quarter. We knew that kind of coming into the year. But we were further impacted by the couple of things that you mentioned, the Middle East disruption and a softer start to our run rate MRO business that occurred in January and February, primarily in North America. The Middle East disruption was approximately 2% or 200 basis points year-over-year. And I'll just comment that as we look at the North American MRO run rate in March, which gives us some comfort in the Q2, that we're better positioned. Original equipment was also up against a pretty strong comp, particularly if you look in the Q1 of last year.

Speaker #4: And the margin side, 100 basis points excluding the one-offs of tariffs in Mexico.

Speaker #6: Okay. Good. Starting with the January and February kind of air pocket there in the business, I'm just a little I guess surprised. When we did the fourth quarter call, that was February.

R. Scott Rowe: Absolutely. I can talk about the first part of the question. The second part's a little bit harder on timing. On the first part, you know, as you know, Nathan, we have a unbelievable installed base in the Middle East. We've got probably more pumps than any other provider in the world that, you know, across the various countries in the region, including pumps installed in Iran. On the valve side, a massive presence across the facilities there. Inevitably, anything that you see on the news in terms of damaged, you know, equipment and assets, you know, Flowserve is been impacted or involved in that. The teams are working incredibly closely with our customers.

Scott Rowe: Absolutely. I can talk about the first part of the question. The second part's a little bit harder on timing. On the first part, you know, as you know, Nathan, we have a unbelievable installed base in the Middle East. We've got probably more pumps than any other provider in the world that, you know, across the various countries in the region, including pumps installed in Iran. On the valve side, a massive presence across the facilities there. Inevitably, anything that you see on the news in terms of damaged, you know, equipment and assets, you know, Flowserve is been impacted or involved in that. The teams are working incredibly closely with our customers.

Speaker #6: And you guys definitely had a pretty positive confident tone there. Was that not evident at the time when we had that last call that this business in January was way under where you were targeting?

Speaker #4: Yeah. So I'll start with we've got much better visibility in our business than ever before with the system upgrades and we can see weekly bookings and activity.

Speaker #4: And when we did the call, we basically had a month of January numbers. And we had some positive indicators that that would start to improve.

And then basis point, it's going to 1 off of tariffs in Mexico.

Okay good.

Speaker #4: And we just didn't see that pick up in February. And so we didn't feel it was prudent to kind of sound the alarm just given one data point from the month of January.

Um,

R. Scott Rowe: You know, I said in the prepared remarks, I'd say, you know, first and foremost is making sure our associates are safe and we're keeping them out of harm's way. The second priority is making sure that our customers can continue to operate, and we're involved in critical infrastructure that's supporting their economy and supporting commodity practices. We're doing some things that, you know, that would be a little bit different than the normal day-to-day business to make sure that we're 100% supporting that work. Right now it's about emergencies, it's about call-offs, it's being incredibly responsive. At some point, you move to reconstruction activities. You know, today, I would say the damage assessments are different depending on the level of damage. We're already preparing some quotes to help customers on rebuild activities.

Scott Rowe: You know, I said in the prepared remarks, I'd say, you know, first and foremost is making sure our associates are safe and we're keeping them out of harm's way. The second priority is making sure that our customers can continue to operate, and we're involved in critical infrastructure that's supporting their economy and supporting commodity practices. We're doing some things that, you know, that would be a little bit different than the normal day-to-day business to make sure that we're 100% supporting that work. Right now it's about emergencies, it's about call-offs, it's being incredibly responsive. At some point, you move to reconstruction activities. You know, today, I would say the damage assessments are different depending on the level of damage. We're already preparing some quotes to help customers on rebuild activities.

Amy Schwetz: So backlog conversion was lower because of the nuclear component of the business. As a reminder, conversion of our year-end backlog was expected to be around 76% entering the year versus historical levels in the mid-eighties or higher due to that nuclear component. I think we're feeling good about the way we ended the quarter and about the opportunities in the book-to-ship business, which gives us some comfort going into the Q2.

Speaker #4: And unfortunately, it didn't pick up in February, but we did see that increase back to what I'd call our normal run rate in March.

Speaker #4: And we've confirmed that again in April. And so right now, that run rate activity looks pretty robust. And kind of on our planning levels.

Starting with the the um the January and February kind of air pocket there in the in the in the business a little I guess surprised like when we did the fourth quarter fall, that was February and you guys definitely had a pretty positive conflict on there. Like, was that not evident at the time when we had that call that this is where

Speaker #6: Fair enough. And then if I think about the second half, is there anything in the full year guide at this point kind of hedging Mid-East being potentially now we're talking about extended blockades and maybe targeted strikes again?

R. Scott Rowe: I'll just add that, you know, the teams are incredibly focused on winning works that can ship in a relatively shorter period of time. As you know, those nuclear awards are fantastic, and we'll get great revenue and margin on those, but typically they won't show up in the first year. The teams are really focused through the commercial excellence process of winning work that drives revenue and continues our progress towards growth.

Speaker #6: So curious, you have the impact in 2Q kind of message here. Is 3Q just assume that we're back at full run rate in that region?

R. Scott Rowe: The timing of that is just not known right now. It depends on when they get comfortable to bring people back into the region. When do they get comfortable about bringing people onto site? Again, everyone's concerned about, you know, individual safety. You know, I think if the ceasefire prevails and things start to settle down, that rebuilding activity obviously happens a little bit sooner. I think there's a third category here on just, you know, what's the future of the Middle East and the role of the different countries there providing, you know, further energy assurance around the world, but also, you know, assurance and security within their country. I believe that you'll see more projects ultimately come into the Middle East.

Scott Rowe: The timing of that is just not known right now. It depends on when they get comfortable to bring people back into the region. When do they get comfortable about bringing people onto site? Again, everyone's concerned about, you know, individual safety. You know, I think if the ceasefire prevails and things start to settle down, that rebuilding activity obviously happens a little bit sooner. I think there's a third category here on just, you know, what's the future of the Middle East and the role of the different countries there providing, you know, further energy assurance around the world, but also, you know, assurance and security within their country. I believe that you'll see more projects ultimately come into the Middle East.

Speaker #5: So I don't know that it assumes that we're back at full run rate Joe, but I think that what it does allow for is, one, giving us more time to react to the situation and address supply chain and customer relationships and get back to the new normal.

[Analyst] (Citi): Very helpful. Appreciate the color there. Maybe as a follow-up, maybe we can spend a couple minutes on FCD. I think if we remove the tariff recovery from the quarter, it does seem like margins were weaker year over year. I understand there's elements of fixed price and lower volumes in the quarter, but looking on the quarter that you called out or maybe you can also give some more color on what 80/20 actions you guys are implementing and how you're expecting quarter.

Yeah, so I'll start. We've got much better visibility in our business than ever before with the system upgrades, and you know, we can see weekly bookings and activity. And, you know, we did the call. We basically had a month of January numbers, and, you know, we had some positive indicators that things would start to improve, and we just didn't see that pick up in February. And so we didn't feel it was prudent to sound the alarm just given one data point from the month of January. You know, unfortunately, we didn't see a pick up in February, but we did see that increase back to what I call our normal run rate, you know, in March, and we've confirmed that again in April. And so right now that run rate activity looks pretty robust and, you know, kind of on our planning levels.

Okay, fair enough. Um, and then if I think about—

Speaker #5: And it also allows for some opportunities that we might see around the rebuild. So at this point in time, there are a lot of different outcomes we can't predict geopolitical events.

The second half. Is there anything in the full year guide? At this point?

Speaker #5: And so we felt best to go kind of quarter by quarter here. But I do think that we have more levers to pull from a mitigation factor in the second half of the year as we adapt to the changes.

Kind of edging, Middle East being potentially like. Now, we're talking about extended blockades and maybe targeted strikes again. So, curious like you have the impact in 2q kind of um message here is 3Q just assume that we're back at like full run rate in that region.

R. Scott Rowe: As we talked about in Q4, we thought the Middle East bookings were gonna be a very positive year for us, mostly back H2-weighted. I still think that is the case. I think we're gonna get some restoration activity. We'll get some of the work that we had planned on. I think some of that may get reprioritized, but I think net-net, Middle East is a benefit for us for the full year bookings.

Scott Rowe: As we talked about in Q4, we thought the Middle East bookings were gonna be a very positive year for us, mostly back H2-weighted. I still think that is the case. I think we're gonna get some restoration activity. We'll get some of the work that we had planned on. I think some of that may get reprioritized, but I think net-net, Middle East is a benefit for us for the full year bookings.

Amy Schwetz: Yes.

Speaker #4: I'll just reiterate, Joe. It's a dynamic time. We get different viewpoints almost on a daily basis. And we're trying to give our best view for the back half of the year given what we know today.

Speaker #6: Yep. Thank you.

Speaker #3: We'll now take our next question from Dean Dray with RBC Capital Markets.

Nathan Jones: Seems like there should be some pipeline activity. Thanks very much for taking my questions.

Speaker #7: Hi. Tom Wisniewski on for Dean Dray. Thanks for the question.

R. Scott Rowe: Yeah.

Scott Rowe: Yeah.

Speaker #4: Okay. Hey, Tom.

Operator: We'll now take our next question from Joe Giordano with, I'm sorry, TD Cowen.

Speaker #7: Hey. In terms of it's been another great quarter in terms of bookings, in terms of nuclear. I was just wondering how do you could you give some more detail on your nuclear backlog at this stage?

Joe Giordano: Hey, guys. Good morning.

R. Scott Rowe: Good morning.

Scott Rowe: Good morning.

Joe Giordano: Before I get into, like, real questions, just quick confirmation, clarification type stuff. When you say mid-single digit bookings growth, I just wanna understand, you're not adjusting for, like, Middle East headwinds, right? That's a, like, inclusive of Middle East.

Speaker #7: And I guess I would assume the project funnel is also increasing in terms of nuclear opportunities.

So I don't know that it assumes that we're back at full run rate, uh, Joe. But I think that what it does allow for is 1 giving us more time to react situation, um, and address and address supplying, and and customer relationships, and get back to the new normal. Um, and it also allows for some opportunities that we might see around around the rebuild. So at this point in time, there are a lot of different outcomes, um, we can't, we can't predict geopolitical events. And so we felt best to go kind of quarter by quarter here. Um, but I do think we have more leverage tool from a mitigation factor in half of the year. Um, as we adapt the changes

Speaker #4: Yeah. I'll let Amy talk about the backlog and kind of how that converts. And then I can talk about the funnel and the forward look.

Speaker #5: Yeah. So I would say if you look at kind of going back to where we were at to start the year at about 2.9 billion of backlog with 76% of that shippable over the next 12 months, it's safe to assume that the lion's share of that 24% of the backlog is nuclear.

R. Scott Rowe: Yeah.

Scott Rowe: Yeah.

Joe Giordano: We still think that. When you talk about margins up 100 bips, that's stripping out the tariff benefit and the tax thing and not adjusting for Middle East, right? That's inclusive of Middle East. Just wanna confirm those two things.

I'll just, you know, it's a dynamic time. We get different different, uh, you know, different viewpoints almost on a daily basis. And we're trying to give our best view for the back half of the Year, given what we know today.

Yep, thank you.

well, now, take our next question from Dean Dre, with RBC Capital markets,

R. Scott Rowe: Correct.

Scott Rowe: Correct.

Amy Schwetz: That's correct.

R. Scott Rowe: we'll confirm both. The Middle East disruption would be in my comments on mid-single digit growth. Year on year, you know, without all things in, we still believe that we can grow those bookings. In the margin side, 100 basis points excluding the one-offs of tariffs in Mexico.

Scott Rowe: we'll confirm both. The Middle East disruption would be in my comments on mid-single digit growth. Year on year, you know, without all things in, we still believe that we can grow those bookings. In the margin side, 100 basis points excluding the one-offs of tariffs in Mexico.

Hi. Tom is nuski on for DeAndre, thanks for the question, okay, thanks up.

Speaker #5: And so that only grows with what we saw in the first quarter bookings at call it 110 about 110 million dollars of nuclear backlog.

Joe Giordano: Okay. Good. Starting with the January and February kind of air pocket there in the business. I'm just a little, I guess, surprised. When we did the Q4 call, that was February, and you guys definitely had a pretty positive, confident tone there. Was that not evident at the time when we had that last call that this business in January was, like, way under where you were targeting?

Um, in terms of it's been another great quarter in terms of bookings, in terms of nuclear, I was just wondering how do you could you give some more detail on your nuclear back wage? And I guess I would assume the project funnel is also increasing in terms of nuclear opportunities.

Speaker #4: Yeah. And then on the forward look, we're booking roughly 100 million dollars a quarter. A lot of that is on the back of kind of what I'll call supporting the existing assets.

Speaker #4: So re-rate, life extensions of those assets, and really making sure that the nuclear plants will be around and productive for years to come. And as we've stated before, we've got an unbelievable installed basin entitlement in those existing assets.

R. Scott Rowe: Yeah. Joe, I'll start with, look, we've got much better visibility in our business than ever before with the system upgrades and, you know, we can see weekly bookings and activity. You know, when we did the call, we basically had a month of January numbers and, you know, we had some positive indicators that that would start to improve, and we just didn't see that pickup in February. We didn't feel it was prudent to kind of sound the alarm just given one data point from the month of January. You know, unfortunately, it didn't pick up in February, but we did see that increase back to what I'd call our normal run rate, you know, in March, and we've confirmed that again in April.

Scott Rowe: Yeah. Joe, I'll start with, look, we've got much better visibility in our business than ever before with the system upgrades and, you know, we can see weekly bookings and activity. You know, when we did the call, we basically had a month of January numbers and, you know, we had some positive indicators that that would start to improve, and we just didn't see that pickup in February. We didn't feel it was prudent to kind of sound the alarm just given one data point from the month of January. You know, unfortunately, it didn't pick up in February, but we did see that increase back to what I'd call our normal run rate, you know, in March, and we've confirmed that again in April. Right now that run rate activity looks pretty robust and, you know, kind of on our planning levels.

Speaker #4: And so that work is relatively steady. And we're seeing more and more of these re-rates and life extensions as we go forward. And then the other category is the new traditional reactors.

Speaker #4: And we still are incredibly optimistic that traditional nuclear reactors continue to move forward both in Europe and the United States. In parts of Asia, and maybe a little bit slowed down on the Middle East, but ultimately we'll come there.

Yeah, I'll let Amy talked about the, the backline that converts and then on the forward look. Yeah. So I I would say, you know, if you look at kind of go Point N billion dollars the backlog with, with, um, with 76% of that shippable over the next couple months. It's safe to assume that the, that the Lion Share of that of that 24% of the backlog is, is nuclear and so that, um, that only grows with what we saw in the first quarter, bookings that I call it 110, um, about 110 million dollars of of nuclear backlog.

Speaker #4: And so we're incredibly well positioned with the customers to make sure that our content is on those new builds. And I'd say certainly for the United States, there's a lot of stakeholders and you've got the US government, you've got local state governments, we've got EPCs, and then we've got the utilities themselves.

R. Scott Rowe: Right now that run rate activity looks pretty robust and, you know, kind of on our planning levels.

Yeah, none of the forward look you know we're booking roughly a hundred million dollars a quarter, a lot of that is on the back of kind of what I'll call supporting the existing assets so rewrite um you know Life Extensions of those assets. And and really making sure that the nuclear plants will be around in productive work for years to come and you know as we've stated before we've got a unbelievable installed base and entitlement.

Joe Giordano: Okay. Fair enough. If I think about the H2, like is there anything in the full year guide at this point kind of hedging Middle East being potentially, like now we're talking about extended blockades and maybe targeted strikes again. Curious, like you have the impact in Q2 kind of message here. Is Q3 just assume that we're back at, like full run rate in that region?

Speaker #4: And so it's a little bit of a complex equation in terms of getting all of the parties to agree on some of the timing.

Speaker #4: But I would say in the last quarter, we've seen advancements in terms of those discussions. And we're getting more and more optimistic that the US moves forward with a new nuclear program build-out.

Speaker #4: And then in Europe, we're actively in pursuit of several new reactors in Europe. And I'd say we're more optimistic that that does happen within the year.

Amy Schwetz: I don't know that it assumes that we're back at full run rate, Joe, but I think that what it does allow for is, one, giving us more time to react to the situation, and address supply chain and customer relationships and get back to the new normal. It also allows for some opportunities that we might see around the rebuild. At this point in time, there are a lot of different outcomes. We can't predict geopolitical events and so we felt best to go kind of quarter by quarter here. I do think that we have more levers to pull from a mitigation factor in H2 of the year, as we adapt to the changes.

Speaker #4: There's more certainty there. And so I feel pretty comfortable that we'll get awards on new reactors in Europe as we move through 2026. And then finally, on the SMRs, we're working with a select group of SMR providers and the technology we continue to win awards on, I'll call it, on the prototype side and some of the engineering contract to help them with design and making sure that they've got a solution that can work for the long run.

Incredibly, well, positioned with the customers to that our content is on those new builds. And, you know, I'd say certainly for the United States, there are, you know, there's a lot of Voters and you've got the government. You've got local governments, you've got PC, and then we've got that all the parties more and more.

Speaker #4: And I remain incredibly optimistic that SMRs are part of the equation in the future. I just think the timing on winning real work that can be scaled into multiple sites is still a couple of years away.

R. Scott Rowe: I'll just reiterate, Joe. It's a dynamic time. We get different, you know, different viewpoints almost on a daily basis. We're trying to give our best view for H2 given what we know today.

Scott Rowe: I'll just reiterate, Joe. It's a dynamic time. We get different, you know, different viewpoints almost on a daily basis. We're trying to give our best view for H2 given what we know today.

Speaker #7: Got it. No, really appreciate the color. I guess the follow-up for me would be, in terms of trillium, you mentioned the timing closing around towards the half year.

Joe Giordano: Yep. Thank you.

Speaker #7: Any additional insight on synergy opportunities you're seeing? I know it's still early days of the transaction.

Operator: We'll now take our next question from Deane Dray with RBC Capital Markets.

Speaker #5: Yeah. So early days, the teams have met. A couple of times to sit down and, one, just go through day one actions, but also think about synergies.

Tom Wisniewski: Hi, Tom Wisniewski on for Deane Dray. Thanks for the question.

R. Scott Rowe: Okay. Thanks, Tom.

Scott Rowe: Okay. Thanks, Tom.

Tom Wisniewski: Hey. It's been another great quarter in terms of order bookings, in terms of nuclear. I was just wondering, could you give some more detail on your nuclear backlog at this stage? I guess I would assume the project funnel is also increasing in terms of nuclear opportunities.

Speaker #5: But I think we're probably a couple of months out before we're confident talking about what those synergies will be as we move forward. But I will say just based on those conversations and our knowledge of their product and the industries they've served, we're even more excited today than we were two or three months ago about this acquisition.

R. Scott Rowe: Yeah. I'll let Amy talk about the backlog and kind of how that converts, and then I can talk about the funnel and the forward look.

Scott Rowe: Yeah. I'll let Amy talk about the backlog and kind of how that converts, and then I can talk about the funnel and the forward look.

Amy Schwetz: Yeah. I would say, you know, if you look at kind of going back to where we were at to start the year at about $2.9 billion of backlog with 76% of that shippable over the next 12 months, it's safe to assume that the, that the lion's share of that, of that 24% of the backlog is nuclear. That only grows with what we saw in the Q1 bookings at about $110 million of nuclear backlog.

Speaker #5: And we're looking forward to welcoming them to our team.

Speaker #7: Thanks.

Speaker #3: And as a reminder, that is STAR 1 if you would like to ask a question. We'll take our next question from Joe Ritchie with Goldman Sachs.

Speaker #4: Hey, guys. Good morning.

Speaker #8: Morning, Joe.

Speaker #4: So yeah. So look, I fully recognize that for refining specifically crack spreads or long-term positive, when they start to widen I guess just from a near-term perspective, how are you how is that potentially going to change your customer behavior?

R. Scott Rowe: Yeah. Then on the forward look, you know, we're booking roughly $100 million a quarter. A lot of that is on the back of kinda what I'll call supporting the existing assets. rerate, you know, life extensions of those assets and really making sure that the nuclear plants will be around and productive for years to come. You know, as we've stated before, we've got a unbelievable installed base and entitlement in those existing assets. So that work is relatively steady, and we're seeing more and more of these rerate and life extensions as we go forward. Then the other category is the new traditional reactors.

Scott Rowe: Yeah. Then on the forward look, you know, we're booking roughly $100 million a quarter. A lot of that is on the back of kinda what I'll call supporting the existing assets. rerate, you know, life extensions of those assets and really making sure that the nuclear plants will be around and productive for years to come. You know, as we've stated before, we've got a unbelievable installed base and entitlement in those existing assets. So that work is relatively steady, and we're seeing more and more of these rerate and life extensions as we go forward. Then the other category is the new traditional reactors.

Speaker #4: And I'm really thinking about your aftermarket business. Could they run their refineries a little bit longer? Does that create any type of, I don't know, ear pocket in growth in the coming quarters?

Speaker #4: What are your customers saying about maintenance on their refineries today?

Speaker #8: Yeah. So that's a good question. And again, a very dynamic environment. But right now, certainly the North American refiners are doing really well. And so there's higher utilization.

R. Scott Rowe: You know, we still are incredibly optimistic that, you know, traditional nuclear reactors continue to move forward, both in Europe and the United States and parts of Asia, maybe a little bit slowed down on the Middle East, ultimately we'll come there. We're incredibly well-positioned with the customers to make sure that our content is on those new builds. You know, I'd say certainly for the United States, there are, you know, there's a lot of stakeholders and you've got the US government, you've got local, you know, state governments, we've got EPCs, we've got the utilities themselves. It's a little bit of a complex equation in terms of getting all of the parties to agree on some of the timing.

Scott Rowe: You know, we still are incredibly optimistic that, you know, traditional nuclear reactors continue to move forward, both in Europe and the United States and parts of Asia, maybe a little bit slowed down on the Middle East, ultimately we'll come there. We're incredibly well-positioned with the customers to make sure that our content is on those new builds. You know, I'd say certainly for the United States, there are, you know, there's a lot of stakeholders and you've got the US government, you've got local, you know, state governments, we've got EPCs, we've got the utilities themselves. It's a little bit of a complex equation in terms of getting all of the parties to agree on some of the timing.

Speaker #8: There's higher crack spreads driving high profitability. And so typically, when you see work like that, they don't want to do an extended turnaround. And so they want to delay their maintenance and maximize the profits.

Speaker #8: And so we're seeing some turnarounds that were scheduled in the spring, get moved out into probably the fall. And so we'll have a little bit of headwind on the turnaround season.

Speaker #8: With that said, we're seeing an increase or an uptick in what I'll call emergency or kind of call-off work for a pump or a valve or a mechanical seal that's necessary to keep their operations running.

Speaker #8: And I'd say our view today is that's probably neutral as we kind of work through the year. And we'll have a better understanding here in the next month or two because we're really only kind of two months into this.

R. Scott Rowe: I would say, you know, in the last quarter, we've seen advancements in terms of those discussions, and we're getting more and more optimistic that the US moves forward with a new nuclear program build-out. In Europe, we're actively in pursuit of several new reactors in Europe. I'd say we're more optimistic that that does happen within the year. There's more certainty there, I feel pretty comfortable that we'll get awards on new reactors in Europe as we move through 2026. Finally, on the SMRs. You know, we're working with a select group of SMR providers and the technology.

Scott Rowe: I would say, you know, in the last quarter, we've seen advancements in terms of those discussions, and we're getting more and more optimistic that the US moves forward with a new nuclear program build-out. In Europe, we're actively in pursuit of several new reactors in Europe. I'd say we're more optimistic that that does happen within the year. There's more certainty there, I feel pretty comfortable that we'll get awards on new reactors in Europe as we move through 2026. Finally, on the SMRs. You know, we're working with a select group of SMR providers and the technology.

Speaker #8: But I would say we've got great relationships with the North American refiners. We're watching this closely. And we're committed to making sure that they stay up and run at a high level.

Speaker #8: And then in Europe, you've got a similar dynamic there. I'd say they're a little bit more on the schedule-driven maintenance is happening inside, say, less of an impact in the European theater.

Speaker #4: Got it. That's super helpful, Scott. And I guess my second question just on the organic growth ramp into the second half of the year.

R. Scott Rowe: We continue to win awards on, well, call it, on the prototype side and, you know, some of the engineering contract to help them with design and making sure that they've got a solution that can work for the long run. You know, I remain incredibly optimistic that SMRs are part of the equation in the future. I just think the timing on, you know, winning real work that can be scaled into multiple sites is still a couple years away.

Scott Rowe: We continue to win awards on, well, call it, on the prototype side and, you know, some of the engineering contract to help them with design and making sure that they've got a solution that can work for the long run. You know, I remain incredibly optimistic that SMRs are part of the equation in the future. I just think the timing on, you know, winning real work that can be scaled into multiple sites is still a couple years away.

Speaker #4: So I know you built a little bit of backlog in the first quarter. Some of that being nuclear. But the ramp probably implies a little over 100 million dollars in organic revenue growth in the second half of the year.

Speaker #4: And I guess I'm just as we sit here today, maybe some of the answer is some of the refinery business being pushed out into the second half.

Speaker #4: But how do we kind of square the ramp into the second half of the year to feel good about kind of like that mid-single-digit organic number that you have embedded in the guide in 2H?

Tom Wisniewski: Got it. No, really appreciate the color. I guess the follow-up for me would be, in terms of Trillium, you mentioned the timing closing around towards the half year. Any additional insight on synergy opportunities you're seeing? I know it's still early days of the transaction.

Speaker #5: Yeah. So we still have a lot of confidence in the setup for the second half of the year. And just as a reminder, as we think about what the first half of the year last year looked like versus the second half, we did see a more normalized level of OE equipment revenue in the second half of the year than what we saw in the first half.

Amy Schwetz: Yeah. Early days, the teams have met, a couple of times to sit down and, 1, just go through day 1 actions, but also think about synergies. I think we're probably a couple of months out before we're confident talking about what those synergies will be as we move forward. I will say, just based on those conversations and Our knowledge of their product and the industries they serve, we were even more excited today than we were 2 or 3 months ago about this acquisition, and we're looking forward to welcoming them to our team.

Speaker #5: And so our confidence is driven by that dynamic. But it's also supported by the funnel. Our customer discussions, the run rate that we saw in March, some encouraging April awards that we've seen.

Speaker #5: And a higher backlog at the end of Q1. And so it's going to be important that we continue to accelerate the nuclear and the broader project activity in the second half of the year without a doubt.

R. Scott Rowe: Thanks.

Tom Wisniewski: Thanks.

Speaker #5: But we think that the fundamentals are there to drive that type of revenue expansion.

Operator: As a reminder, that is star one if you would like to ask a question. We'll take our next question from Joe Ritchie with Goldman Sachs.

Speaker #4: Okay. Thank you.

Joe Ritchie: Hey, guys. Good morning.

Speaker #3: We'll now take our next question from Steve Volkman with Jefferies.

R. Scott Rowe: Morning, Joe.

Scott Rowe: Morning, Joe.

Joe Ritchie: Yeah. Look, I fully recognize that, for refining, you know, specifically, like, crack spreads are a long-term positive when they start to widen. I guess, just from a near-term perspective, how is that potentially gonna change your customer behavior? I'm really thinking about your aftermarket business. Could they run their refineries a little bit longer? Does that create any type of like, I don't know, air pocket in growth in like the coming quarters? Like, what are your customers saying about maintenance on their refineries today?

Speaker #7: Hi. Excuse me. Good morning, guys. Thank you for taking my question. I apologize. I guess I'm kind of the new guy here. But I just don't understand why the MRO business started out the year as weak as it did.

Speaker #7: Was it sort of related to weather? Or specific projects? Or just maybe a little more color on that?

Speaker #8: Yeah. I think, again, this is mostly a North America phenomenon. And it really depends on buying behaviors and budgets. And January is always a little bit like an interesting time for us in terms of will the customer start to spend money straight out of the gate or not.

Yeah, so we we still have a lot of confidence in the setup for the second half of the year and just as a a reminder as we we think about what the first half of the year last year looked like versus the second half, we did see, um, a more normalized level of um, of OE equipment. Um, Revenue in the second half of the year than what we saw in the first half and and so our confidence is, is is driven by that Dynamic, um, but it's also supported by the funnel. Our customer discussions, the Run rate that we saw in March, um, some encouraging April awards that we've seen and a higher backlog at the end of q1. And so, um, it's going to be important that we continue to accelerate the nuclear and the broader project activity, um, in the second half of the year without a doubt. Um but but we think that the the fundamentals are are there to drive that type of Revenue expansion.

R. Scott Rowe: Yeah. That's a good question and, again, a very dynamic environment. Right now certainly the North American refiners are doing really well. There's higher utilization, there's higher crack spreads driving high profitability. Typically when you see work like that, they don't want to do an extended turnaround. They wanna delay their maintenance and maximize the profits. We're seeing some turnarounds that were scheduled in the spring get moved out into probably the fall. We'll have a little bit of headwind on the turnaround season. With that said, we're seeing an increase or an uptick in what I'll call emergency or kind of call-off work for a pump or a valve or a mechanical seal that's necessary to keep their operations running.

Scott Rowe: Yeah. That's a good question and, again, a very dynamic environment. Right now certainly the North American refiners are doing really well. There's higher utilization, there's higher crack spreads driving high profitability. Typically when you see work like that, they don't want to do an extended turnaround. They wanna delay their maintenance and maximize the profits. We're seeing some turnarounds that were scheduled in the spring get moved out into probably the fall. We'll have a little bit of headwind on the turnaround season. With that said, we're seeing an increase or an uptick in what I'll call emergency or kind of call-off work for a pump or a valve or a mechanical seal that's necessary to keep their operations running.

Well, and I'll take our next question from Steve. Volkman with Jeffries.

Speaker #8: And so I don't think it's highly unusual. But it lasted a little bit longer than what we were anticipating and expected. And so this is think of the large installations around the US and just not spending that amount of money that we were expecting in the Jan-Fab timeframe.

Speaker #8: And again, we saw that start to pick up in February. And we're at a healthy level and at expectations and then in April, we had a we're continuing in April.

Hi, excuse me. Good morning. Uh guys, thank you for taking my question. Um I apologize, I guess I'm I'm kind of the new guy here but I just uh, don't understand why the mro business. Uh started out the year as weak as it did it. It was a sort of related to weather or specific projects or just maybe a little more color on that.

Speaker #8: But so far, we've seen some really good numbers with our April to date. Month to date.

Speaker #7: Okay. All right. Thank you for that. And then maybe switching maybe to Amy's question. But how should we think about the opportunities for SG&A leverage?

R. Scott Rowe: You know, I'd say our view today is that's probably neutral as we kind of work through the year. We'll have a better understanding here in the next month or 2 because we're really only kind of 2 months into this. I would say that, you know, we've got great relationships with the North American refiners. We're watching this closely and, you know, we're committed to making sure that they stay up and run at a high level. In Europe, you've got a similar dynamic there. I'd say they're a little bit more, you know, on the schedule-driven maintenance is happening, I'd say less of an impact in the European theater.

Scott Rowe: You know, I'd say our view today is that's probably neutral as we kind of work through the year. We'll have a better understanding here in the next month or 2 because we're really only kind of 2 months into this. I would say that, you know, we've got great relationships with the North American refiners. We're watching this closely and, you know, we're committed to making sure that they stay up and run at a high level. In Europe, you've got a similar dynamic there. I'd say they're a little bit more, you know, on the schedule-driven maintenance is happening, I'd say less of an impact in the European theater.

Speaker #7: Is there anything you can do to reduce SG&A, maybe specifically an FCD, but more broadly if appropriate?

Speaker #5: Yeah. So certainly, as we took a look at volumes coming into the year, we're focused on making sure SG&A is scalable. We think that we've got the right organizational structure with that.

Speaker #5: But certainly, the start of the year has made a sharpen our pencils to make sure that we're doing all that we need to do from an SG&A perspective.

Joe Ritchie: Got it. That's super helpful, Scott. I guess my second question, just on the organic growth ramp into the H2 of the year. I know you built a little bit of backlog in Q1, some of that being nuclear. The ramp probably implies a little over $100 million in organic revenue growth in the H2 of the year. I guess, as we sit here today, maybe some of the answer is some of the refinery business being pushed out into the H2. How do we kind of square the ramp into the H2 of the year to feel good about that mid-single-digit organic number that you have embedded in the guidance H2?

Yeah, I think, you know, again, this is mostly a North America phenomenon and you know, it really depends on buying behaviors and budgets and January is always a little bit like, uh, an interesting time for us. In terms of, you know, we'll, we'll the customers start to spend money straight out of the gate or not. And so I, I don't think it's, you know, highly unusual but it it lasted a little bit longer than what we were anticipating in the expected. And so this is, uh, you think of like the large installations are around the US and just not spending that amount of money that we were expecting in the Jan fab time frame. And again, we saw that start to pick up in February and we're at a healthy level and add expectations. And then in April, we had a, we're we're, you know, continuing in April, but, you know, so far, we've seen some, some really good numbers with our, our April, the date month to date.

Speaker #5: I would expect sort of flat as we make our way into the second quarter of the year with volumes coming up slightly from a revenue perspective.

Speaker #5: Which will improve our leverage from an SG&A perspective and continue to improve over the course of the year.

Okay, all right. Thank you for that. And then maybe switching, uh, maybe the Amy question, but how should we think about the opportunities for sgna leverage? Um, you know, is there any anything you can do to reduce sgna, maybe specifically, in FCD but more broadly? If if appropriate

yeah, so certainly, you know as we took

Speaker #8: And I'd say we're always looking at ways to drive. We're always looking at ways to drive efficiency and cost reduction. And this year is no different.

Speaker #8: And we'll continue to make sure that we're driving our SG&A as efficiently as possible as we think about what's in front of us in 2026 and beyond.

Amy Schwetz: We still have a lot of confidence in the setup for H2 of the year. Just as a reminder, as we think about what H1 of the year last year looked like versus H2, we did see a more normalized level of OE equipment revenue in H2 of the year than what we saw in H1. Our confidence is driven by that dynamic, but it is also supported by the funnel, our customer discussions, the run rate that we saw in March, some encouraging April awards that we've seen, and a higher backlog at the end of Q1.

Speaker #7: Super. Thank you.

Speaker #3: We'll now take our last question from Amit Mehrotra with UBS.

Speaker #9: Hey. This is actually Zach Waljas. We're on for Amit. Just one quick question on margins. The adjusted gross margins how much of that maybe was benefit from the one-time versus the 80/20?

Here. We're we're focused on making sure sgna is, um, is scalable, um, we think that we've got the right organizational structure with that, but certainly, um, the start of the year has made a sharp in our, our pencils, to make sure that we're that we're doing all that we need to do from an sgna perspective. I would expect sort of, sort of flat, um, as we make our way, um, into the second quarter of the year with volumes coming up slightly from a revenue perspective, um which will include uh will improve our leverage from an sgna, uh perspective and and continue to improve over the course of the year.

Speaker #9: I'm just trying to kind of parse that through too. And then especially when we talk about the MRO, what about is any of your customers maybe changed in tonal shifts on maybe new capacity and new additions?

Speaker #9: Any kind of tangible examples or anything you kind of speak to? Thank you.

Amy Schwetz: It's gonna be important that we continue to accelerate the nuclear and the broader project activity in H2 of the year, without a doubt. We think that the fundamentals are there to drive that type of revenue expansion.

Speaker #5: Yeah. I'll hit the second part first. And Amy can hit the margins. And I'd say if we think about a global basis, we operate around the globe and have customers in all different parts of the region.

Let's say we're always looking at ways to drive—we're always looking at ways to drive efficiency and cost reduction, and you know, this year's no different. We'll continue to make sure that we're driving our SG&A as efficiently as possible as we think about what's in front of us in 2026 and beyond.

Super, thank you.

Well, now, take our last question from Amit Mayora with UBS.

Speaker #5: And with the dynamics in the Middle East, we're seeing some really interesting times in terms of folks trying to think about expanding capacity or doing things a little bit differently or potentially accelerating projects.

Joe Ritchie: Okay. Thank you.

Hey, uh, this is actually Zach Wall, Jasper on for Amit. Uh, just one quick question on margins.

Operator: We'll now take our next question from Stephen Volkmann with Jefferies.

Speaker #5: And a lot of this is around energy security and making sure that that country has the energy that they need to move forward. And so I think, again, incredibly dynamic time.

Stephen Volkmann: Hi. Excuse me. Good morning, guys. Thank you for taking my question. I apologize, I guess I'm kind of the new guy here. I just don't understand why the MRO business started out the year as weak as it did. Was it sort of related to weather or specific projects or just maybe a little more color on that?

Steve Volkmann: Hi. Excuse me. Good morning, guys. Thank you for taking my question. I apologize, I guess I'm kind of the new guy here. I just don't understand why the MRO business started out the year as weak as it did. Was it sort of related to weather or specific projects or just maybe a little more color on that?

Speaker #5: But we're seeing things that we weren't expecting in the year. And our customers talking about doing things differently about increasing capacity or actual expansions or even new projects.

Uh, the adjusted gross margins. How much of that? Maybe was benefit from the 1 time versus the 80/20. I was trying to kind of parse that through to. And then uh, as soon as we talk about the mro, uh, what about is any of your customers maybe changed tonal shifts on maybe like new capacity and new additions like any kind of tangible examples or anything, you kind of speak to thank you.

Speaker #5: And so again, we're early days in terms of the conflict and what that means for the rest of the world. But right now, we're pretty optimistic that we'll start to see some different types of work that we weren't expecting at the beginning of 2026.

R. Scott Rowe: Yeah. I think, you know, again, this is mostly a North America phenomenon, and, you know, it really depends on buying behaviors and budgets. January's always a little bit like an interesting time for us in terms of, you know, will the customers start to spend money straight out of the gate or not? I don't think it's, you know, highly unusual, but it lasted a little bit longer than what we were anticipating and expected. This is a, you know, think of like the large installations around the US and just not spending that amount of money that we were expecting in the Jan, Feb timeframe. Again, we saw that start to pick up in February, and we're at a healthy level and at expectations.

Scott Rowe: Yeah. I think, you know, again, this is mostly a North America phenomenon, and, you know, it really depends on buying behaviors and budgets. January's always a little bit like an interesting time for us in terms of, you know, will the customers start to spend money straight out of the gate or not? I don't think it's, you know, highly unusual, but it lasted a little bit longer than what we were anticipating and expected.

Speaker #5: Yeah. So Zach, excluding tariffs and the tax authority item that we discussed, we gross margins were above 35%. So 35.1%. So expansion of about 160 basis points year over year.

Projects and a lot of this is around energy security and making sure that, you know, that country has the the energy that they need to to move forward. And so I I think

Scott Rowe: This is a, you know, think of like the large installations around the US and just not spending that amount of money that we were expecting in the Jan, Feb timeframe. Again, we saw that start to pick up in February, and we're at a healthy level and at expectations. In April, we're, you know, continuing in April, you know, so far we've seen some really good numbers with our April, to date, month to date.

Speaker #5: I will just say that as we look at the impacts by segment and look at the three big items that we talked about, AIPA, tariffs, the tax authority impact, and the Middle East disruption, those items pretty much offset in FPD.

R. Scott Rowe: In April, we're, you know, continuing in April, you know, so far we've seen some really good numbers with our April, to date, month to date.

Speaker #5: So the FPD margin absent those three items is kind of what we reported. From an FCD perspective, there was benefit from the tariff that is baked into those numbers.

Stephen Volkmann: Okay. All right. Thank you for that. Maybe switching, maybe an Amy question, how should we think about the opportunities for SG&A leverage? You know, is there anything you can do to reduce SG&A, maybe specifically in FCD, more broadly if appropriate?

Steve Volkmann: Okay. All right. Thank you for that. Maybe switching, maybe an Amy question, how should we think about the opportunities for SG&A leverage? You know, is there anything you can do to reduce SG&A, maybe specifically in FCD, more broadly if appropriate?

Speaker #5: On a net basis.

Speaker #9: Okay. Got it. Super helpful. Thank you, guys.

Speaker #8: Yep. Thank you.

Amy Schwetz: Yeah. Certainly, you know, as we took a look at volumes coming into the year, we're focused on making sure SG&A is scalable. We think that we've got the right organizational structure with that, but certainly, the start of the year has made us sharpen our pencils to make sure that we're doing all that we need to do from an SG&A perspective. I would expect sort of flat, as we make our way into the Q2 of the year with volumes coming up slightly from a revenue perspective, which will improve our leverage from an SG&A perspective and continue to improve over the course of the year.

Speaker #3: And it appears there are no further telephone questions. I'd like to turn the conference back to our presenter, for any additional or closing comments.

Again, incredibly Dynamic time, but we're seeing things that, um, you know, that we weren't expecting in the year and our customers talking about doing things differently about increasing capacity, or actual expansions, or, and even new projects. And so again, we're we're early days in terms of, you know, the conflict and what that means for for the rest of the world. But, but right now, we're pretty optimistic, that we'll start to see some different types of work that we weren't expecting at the beginning of 2026. Yeah. So Zack, um, excluding tariffs and the the tax Authority item that we discussed. We, uh, gross margins were, were above 35% so 35.1%. So expansion of about 160 basis points? Uh, year-over-year. I will just say that as we look at the impacts by, um, by segment and look at the 3, big items that we talked about iipa tariffs, uh, the, the

Speaker #8: Yeah. Thanks for your time this morning. As always, we're the Investment Relations team is available to discuss. If you have more questions and if not, we will look forward to speaking with you again following our second quarter.

kind of,

What we reported um from an FCD perspective. There was there was benefit from the Tariff that is baked into those numbers um on a net basis.

Okay, got it. Super helpful. Thank you, guys.

Thank you.

Stephen Volkmann: All right. Thank you.

Steve Volkmann: All right. Thank you.

Stephen Volkmann: I'd say, look, we're always looking at ways to drive efficiency and cost reduction and, you know, this year is no different, and we'll continue to make sure that we're driving our SG&A as efficiently as possible as we think about what's in front of us in 2026 and beyond.

Scott Rowe: I'd say, look, we're always looking at ways to drive efficiency and cost reduction and, you know, this year is no different, and we'll continue to make sure that we're driving our SG&A as efficiently as possible as we think about what's in front of us in 2026 and beyond.

And it appears there are no further telephone questions. I'd like to turn the conference back to our presenters for any additional or closing comments.

Stephen Volkmann: Super. Thank you.

Steve Volkmann: Super. Thank you.

Yeah, thanks for your time this morning. As always, the investor relations team is available to discuss if you have more questions, and if not, we will look forward to speaking with you again following our second quarter.

Operator: We'll now take our last question from Amit Mehrotra with UBS.

And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect. Come on.

Zach Walsh: Hey, this is actually Zach Walsh. I'll answer on for Amit. Just one quick question on margins. The adjusted gross margins, how much of that maybe was benefit from the one-time versus the 80/20? I'm just trying to kind of parse that through too. Then, especially when we talk about the MRO, has any of your customers maybe changed any tonal shifts on maybe, like, new capacity and new additions? Like, any kind of tangible examples or anything you kind of speak to? Thank you.

R. Scott Rowe: Yeah, I'll hit the second part first, Amy can hit the margins. You know, I'd say, you know, if we think about a global basis, you know, we operate around the globe and have customers in all different parts of the region. You know, with the dynamics in the Middle East, we're seeing some really interesting times in terms of, you know, folks trying to think about expanding capacity or doing things a little bit differently or potentially accelerating projects. A lot of this is around energy security and making sure that, you know, that country has the energy that they need to move forward.

Scott Rowe: Yeah, I'll hit the second part first, Amy can hit the margins. You know, I'd say, you know, if we think about a global basis, you know, we operate around the globe and have customers in all different parts of the region. You know, with the dynamics in the Middle East, we're seeing some really interesting times in terms of, you know, folks trying to think about expanding capacity or doing things a little bit differently or potentially accelerating projects. A lot of this is around energy security and making sure that, you know, that country has the energy that they need to move forward.

R. Scott Rowe: I think, again, incredibly dynamic time, but we're seeing things that, you know, that we weren't expecting in the year and our customers talking about doing things differently about increasing capacity or actual expansions and even new projects. Again, we're early days in terms of, you know, the conflict and what that means for the rest of the world. But right now we're pretty optimistic that we'll start to see some different types of work that we weren't expecting at the beginning of 2026.

Scott Rowe: I think, again, incredibly dynamic time, but we're seeing things that, you know, that we weren't expecting in the year and our customers talking about doing things differently about increasing capacity or actual expansions and even new projects. Again, we're early days in terms of, you know, the conflict and what that means for the rest of the world. But right now we're pretty optimistic that we'll start to see some different types of work that we weren't expecting at the beginning of 2026.

Amy Schwetz: Yeah. Zach, excluding tariffs and the tax authority item that we discussed, we gross margins were above 35%, so 35.1%, so expansion of about 160 basis points year over year. I will just say that as we look at the impacts by segment and look at the 3 big items that we talked about, IEEPA, tariffs, the tax authority impact and the Middle East disruption, those items pretty much offset in FPD. The FPD margin, absent those 3 items, is kind of what we reported. From an FCD perspective, there was benefit from the tariff that is baked into those numbers on a net basis.

Zach Walsh: Okay. Got it. Super helpful. Thank you, guys.

R. Scott Rowe: Yep, thank you.

Scott Rowe: Yep, thank you.

Operator: It appears there are no further telephone questions. I'd like to turn the conference back to our presenters for any additional or closing comments.

R. Scott Rowe: Yeah, thanks for your time this morning. As always, the investor relations team is available to discuss if you have more questions. If not, we will look forward to speaking with you again following our Q2.

Scott Rowe: Yeah, thanks for your time this morning. As always, the investor relations team is available to discuss if you have more questions. If not, we will look forward to speaking with you again following our Q2.

Operator: Once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.

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