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Flowserve Corporation (FLS) reported its second-quarter 2025 earnings, surpassing analyst expectations with an adjusted earnings per share (EPS) of $0.91 against a forecast of $0.78, marking a 16.67% surprise. Despite this earnings beat, the company’s revenue of $1.19 billion fell short of the $1.23 billion forecast, resulting in a 3.25% miss. The stock price reacted with a slight decline of 0.84%, closing at $56.20, as investors weighed the mixed results. InvestingPro data reveals that 3 analysts have recently revised their earnings estimates upward for the upcoming period, suggesting growing confidence in Flowserve’s performance trajectory.
Key Takeaways
- Flowserve’s Q2 EPS exceeded expectations by 16.67%.
- Revenue came in below forecasts, missing by 3.25%.
- Stock price fell 0.84% post-earnings.
- Margins expanded significantly, indicating improved operational efficiency.
- New strategic initiatives and partnerships announced.
Company Performance
Flowserve demonstrated robust performance in the second quarter of 2025, with a 25% year-over-year increase in adjusted EPS. The company also reported a 3% growth in revenue compared to the previous year, contributing to its trailing twelve-month revenue of $4.61 billion. Despite missing revenue forecasts, Flowserve’s operational efficiency improved, as evidenced by a 210 basis point expansion in the adjusted operating margin and a 260 basis point increase in the adjusted gross margin. The company maintains strong financial health, earning a GOOD rating from InvestingPro, with a notable current ratio of 2.07 indicating solid liquidity.
Financial Highlights
- Revenue: $1.19 billion, 3% year-over-year growth
- Earnings per share: $0.91, 25% increase from prior year
- Adjusted Operating Margin: 14.6%, expanded 210 basis points
- Adjusted Gross Margin: 34.9%, expanded 260 basis points
Earnings vs. Forecast
Flowserve’s actual EPS of $0.91 surpassed the forecasted $0.78, delivering a 16.67% positive surprise. This performance underscores the company’s ability to manage costs and drive profitability despite revenue falling short of expectations by 3.25%.
Market Reaction
Following the earnings announcement, Flowserve’s stock price declined by 0.84%, closing at $56.20. The stock’s movement reflects investor concerns over the revenue miss, despite strong earnings. Based on InvestingPro’s Fair Value analysis, the stock is currently trading near its fair value. With a market capitalization of $7.27 billion and analyst targets ranging from $60 to $75, the stock remains within its 52-week range, indicating steady long-term investor confidence. Notably, the company has maintained dividend payments for 19 consecutive years, demonstrating consistent shareholder returns.
Outlook & Guidance
Flowserve reaffirmed its full-year adjusted EPS guidance of $3.25 to $3.40, representing a 25% increase at the midpoint. The company anticipates organic sales growth of 3-4% and is targeting further margin expansion. Strategic initiatives, including a partnership with Honeywell and advancements in nuclear technology, are expected to drive future growth.
Executive Commentary
CEO Scott Rowe highlighted the company’s strong execution in a dynamic macro environment, stating, "We delivered exceptional second quarter earnings." He emphasized the health of end markets and the company’s strategic positioning, noting, "We are positioned to grow adjusted EPS nearly 60% since 2023."
Risks and Challenges
- Revenue miss indicates potential sales challenges.
- Macro environment uncertainties could impact future performance.
- Execution of new strategic initiatives and partnerships may face hurdles.
- Competitive pressures in the industry could affect market share.
Q&A
During the earnings call, analysts inquired about the termination of the Chart Industries merger, the performance of the Mogus acquisition, and the implementation of the 8020 complexity reduction program. Executives addressed these concerns, emphasizing the company’s strategic focus on diversification and operational efficiency.
Full transcript - Flowserve Corp (FLS) Q2 2025:
Conference Operator: Day, and welcome to the Flowserve Second Quarter twenty twenty five Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Brian Ezel, Vice President, Investor Relations, Treasurer and Corporate Finance. Please go ahead.
Brian Ezel, Vice President, Investor Relations, Treasurer and Corporate Finance, Flowserve: Thank you, and good morning, everyone. Welcome to Flowserve’s Second Quarter twenty twenty five Business Update. I’m joined by Scott Rowe, Flowserve’s President and Chief Executive Officer and Flowserve’s Chief Financial Officer, Amy Swetz. Turning to Slide two. Our discussion will contain forward looking statements that are based upon information available as of today.
Actual results may differ due to risks and uncertainties. Refer to additional information, including our note on non GAAP measures in our press release, earnings presentation and SEC filings, which are available on our website. I will now turn it over to Scott.
Scott Rowe, President and Chief Executive Officer, Flowserve: Great. Thank you, Brian. Good morning, everyone. Before we talk about our outstanding second quarter results, I want to provide an update on the Chart merger. As we announced yesterday, we reached an agreement to terminate the proposed merger with Chart Industries.
When we were first approached by Chart about the potential merger, we took a very disciplined approach to the discussion with a focus on ensuring the strong value creation opportunities offered by Flowserve would continue in the merger. This disciplined approach guided us through our decision making process following the subsequent all cash offer for Chart from Baker Hughes. Based on our assessment, further pursuing the merger would have been value diminishing to Flowserve shareholders given the additional cash, leverage, and diluted ownership required to continue the process. While we are disappointed in this outcome, we are confident that this decision was in the best interest of our shareholders and our company. As a result, Flowserve received a 266,000,000 termination payment in accordance with our signed agreement.
Near term, we’ll evaluate opportunities to deploy this capital to create value for our shareholders, including through share repurchases. Over time, we remain committed to a disciplined approach to capital allocation, including m and a. While the outcome wasn’t what we wanted, we have no regrets in our decision to pursue this opportunity or with our decision to terminate the agreement. The Flowserve team and our board of directors were thoughtful, disciplined, and focused on our stakeholders throughout this engagement. And I believe we’re at a better place today than ever before to capitalize on the opportunities in front of us.
Let’s now turn to slide three. We delivered exceptional second quarter earnings in a dynamic macro environment, demonstrating the focus and strong execution of our associates. We are encouraged by our momentum through the first half of the year and remain confident in our ability to execute at a high level even as the environment remains fluid. As a result, we increased our full year adjusted EPS guidance to $3.25 to $3.40, which at the midpoint represents an increase of more than 25% year over year. Looking at our second quarter results in detail, we delivered bookings of approximately $1,100,000,000 and revenue growth of 3% with adjusted gross margins expanding two sixty basis points to 34.9.
Adjusted operating margins were 14.6% resulting in impressive incremental margins of 94% during the quarter. While adjusted earnings per share was 91¢, an increase of 25% compared to the prior year period. The Flowserve business system is taking hold across the organization, driving excellence through functional discipline and accountability within our operating divisions and business units. We continue to be laser focused on expanding margins and driving profitable growth. All products are now fully utilizing the 8020 framework, and we believe there are further opportunities to increase margins as we are still in the early phases of this program.
For the full year, we now expect to expand adjusted operating margins 200 basis points year over year. Turning to slide four, we delivered solid bookings performance with our fifth consecutive quarter of aftermarket bookings above $600,000,000. Our focus on growing the aftermarket business continues to pay dividends, and our high service levels are translating into improved aftermarket capture. Our largest award in the quarter was an $11,000,000 nuclear aftermarket order for the ongoing upgrade of a nuclear power plant in North America. Additionally, in pumps, we secured our first production order related to a small modular nuclear reactor or SMR, which is a testament to Flowserve being a leader in the advanced nuclear technology space.
Total nuclear bookings were nearly $60,000,000 during the second quarter. We also booked several other smaller projects in the 5 to $10,000,000 range across different end markets. Second quarter bookings were largely driven by our core business of aftermarket m MRO and short cycle activities. This base business remained healthy in the quarter as customers continue to focus on uptime and facility utilization. Overall, our markets remain healthy, and our project funnel continues to grow, though we did see approvals for a few projects pushed from second quarter to the third quarter as customers assess the macro environment and tariff situation.
By end market, we generated strong year over year growth in general industries of 9%. Energy and chemical bookings decreased as expected given two large Middle East awards totaling a $150,000,000 that did not repeat this year. We continue to see good opportunities in The Middle East with medium sized projects across a variety of end markets. We were happy to sign an MOU with Honeywell to integrate our Redraven digital offering into their asset performance management system called Forge. This exciting step forward validates the incredible technology we have developed and is an opportunity to significantly scale our Red Raven offering.
Leveraging this partnership, we have the ability to serve large industrial facilities, enhancing efficiency, and operating predictability for our customers while creating a recurring stream of revenue for Flowserve. We look forward to sharing more details as we make progress with our customers. Turning to slide five. While the macroeconomic environment continues to be dynamic, our end markets remain healthy. Asset utilization for large process industries remained steady, and maintenance spending has continued as expected.
Our project funnel remains healthy and increased sequentially in all of our end markets. In particular, the nuclear project funnel continues to grow and is at the highest level we have seen. While some new project approvals in the chemical and energy markets have been pushed out a quarter or two, there have been no unusual backlog cancellations or significant change in activity to date. Our first half book to bill was a strong point nine nine times. For the full year, we expect our book to bill ratio to be approximately one point o times, assuming project approvals continue as expected.
Our strong backlog of $2,900,000,000 continues to position us well for future growth in the second half of the year as well as into 2026. Our elevated backlog provides a comforting level of certainty in the current market environment. Turning to slide six. Trade policy continues to evolve, and we remain focused on building resiliency into our supply chain as well as responding as quickly as possible to the latest tariff changes. As we look at the tariff rates in place today, we estimate the annualized gross impact from these tariffs before any mitigating actions to be between 50 to $60,000,000.
This compares to the range we shared in April ’90 to a $100,000,000. We continue to actively shift sourcing around the globe, leveraging our regional structure to reduce the overall tariff impact for our customers. The pricing actions we took in response to tariffs are now fully in place with no noticeable impact to demand. We estimate the impact for tariffs to the second quarter, net of our mitigating actions, were neutral to earnings, and our goal remains to be tariff impact neutral for the full year. I would like to conclude with the progress we are making with the Flowserve business system.
Operational excellence is now fully embedded with how we run our global manufacturing and is helping us deliver for our customers and our shareholders. Additionally, we are now executing eighty twenty across all of our business units, and we believe there’s significantly more opportunity as we decrease complexity in our product portfolio offering. Finally, we launched commercial excellence in the second quarter with the expectation that this program drives long term profitable growth. We are excited about the tenets of the commercial excellence program, and we are confident in our ability to gain traction quickly. Let me now turn the call over to Amy to speak about our financials in greater detail.
Amy?
Amy Swetz, Chief Financial Officer, Flowserve: Thank you, Scott, and good morning, everyone. Turning to slide seven. The strong second quarter is another data point in demonstrating both the execution focus and the potential to be realized of the Flowserve business. We delivered second quarter revenue of $1,200,000,000 adjusted operating margin of fourteen point six percent and $0.91 of adjusted earnings per share, representing 25% earnings growth versus the prior year period. I want to thank our associates for their efforts, which were critical to delivering exceptional results during the quarter.
Overall, revenues grew 3% versus the prior year period, with the Mogus acquisition and foreign currency benefiting revenues by two sixty and one hundred and ten basis points, respectively, while organic sales decreased about 100 basis points. Our eightytwenty program is driving significant benefits to gross profits. However, the actions we have taken to reduce SKU counts were a modest headwind to organic growth in the quarter. Aftermarket revenues grew 7%, driven by continued aftermarket capture, while original equipment sales decreased 2%, driven by lower engineered to order work in the quarter. Shifting to margins.
We generated an adjusted gross margin of 34.9%, representing a two sixty basis point year over year increase and our seventh consecutive quarter of sequential margin improvement. In the quarter, adjusted gross margins benefited from strong execution of the Flowserve business system with benefits from our eightytwenty complexity reduction program proving to be a tailwind in the quarter. The quarter also benefited from favorable product mix within Original Equipment sales and higher aftermarket sales in the FPD segment. We believe the continued execution of the Flowserve business system positions us well to further expand margins. Higher adjusted gross margins, coupled with consistent SG and A as a percentage of sales, led to adjusted operating margin expanding two ten basis points versus the prior year period to 14.6% and represented exceptional incremental margins of 94%.
Adjusted operating income was $174,000,000 a 20% increase versus last year. Our adjusted tax rate for the quarter was 17.1%, driven by discrete tax benefits from foreign operations. The change in tax rate versus the prior year period favorably impacted adjusted EPS by approximately $05 Altogether, we delivered robust earnings per share of $0.91 for the second quarter. Turning to our segments and starting with FPD on Slide eight. FPD delivered solid bookings with growth in General Industries, but lower bookings than last year, driven by the non recurrence of certain large projects and some project pushouts to the back half of the year.
FPD grew sales 1% versus the prior year, driven by continued strength in aftermarket activity. We are particularly pleased with adjusted gross margin performance of 36.8%, an increase of three ninety basis points compared to last year, driven by our eightytwenty program, increased productivity and favorable mix. These results translated into FPD delivering an outstanding adjusted operating margin of 20.3%, a three forty basis point increase versus the prior year period. We have made tremendous progress in FPD in the first half adjusted operating margins of 19. FPD is now operating at margins similar to best in class industrials, and yet we still see opportunities to increase FPD margins from here.
While margins may vary modestly quarter to quarter, largely driven by mix, we see an opportunity for FPD operating margins to be at 20% or more over time, which would be well above the long term targets we had previously established to deliver by 2027. Turning to FCD on Slide 10. In the quarter, FCD delivered bookings growth of 2% and sales growth of 7%, driven by Mogus. FCD adjusted gross and adjusted operating margins were 30.812.2%, respectively. Mogus unfavorably impacted FCD adjusted operating margins by roughly two sixty basis points, largely due to the fabricated modules business and, to a lesser extent, inventory write offs, which together resulted in an operating loss for Mogus.
We have not bid on or accepted any fabricated modules orders since acquiring the Mogus business. And after we shipped the last remaining order, we do not expect to continue this type of activity, which is consistent with our plans at acquisition. While the results are lower than we expected, we recognize the acquisition is still in early days and that synergy realization is on track. We remain excited about the long term outlook for Mogus, which expands our offerings in the attractive mining and minerals end markets and enhances our diversification efforts. To be clear, FCD margins are not meeting our margin expectations.
However, we are executing on the same elements of the Flowserve business system that have yielded exceptional results for FPD, and we believe we’ll do the same here. It’s important to note that absent Mogus, FCD adjusted gross margins increased 180 basis points versus prior year. Turning now to cash flow on Slide 10. We delivered strong cash from operations of $154,000,000 during the quarter, driven primarily from robust earnings generation. As expected, days sales outstanding improved sequentially due to increased receipts from milestone billings and accrued liabilities with a modest source of cash following last quarter’s performance based incentive compensation payout.
Overall, adjusted primary working capital as a percent of sales was 30.1%. Working capital efficiency remains an opportunity and a priority. We expect continued improvement from in our cash from operations in the second half of the year. For the quarter, capital expenditures were $17,000,000 and resulted in strong free cash flow of 138,000,000 and a free cash conversion ratio of 115%. For the full year, we continue to expect a free cash flow to adjusted net earnings ratio of 90% or more.
Other uses of cash during the second quarter included nearly $60,000,000 for dividends and share repurchases combined. Importantly, we closed the quarter with a net debt to adjusted EBITDA ratio of 1.25 times, our lowest level in the last decade, providing significant flexibility for capital allocation choices. It’s important to note that with our current leverage level, the $266,000,000 break fee represents an opportunity to allocate capital. As we have demonstrated, we will be thorough and disciplined in approach, including consideration of shareholder returns. We currently have over $200,000,000 remaining under our share repurchase authorization.
Turning to our 2025 outlook on Slide 11. While the environment continues to evolve, we delivered robust first half results and remain focused and committed on growth, margin expansion and cash flow generation in the second half of the year. As a result, we are increasing our earnings guidance, including adjusted operating margin expansion of 200 basis points and adjusted earnings per share of $3.25 to $3.4 The macro environment has resulted in some bookings and revenue deferrals, and we now expect organic sales growth to range from 3% to 4%, a modest decrease from our prior guidance of 3% to 5%. So back half organic growth is expected to be higher than the first half organic growth. With the weakening of the U.
S. Dollar, we also expect the impact from currency rates to be neutral to slightly positive to growth and earnings for the full year. We also expect this year’s tax rate to be 20%, a modest improvement versus our prior guidance of 21%, driven by discrete benefits from foreign operations. Lastly, we expect the Mogus operations to now contribute approximately $08 to full year adjusted EPS. Turning to the progression of earnings, we expect to deliver higher earnings in the second half of the year compared to the first half, driven by increased revenues but tempered somewhat by a higher tax rate and a more normalized mix composition versus that in the second quarter, which we expect to modestly impact back half gross margins.
Specifically, we would expect Q3 revenue to be similar to Q2 and to include the aforementioned shift in mix. Revenue in Q4 will experience the traditional ramp with incremental volume benefiting operating income with margins increasing sequentially from Q3 levels. On a year over year basis, we continue to expect gross and operating margin expansion in both the third and fourth quarters. Additionally, our annual true up of certain incurred but not reported liabilities is expected to occur in the third quarter, though this true up will be excluded from our adjusted results in 2025 and going forward. We continue to expect the fourth quarter to be our highest earnings quarter driven by the acceleration of growth, acquisition synergies and our eightytwenty program results.
In summary, I am proud of our first half results and believe we are well positioned to drive year over year earnings growth in the second half of the year. Let me now turn the call back to Scott.
Scott Rowe, President and Chief Executive Officer, Flowserve: Thanks, Amy. We’ll now turn to Slide 12. Looking ahead, I remain excited about our ability to drive significant value for our shareholders. We are executing from a clear position of strength with significant momentum. Global demand for our mission critical full control products and solutions remains robust, and our three d strategy has has us positioned to deliver sustained growth.
The Flowserve business system is accelerating performance across the organization, and we see further opportunities to drive growth, productivity, and margin expansion to unlock further value. Our strong free cash flow generation positions us to invest in innovation and strategic initiatives to support our customers’ evolving needs across the industrial spectrum. In closing, on slide 13, our end markets remain healthy, and our execution is the best I’ve seen so far with more opportunities for improvement. We continue to deliver towards our twenty twenty seven margins and EPS targets and are well positioned to deliver strong performance for the full year in 2025. The midpoint of our updated adjusted EPS guidance represents an impressive 27% increase versus last year.
And combined with the significant EPS growth we delivered in 2024, we are positioned to grow adjusted EPS nearly 60% since 2023. I’m proud of our associates and their hard work to deliver significant value for our shareholders, and we look forward to continuing to do so in the future. With that, I’ll turn the call over to the operator to open up questions and answers.
Conference Operator: Thank you. If you are dialed in via the telephone and 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 wire signal to reach our equipment. We’ll take our first question from Andy Kaplowitz with Citigroup.
Andy Kaplowitz, Analyst, Citigroup: Morning, everyone.
Scott Rowe, President and Chief Executive Officer, Flowserve: Good morning. Hey, Andy. Good morning.
Dean Dre, Analyst, RBC Capital Markets: Scott, can you give more color into the bookings environment and your expectation for book to bill around one for the year, which I think would imply bookings slightly over one for the second half. So can you talk about the visibility toward those bookings? Are you seeing any evidence that some of the delayed projects you saw in q two are starting to move forward again in q three? I think you mentioned the funnel is up sequentially. Any way to quantify what the funnel actually looks like?
Scott Rowe, President and Chief Executive Officer, Flowserve: Sure. Yeah. Obviously, the market is a little bit uncertain right now. Certainly, in the second quarter, the macro picture plus the tariffs really impacted some of the the project spending and some of those projects just shifting. And it makes sense.
Right? I mean, operators wanna have a clear financial returns in in their in their assessments before they pull the trigger. And so I’d say, you know, not overly surprising for us. On the positive side, our our run rate in aftermarket business was incredibly strong, and we didn’t see any slowdown at all in that run rate or aftermarket business throughout q two. And, you know, we certainly don’t expect that on the go forward basis.
You know, as you said, q q two well, first half of the year book to bill is point nine nine. And so we’re, you know, we’re we believe at this point with everything we know that the full year will be one point o, which implies, you know, slightly better than one point o in the in the second half of the year. And, you know, right now, the the project funnel is up sequentially, and so the opportunities are there. Just as a reminder, that funnel number is a one year funnel, and so that would take us into the second half of of twenty twenty six. But the teams have a a bottom up approach, and, you know, we wouldn’t talk about one point o if we didn’t have the visas visibility to deliver that.
And so, you know, I’d say, you know, there there is some risk with it as, you know, there there continues to be some uncertainty in the trade environment, which causes cost uncertainty with with projects. And so I’d say that’s what we’re watching the closest is the project environment. It’s impacting the energy side of our business and the chemical side of our business more than anything else. General industries appears to be pretty robust at this point. We had some really nice general industry bookings in the quarter, and then the power bookings remain incredibly strong.
And so we have seen you know, back to your your last kind of question was, you know, we have seen some projects now move into to financial decision in q three, and so we’re confident we’ll win some some nice awards in q three. And, given the current environment, you know, we feel we feel as come through as comfortable and confident as we can to deliver one point o given everything we know today.
Amy Swetz, Chief Financial Officer, Flowserve: Yeah. And, Andy, the only thing that I would add to that is, you know, as we look at July activity, Scott referenced really no large, project orders were were placed in the second quarter. And this month already, we’ve seen a large project order, sort of the size of the three that were in the 11,000,000 to $12,000,000 range in the third quarter combined. So we feel pretty good about that project funnel delivering in the third quarter.
Dean Dre, Analyst, RBC Capital Markets: Very helpful. And then, Scott or Amy, just we understand that Mogus is diluting SCD margin, but how should we think about the potential improvement in the segment moving forward? Obviously, you disclosed the two sixty basis points in Q2, but how do we think about ongoing pressure from Mogus? And and stepping back as Scott, as you know, FCD used to have similar, maybe even better margin than FPD. So what will it take or what time frame can margin FCD get back closer to the levels of FPD?
Scott Rowe, President and Chief Executive Officer, Flowserve: Yep. Yep. For a long time, FCD had the the higher margin. So maybe I’ll let Amy walk through the the margin and kinda how we see it and then the Mogus impact, and then I’ll kinda summarize that.
Amy Swetz, Chief Financial Officer, Flowserve: Yeah. And I I think you’re right, Andy. To to truly understand the performance, you have to look at organic FCD and Mogus somewhat separately right now. The organic FCD had a solid quarter. We still wanna see more margin expansion than where we’re at, but gross margins did improve 180 basis points, and OI improved 140 basis points year on year, excluding Mogus.
As we look at the Mogus side of the business, really three issues impacted the quarter and give us some confidence that this is a temporary issue. We focused a lot on this module, this fabricated module business. That’s one we absolutely planned on discontinuing or not continuing once these orders shipped. And so they’re working through the system really in the first three quarters of this year. But it’s but it’s taken a little bit longer and cost a bit more to ship that final module than than we’d expected.
And so that’s, you know, really the the first item factoring their performance. And then the second is really around project bookings that have been slower in really the last nine months than we would have anticipated. That has impacted their backlog a bit, but it’s also impacted bookings and project revenues in first half of the year. We do have visibility to elevated project bookings over the next twelve months, and I think we remain really excited about the exposure that Mogus overall gives us to the mining and minerals business. And so we we remain pretty committed to that.
And I’d say, overall, the integration is going well. So really, synergy realization, which we’ve needed to overcome some of these these issues, is right on track, right where we want it to be. And so I would say it’s been a little messy in our first six months of ownership, but we’re really excited about the continued options and and future of Mogus that it that it gives us, not just within that business, but for cross selling.
Scott Rowe, President and Chief Executive Officer, Flowserve: Yeah. And then I I’ll just add first on Mogus. Mogus is a good business. We we’ve gotta get these fabricated modules through the system, and we’ll start to clear that toward the end of the year. And then secondly, the project bookings have to come through.
And, you know, the mining and minerals industry is is actually really strong. We’ve got visibility to those orders as we go forward. And so we we feel really good about the Mogus business. It’s just we gotta we gotta clear through some of these things that we identified in in due diligence. And then back to FCD and and its aggregate, you know, in theory, Mogus should be accretive to the FCD, overall financials.
And so we’ll start to see that play out in 2026 and beyond. And, you know, like you said, Andy, you know, we we do believe, and and we are definitely leaning toward, you know, making sure that the gross margins in FCD are are back to where we saw historically in that kind of, you know, the mid thirties to to get mid to high thirties, if you will, on the gross margin side. And, you know, we have the playbook. The operate the full service business system, the operational excellence, the 8020 is has delivered incredible results on the FPD side. We’re running that exact same playbook in FCD.
We started a little bit later, and so they were always gonna be a little bit of a lag behind the FPD progress, but the Mogus is is definitely impacting them more. I will now be spending more time with our FCD team than I would have done prior to our announcement yesterday. And so I’ll be in Europe on Monday morning with the team and going through a couple of their sites and making sure that we are doing the right things. And so we do have a lot of confidence in that team and definitely look forward to a second half of of improved margins.
Dean Dre, Analyst, RBC Capital Markets: It’s good to hear. Thanks, Scott.
Conference Operator: We’ll go next to Dean Dre with RBC Capital Markets.
Damian Karas, Analyst, UBS: Implications of this whole chart, experience, if I can call it that. So, look, in our view, the deal made sense when it was announced. The deal termination also makes complete sense. So that chapter gets closed. But now we do know more about flow serves growth ambitions.
So does that growth ambition get put the genie back in the bottle, or are you in the hunt for another deal? You know, I love hearing that you can focus now a 100% back on the business, and, you know, you’re gonna spend time at FCD. That makes sense. But what about this this growth ambition, and how does that play out? And how can you know, what can you say about it today?
Scott Rowe, President and Chief Executive Officer, Flowserve: Sure. You know, Dean, let me just start with a couple of comments that you said at the beginning because I do think they’re important. And, you know, I put this in the prepared remarks. And, you know, while we are disappointed in the outcome, you know, we we believe this business is in a in a really good place. We were always bought into the strategic logic of the combination, right, the flow and the thermal management.
And and there was something there that we thought we could do that was was truly transformational in the space. You know, I am proud of our team and our board to to remain disciplined in the the early negotiations in getting to a deal, but also in our ability to to exit and terminate the deal in a successful way. And, you know, obviously, that results in a a 266,000,000 breakup fee that enhances our balance sheet, and we’ve received that money to date. And so that’s in our in our bank account, and, you know, we are looking to how to deploy that properly. Additionally, we were able to secure a supply agreement with Chart that, that really was kinda on the back of, some of the revenue synergies that we were talking about with the combination.
We wanted to make sure the full serve product got pulled through. And so we’ve got a multiyear supply agreement to to to progress that forward. And so as we think forward, right, we’re we’re not gonna shy away from m and a. And I’m gonna let Amy talk about kinda how we think about that and what it looks like. But what I’d say is the other thing that we demonstrated here is that, you know, we can make progress while the corporate team looks at mergers and acquisitions.
And we delivered an incredibly strong quarter, you know, despite the fact that we were in, you know, a small group of our our corporate team was involved in, you know, pulling off a transaction and and starting to build a a very robust integration plan. And so that gives me confidence that that we can do things a little bit differently here, that we can lean in. But I’d also say we’re gonna do that incredibly thoughtfully, and we’re gonna be incredibly disciplined. But, Amy, you wanna pick up on on that?
Amy Swetz, Chief Financial Officer, Flowserve: Yeah. So I would say, Dean, our the filter which we are gonna use m and a to really drive shareholder value is is unchanged from from before the time that we announced the acquisition. So we look for transactions that fit our strategy around diversification, decarbonization and digitization. And ideally, that comes with an attractive aftermarket component or opportunity for us to build on. We wanna see attractive financials that drive accretion at both the margin and the cash flow level, and we wanna maintain our healthy balance sheet and investment grade rating.
And so we’ve proven to be pretty disciplined in this approach, and and you can certainly expect that as we go forward. And I think that the you know, it’s it’s important. We’re gonna take a moment to breathe Absolutely. You know, after this. But but I think that the chart transaction demonstrates three elements of of our process, and that’s that although the majority of our opportunities going forward are gonna be bolt ons, we will look at larger transactions if the value creation is compelling.
And I think that that is a sort of a risk reward proposition that we look to fully understand. We’re gonna be disciplined in our approach as as evidenced by our by our desire to pursue to not pursue this deal at any cost. And finally, I just want to point out that we were able to progress the deal, announce and begin integration planning while delivering what was really an outstanding quarter in Q2. And I think that’s evidence that the Flowserve business system is mature enough to allow parts of the organization to spend time on strategic opportunities while not impeding the progress of our organic business. And so it’s it’s one of the reasons why we feel confident in m and a being part of our strategy going forward.
Damian Karas, Analyst, UBS: Look. I I really appreciate all that context and color. And I think Scott made my second question, to Amy just the idea of, how does m and a play out from here. So that counts as my two questions. I appreciate all the color.
Thank you.
Amy Swetz, Chief Financial Officer, Flowserve: I’d be the first.
Scott Rowe, President and Chief Executive Officer, Flowserve: That is the first part. Thank you.
Conference Operator: We’ll go next to Damian Karas with UBS.
Nathan Jones, Analyst, Stifel: Hey. Good morning, everyone. Amy, you talked hey. A little bit about Morning. Amy, you were talking a little bit about, you know, FPD segment margin and excuse me, FCD is what I meant to say, and and the opportunity to, you know, continue to push that, over 20%.
You know, curious to hear what are the biggest remaining levers that you that you see after the, you know, the progress that you’ve already made there.
Amy Swetz, Chief Financial Officer, Flowserve: Yeah. So I think with FPD, I just wanna take a little bit of a victory lap that we’re we’re really excited about where we where we finished the quarter from from a margin perspective, both gross margins and what we see saw drop to the operating margin line at over 20%. I think the things that continue to give us confidence that that’s a level that we can and will achieve again and that we can build on is really a couple of things. I think, one, the initiatives that the teams are focused on, including aftermarket capture, are driving that margin expansion. And then really, the second is around eightytwenty.
We are very much in early days of eightytwenty. And so we’ve started to see those results come through in some really faster than I think that we anticipated. But there’s more to be done here. And so really, what we’ve asked of the FPD team, we talked to our leaders this morning, and we said, please lean into growth. This is one of the reasons why we’ve launched our commercial excellence programs.
But at but at 20% operating margins or 18 to 20% operating margins, this is a business that we really wanna be focused on continuing continuing to grow on behalf of our Flowserve shareholders. Yep.
Scott Rowe, President and Chief Executive Officer, Flowserve: And I’ll just add well, I’ll add a third lever there, which is technology. And so we’ve talked about some really differentiated technology within the pump area. And so we’ve got a pressure exchange device called Flex. We’ve got a hydrogen pump that’s differentiated. We’re commercializing an LNG and a cryogenic pump.
All of those will be at premium margins given the technology, that’s embedded in those products. And so as we move toward commercialization and growth here, that’s gonna help us as well. And so we’re we couldn’t be more proud of what the FPD’s done FPG FPD team has done. They’ve made really good progress. They’re incredibly focused, and and we’re excited about the journey forward here.
Nathan Jones, Analyst, Stifel: I think, my mixing up of the p’s and the c’s and the d’s, just just rubbed off on you, Scott. So, I apologize. Did you guys do what I was talking about? Yeah. On the new I just wanted to ask you.
So the nuclear bookings, called out $60,000,000 in the quarter. So obviously, a little bit of step down from that $100,000,000 plus you’ve been talking about the last several quarters. Is that just more a timing factor than anything else? Or should we be reading anything in addition, to that? I mean, it just seems like since last quarter, there’s been, more positive headlines around, future nuclear activity.
Scott Rowe, President and Chief Executive Officer, Flowserve: Yeah. So the the nuclear orders are are definitely lumpy. They’re they’re large in size anywhere you know, sometimes you’ll get smaller ones in the 10 to $15,000,000 range. But the larger ones are are $30.50, and and sometimes even a $100,000,000. And so it really is just project timing.
And so, you know, these are hard to get over the finish line, not not because we’re gonna win or lose, but just making sure all the documentation is correct and making sure that the you know, that you’re working to the customer through a very technical process. And so I I wouldn’t read anything into the 60,000,000 versus kinda the the last three quarters at a 100, we still see that this is an an incredibly attractive kind of, you know, market. And our funnel continues to grow, and it’s at the highest level that we’ve ever seen. And so I just I chalk it up to, you know, a little bit timing, a little bit of a lumpy orders, but we’re excited about, you know, nuclear as being a part of the mix as they go forward. And then the other one, I just wanna call out it.
We put it in the prepared remarks, but we did win our first commercial award for a for a small modular nuclear reactor. And so, you know, we’re we’ve been participating in that. A lot of it has been through technology development. And so we have a a handful of partnerships where we’ve been doing a lot of work to make sure that our technology is positioned well for SMR. And in the quarter, we were able to secure our our first award, where we will provide the primary coolant pumps for for SMR technology.
And so we continue to differentiate and and put ourselves in a in a really good position to to work both in traditional nuclear power, but also in the SMR as that that starts to take traction.
Nathan Jones, Analyst, Stifel: That’s great to hear. Thanks for the color. Good luck out there, guys.
Conference Operator: We’ll take our next question from Nathan Jones with Stifel.
Mike Halloran, Analyst, Baird: Good morning, everyone.
Scott Rowe, President and Chief Executive Officer, Flowserve: Hello, Nathan.
Mike Halloran, Analyst, Baird: I guess I’ll I’ll start on the the commercial excellence. I mean, you talked about the, you know, starting the commercial excellence pillar of of your eighty twenty initiatives in the second quarter. Can you maybe talk a little bit more about what that involves for Flowserve, how you’re deploying that? I assume this probably focuses a little more on FPD to start with, with with FCD needing, you know, probably some some more margin work before it pursues growth. But just any more color you can provide us around that.
Scott Rowe, President and Chief Executive Officer, Flowserve: Sure. Yeah. Let me start on kinda why commercial excellence is so and then I’m gonna let Amy jump in as she’s our executive sponsor for commercial excellence. But but really, as we think about the full serve business system and kind of the progress there, we we really had to get operational excellence going and and making sure that we’re delivering for our customers in the right way. And so, you know, we we feel really good about that progress and the sustainability of that program.
And then, you know, as you know, last year, we we doubled down on portfolio excellence, which is where we embed the 8020 program. We’re now, you know, fully into that kinda second year of 8020. We’ve got all product lines in there. And, you know, by definition, when you you look at 8020, you you start to call out some of your products. And, you know, that puts a a debt some downward pressure on revenue.
And so, you know, while we are focused with our customers on our top products that make sense for full survey and for our customers, there are things that are coming out of the system. And so the natural progression is then the commercial excellence to make sure that our our whole organization is leaning in toward growth and making sure that we can kinda pick up some of the, you know, the the loss from the 8020 program as we cut products out. And so this is the the right thing to do. We’re at the the right time. And I’ll let Amy kinda talk through some of the tenets of commercial excellence.
Amy Swetz, Chief Financial Officer, Flowserve: Yeah. And and Scott touched on this, but, really, the the goal is to use enhanced commercial performance to offset revenue reduction from eightytwenty decisions. And so we don’t lose sight of, as an organization, of the goal to grow. And so the pillar is intended to really cover all elements of the commercial life cycle. And so that’s opportunity generation all the way through kind of post shipment support and recovery.
And it is supposed to be cover channel management, pricing, incentives, use of analytics to drive better performance within the organization. And I think what’s really cool is as we’ve seen the progress that we’ve made around portfolio and operations, the organization is really excited about strengthening our capabilities in in these areas. So we’ve launched pilots this summer around the program and would expect to start to see results being demonstrated in our twenty twenty six bookings levels. It’s something that Scott and I are gonna be very focused on going into our annual operating planning. And I I think what’s great about this is I’m sponsoring the program, but really, the program is being led by our commercial leaders with with a lot of input, from the people on the ground, who are who are helping our customers on a daily basis.
And so we’re excited to see what comes next year.
Mike Halloran, Analyst, Baird: And does this start in in FPD, and will move to FCD maybe as it progresses through its, its simplification initiatives?
Amy Swetz, Chief Financial Officer, Flowserve: So we we’ve started this across the commercial organization, and so we’ve gotten input from both from both FPD and FCD commercial organizations and businesses as we’ve as we’ve moved forward. But but you are correct, Nathan, that we’re much more focused on growth in FPD than we are in FCD at this point in time. And so that means the pilots that are being launched in both programs are are specifically addressed to to sort of in improve elements of the business that that we think that we think that we can we can drive marginality through focusing on.
Mike Halloran, Analyst, Baird: I just have one clarification on the the dilution you’re seeing in Mogus. These, these modular things, are they the the last one of those or last ones of those get delivered in the third quarter of this year. Is is that what I heard you say? And then maybe if you can just provide some color on kind of what inbuilt margin expansion there would be just from the absence of having to deliver those things.
Scott Rowe, President and Chief Executive Officer, Flowserve: Yeah. I’ll hit timing. I’ll let I’ll let Amy hit the margin. So these are this is we’ve got one large fabrication. This is a really, really big fabrication.
It is at, you know, call it 90 plus percent complete. Sadly, the the you know, to get this completely out of our our business, it’s gonna take us in the 2026. There won’t be a ton of revenue at the end of this year, but there will be a a little bit of a remaining tail. And so the team’s working hard to get this cleaned up and and officially delivered to our our customer. And as you know, this is obviously a percentage of completion accounting.
And so there’s there’s not a whole lot there, but we will be impacted in the second half of the year and then just to touch in the first quarter.
Amy Swetz, Chief Financial Officer, Flowserve: Yeah. And just to put it in perspective, I mean, Nathan, one, we had some discrete charges as we complete as we’re moving towards completion on that last module in the second quarter. But just at a standard level, you’re looking at between 2,500 basis points differential in margins, in standard margins between kind of the rest of the Mogus portfolio and modules.
Mike Halloran, Analyst, Baird: Great. Thank you very much for the clarification.
Conference Operator: We’ll go next to Mike Halloran with Baird.
Brian Ezel, Vice President, Investor Relations, Treasurer and Corporate Finance, Flowserve: Hey. Morning, everyone. So just wanna clarify the what happened on the order side and just make sure I understand what has or has not changed. Is it a fair representation to say that there was an air pocket in February and that your expectations for the back half of the year are largely unchanged relative to be to before? Or or maybe better put, what has changed in the back half of the year expectations from an order perspective relative to three or six months ago?
Scott Rowe, President and Chief Executive Officer, Flowserve: Sure. Yeah. I’ll start with what has changed at all, which is the aftermarket MRO and kind of that run rate business. And so that that’s coming through at healthy levels. Utilization’s there.
Customers are buying parts. They’re they’re servicing our equipment. Yeah. I I don’t you know, we didn’t see a change in q two. There there was a lumpy order in q one.
So sequentially, you you gotta you gotta normalize for that. But overall, again, it’s $600,000,000 of aftermarket. It’s a it’s a really, really strong number, and we we just don’t see that slowing down into the second half of the year. You know, what what we did see in in q two was the project bookings and just given the macro environment, given tariffs, given the uncertainty on how to cost things, we just saw, you know, larger project primarily in energy and chemicals, press pause. And they wanted to get some some certainty on on the macro picture.
They wanted to get some certainty on what the cost was. And so those got, you know, there we saw projects getting delayed. And, you know, I’d say a lot of those are a one quarter delay or two quarters delay. Some might be a little bit longer. The current outlook for the the second half of the year and and everything that that we see today remains pretty solid.
And I’d say that over the last two or three weeks, the the macro picture has gotten a little more constructive. And so we feel probably a little bit better right now about projects moving forward in the second half of the year than what we would have said maybe a month ago. With that said, even this morning, there was a change in in the the tariff perspective and, you know, which which does put some uncertainty back into the system. And so I I you know, while I believe the environment’s getting more constructive, you know, you’re one or two messages away from from that, you know, you know, going back into a a little bit of uncertainty. So it’s just a it’s a really hard environment to predict right now, especially on how our customers are viewing projects.
But we’re in close communication with them. Our our opportunity funnel is large. And, you know, again, you know, we feel at you know, given everything we know and all of our discussions and and where our funnel is, we we feel like that book to bill ratio for the full year should end up right at one point o.
Brian Ezel, Vice President, Investor Relations, Treasurer and Corporate Finance, Flowserve: Thanks for that. And then just to follow-up on the on the pricing side of things, just kind of a twofold question. One, how is pricing in the marketplace tracking from a competitive perspective? Any issues that you manage through all these, call it, geopolitical tariff headwinds? And then secondarily, just a a comment on what the margins of the backlog look like and if that’s still tracking the right way.
Appreciate it.
Scott Rowe, President and Chief Executive Officer, Flowserve: Yeah. I’ll hit the first part. Amy can hit margins of backlog. So just I’d say, you know, we we’ve been aggressive on price this year. We talked about in the prepared remarks that the prices come through with without major demand implications.
And so, again, list price is gonna be more impacted on our run rate business. So think parts, the the the products that go through distribution, the MRO business, all all of that, we’ve got an incredible level of of confidence that that the pricing actions have have been as sticky as as we would have expected, and in some cases, exceeding our expectations. You know, in the project business, anytime that you get some uncertainty on project timing or that that we may be going in a a downward direction, our competitors get you know, they they sharpen their pencils. And so we’re sharpening our pencils as well, as we look at project bidding and making sure that we’ve got the right cost position to put forward to our customers. And so I’d say that environment has gotten slightly more competitive.
I I don’t I wouldn’t say that it’s in a in a nonconstructive fashion, but it is a it is making our teams work a little bit harder to make sure we’re sourcing from the right people, that we’re stripping out engineering costs, that we’re using standard product, like, all the all the things that we know. That engineer pumps team is is really the the group that does the most of this. They they have done a tremendous job in the last year with our selective bidding in making sure that we, you know, one, earn the work in the margins that we deserve, but two, making sure that our out margins or our execution margins are higher than what we tender. And so we’re having discussions with that team about how do we make sure that we’re putting the our best foot forward in the tender and not losing some of those those that that work. But I’d say that the pricing environment remains constructive.
It’s not in a bad place at all, but there are some areas where where where folks are getting a little more competitive.
Amy Swetz, Chief Financial Officer, Flowserve: Yeah. And the only thing that I would add to that is I think in terms of backlog, we’re in a really good place from a margin perspective. And a couple of things that I’d point out there, just one with the eightytwenty program, more and more embedded in the business. We’re selling the right products. We’re selling the products that we know that we can make money on in the market.
And the second piece was something that Scott touched upon, which is our out margins on large projects have been very positive. And so it’s something that is allowing us to sharpen our pencil, but also giving us a great deal of comfort that when we continue to execute at the levels that we’re executing today, that that we’re gonna continue to see the positive margin trends.
Conference Operator: We’ll go next to Saree Boroditsky with Jefferies.
James, Analyst, Jefferies: Oh, hi. This is James on for Saree. Thanks for taking questions. So I wanted to touch on 8020. Can you kind of provide an update on where you kind of stand in 8020 journey?
And how much of, like, February basis point of margin expansion this year is kind of attributable to it? And is there a timing difference on implementation between FPD and FCD?
Scott Rowe, President and Chief Executive Officer, Flowserve: Sure. Yeah. We’re we’re well into the program now. We we launched this at the beginning of last year. FPD was the the leader in terms of the business units going through the program.
But now all five of our product business units or the new equipment is is fully on 8020. And so we’re we’re excited about the progress. The the business unit leaders have been incredibly disciplined in in, you know, setting up their segmentation, the quads following the methodology. We you know, two of our business units are now in year two, and so they’ve done a second segmentation on their quads and and making really good progress. We we haven’t called out specifically how much of the margin improvement is attributable to 8020.
But what I would say is, you know, they it has been a a nice factor to to what we’ve done, but there’s still a lot more room and more opportunities in the combined portfolio to continue to move margins up. And if you look at companies that that have been doing this for for a long, long time, they they typically gotten a 100 basis points a year on the back of their programs. And so that that’s our goal and objective is to be somewhere in that kind of, you know, that line where we’re seeing about a 100 basis points a year as we progress through the program. And, you know, at this point, we’re very confident that we’re we’re delivering to that expectation.
Amy Swetz, Chief Financial Officer, Flowserve: Yeah. And, James, just just a little color in terms of how I think about it. At the at the 200 basis points of operating margin expansion that that we’re targeting for this year, that would be between 50 and a 100 basis points of of improvement from from 8020. So we’re getting close to that run rate that we wanna be at as a company.
James, Analyst, Jefferies: Great. Thanks for the color. And I guess as a follow-up, you noted a sequential increase in project funnel. So how does this compare on a year over year year over year basis? And where are you seeing, like, strengths and weaknesses in the end markets?
Thank you.
Scott Rowe, President and Chief Executive Officer, Flowserve: Yeah. I don’t have the exact year on year funnel. I would say that the funnel is in the the overall funnel is in a very healthy place. And so, again, we we feel good that the the funnel itself is in a in a position that, you know, allows us to to drive the bookings that we need and and what we’ve we’ve talked about to have that slightly over one point o in in the second half of the year. You know, we are, you know, obviously looking to to continue to enhance the funnel opportunities.
The power side is is definitely up, and so we’ve gotta continue to lean in and and making sure that we can track the the projects in the right way that that allows us to to see growth in the go forward basis.
James, Analyst, Jefferies: Great. Thanks for taking questions.
Conference Operator: We’ll go next to Joe Giordano with TD Cowen.
Andy Kaplowitz, Analyst, Citigroup: Hey, guys. Good morning.
Scott Rowe, President and Chief Executive Officer, Flowserve: Good morning, Joe.
Andy Kaplowitz, Analyst, Citigroup: Hey, Scott. I’m I’m just curious how you manage so the chart, the note chart, like, as a leader of the organization, how do you deal with this internally, like, from a how do you messages messages to your employees? Right? Like, so you you sell them on this is a transformative this is transformative for us. This is the future of the company.
This is where we’re going. It’s gonna be disruptive. There’s probably gonna be some of, you know, some people who are in that synergy bucket. Right? And then now we come out and, like, no.
This is the future of the company. It wasn’t that. It’s this, and we’re good this way. Like, I get it. I think the people in the financial community get it, but, like, it’s a different discussion point when you’re talking internally to keep people motivated.
And how do you manage something like that?
Scott Rowe, President and Chief Executive Officer, Flowserve: Yeah. No. Look. I appreciate the question. We’ve had a lot of videos that I pushed out globally that relatively short notice in terms of preparation.
But I’d just say we’ve we’ve had an open communication with our teams from from day one. And I I’d say, you know, we never over rotated. And while we were incredibly excited about Chart, the message that we gave to our teams was, you know, put your heads down and and do your jobs. And Chart didn’t have a mechanical seal business. They didn’t have a pump business.
They didn’t have a valve business. And so for the folks that were were leading our operations or our products, they they really weren’t impacted. And that’s one of the reasons why we could continue to progress our business and have a a really, really strong second quarter. You know, the the folks that were maybe a little bit more nervous about the transaction were in the, you know, some of the functions in the in the corporate office. And, you know, we’ve had some some really transparent and open discussions with them about what the possibilities could be and, you know, how that, you know, we we would lean on our people value and treat people with respect and dignity regardless of the outcome.
And so, yeah, I I’m a believer in, you know, having, you know, frank discussions, but keeping it open and, you know, and making sure that we’re we’re actively communicating. And so we pushed out a video yesterday morning. We did our leadership team this morning, and we’ll do a global town hall right after our earnings call. And so we’ll we’ll touch a a lot of folks, and I’ll get back out on the road and start to visit more of our sites and and make sure our teams are are leaning in and continuing to do the good work. But, you know, I I think we’ve we’ve we’ve done a a real nice job here with our culture.
And, you know, I’d say, you know, it’s definitely one of the strengths of of what we put together at full serve. And so I’m I’m proud of our folks that the people continue to work hard for our customers and ultimately for Flowserve.
Amy Swetz, Chief Financial Officer, Flowserve: And I I just comment that when your m and a is an extension of your strategy, You may be you may be explaining the size of a transaction, or there may be surprise that you’re doing something of the scale that that the merger was. But I think there is comfort throughout the organization that we’ve we’ve said what our strategy would be around around the three d’s, and the transactions that that we have announced to date have been in keeping with with that. And so it is a it’s a fork in the road for sure, and but I wouldn’t necessarily call it a a full on change in direction.
Andy Kaplowitz, Analyst, Citigroup: That’s fair. And just my second one. I I don’t wanna belabor Amogus. It’s a small company within a large company, but, I I I think the expectation initially was something around $200,000,000 in revenue. I think it’s way lower than that.
So maybe some color on what’s driving that. And then just within the context of the FCD, and I know it’s earlier stage in the margin journey than FPD. But is there something inherently more challenging in taking costs out of FCD relative to FPD, like something in the cost structure inherent there, or is it just purely timing and and just working at it? Thanks.
Scott Rowe, President and Chief Executive Officer, Flowserve: Yeah. I’ll I’ll hit Mogus revenue. Amy can hit the the margins there. So look. We we have talked about Mogus being a $200,000,000 business.
We we are confident that that’s where this business needs to be and that we can grow from there. You know, Amy mentioned it a couple times that the project side of Mogus has been light really since kind of the second half of last year and into the first half of this year. And so that’s putting downward pressure on the overall revenue number. And, you know, we I’d say two things. One, the aftermarket side of Mogus has been incredibly healthy, and so, you know, that continues to progress forward.
Some of the project timing, comments that I had in in overall flow serve certainly applied to some of the mining and minerals projects that Mogus does so well in. But we have clear visibility now. We’re starting to see more activity in mining and and mineral extraction, and so that funnel has improved pretty substantially in the second half of year and into 2026. And so the goal is still a a $200,000,000 revenue number. We’ll exit or or, you know, the the last fabricated module will be out of the system.
The the aftermarket margins are fantastic, and the the OEM project margins are are coming in at the right levels to to make this accretive to the overall FCD portfolio.
Amy Swetz, Chief Financial Officer, Flowserve: And and I would say, Joe, we we are still very committed to growing FCD margins back to more historic levels and and really then trying to to reset the bar around that. There is nothing structurally that tells us that we cannot get back to those levels. I will say that FCD overall was was probably five, seven, ten years ago was more exposed to to upstream business than than other parts of than other parts of Flowserve. And so as that business has has moved away, we have taken out high high cost country sites from from the portfolio. And so that is some of the pain that we’ve seen in previous years.
We think those actions are behind us that sets up a little bit of a tailwind. But but other than than that movement, there’s nothing structurally that’s happened within the business, and we believe that we’ve addressed that in over the last couple of years.
Andy Kaplowitz, Analyst, Citigroup: Thanks, guys.
Conference Operator: This does conclude today’s question and answer session. At this time, I’d like to turn the call back to Brian for any additional or closing remarks.
Brian Ezel, Vice President, Investor Relations, Treasurer and Corporate Finance, Flowserve: Great. Thank you, everyone, for joining the
Scott Rowe, President and Chief Executive Officer, Flowserve: call today. We look forward to seeing many of you
Brian Ezel, Vice President, Investor Relations, Treasurer and Corporate Finance, Flowserve: at conferences in the rest of the quarter and then providing another update following Q3. If you do have any questions or follow ups, please reach out to the Investor Relations team. We’ll be happy to talk you through anything. In the meantime, we hope you have a great day.
Conference Operator: This does conclude today’s conference. We thank you for your participation.
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