Flowserve Corporation · NYSE:FLS
Flowserve — Investor Day (September 2023)
117 slides from Flowserve's investor day presentation, Sep 28, 2023
Slide 1: The Future of Flowserve
The Future of Flowserve DIVERSIFY | DECARBONIZE | DIGITIZE Analyst Day September 28, 2023
Slide 2: Opening Comments
1 Opening Comments Jay Roueche Vice President, Treasurer & Investor Relations 2
Slide 3: Hotel Safety
Hotel Safety 20th Floor Evacuation Route From Ballroom Stairwell C In the ballroom on the 20th floor Stairwell A is located in On the 20th floor Stairwell C is located at the end of the the back of the ballroom on the right. Stairwell A exits on penthouse on the left near the back windows. Please bo
Slide 4: Forward Looking Statements & Non-GAAP Measures
Forward Looking Statements & Non-GAAP Measures This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities
Slide 5: Today's Presenters
Today’s Presenters Scott Rowe Amy Schwetz Lamar Duhon Kirk Wilson Susan Hudson Karthik Sivaraman President and Chief Senior Vice President, President, Flowserve President, Flow Control Senior Vice President, Vice President, Executive Officer Chief Financial Officer Pumps Division Division Chief Lega
Slide 6: Agenda
Agenda Check-in Break Welcome & Overview Innovating for the Future Jay Roueche / Vice President, Karthik Sivaraman / Vice President, Treasurer and Investor Relations Innovation & Technology Leading Flowserve Advancing Climate, Culture Scott Rowe / President and & Core Responsibility Chief Executive
Slide 7: Leading Flowserve
2 Leading Flowserve Scott Rowe President & Chief Executive Officer 7 7
Slide 8: Key Takeaways for the Day
KEY TAKEAWAYS FOR THE DAY Flowserve is… A global leader in flow Capitalizing on large control solutions with a and growing comprehensive addressable markets portfolio underpinned by favorable megatrends Accelerating growth through 3D strategy Harnessing emerging technology to deliver innovative flow
Slide 9: Global Leader in Flow Control Solutions
Global Leader in Flow Control Solutions 9
Slide 10: A Strong Foundation with a Long History of Success
SELECT CUSTOMERS A Strong Foundation with a Long History of Success 230-year 50+ Distinguished Trusted global heritage brands 10 10
Slide 11: Driven by Our Culture
Driven by Our Culture Inspired by Our Purpose Grounded in Our Values Focused on Our Passions Flow Control People Customers 11
Slide 12: We Are the Global Leader in Flow Control
We Are the Global Leader in Flow Control $4.0B TTM Revenue as of 6/30/23 Employees Countries Customers Annually FY 2023 Revenue Growth Guidance Aftermarket QRCs (quick response centers) Assets (installed base) Leading Product Brands 16 – 18% YoY Growth Flowserve Pumps Division (FPD) Flow Control Div
Slide 13: ...With a Balanced and Diverse Portfolio
...With a Balanced and Diverse Portfolio FY 2022 Geographic Diversity (% Revenues) Balanced Product Portfolio (% Revenues) • Broad geographic and industrial base provides 7% North America 18% 13% strategic flexibility Europe Pumps 42% Asia Pacific 52% Valves 19% Middle East & Africa 30% Seals 19% La
Slide 14: Transformed Operating Model
Transformed Operating Model 14
Slide 15: We Have Transformed Our Business to Drive Profitable Growth
We Have Transformed Our Business to Drive Profitable Growth 2023+ Flowserve Today and Beyond 2018 – 2022 FLS 2.0 • Consistent operating metrics and processes across 7 P&Ls 2014 – 2017 • Organization aligned to enhance Pre-FLS 2.0 • Significantly reduced the number of P&Ls 3D strategic growth • Devel
Slide 16: Significant Progress Achieved... With Further Upside Ahead
Significant Progress Achieved… With Further Upside Ahead Purpose & Values: ERP consolidation Commercial intensity achieved 1st quartile achieved 41% delivered 7 consecutive employee engagement reduction quarters with $500M+ from 3rd quartile in ERP systems aftermarket bookings Implemented global Man
Slide 17: New Operating Model Launched in Early 2023...
New Operating Model Launched in Early 2023... What • Creates 7 business units • Dedicated organization to drive Speed in 2 segments with innovation and technology full P&L accountability Accountability • Enhances product and portfolio • Drives execution discipline management Cost and standardization
Slide 18: ...Is Delivering Improved Execution...
...Is Delivering Improved Execution... Speed | Accountability | Cost Lamar Duhon, Karthik Sivaraman, Juan Carrera, Flowserve Pumps Division (“FPD”) Innovation and Technology Global Operations Excellence Strategy | Commercial | Execution Aftermarket Engineered Industrial Seals Services Pumps Pumps &
Slide 19: ...Accelerating Operational Excellence...
...Accelerating Operational Excellence... Expected to deliver 100-200 bps margin improvement by 2027 • Employee Engagement • Organizational Design, Alignment & Capabilities • Operational Excellence Maturity Model Road Map • Safety Program • Sales, Inventory & Operating Planning (SIOP) • Integrated O
Slide 20: ...And Refining Our Product Management
...And Refining Our Product Management Product Management Competency | Portfolio Optimization | Design to Value | Price / Cost Enhancement | Strategic Alignment Transition to Higher Revenue, Higher Margin Products Market Grow Sustain & Grow Analysis Gross Margin % Product Product Strategic Delivery
Slide 21: Large and Growing End Markets
Large and Growing End Markets 21
Slide 22: Our Traditional Markets Remain Large and Growing...
Our Traditional Markets Remain Large and Growing... $14B TAM* CAGR 2023-2028 % $29B +3.2% ◼︎ Power $38B Oil & Gas +3.4% 2023 TAM $169B Chemical +3.4% $61B General Industries +3.1% $27B ︎ Water +3.7% * TAM: Total Addressable Market (representing capital expenditures and operating expenses); CAGR: Com
Slide 23: ...Underpinned by Powerful Megatrends...
...Underpinned by Powerful Megatrends... DECARBONIZATION / RESOURCE SECURITY REGIONALIZATION DIGITIZATION SUSTAINABILITY • Geopolitical tension and • Increasing investment in • Increased connectivity, • 90+ countries with net-zero shifting alliances driving supply chain proximity advanced data analy
Slide 24: ...Creating Significant Opportunities for Today and Tomorrow
...Creating Significant Opportunities for Today and Tomorrow DECARBONIZATION / RESOURCE REGIONALIZATION SUSTAINABILITY SECURITY • Hydrogen Oil & Gas • Sustainable Fuels • Liquefied Natural Gas (LNG) • Traditional Oil and Gas • Carbon Capture, Utilization, and Storage • Carbon Capture, Utilization, a
Slide 25: ...Creating Significant Opportunities for Today and Tomorrow
...Creating Significant Opportunities for Today and Tomorrow DECARBONIZATION / RESOURCE REGIONALIZATION DIGITIZATION SUSTAINABILITY SECURITY • Hydrogen Oil & Gas • Sustainable Fuels • Liquefied Natural Gas (LNG) • Traditional Oil and Gas ✓ • Carbon Capture, Utilization, and Storage • Carbon Capture,
Slide 26: Energy Transition Opportunities Are Rapidly Expanding
Energy Transition Opportunities Are Rapidly Expanding New Energy Market More Than Triples 2023 2028 $2.4B $8.3B New Energy New Energy $10B $18B TAM TAM Biofuels LNG Nuclear Renewable Power Biofuels LNG Nuclear Renewable Power Hydrogen Energy Storage CCUS Sustainable Fuels Hydrogen Energy Storage CCU
Slide 27: Our 3D Strategy is Designed to Capitalize on Attractive Markets
Our 3D Strategy is Designed to Capitalize on Attractive Markets CAGR in Select Markets (2023-2028)* 40.3% 13.5% 8.7% Hydrogen CCUS Renewable Plastics 7.6% 3.3% 9.3% Specialty Vacuum Nuclear LNG Source: Company market estimates of TAMs and the associated CAGRs utilizing multiple industry sources, as
Slide 28: Driving Growth Through 3D Strategy
Driving Growth Through 3D Strategy 28
Slide 29: 3D Strategy is Our Vision for the Future
3D Strategy is Our Vision for the Future DIVERSIFY DECARBONIZE DIGITIZE Diversify end markets and Support our customers Leverage technology and data create a more balanced today and through the to improve internal operations, portfolio energy transition customer experience and provide customer solut
Slide 30: 3D Strategy Delivering Early Results
3D Strategy Delivering Early Results DIVERSIFY DECARBONIZE DIGITIZE 16% 75% 39% 2022 Bookings Growth 2022 Bookings Growth 2022 Installation Growth 3D bookings generated approximately 28% of 2022 bookings 30
Slide 31: Our 3D Strategy in Action
Our 3D Strategy in Action Markets Products DIVERSIFY • Water • Vacuum Technology • Specialty Chemicals • Seals Energy Advantage Liquefied Carbon Capture Sustainable Blue / Green Recyclable Nuclear Program Natural Gas & Sequestration Fuels Hydrogen Plastics DECARBONIZE LNG New Energy Transition Techn
Slide 32: Vacuum Technology is Critical in Multiple End Markets
DIVERSIFY Vacuum Technology is Critical in Multiple End Markets Vacuum technology PRODUCTS supports chemical 12-month opportunity funnel processing and advanced Liquid Ring Dry industrial manufacturing Compressor Vacuum Applications +14% • Flare gas recovery YoY Growth • Chemical processing • Solar
Slide 33: Our 3D Strategy in Action
Our 3D Strategy in Action Markets Products DIVERSIFY • Water • Vacuum Technology • Specialty Chemicals • Seals Energy Advantage Liquefied Carbon Capture Sustainable Blue / Green Recyclable Nuclear Program Natural Gas & Sequestration Fuels Hydrogen Plastics DECARBONIZE LNG New Energy Transition Techn
Slide 34: Nuclear Provides Carbon-Free, Reliable Energy
DECARBONIZE Nuclear Provides Carbon-Free, Reliable Energy Nuclear is the most PRODUCTS dense and efficient 12-month opportunity funnel form of energy Main Steam Nuclear Isolation Valve Pump Flowserve provides pumps, valves and +85% seals within the nuclear YoY Growth containment and power turbine is
Slide 35: Hydrogen Projects Are Attracting Significant Investment
DECARBONIZE Hydrogen Projects Are Attracting Significant Investment Hydrogen is a clean PRODUCTS and efficient fuel 12-month opportunity funnel source produced by Hydrogen Cryogenic Pump Valve +22% natural gas or through electrolysis Hydrogen requires significant flow control YoY Growth technology t
Slide 36: Our 3D Strategy in Action
Our 3D Strategy in Action Markets Products DIVERSIFY • Water • Vacuum Technology • Specialty Chemicals • Seals Energy Advantage Liquefied Carbon Capture Sustainable Blue / Green Recyclable Nuclear Program Natural Gas & Sequestration Fuels Hydrogen Plastics DECARBONIZE LNG New Energy Transition Techn
Slide 37: Red Raven Drives Flow Loop Optimization
DIGITIZE Red Raven Drives Flow Loop Optimization Monitor existing assets Predict unplanned downtime Red Raven provides Optimize flow loop operations enhanced condition monitoring and predictive analytics using extensive data analytics and 70+ 30% AI to drive the Customer Sites CAGR* optimal flow loo
Slide 38: 3D Strategy Accelerates Revenue Growth
3D Strategy Accelerates Revenue Growth 5 %+ Multi-Year Revenue Growth* 3.3 %+ 10 %+ Core Market Growth 3D Growth + * 2023-2027 Revenue CAGR. Revenue growth target excludes any impact from potential acquisitions. Please see Appendix for key assumptions 38
Slide 39: Accelerating Innovation
Accelerating Innovation 39 39
Slide 40: Connected Flow Control Positions Us for the Future
Connected Flow Control Positions Us for the Future Installed Base Hardware provides essential domain expertise and installed base to leverage • Driving enhanced flow loop optimization with rich data and product expertise • Delivering recurring revenue streams from Services & IoT service agreements S
Slide 41: Innovating Through Digital Solutions
Innovating Through Digital Solutions Evolution from Products → Services → Solutions TRADITIONAL OFFERINGS • Replacement Parts • On-site Services • Select Repairs and Upgrades 41
Slide 42: Innovating Through Digital Solutions
Innovating Through Digital Solutions Evolution from Products → Services → Solutions TRADITIONAL OFFERINGS • Replacement Parts • On-site Services • Select Repairs and Upgrades 42
Slide 43: Innovating Through Digital Solutions
Innovating Through Digital Solutions Evolution from Products → Services → Solutions TRADITIONAL ENHANCED OFFERINGS CAPABILITIES • Replacement Parts • Asset Monitoring • On-site Services • Predictive Maintenance • Select Repairs and Early Failure and Upgrades Notification • Downtime Prevention • Redu
Slide 44: Positioned for Value Creation
Positioned for Value Creation 44
Slide 45: Flowserve's Execution Roadmap
Solutions Innovation and New Flowserve’s Product Development Execution Roadmap Product and Portfolio Optimization Strategy Operational Excellence Overhead and Structural Cost Culture Execution Flowserve 2.0 People and Engagement 45
Slide 46: 2027 Financial Targets
2027 Financial Targets $5B+ 14 – 16% >$4.00 Organic Revenue Adjusted Operating Adjusted EPS* Margin* All figures exclude any impact from potential acquisitions. Please see Appendix for key target assumptions * Adjusted Operating Margin and Adjusted EPS are Non-GAAP figures. Please refer to Appendix
Slide 47: Progressing in Pumps
3 Progressing in Pumps Lamar Duhon President, Flowserve Pumps Division (FPD) 47
Slide 48: FPD Snapshot
FPD Snapshot 2022 Revenue $94B TAM* Business Units Regional OE / Aftermarket $2.8B TTM Revenue Engineered Pumps Industrial Pumps N. Am. Europe ME/Africa OE AM Seals Services & Solutions AsiaPac L. Am. SIHI INNOMAG MARK III FLOWSERVE DURAMETALLIC III BYRON JACKSON * TAM: Total Addressable Market (rep
Slide 49: Top Priorities to Drive Growth
Top Priorities to Drive Growth • Dry Vacuum for thin film & pharmaceuticals Growth through • LNG cryogenic pumps & expanders Advantaged Markets • Nuclear life extensions & new projects • Hydrogen cryogenic submersible pumps • Accelerate Pump Parts capture Delivering Growth in • Grow recurring revenu
Slide 50: Diversifying Through Dry Vacuum Growth
Diversifying Through Dry Vacuum Growth Growth through Advantaged Markets Dry Vacuum 2X • Thin film and pharma are high-growth market segments Organic Delivering Growth in • Increase manufacturing capacity to align with market demand and share growth Revenue Aftermarket • Strengthen local aftermarket
Slide 51: Capturing Double-Digit Growth in Pump Parts
Capturing Double-Digit Growth in Pump Parts Growth through Advantaged Markets Pump Parts Capture • Speed of quoting and delivery • differentiate us Increase bookings from pricing agreements 12% CAGR Delivering Growth in • Expand customer inventory management programs Aftermarket • Advance order rout
Slide 52: Enhancing Margins in Industrial Pumps
Enhancing Margins in Industrial Pumps Growth through Advantaged Markets Industrial Pumps Improve Product Management Product Rationalize product portfolio Operating • • Utilize existing Design to Value process to Delivering Growth in reduce product costs Aftermarket • Concentrate product manufacturin
Slide 53: Revenue Growth and Margin Expansion
Revenue Growth and Margin Expansion FPD Revenue Revenue Growth $4.5 $3.6B - $3.9B $4.5 • Increase aftermarket $4.0 $4.0 capture rate $3.5 $3.5 $3.0 $2.5B $3.0 • Differentiate with speed $2.5 $2.5 and delivery certainty $2.0 $2.0 $1.5 $1.5 • Diversify into high-growth $1.0 $1.0 market segments $0.5 $
Slide 54: Keys to Success
Keys to Success Speed of execution 2027 Financial Targets (Revenue and Adjusted Operating Margin*) Focus on large scale, high margin market segments % Energy Transition technology commercialization % Cycle-resilient cost structure * 2022-2027 Revenue CAGR. All figures exclude any impact from potenti
Slide 55: Advancing in Flow Control
4 Advancing in Flow Control Kirk Wilson President, Flow Control Division (FCD) 55
Slide 56: FCD Snapshot
FCD Snapshot 2022 Revenue $78B TAM* Business Units Regional OE/Aftermarket $1.2B TTM Revenue N. Am Europe Asia Pac OE - MRO Aftermarket OE - Projects Isolation Automation Services & Solutions ME/Africa L. Am ARGUS DURCO LIMITORQUE WORCESTER VALTEK EDWARD 56 * TAM: Total Addressable Market (represent
Slide 57: Top Priorities to Drive Growth
Top Priorities to Drive Growth • End User Focus End User • Commercial Intensity Customer Growth • MRO Growth • Service Program Expansion • Complete Velan Transaction Applications for • Invest in Nuclear Offering Dry Vacuum Energy Transition • Expand Cryogenic Applications • Deliver Low Emission Valv
Slide 58: Supporting Existing Customers with Services & Solutions
Supporting Existing Customers with Services & Solutions End User Customer Growth MRO Growth • Increase share of our customers’ $100M+ maintenance, repair and operations MRO Revenue spend growth by 2027 Applications for • Invest in local service capabilities and programs to address customer-specific
Slide 59: Severe Service Growth Through Energy Transition
Severe Service Growth Through Energy Transition End User Customer Growth Cryogenic Applications • Expand product portfolio to meet the unique Applications for demands of cryogenic applications • Leverage our strengths from LNG and $60M+ industrial gases for emerging hydrogen Revenue growth Energy Tr
Slide 60: Velan Acquisition Accelerates 3D Strategy
Velan Acquisition Accelerates 3D Strategy End User Customer Growth $363M Velan Transaction Benefits TTM Revenue* • Flowserve to acquire Velan for ~$215M Applications for • Highly complementary product portfolio for nuclear, cryogenic and severe service $20M+ applications in cost synergies Energy Tra
Slide 61: Revenue Growth Through Geographic Expansion
Revenue Growth Through Geographic Expansion Product Globalization End User Customer Growth • Significant room to position leading $100M+ brands for growth beyond current geographies Revenue growth by 2027 – Isolation Valves Applications for – Actuators Energy Transition • Expand our engineering, sup
Slide 62: Revenue Growth and Margin Expansion
Revenue Growth and Margin Expansion FCD Revenue Organic Revenue Growth $1.5 - $1.8B • Deliberate growth in share $1.9 $1.9 of customer’s MRO spend $1.7 $1.7 $1.5 $1.5 • Differentiate with speed and $1.3 $1.1B $1.3 customer service $1.1 $1.1 Expand into underserved $0.9 $0.9 • $0.7 $0.7 $0.5 $0.5 geo
Slide 63: Keys to Success
Keys to Success Accelerate MRO growth 2027 Financial Targets (Revenue and Adjusted Operating Margin*) Position product portfolio to capture 3D opportunities % Expand margins through operational excellence and product management % Optimize our global operating platform * 2022-2027 Revenue CAGR. All f
Slide 64: Innovating for the Future
5 Innovating for the Future Karthik Sivaraman Vice President, Innovation and Technology 64
Slide 65: Differentiation Through Innovation
Differentiation Through Innovation Focusing on Increasing Offering Smarter and Customer-Centric Innovation Speed to Market Connected Solutions 65
Slide 66: We Have A Strong Foundation To Drive Future Innovation
We Have A Strong Foundation To Drive Future Innovation 2,000+ Engineers and Scientists Customer-Centric 45% of 2022 R&D spend Innovation dedicated to 3D innovation 12 Technology Hubs Doubled new product revenue Speed to Market over past 5 years 1,100 Active Patents Smarter and Connected >450K smart
Slide 67: Meeting Customers Where They Are
Meeting Customers Where They Are Customer-Centric Drive Core Market Cost Innovation Competitiveness Through Design to Value 20% average product cost reduction 15% average part count reduction Speed to Market Smarter and Connected 3D Strategy: Solutions March Towards Solutions 67
Slide 68: Focusing On Large Cost Levers
Focusing On Large Cost Levers 100 Production 80 Product Cost 60 Customer-Centric Drive Core Market Cost Innovation Competitiveness 40 Design Through Design to Value DTV 20 Focus 20% average product cost reduction 15% average part count reduction 0 Speed to Market Design Stage Production Stage 3D Str
Slide 69: Supporting the 3D Strategy Through Innovative Technology
Supporting the 3D Strategy Through Diversify & Decarbonize Differentiated Products Innovative Technology Customer-Centric Core Market Cost Innovation Competitiveness thru Design to Value + 20% average product cost reduction 15% average part count reduction Digitize Speed to Market Path to Increase R
Slide 70: Ready When Customers Need Us
Ready When Customers Need Us Customer-Centric Product Management Innovation Excellence Market Centric Strategy 100-200 Bs Points Improvement Speed to Market Smarter and Connected Accelerate Product Solutions Development 70
Slide 71: Driving Margins With Focused Portfolio Management
Driving Margins With Focused Portfolio Management grow sustain/grow Adjacencies Differentiate Customer-Centric Product Management Margins Innovation Excellence Rationalize Design to Value Market-centric strategy improve/exit increase margin 100-200 bps margin improvement Revenue Speed to Market Smar
Slide 72: Ready When Customers Need Us: Lean Product Development
Ready When Customers Need Us Lean Product Development Build Customer-Centric Product Management Learning Innovation Excellence Cycle Market centric strategy 100-200 bps margin improvement Speed to Market Accelerate Product Throughput Smarter and Connected Development Solutions Value creation from th
Slide 73: Meeting Customers' Needs Through Tailored Solutions
Meeting Customers’ Needs Through Tailored Solutions Customer-Centric Innovation Total Flow Management Making our foundation smart Speed to Market Scalable Solutions Leverage global experience Smarter and Connected Solutions 73
Slide 74: Flowserve is Well Positioned to Serve Emerging Industries
Flowserve is Well Positioned to Serve Emerging Industries TOTAL FLOW MANAGEMENT Midstream Desalination Desalination High O&G (large scale) (small scale) Recycling Hydrogen Transportation & Connected Distribution Rare Biofuel Connected Thermal Mineral LNG Solutions Specialty Power Extraction Semicond
Slide 75: Solving Our Customers' Scalability Challenges
Solving Our Customers’ Scalability Challenges ENGINEERING MANUFACTURING COMMERCIALIZATION Full scale flow control Prototype to full scale production Commercialization and operational architecture through engineering leveraging extensive support through extensive global and technology know-how manufa
Slide 76: Building on Core Foundation to Drive Stronger Customer Alignment
Building on Core Foundation to Drive Stronger Customer Alignment Installed Base Technology Enablers Value Enablers Pumps, valves, seals, actuators + Instrumentation, data management, network connectivity + System and process engineering and positioners Enterprise level-operation, condition- System a
Slide 77: Building on Core Foundation to Drive Stronger Customer Alignment
Building on Core Foundation to Drive Stronger Customer Alignment Unparalleled 230-years of domain expertise Installed Base Technology Enablers Value Enablers Pumps, valves, seals, actuators + Instrumentation, data management, network connectivity + System and process engineering and positioners Ente
Slide 78: Building on Core Foundation to Drive Stronger Customer Alignment
Building on Core Foundation to Drive Stronger Customer Alignment Unparalleled 230-years of domain expertise Installed Base Technology Enablers Value Enablers Pumps, valves, seals, actuators + Instrumentation, data management, + System and process engineering Total Flow and positioners network connec
Slide 79: Stacking on Red Raven and Energy Advantage
Stacking on Red Raven and Energy Advantage RED ENERGY TOTAL FLOW RAVEN ADVANTAGE MANAGEMENT Conditional monitoring to Flow loop optimization through Connected solutions driving predictive analytics with focus system analysis and hardware OPEX and CAPEX reductions on uptime modifications for our cust
Slide 80: Investing in Our Future
Investing in Our Future By 2027, we will deliver... +100-200 3X 70% bps in margin new product vitality of our R&D through product spend towards management 3D innovation 80 80
Slide 81: Advancing Climate, Culture, and Core Responsibility
6 Advancing Climate, Culture, and Core Responsibility Susan Hudson SVP, Chief Legal Officer & Corporate Secretary 81
Slide 82: ESG is core to us…
ESG is core to us… Our approach is fully aligned with our 3D growth strategy Committed to building a more sustainable future to make the world better for everyone Guided by our Purpose, our Values, and our Vision 82
Slide 83: …and to our customers
…and to our customers Our approach is fully aligned with our 3D growth strategy Committed to building a more sustainable future to make the world better for everyone Guided by our Purpose, our Values, and our Vision 83
Slide 84: Our Journey
Our Journey 1st Quartile 2020 - 2021 2022 and beyond → in Industrial Manufacturing Set our 1st Published Established an Implemented Achieved 80% carbon emission our 1st ESG ESG vision of Scope 1 and 2 of carbon intensity Report 3C focus reporting software reduction target reduction target: 175 commu
Slide 85: Climate: Enabling a Clean Energy Future
CLIMATE Climate: Enabling a Clean Energy Future Progress through 2022 on 2030 goals Closed loop testing in Chesapeake, Virginia 80 % achievement ~6 % reduction Solar installation in Marcianise, Italy 2030 carbon emissions Indirect energy reduction goal* consumption YoY ~15 % reduction >80 sites % In
Slide 86: Culture: The Collective Energy of Our People Sets Us Apart
CULTURE Culture: The Collective Energy of Our People Sets Us Apart People Safety Flowserve Cares Employee engagement Delivering world class Serving the communities levels in the top quartile safety performance where we live and work across all industries Total Recordable Rate at 0.26 500+ organizati
Slide 87: Core Responsibility: Diverse Perspectives and Deep Experience
CORE RESPONSIBILITY Core Responsibility: Diverse Perspectives and Deep Experience Robust Board Governance • 65% Board refreshment in 5 years • Technology expertise and cybersecurity oversight certified R. Scott Rowe David Roberts, Gayla Delly John Garrison Michael McMurray Ruby Chandy • Over 80% of
Slide 88: Supporting Our Customers' Sustainability Journey: Energy Advantage Results
Supporting Our Customers’ Sustainability Journey: Energy Advantage Results Opportunity Our Solution Outcome • German government is providing • Reducing customer carbon emissions funding to support energy efficiency by optimizing flow loops and reducing projects energy consumption • Customer wanted t
Slide 89: Supporting Our Customers' Sustainability Journey: Flare Gas Recovery Results
Supporting Our Customers' Sustainability Journey: Flare Gas Recovery Results Opportunity Our Solution Outcome • Refinery and chemical plant • The Flowserve flare gas recovery Flowserve is the sole supplier of FGR customers have historically system provides the ability to recover systems for five Gul
Slide 90: Supporting Our Customers' Sustainability Journey: Seals Spotlight Results
Supporting Our Customers' Sustainability Journey: Seals Spotlight Results Opportunity Our Solution Outcome Our customers need to Life Cycle Advantage maximize their MTBR: Mean Program Time Between Repairs • Long-term dedicated partnership • Reduces leakage of harmful waste into the environment • MTB
Slide 91: Creating Flow Control For a Better World
Creating Flow Control For a Better World Our ability to help our customers has significant ESG impact ESG program aligned with 3D strategy Our products and solutions are designed to deliver ESG results and grow profitably Our strong purpose and values will continue to drive our progress in Climate,
Slide 92: Creating Value Through Profitable Growth
7 Creating Value Through Profitable Growth Amy Schwetz Senior Vice President & Chief Financial Officer 92
Slide 93: We Are Building Momentum
We Are Building Momentum Improved revenue conversion and strong backlog are driving top-line growth Margin expansion through growth strategy execution and effective cost control is taking hold Disciplined capital allocation approach designed to deliver superior returns Ambitious and achievable long-
Slide 94: Solid Execution in 2023 Driving Higher Expectations
Solid Execution in 2023 Driving Higher Expectations Guidance raised twice YTD and we reaffirm today 2023 Revenue Guidance Progress 2023 Adjusted EPS Guidance Progress $2.00 $4,500 $2.00 $1.85 $1.75 Up 16-18% $1.85 $4,125 $1.50 $1.65 Up 9-11% Up 10-12% $1.50 ( $ in millions) $1.00 ~75% Adjusted EPS $
Slide 95: We Have Delivered Cost Containment...
We Have Delivered Cost Containment... Adjusted SG&A* Expense • Implemented FLS 2.0 “downturn $920 playbook” quickly in 2020 $900 $880 • Maintained structural cost savings as $860 bookings and backlog grew $840 ( $ in millions) ~$60M lower $820 • Plan to exit 2023 with SG&A / sales at $800 ~20%, lowe
Slide 96: ...and We Are Now at an Inflection Point to Drive Growth
...and We Are Now at an Inflection Point to Drive Growth Leading Indicators — Bookings Leading Indicators — Backlog Lagging Indicator — Revenues $2,800 $3,000 $2,400 $2,600 $2,800 $2,200 $2,600 $2,400 $2,400 $2,000 $2,200 ( $ in millions) ( $ in millions) ( $ in millions) $2,200 $2,000 $1,800 $2,000
Slide 97: Delivering On Our 2023 Cost Reduction Plan
Delivering On Our 2023 Cost Reduction Plan • The new operating model drives Progression of Cost Reduction Plan (Annualized) speed and accountability, while reducing our cost structure $75 • Actions through Q3 2023 secure ~$50M of annualized cost savings ( $ in millions) FY Target $50 • Approximately
Slide 98: Top-Line Growth to Support Further Margin Expansion
Top-Line Growth to Support Further Margin Expansion Operating Leverage Supports Adjusted Operating Margin* Growth • Revenue and margins are $4,250 12.0% directionally correlated, historically $4,000 10.0% • 2020 through 2022 was $3,750 8.0% ( $ in millions) challenged by a number of issues $3,500 6
Slide 99: Controlling Below-the-Line Items
Controlling Below-the-Line Items Debt Outstanding Adjusted Effective Tax Rate* Debt reduced by $1,800 30.0% $1,700 ~$300 million Refinancing Impact $1,600 25.0% 2023 Guidance since 2016 ( $ in millions) $1,500 ~20% $1,400 20.0% $1,300 $1,200 15.0% Adjusted ETR $1,100 $1,000 10.0% guidance ~1000 bps
Slide 100: Ample Capital and No Near-Term Debt Maturities
Ample Capital and No Near-Term Debt Maturities Debt Maturity Schedule1 $420M+ 1000 Cash* 900 $100 800 700 600 $1.3B ( $ in millions) 500 3.5% 2.8% Total Debt* $750 400 300 $495 $495 200 100 $30 $60 $60 $50 BBB- Baa3 BBB- 0 (Stable Outlook) – (Stable Outlook) – (Stable Outlook) – 2023 2024 2025 2026
Slide 101: Meaningful Cash Flow Generation Expected
Meaningful Cash Flow Generation Expected Substantial Opportunities to Improve Working Capital as a Percentage of Revenue • Operational excellence expected to generate substantial working capital savings in addition to margin improvement through 34.0% 34.0% 32.4% 32.0% 32.0% focus on planning and sup
Slide 102: Purposeful Allocation of Capital
Purposeful Allocation of Capital Guiding Principles COMMITMENTS STRATEGIC • Capital allocation based Quarterly dividends Growth / margin expansion on highest long-term return Safety and maintenance CAPEX CAPEX Share repurchases to offset New product development • Free cash flow conversion dilution B
Slide 103: Disciplined M&A Criteria
Disciplined M&A Criteria Strategic Filters Focused on Delivering Value Enhance 3D Leverage Confidence Strategy Scale in Integration IRR > Cost of Capital | Margin Accretive | Cash EPS Accretive 103
Slide 104: Preliminary 2024 Outlook
Preliminary 2024 Outlook* Official guidance expected to be initiated in February 2024 Revenues Adj. Operating Margin* Adjusted EPS* MSD% LDD% 20-25% + (YoY) up ~100 bps Growth (YoY) * Preliminary 2024 Outlook figures exclude any impact from potential acquisitions and foreign exchange rates. Adjusted
Slide 105: Long-Term Guidance Drivers
Long-Term Guidance Drivers Adjusted EPS expected to double from 2023 - 2027 Solid $2.8B Backlog $5.00 $4.00 5%+ Enhanced $3.00 Accelerated 3D Growth Revenue Backlog Conversion $2.00 CAGR (2023-2027) $1.00 $0.00 2022 2023E 2024E Mkt Growth Product Mgmt Operational 2027 Core End Market Adjusted EPS ex
Slide 106: 2027 Financial Targets
2027 Financial Targets $5B+ 14 – 16 % >$4.00 Organic Revenue Adjusted Operating Margin* Adjusted EPS* 5% CAGR (2023-2027) Operational excellence, portfolio Significant growth expected in 2024 3D strategy, aftermarket growth, optimization & product management Multiple levers to enable success and new
Slide 107: Flowserve's Execution Roadmap
Solutions Innovation and New Flowserve’s Product Development Execution Product and Strategy Roadmap Portfolio Optimization Operational Excellence Overhead and Structural Cost Culture Execution Flowserve 2.0 People and Engagement 107
Slide 108: The Future of Flowserve
The Future of Flowserve • Strong end markets enhanced by 3D growth strategy provides visibility to 5%+ revenue CAGR • Improved FLS 2.0 fundamentals + new operating model delivers consistency and resiliency • Operational excellence, product & portfolio management, and operating leverage drive adjuste
Slide 109: Appendix
Appendix 109
Slide 110: Reconciliation of Non-GAAP Measures (Unaudited)
Reconciliation of Non-GAAP Measures (Unaudited) Consolidated Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited) (Amounts in millions) YTD Q2 Full Year Full Year Full Year Full Year Full Year Full Year Operating Income 2023 2022 2021 2020
Slide 111: Reconciliation of Non-GAAP Measures (Unaudited)
Reconciliation of Non-GAAP Measures (Unaudited) Consolidated Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited) (Amounts in millions) Full Year Full Year Full Year Full Year Full Year Full Year Full Year Selling, General & Administrative
Slide 112: Reconciliation of Non-GAAP Measures (Unaudited)
Reconciliation of Non-GAAP Measures (Unaudited) Consolidated Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited) (Amounts in millions, except per share data) Other Selling, General Income Gross & Administrative Operating (Expense), Income
Slide 113: Reconciliation of Non-GAAP Measures (Unaudited)
Reconciliation of Non-GAAP Measures (Unaudited) Division Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited) (Amounts in millions) Flowserve Pumps Division Flow Control Division Full Year Full Year Operating Income 2022 Operating Income 20
Slide 114: Reconciliation of Non-GAAP Measures (Unaudited)
Reconciliation of Non-GAAP Measures (Unaudited) Consolidated Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited) (Amounts in millions) Earnings Income Effective Tax Twelve Months Ended December 31, 2020 Before Tax Taxes Rate Reported $ 186
Slide 115: 2027 Financial Target Assumptions
2027 Financial Target Assumptions Key assumptions include: no significant macroeconomic, pandemic, geopolitical or terrorist-related disruptions that could have a material impact on our business and industry; ongoing modestly positive global GDP growth; inflation and interest rates at current levels
Slide 116: Analyst Day Presenters
Analyst Day Presenters SCOTT ROWE President and Chief Executive Officer R. Scott Rowe, has served as President and Chief Executive Officer since April 2017. Prior to joining Flowserve, Mr. Rowe served as President of the Cameron Group, a position he assumed in April 2016 following the merger between
Slide 117: Analyst Day Presenters
Analyst Day Presenters SUSAN C. HUDSON Senior Vice President, Chief Legal Officer & Corporate Secretary Susan C. Hudson has served as SVP, Chief Legal Officer since May 2022. She has served in various role of increasing responsibility since joining the Company in 2016, including most recently as Vic