Flowserve Corporation Reports First Quarter 2022 Results

Source: www.gulfoilandgas.com 5/2/2022, Location: Asia

- Strong bookings of $1.09 billion increased 14.9% year-over-year and 17.6% constant currency, the highest quarterly bookings level delivered since Q2 2019

- Backlog of $2.23 billion at March 31 was up 11.3% versus 2021 year-end and 18.4% year-over-year. Backlog at highest level since Q3 2015 – positioning the Company for growth

- Exiting operations in Russia and cancelled related contracts from backlog

- Reported Loss Per Share of 12 cents primarily reflects Flowserve’s write down and other exit expenses from Russian operations

- Adjusted Earnings Per Share of 7 cents was impacted by revenue-driven under-absorption, due to continued supply chain and logistics issues, and labor availability issues, including Omicron-related absenteeism

- Revised 2022 full year targets to reflect expected impacts of Russian exit, current supply chain and logistics constraints, and the strengthening dollar, partially offset by strong backlog, favorable market environment and improvement initiatives

Flowserve Corporation (FLS), a leading provider of flow control products and services for the global infrastructure markets, today announced its financial results for the first quarter ended March 31, 2022.

First Quarter 2022 Highlights (all comparisons to the 2021 first quarter, unless otherwise noted)

- Reported Loss Per Share (LPS) of $0.12 and Adjusted Earnings Per Share (EPS)1 of $0.07
- Reported LPS includes a net after-tax adjusted loss of $25.4 million, comprised primarily of reserves of Russia-related financial exposures and below-the-line foreign exchange impacts

- Total bookings were $1.09 billion, up 14.9%, or 17.6% on a constant currency basis
- Original equipment bookings were $543.8 million, up 11.5% or 14.1% on a constant currency basis
- Aftermarket bookings were $542.3 million, up 18.6%, or 21.4% on a constant currency basis, and represent highest bookings quarter since 2014

- Sales were $821.1 million, down 4.2%, or 2.0% on a constant currency basis
- Original equipment sales were $383.2 million, down 5.8%, or 3.8% on a constant currency basis
- Aftermarket sales were $437.9 million, down 2.8%, or 0.4% on a constant currency basis

- Reported gross and operating margins were 25.5% and 0.9%, respectively
- Adjusted gross and operating margins2 were 26.7% and 3.3%, respectively

“Demand across our end markets continued to improve in the first quarter of 2022, including the release of a number of project awards which had been deferred over the last two years,” said Scott Rowe, Flowserve’s president and chief executive officer. “High utilization rates in our customers’ facilities continued to support strong aftermarket and MRO spending, which drove our highest aftermarket bookings quarter in over seven years. While we are encouraged by our ability to capture solid bookings in this improved demand environment, rapid material and logistics inflation, extended supply chain lead times and labor availability issues, including the associated mitigation costs, resulted in backlog conversion and margin challenges which significantly impacted our first quarter financial results.”

Rowe concluded, “Improving our backlog conversion cadence for the balance of the year is our major priority. I am confident in our ability to deliver sequential revenue and earnings growth throughout 2022 based upon our ongoing operational efforts, our six-year high backlog, and the robust demand environment. We are also pleased with the progress of our 3D strategy to date. With this strategy providing incremental growth while we continue to capitalize on the current strength of our traditional end markets, we believe this combination will further establish Flowserve’s strong foundation to deliver value for all of our stakeholders.”

Flowserve to Exit All Russian Operations

In the first quarter 2022, in response to the invasion of Ukraine and the ongoing military actions taken by Russia, Flowserve made the decision to exit the Company’s operations in Russia. This includes commencing the necessary actions to cease the operations of its Russian subsidiary, suspending fulfillment of existing Russian-located orders, canceling existing contracts in backlog and terminating other related contractual commitments. This process is expected to continue throughout 2022.

Flowserve recorded a $20.2 million pre-tax, predominantly non-cash, charge in the first quarter of 2022 to reserve the asset portions of its Russian subsidiary, establish a reserve for the associated exit costs, reverse previously recorded revenue, and record the estimated financial exposure on contracts that have been, or are anticipated to be, cancelled.

In prior years, Russian-associated work typically represented between 1-2 percent of Flowserve’s consolidated revenues. In addition to the charge established related to existing assets and contracts, there will be an ongoing opportunity cost associated with no longer pursuing future Russian work, however the Company expects the overall impact to be immaterial.

Revised 2022 Guidance3

Flowserve’s 2022 Adjusted EPS target range excludes expected adjusted items including realignment charges of approximately $10 million, as well as the potential impact of below-the-line foreign currency effects and certain other discrete items which may arise during the course of the year, such as this quarter’s Russian exit charges.

First Quarter 2022 Results Conference Call

Flowserve will host its conference call with the financial community on Tuesday, May 3rd at 11:00 AM Eastern. Scott Rowe, president and chief executive officer, as well as other members of the management team will be presenting. The call can be accessed by shareholders and other interested parties at www.flowserve.com under the “Investor Relations” section.

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