Flowserve Corporation (FLS) Earnings Call Transcript & Summary

Get started again. We are really excited to have Flowserve Corporation with us. And we're particularly excited to have Scott Rowe. He's usually get around every year. We have this conference. So he's here with us today. He's the President and Chief Executive Officer of Flowserve. So I know Scott has some prepared remarks, so I'm going to go over to him, and then we'll go right into Q&A.

Great. Thank you, Andy. And it is a pleasure to be here for the first time in my 9 years, but it's because of our earnings call timing. That was not an issue. But we want to thank you and for Citi for hosting us and thank everybody here in the room today for coming to hear about the Flowserve story. So I've got a couple of slides. I'll be quick, and then we can jump into Q&A. We've got our forward-looking statements here. I'll skip that. Just 2 things on this slide. One, we've made incredible margin progression over the last couple of years. I'll go back to 2023, and Andy, you know the story well. In 2023, we did a couple of things that were incredibly formative. One was an organization design, which oriented us to business units that were global around product family. That was the catalyst that allowed us to do some really cool things. And so that was also the launch of our business system. We didn't talk about Flowserve Business System externally in 2023, but that's really when we went live with it. And we saw a lot of incredible progress with the business system, and we'll talk through that in great detail. And then finally, the 80/20 program was formed in 2023, which we went live in 2024, which is also part of the business system. But 500 basis points of margin improvement over the last 3 years, culminating at the end of last year above what we put out was our 2027 target framework. So with that, we thought it was appropriate to put out new targets, which a lot of our analysts, including Andy, were asking for. And so we put out new long-range targets. We did this in our earnings call a week ago. And so our framework for our 2030 targets are organic sales growth of mid-single digits. And so we've got a reorientation toward growth in the 5-year period, capitalizing on some of the megatrends in the market, continued margin expansion journey here, so roughly 100 basis points a year by 2030, getting us to an operating income of 20% -- and then adjusted EPS growth of double digits. So leveraging all facets of the balance sheet to allow us to really drive EPS growth into 2030. And so with that, I will -- I'll turn it over to you, Andy.

Very concise, Scott.

So back to a slide that looks good here.

All right -- there you go. So I mean, you've been working -- you became CEO in '17, and you've been working on improved performance on for Flowserve for a while, but it just seems like something clicked in 2025, like 300 basis points of adjusted margin improvement. Your new guide, as you said, is 20% by 2030, and it contemplates 100 basis points a year. So that's pretty good, too. So what clicked in the performance in '25? Why do you seem so confident now about continued improvement going forward?

Yes. You say what clicked in 2025. It really is a longer journey than that, and it's about momentum. And [ Jim Collins ] uses the flywheel example, which I won't bore everyone with. But I would just say it's a lot of hard work and a lot of consistency with our messages, our business process, how we run the business, and it's really taking hold. And so it's a really beautiful thing to see internally. But I'll hit the 2 pillars that are driving margin expansion. So it's operational excellence and it's portfolio excellence, which is essentially 80/20. On the operational excellence, this has been a long journey. I mean we started some of the tenets with operational excellence back in 2018 with Flowserve 2.0. A lot of that's now -- we're training. We've doubled down on that training. We've doubled down on how we run our facilities, and we're driving substantial productivity at all of our sites. And we're avoiding what I would call disruptive type events where you're leaking margin or you're hurting our customers and things like that. And so a lot of the conversations we are having in the early days are now long gone. And so that momentum continues to build. We continue to have greater competency within the manufacturing operations. And then we continue to lean out our facilities. And so leaning out the facilities allows for further roofline consolidation, which we did in '25 and '24. And so it's just -- it's really working, and we've got a lot of people moving in the right direction that are aligned with our approach and our strategy. And then on portfolio excellence, the 80/20 program. So 2024 was the first full year that we did that. we had about half of our product business units in the 80/20 program. We spotlighted our -- in the Q3 earnings call, our industrial pumps division where we made a lot of progress. We put some of those facts and figures out there. But that was our early -- that was our first one. And in 2025, we had all of our product business units in the 80/20 program. And so we're now fully in the methodology. We're moving forward with everybody. There's still opportunities because I'd say we're still relatively in the early innings. But in 2025, everybody understood the methodology. We're using the terminology. You could go in any facility in Flowserve around the world, and they're talking about the quadrant segments, our 8 products, our target selling accounts. And so we just have very strong alignment throughout the organization. And so yes, I feel like while 2025 was certainly an inflection up, it's not an anomaly, and we've got the platform that allows us to continue to build and progress forward, giving us the confidence for our 2030 targets.

That's helpful, Scott. And so I want to double-click on a couple of those things. So I think you've said commercial excellence is still in the early going. So what are you doing on commercial excellence? And when I hear that I feel like maybe reteaching sales force to do things, you tell me sort of what you're doing?

No. I mean it's almost exactly that. And again, we're picking up some of the tenets of Flowserve 2.0, applying it into the new framework of the business system and commercial excellence. But I'd say the foundation for all of the business system is training. And so we're starting commercial excellence with kind of a retraining of all of our sales force. We launched that midyear in 2025. And so we're kind of halfway done, maybe 40% done with that training. And so we still have some work to do. But that's all of our commercial teams trained in what we call practitioners of the commercial excellence framework. And then from there, we start to build on account segmentation, target selling, pursuit plans, how do we leverage CRM more effectively? How do we know when we're taking market share and share of customer wallet. And so it really is a lot of the basics. But I think the basics in our business is really what can drive outsized growth. And so we're confident by really leaning in with the commercial team, investing in our organization. We've also changed our incentive plans. That's helpful as well to get them focused on the areas, the products and the customers that we want to be focused on. We're confident that, that's going to lead to growth over the long term. And with 80/20, we're segmenting our products to our A products. And so we're really now focusing that growth on our A products and with our best customers.

Got it. And you did talk about footprint optimization. Like I feel like I mean I've covered Flowserve for a long time. There's always like factory a year, something like that, but it feels like maybe you're a little bit more optimistic because as you know, when you came, there was a lot of sprawl at Flowserve. So like it feels like you've got it, maybe the flywheel moving a little faster there. Maybe talk about what you're doing there that might be different than when you started on footprint optimization.

Sure. Yes. It's this one has been a long, long story. Flowserve has a lot of manufacturing facilities. We'll start with that. It was a series of acquisitions 25 years ago. And consolidation was always there. There were some big announced programs that we don't need to talk about before my time that some went well and some did not go so well. Since I've been there, we've identified further opportunities. Every year, we typically are doing 1 or 2 kind of facilities through the network. And I would say in the last 2 years on the back of operational excellence, -- and some of this has to do with IT systems and data cleanliness. We've got a bigger prize here. And so as we're leaning out our facilities with 80/20 and taking things out, as we're driving lean operations with the operational excellence, we're freeing up capacity. And so as we see this capacity allows us to do things differently with where we think our optimal footprint is. And so we have a multiyear plan. And I would say every year, it might change a little bit because of geopolitics or where the tariff is or we can't chase that, but we do have a dynamic plan here, but we'll lock it in kind of 18 months out and then we start to execute. And so last year, we did 2 very successful consolidations. This year, we'll have at least 2 on the plan. And I think kind of every year, you can see a similar type program for us. And at this point, even with our growth, we don't necessarily need to invest in a massive greenfield complex to expand capacity. It's still about driving efficiencies and leveraging the scale that we have, and we're confident that we can grow and do that together.

Excellent. And then just on 80/20 itself, a lot of times when I follow companies with 80/20, you kind of worry a little bit about growth because you -- some people will say firing customers, what have you. So maybe talk about the balance because like when I look at something like FCD, right, you've all of a sudden had quite good margin improvement, but the growth is still a little bit slower. So is it an inhibitor? How do you think about that growth versus margin?

No, it's a really good question. We're following -- I'll start with we're following the methodology fully. And there's a lot of different people that will talk about the methodology and what should the result be. And in theory, the revenue should not get impacted substantially. What I would tell you is the opportunity set at Flowserve was incredibly rich, and it's relatively easy once you segment the data to make decisions on the exit. And so where I'm going with this is there's a little bit of timing. You can make decisions fast on product exits and turning things off turning things on and investing in that growth takes a little bit more time. And so we're definitely seeing a headwind. On our earnings call, the fourth quarter earnings call, Amy mentioned 100 basis points of headwind in the second half of the year last year, and that came through because of those exits. And then she referenced a similar kind of scenario for the first half of 2026. And so that will culminate in roughly revenue being flat to 2025 for the first half. And in the first quarter, we'll roughly be flat to maybe slightly down. And I would say most of that, if not all, is attributed to the 80/20 headwind. So another 100 basis points essentially. And so a great example here is we've talked about a modules offering within MOGAS.. That got 80/20 out very quickly in our integration, and that had a lot of revenue content in Q1 and Q2 last year. And so that's gone. With that said, though, now as we've kind of continued to prune that portfolio, our efforts are going to the A products and our best customers. And so we put -- in Q3, we put a data point out there around industrial pumps and growing at over 20% with our target accounts. And so where we're focused, we're starting to see that growth. And so I believe over time, you start to see that outsized growth coming through, both on the back of 80/20 and commercial excellence. And this is what gave us confidence in our 2030 target of mid-single-digit growth.

Yes, that's helpful, Scott. And just on '26, right, like to your point, you're going to have a second half acceleration in revenue. How much of that is just kind of like 80/20 evolving into less headwind versus something else in the market or something?

Yes. I think -- I mean, we gave the number. It's about 100 basis points of headwind on the first half of the year. And so call it half and half. And then I'd just say the other part of that is project timing of bookings and when they come through. That will generate -- we believe that, that's going to help us or be a tailwind in the second half of the year. And I'd say that what's steady is the growth rates within our aftermarket business. And so we're growing the aftermarket business at kind of mid- to high single digits. We'll continue to grow that. Essentially, for those that are -- we have a massive installed base of pumps and valves. We have 2 teams, pumps and valves, very, very focused on improving our capture rate, harvesting our installed base and growing that aftermarket. They've done a really nice job over the last 2 years, and that will be a nice kind of steady towards our growth in 2026 and beyond.

Don't worry. We'll get into aftermarket. It's I did want to ask you about FCD, maybe somewhat similar to the question I asked you before, but like FCD was stubborn to improve, I'll call it. And then in the last couple of quarters, has really broken out. I think you already said like FCD was later into 80/20. So we get that. But again, what sort of happened to like have that Eureka moment there? And then as you think about the 20% new target for 2030, do you think that both FCD and FPD have equal margin potential to get there?

So we'll start with FPD, but I'll answer your question. FPD has done a remarkable job, right? They fully have committed to the business system, both operational excellence, portfolio excellence. They were the first division/business unit to go on the 80/20 playbook. They've done everything that we've wanted and more. And so the org design, the 80/20 OpEx has all worked really well. FCD has been a little bit of a lagger. Some of that was deliberate. And so we pushed them kind of in the second phase of 80/20 versus the first phase. I'd say they're probably 12 months behind, but the playbook is exactly the same. If you went into an FCD site or a valve site versus a pump site, you wouldn't be able to tell the difference in terms of how we run the business, our shop floor daily management, how do we talk 80/20, how do we talk strategy deployment. It's all the same. And so we're super confident that FCD continues to move on margins. You saw a substantial improvement in 2025. And so I just think that, that's -- we have the blueprint. We know what we need to do. We'll continue to see progress there. We did some pretty heavy lifting on the facility consolidation for FCD. And so you'll see that work through. MOGAS synergies came through exactly as we anticipated, maybe a little bit more. And so you'll see the synergy number continue to play out in 2026 and beyond. And then quite frankly, you're picking up Trillium, which will have nice margins that help us there and incremental cost synergies in that business. So we feel really good about the runway with FCD. But yes, it's about a 12-month delay to what we've seen with the pumps division.

Got it. And then, Scott, maybe one more on margin. pricing, especially on projects. In the past, I used to think of projects as much lower margin. It seems like that's improved significantly over time. Is that true? And then can you talk about how investors should look at Flowserve's price versus cost in the current environment? There's still inflation pretty choppy on the commodity side. Do we worry at all about tight electronic supply chains, things like that?

Yes. So I'll start price cost. I'll come back to project pricing. So 2025 was a dynamic year. Like -- I mean, I would have never thought some of the things that we dealt with that we were working through. And I just want to say thank you to our supply chain team and our commercial team for working in an incredibly dynamic environment, shifting supply around the world and then having difficult discussions with our customers on pricing. With that said, we ended up in a really good place on price cost at the end of 2025. And so we've got better visibility and a better handle of our supply chain than ever before. We continue to make amazing progress there. One thing that I failed to say earlier, we started to do some 80-20 principles with our suppliers, and that's helping further margin expansion, but it's also helping us with just certainty. And sorry, I'm throwing out nuggets now, but you'll like this. So we look back -- we look at our supplier count versus when I started versus today. We've reduced suppliers by 50%, which is not surprising to you, but for some people, that's probably surprising. But we've done a really nice job continuing to rationalize and getting focus. And back to price cost is if you're working with our best suppliers, if we're giving them a healthy amount of business, it's a lot easier to have these type of discussions with them in terms of balancing our load or shifting our load. And so I feel really good about our ability, our visibility with our suppliers, our understanding of cost, our ability to pivot around the world and continue to be in a favorable position on price cost. So now let's go to project pricing. And when I talk project pricing, it really is pumps projects. These are the big ones that historically have not had any margin or lower margins. Since we announced the business units and the focus on engineered pumps, we've been really careful about what we're calling selective bidding. And so we've chosen to do less. With that said, the margin is substantially different than what we've ever been since I've been at the company. And so -- we were talking about gross margins, Andy, I think, in maybe a 10% number and sometimes they were even lower before my time. But that's over now, right? I mean I don't -- there's -- occasionally, we would approve something that would be below a 20%, but that's really rare. And so we're now -- our original equipment margins are in a healthy place. Now we would like those to be higher than 30%. But what -- in this business, this is what drives our aftermarket. So there's a kind of a whole life cycle type look here. We look at the original equipment. We look at that customer and that site and how confident are we in getting the parts and the service work. And we look at kind of a 5- to 7-year type return that generates above what we call accretive to Flowserve on a returns on a margin basis. And so we're incredibly deliberate. And so we call this selective bidding. We've reduced the number of opportunities in the funnel. We work with customers. We know that we can get aftermarket -- and then we're more focused on the front end and getting our cost right. And so making sure that we have a fit-for-purpose offering for our customers. But this has been a big win since 2023 and the formation of the Engineered business unit. The team has done a really good job, and we believe we can continue to grow and have healthy margins in this side of the business.

Yes, that's good to hear. I'm going to open it up to the audience in a second. Let me ask you one more question and I'll open it up. You mentioned aftermarket, so let's talk about that a little bit. I think you said the possibility for mid- to high single-digit growth. I want to understand that a little bit more. It seems like you have turned the corner to your installed base. And I think I remember, I covered Flowserve for too long. I think I remember you basically didn't have the data. Now you kind of have the data. Like is that -- I assume that's one big difference. What are the other big differences over the last few years so you're able to capture your installed base more?

Yes. So I'll start with Flowserve has hundreds of years of putting pumps into the market. There are pumps out there that are close to 100 years old. I found one that was 70 years old here recently. which was amazing to me. But the fact is we have a massive installed base. Our customers want to come to us for repair and service. The one, we have to know where it is. So data cleanliness, understanding where our product is and how we can help our customers is important. The second biggest factor is speed. And so if we can quote within hours, if we can do our turnaround in days and not weeks and months, and we can be incredibly responsive, then we get that work. And so our capture rate has moved up a couple of hundred basis points over the last 2 years. We're confident that by continuing kind of our -- we call it the speed Wins campaign, we're confident that with continued kind of quoting a little bit of e-commerce configure price quote tools that help us do this very quickly that we can continue to grow this business. And so we believe kind of mid- to high single digits is a good range for our aftermarket growth. And again, we've got the largest installed base in the world on both pumps and valves. And this allows us to do some things that are pretty exciting for our customers to support their operations.

I've been to a couple of your QRCs, your quick response centers. Have they -- have you improved them more lately? Like is that part of this, too, as you've got them better?

For sure. Yes. I mean they run on our operational excellence playbook. It's different than our new manufacturing. It has the tenets of aftermarket and speed, but the consistency is the same thing. And so -- we have a version of shop floor daily management. They know who our best customers are, our strategic accounts to target selling, and they're running on a very disciplined playbook. And so that improvement allows us to do things differently. It's improved our utilization of our service techs. It's allowed us to move margins up. And quite frankly, it's allowed us to quote and move with speed when we do service and repair work.

Just one more on that. Is the QRC count staying stable? Is it growing?

Roughly stable. I mean we're kind of in that 150-ish number. I'd say every year, we're adding 1 or 2, we're taking out 2 or 3. But I think we're in a good place right now. I don't think that changes dramatically. And so while we have the opportunity on the original equipment manufacturing to come down, this is an area where proximity to our customers is super important. And quite frankly, to stand up a QRC is a minimal investment. It's not capital intensive. And typically, you're running something new with, call it, 10 to 15 type associates in that workforce. And so we'll -- when we can sign a long-term service agreement or we've won a big project and commit to that support, we're happy to stand up a quick response to them.

Got it. Any audience questions so far? I'll keep going for now.

So you have more.

So I think you mentioned -- I think you mentioned on the stage, the second half rebound in original equipment bookings in '26. It seems like -- I mean, you tell me, it seems like one of the big opportunities in terms of inflection is Middle East, but maybe you can talk about visibility into an OE inflection, where is it coming from?

Yes. So we feel the end markets are reasonably constructive. I'd say geopolitics is a big issue. And for larger projects, our customers want stability. They want to make sure they can get a financial return on their investment over many, many, many years. And so I'd say there's a little bit of a wildcard there. With that said, we feel the end markets are constructive. I'll come back to power. I'll just say in our kind of most of the end markets, we're seeing growth. I was in the Middle East in late January, early February. We saw lots of customers, and we didn't have the biggest year last year on Middle East projects. We see a nice healthy growth rate here. And so for us, we're involved in a lot of different programs and different customers in the region. Those programs are adding expansion. So they're adding a train or they're adding more capacity or they're doing something different to change the dynamics of that production unit. And so we're already in. We have equipment there. We're going to win the next phase. It's just a matter of timing. And so 2025 was a little bit of pause because a lot of capital got deployed in '23 and '24. We see a lot of plans and activities for 2026. And so I wouldn't call this a record year in the Middle East. But certainly versus 2025, we see a healthy step change. And so we feel reasonably confident on that. Picking what quarter this will happen then is always a challenge. It's really difficult, as you know, Andy. And so I would just say right now, we believe it's more second half weighted. There could be projects in the second quarter, but I think second half weighted is probably an easy way to say it.

Got it. And then I want to talk about power and nuclear a little bit, but maybe we're weaving into this question because you're targeting, as you put on the slide, mid-single-digit organic revenue growth through 2030, but it does require, I think, a pickup in backlog burn from your nuclear projects as well as some general recovery as you just talked about in markets. So when you look at what other markets we know you're counting on nuclear to burn faster. Any other markets that need to sort of do better to get that mid-single-digit revenue growth?

We'll -- I'm sure we'll come back to nuclear. So let's park nuclear. Traditional power is super exciting for us. So we're seeing traditional power grow. And so whether that's coal-fired power plants, natural gas, other forms of power. We have a lot of content in that. It's not as high as nuclear, but it's something that we have a massive installed base in. And so as our customer base looks at re-rating that power plant, expanding the capacity of that plant, we're picking up work. And so we see healthy growth rate there. Those projects are a much shorter window than a nuclear project, less than a year in terms of our shipment deliveries. So that's a growth area that we're super excited about. General industries has performed incredibly well for us over the last year or so. We still see structural tailwinds in terms of growth within general industries we're continuing to kind of evolve our portfolio into a more general industry type look and feel. And so we're excited about what that can do as well. And so I think those are 2 areas that should provide nice steady growth for us as we go forward. And I'd just put water in the general industries category. That's something that -- while it's not a huge lever for us, it's a meaningful part of our business, and it's something that we definitely see growth in.

And it reminds me to ask you about your 3D strategy, right? Like I think power has kind of overshadowed 3D a little, but it is kind of part of 3D, right, it's diversification. So maybe where have you been successful in diversification, decarbonization? Where have you been successful? How has the program evolved?

Yes. So our 3D strategy for those that aren't aware, is diversify, decarbonize and digitize. We've been running the strategy now since 2023. It's been -- well, 2022 really and then 2023 externally. It's been helpful, right? It points us in the right direction for opportunities. It allows us to focus our organization. It's easy to talk to our customers because we're aligned with what they're trying to do. And so if we go back to some history data points here, Andy, when I got here, oil and gas was 40-plus percent of our overall offering. Today, we're just over 30%. We call it energy now. We don't call it oil and gas. And we've migrated out of upstream oil and gas almost completely. Our energy business now is roughly, call it, 85%, 90% is downstream and refining. And so that gives us a lot more stability in our ability to work through any type of cycle that's out there. And so I think that's tremendous progress. We have more work to do. Ideally, our energy exposure would be somewhere between 25% and 30%. We'll continue to acquire in diverse industries to round out our portfolio and become more balanced as we go forward. But that's been a big win. And so the teams are very focused. Our new product development efforts are anything on the business development and customer account generation has all been on the diversified side. On the decarbonization lane, we picked up a lot of work as customers are really focused on their ESG programs and carbon emissions. We're still doing reasonably well there. The world has changed though, and it's not what it used to be. And so while we had a big prize on hydrogen and some of the other concepts that were out there, that activity is just not there. But we are well positioned to do flow control in a decarbonization environment. We can debate where you put nuclear. If we put in decarbon, it looks great for us. I would say outside of nuclear, we still feel carbon capture is something that people are very focused on more in Europe and the U.S., but we're still winning work on the carbon capture type opportunities. And then on digitization, this hasn't gone as fast as I would like. But what I would say there is we do have the best technology in the world to monitor and predict on pumps and valves in the flow control space. And so our offering, RedRaven is proven. We've got 2,500 customers or 2,500 installations out there that we're monitoring, we're able to predict. The more data that we have, the better we get. And so we're excited about what we have. We just need to unlock this into a step change in driving growth. And I'm happy to expand a little bit more on that if you want. But it is something in 2026 that we're now seeing as a profit center, which is something that I wasn't able to say in the years past. We'll continue to invest here, but we also believe there's a substantial growth in revenue that could, in theory, generate some very high margins on a more of a kind of a software and a subscription type basis.

Got it. So if energy becomes 25% of the business is -- does most of the business you think go to power, so power is 20% or something?

I think power on the back of nuclear starts to accelerate at a very meaningful rate, and then general industries is the other one.

Got it. Okay. I want to get back to digitization in a second, but let's talk nuclear for a second. So you've talked about $10 billion of nuclear power bookings opportunity. You booked $400 million of $4.7 billion bookings in nuclear in '25. So how do you think about nuclear bookings ramp from here? I mean you just bought or announced Trillium. I think that's going to help you. As I think about the ramp-up, would it be like a typical bell curve? Or could your content be higher or lower for SMRs? Like maybe more color on sort of how you think this is going to ramp up?

Yes. I'd say, first, we're incredibly excited about nuclear, and I'll go back a little bit. Flowserve has equipment on 75% of all reactors in the world today. We don't do well on new China reactors. Those are typically Chinese OEMs. Outside of that, we do incredibly well. We're locked in with the biggest customers. So I think EDF in Europe, Westinghouse in the U.S., all of the other ones, the CANDU reactor in Canada, GE, Hitachi, we're heavily involved in. And so we've got strong customer relations, proven products and then most importantly, the certifications, both with the government or the regional kind of associations that dictate the licensing, but also with the customers. And so we're in a very, very good position to basically be a part of this renaissance in nuclear power. Going into some of the specific numbers, we did $400 million last year. The majority of that was on the back of life extensions and basically power rerates and basically extending the life of current nuclear assets. That work will continue to accelerate. And so we see that growth rate continuing both in Europe and in the U.S. And so we feel really, really good about our ability to support our existing customers and helping them with whatever their plans are with those existing sites. And so that's a lane that we feel very confident in the ability to grow. And the revenue conversion cycle there is a lot better than what I would call on a brand-new greenfield reactor. So if we go to greenfield reactors, similar to the Middle East, it's very difficult to pick project timing on this. There has to be a lot of factors that get aligned with governments and customers and an end user to ultimately pull the trigger on a new reactor. With that said, I fundamentally believe that this will happen. And I think there's going to be an inflection point -- a substantial inflection point in growth. There's a lot of public figures out there in our estimates, that we built our $10 billion prize to in 10 years. We use this what we call kind of the middle of the road public estimates on this. And so if we take that to 2026, it's difficult to say how many new reactors will go forward. We don't necessarily have the new reactor build-out in our plans, but it is upside to our plans. And so I think there's a scenario where the U.S. moves on a handful of reactors. There's a scenario where Europe progresses some thinking on new reactors as well. And so our bookings could go up nicely on the back of that. But again, it wasn't in kind of our guidance or in the way we were thinking about our commitments in 2026. And so let's see what happens. We're in meaningful discussions with all of the right players. And again, if a reactor moves forward, Flowserve will be involved there. And then the third leg of our nuclear strategy is SMR. And so we've been working with what I'll call a smaller set of SMR customers that we believe have the ability to commercialize their offering and are using the technology that would support more flow control content. We have very good relationships. In some cases, we have signed agreements. We have booked work, both pumps and valves in terms of doing a lot of the prototyping and the testing on kind of serial #1 units, and we're starting to move into what I think is what will be production or commercial SMRs. With that said, there has to be government alignment. Customers have to be buying the takeoff of the power, which I think will happen. I'm not worried about that. There's some big players out there. But there's just a lot of things that have to happen for that to take off. And so I'm optimistic that, that ultimately happens. I just don't think it's a meaningful part of our 2026. But I believe beyond 2026, it's an absolutely unlock for some of the challenges in power around the world, quite frankly. So we are leaning in on these partnerships, and we're doing everything we can to secure our pumps and valves in the critical components of the SMR. And then I'll finish with Trillium because it's important. And so we announced the acquisition of Trillium's valve division, which is important. We're buying the valves. It's a carve-out of a company. But those valves increase our content on a new nuclear reactor by somewhere between 15% and 20%. And so what we put out in the third quarter was a new reactor is roughly $100 million of content. Now with Trillium, we think it's $115 million to $120 million per reactor. And so we're excited about that. In the valve side, we've got the mainstream isolation valve, which is essentially the critical safety valve -- that's the one a lot of people talk about. It's what our customers are very focused on. We believe by leveraging that relationship and that expertise, we're going to be able to pull in the Trillium products here. It gives us roughly 4 new product lines to put in front of our customers. They have existing business. They're locked in. They've got the certifications around the world. And so we're very excited about the growth potential within our ability to kind of package this nuclear offering as we go forward.

I think you answered my next question about Trillium revenue synergies. So -- but like -- on the cost side, I mean, you mentioned it's a cost carve-out. So not much in the way of traditional costs. Is that the right way to think about it?

Yes. It's under private equity. It's a carve-out. So there's no corporate costs. There's no -- there's none of that. With that said, though, there are cost synergies. And so we'll move quickly on supply chain. There may be a facility consolidation. There's some other stuff on some of the headcount on our side and their side. But I would say the focus is more around growth and really starting to think about our valves as a portfolio that we can put forward to our best nuclear customers. And then with that said, it's not just nuclear. And so their end markets today are roughly 70% power, 40- 30 nuclear versus traditional power. And so we believe we can grow in the traditional power as well with the Trillium offering.

Got it. So ultimately, when I think about the $10 billion that you talked about, your share potentially of that could be very, very high and even higher with Trillium.

Yes, for sure. I mean our share today is very high. There's a handful of peers that have the certifications to do the nuclear work, and we're in a great position. And by adding Trillium and the certifications in those products, it only increases. And again, it's a meaningful -- we are $100 million of content, so to go up 15% to 20% is something we're pretty excited about.

So we're starting to run out of time. So let me ask you a couple of other quick ones. Like you mentioned general industrial a couple of times, and it's hard for us to know exactly what's in there, but it feels like it's a short cycle, shorter cycle for sure.

Shorter cycle configure products.

So have you -- it seems like you've seen maybe some decent improvement there. Maybe talk about that and could it have a continued decent runway for growth?

Sure. And again, this is under diversified. We've deliberately oriented to general industries. And this is things like water, it's mining, other industrial applications and really making sure that we have a more configured product that we can move quickly with at the right price to support our customers. And so we do well in this historically. We just got to continue to focus and drive that up. But there's a lot of opportunities in North America. We're seeing opportunities in South America, a little bit in Europe as well. And so we believe there's continued growth here. And we believe that we've got the technology and the know-how across any flow control application. So taking some of the existing designs and products and reorienting into attractive end markets is something that we know we can do.

Got it. And then just on RedRaven, you mentioned it's profitable this year. You have, I think, an MOU with Honeywell. Is that part of the reason why it could start to proliferate? Or like how do you think about that technology over the next 2 years.

So this is our Internet of Things or IoT offering where we have the sensors, we instrument, we collect data, we monitor, we predict unplanned downtime. And again...

We didn't sell a lot of software just by itself.

No, we don't. We don't have that. This is only on the back of our installed base. With that said, like we believe and the Honeywell MOU validates, we believe we have the best technology in the world here. And so we're getting good validation. We've got 2,500 assets that are instrumented. We're collecting data. We've got monitoring centers. We're doing some really good things with our customers. We're using AI to help us with the data and making sure that we can continue to evolve the offering. The Honeywell partnership is important as we were going to our end users one by one saying, "Hey, we can instrument your pumps and valves. Our customers were saying, that is amazing, and we want to do this, but what we can't have is a different technology for pumps and valves and a different one for compressors and a different one for fans and blowers and et cetera, et cetera. And so that's when we started to talk to asset performance management partners like Honeywell and saying, "Hey, we believe we've got the best technology within flow control. Can we put this on the back of your asset performance management and maybe do something together. And so we signed a partnership with Honeywell. We are talking to other asset performance management, and we believe that this could be the inflection for us. And so if you think Honeywell Forge comes in to a large site, so pick chemical plant refinery, whatever, they're going to manage that entire site. We'll pick up all flow control equipment. And so all pumps, whether they're Flowserve pumps or competitive pumps, all of the valves and then providing a substantially enhanced service than what we could have done alone. And so -- we're very excited about this. We hope to press release something in the near future, not the near future, but somewhere in 2026 that allow -- talks about what we're doing with our customers. And so the teams are working incredibly hard here. We haven't hit that inflection point yet. But this is one that if it goes forward, it could do some really good things for Flowserve. It gets us a lot closer to our customers, providing more on our capture rate in our aftermarket than ever before. But it is exciting. We just haven't had a breakthrough at this point yet.

I only have 30 seconds, I got 2 questions for you. So a few more Trillium out there, like feel good about capital deployment and weighted toward M&A.

Yes. I mean we're -- in 9 years I've been here, we haven't had the cash flow generation in the balance sheet to do this like we have today. And so with the health of the business, the healthy margins, the cash, we've got a great problem. And that problem is how do we deploy capital in an effective way to create value. And so we'll trade off programmatic M&A with share repurchase. We did both in 2025, and we're confident we can continue that in 2026. Our markets are still fragmented. We've talked about some of the things that we're interested in. And so we'll continue to lean in both in the pumps and the valves to continue to expand our offering.

Awesome. And then one quick one. What are the top 2 or 3 innovations and structural changes affecting your company over the next 5 years? Are there any emerging industry trends that are perhaps being overlooked?

That could take 30 minutes quick in. Let's go nuclear on the structural changes. That's a big one. We didn't talk about AI, and this could go on forever. We are using AI to run our business better. There's more there. And so we're excited about our kind of pilot and test cases that we've used. We've got general kind of persona amplification with the normal stuff, but really focusing AI to solve business process challenges is something that's working.

Awesome. Thank you very much, Scott.

Appreciate it, Andy. Thank you.