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DATE
Wednesday, October 29, 2025 at 10 a.m. ET
CALL PARTICIPANTS
President and Chief Executive Officer — Robert Scott Rowe
Senior Vice President and Chief Financial Officer — Amy B. Schwetz
Vice President, Investor Relations — Brian Ezzell
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RISKS
Energy project delays — Robert Scott Rowe said, "we continue to see some slowness in project timing for larger engineered projects, primarily in the energy end market," with energy bookings declined 19% as a result of lapsed Middle East awards.
Backlog conversion pressure — Amy B. Schwetz noted, "there's probably slight pressure on backlog conversion with the nuclear content," as nuclear-related bookings extend delivery times.
TAKEAWAYS
Adjusted EPS guidance -- Raised adjusted EPS guidance to $3.40-$3.50 for fiscal 2025, representing a 31% increase at the midpoint and more than 60% growth since 2023.
Revenue -- $1.2 billion, reflecting 4% growth in the third quarter; organic sales were flat, while the Mogus acquisition contributed three percentage points in the third quarter.
Bookings -- $1.2 billion in bookings, up $130 million sequentially, driven by more than $140 million in record nuclear bookings, and a 1% year-over-year increase.
Adjusted operating margin -- Adjusted operating margin was 14.8%, up 370 basis points, and now within the long-term target range previously set for 2027.
Adjusted gross margin -- Adjusted gross margin was 34.8%, up 240 basis points through cost improvements under the Flowserve business system.
Aftermarket strength -- Bookings exceeded $600 million for the sixth consecutive quarter, with two of the last three quarters above $650 million.
Nuclear opportunity -- Company estimates a $10 billion addressable nuclear flow control market over the coming decade, excluding China, citing content in 75% of existing nuclear reactors.
Free cash flow conversion -- Free cash flow conversion was 174% (excluding merger termination payment), with $402 million in cash from operations.
Shareholder returns -- $173 million returned, including $145 million in share repurchases, with an additional $55 million repurchased in October.
Legacy asbestos liability divestiture -- The transaction to remove asbestos obligations is expected to improve annual cash flow by $15 million-$20 million per year, with $199 million allocated for closing in the fourth quarter.
FPD segment performance -- Adjusted operating margin was near 20%, with aftermarket bookings growing at a mid-single-digit rate, and book-to-bill at 1.02 times.
FCD segment performance -- Bookings increased 24%, sales rose 7%, adjusted operating margin improved by 230 basis points, and sequential operating margin gained 410 basis points due to Mogus integration and synergies.
80/20 program results -- Industrial pumps SKU count was reduced by 45%, resulting in 21% year-to-date bookings growth for key customers, and approximately 150 basis points of gross margin expansion compared to last year.
Middle East energy projects -- At their lowest levels in five years, constraining current bookings, but management expects potential improvement as project funnel advances.
Backlog mix and conversion -- Increased nuclear content is leading to longer revenue conversion periods, while aftermarket continues to provide faster-turning sales.
SUMMARY
Flowserve (FLS +30.16%) raised its adjusted EPS guidance for fiscal 2025. Continued sequential and year-over-year margin expansion in the third quarter, anchored by aftermarket resilience and record nuclear bookings. The company divested its legacy asbestos liabilities to simplify its capital structure, with cash flow benefits expected. Segment results highlighted strong FCD margin expansion through integration synergies and the 80/20 program, while FPD maintained peer-leading profitability. Nuclear market activity, both for large reactors and small modular reactors, is positioned as a major multiyear growth driver, supported by installed base, high market share, and certification barriers. Management emphasized disciplined capital allocation across share repurchases, M&A, and operational improvement, maintaining focus on maintaining growth, earnings quality, and cash flow enhancement.
Rowe stated, "we're at a price cost neutral basis, if not slightly positive, on the forward look," referring to pricing and tariff effects in the U.S. aftermarket and run-rate business.
Schwetz detailed that "free cash flow starts with margin expansion," while noting further working capital improvements remain ahead.
The Middle East remains a project bookings headwind due to large original equipment delays, although leadership expects this trend could reverse with improved market stability.
Regarding nuclear content, Rowe indicated Flowserve is "well positioned" on upcoming global projects, with the $10 billion opportunity over the next decade excluding China and leveraging, 'of the 416 reactors that are out there, we have content in 75% of them.'
Schwetz confirmed, "the team is focused on driving growth opportunities across the globe through our expanded offering of severe service ball valves," referencing progress post-Mogus integration.
Capital deployment flexibility has increased following the asbestos divestiture, with $200 million in remaining share repurchase authorization as of October 2025, and M&A remains an ongoing priority.
INDUSTRY GLOSSARY
80/20 program: Flowserve's operational strategy to simplify product lines, reduce complexity and SKUs, and prioritize high-margin, high-value offerings to accelerate profitability and growth.
Aftermarket: Sales and associated services pertaining to maintenance, replacement parts, and support for installed base equipment, distinct from original equipment sales.
SMR (Small Modular Reactor): A type of advanced nuclear reactor, significantly smaller than conventional plants, with modular construction that enables scalable, flexible deployment.
Main steam isolation valve: A critical safety valve used in nuclear power facilities to isolate steam lines in hazardous conditions, central to reactor safety systems.
Book to bill: A financial ratio calculated as the amount of bookings received divided by the amount billed (revenue) in a given period, indicating demand relative to deliveries.
Full Conference Call Transcript
Robert Scott Rowe: Thank you, Brian, and good morning, everyone. I'll start on slide three. The momentum we built in the first half of the year continued in the third quarter as we delivered exceptional results across bookings, margin expansion, earnings, and cash flow. We remain focused on driving growth while leveraging the Flowserve business system to accelerate margin expansion. With three quarters of the year now behind us, we have increased confidence in our ability to meet our 2025 objectives, and we are raising our adjusted EPS guidance range for the second time this year to $3.40 to $3.50. The midpoint of our revised guidance represents a 31% increase from last year and an increase of more than 60% from 2023.
It highlights consistent execution of our strategy and our confidence in the growth opportunities ahead. In the quarter, we delivered bookings of $1.2 billion and revenue growth of 4%. We also continued our enduring margin expansion journey with adjusted gross margins increasing 240 basis points to 34.8%, while adjusted operating margins were 14.8%, driven by incremental margins of 115% during the quarter. Adjusted earnings per share was $0.90, an impressive increase of 45% compared to the prior year period. We also returned $173 million of cash to shareholders in the quarter, including $145 million of share repurchases.
We have a healthy balance sheet, low leverage, and we continue to see improved cash flow performance from the business. This, coupled with what we viewed as a discounted share price relative to intrinsic value, makes repurchasing shares an attractive capital allocation decision. Later in the call, Amy will provide more detail on our full-year guidance and our approach to capital allocation. She will also provide more details on the separately announced divestiture of our legacy asbestos liabilities, which will further enhance our capital allocation optionality on a go-forward basis.
I'm proud of all the Flowserve associates for continuing to navigate a dynamic environment while driving relentless execution of the Flowserve business system to expand margins, drive growth, simplify our product portfolio, and ultimately deliver enhanced value for our customers and shareholders.
Now to Slide four. Bookings for the quarter were $1.2 billion, improving sequentially by over $130 million and growing 1% versus the prior year. Our strong aftermarket franchise continued to deliver, with Q3 representing the sixth consecutive quarter of bookings greater than $600 million. In fact, two of the last three quarters have seen aftermarket bookings above $650 million. I remain excited about the opportunity to leverage our capabilities to drive further aftermarket growth. Project activity in the quarter was steady and improved sequentially with strong growth in the power markets and solid trends across most other end markets. For the quarter, we delivered over $140 million of nuclear bookings, a record for the company.
Our two largest bookings in the quarter were both nuclear awards related to two new reactors in Europe. Each of these bookings was approximately $30 million. Many of the project delays we saw in the second quarter did come to market in the third quarter. However, we continue to see some slowness in project timing for larger engineered projects, primarily in the energy end market. Over the last five years, we have evolved Flowserve into a more resilient business. Ten years ago, large engineered projects often represented 20 plus percent of our bookings, which naturally led to more cyclicality based on project investment cycles.
Today, engineered projects remain an important part of our business, but this mix is typically around a mid-single-digit percentage of our bookings. The shift in mix is driving more consistency in our bookings and revenue, allowing us to manage more effectively through cycles. We have also sharpened our focus on capturing more aftermarket opportunities while selectively pursuing the most attractive engineered projects that deliver better margins and a healthy aftermarket entitlement. For the quarter, if we were to exclude engineered pump original equipment bookings, our bookings growth was an impressive 9% across the remaining portfolio. Turning to slide five. Our end markets remain stable with strength in areas including traditional power and nuclear.
Power demand continues to represent an exciting and significant opportunity, while general industries are benefiting from continued industrial build-out in emerging areas of opportunities, like pharmaceuticals, food and beverage. Mining has been an area of excitement for us, though project deferrals have happened bookings over the past twelve months. In the third quarter, we saw mining project activity start to pick up, with overall mining increasing over 60% versus last year. Within energy, asset utilization for large process industries remains elevated. Maintenance spending has continued as expected. Chemical remains our lowest growth in market. However, we were encouraged by improvement in North America chemical in the quarter and the potential for an improved outlook in this space.
With our year-to-date book to bill at 1.0 times, and a strong project funnel, we are optimistic about delivering on a full-year book to bill of approximately 1.0 times. Additionally, our commitment to the Flowserve business system should drive growth in 2026 and beyond as we leverage commercial excellence and 80/20 principles to further grow our business. Moving to slide six. Let me take a moment to highlight the significant opportunities we see ahead in the power space, and specifically nuclear. Our offering of pumps, valves, seals, and actuators play an important role across the nuclear spectrum. Today, we have content in over 75% of the roughly 400 nuclear reactors operating across the globe.
Our main steam isolation valves play a critical safety role in the nuclear island, with other types of valves used across the balance of the nuclear facility. Our pumps are often found in the turbine island, helping to ensure the cooling process runs as intended, with additional legacy pumps within the containment zone itself. Importantly, we have the critical quality assurance certificates and customer approvals necessary to leverage our technology across the global nuclear landscape. We also maintain great relationships with key industrial partners and customers around the world as Flowserve's nuclear equipment is essential to their operations.
This set of key capabilities and domain that we bring to the nuclear space makes us one of a few preferred vendors for pump valve seal and actuation content worldwide, positioning Flowserve for leadership in nuclear flow control for decades to come. Moving to slide seven. Today, power represents roughly 7% of our revenue, with about half of that coming from traditional power and the other half coming from nuclear. Our bookings show an evolving picture, accelerating growth across all power and nuclear growing at the fastest rate. On a year-to-date basis, our total power book to bill is 2.0 times.
The expansion of artificial intelligence, cloud computing, data centers, and broad-scale electrification are creating significant growth for power broadly, and specifically within nuclear power generation. Looking forward, we see the potential for 40 new large nuclear reactors to be under construction in the next ten years across North America, Europe, and parts of Asia. In addition, technology for SMRs or small modular reactors continues to progress. We believe this technology represents an additional growth driver as expansion for the global nuclear fleet begins to accelerate.
While the technology still is in the development phase, many of our SMR partners are making significant progress, and industry data suggests as many as 30 SMRs could be under construction in the next five years. The existing fleet of nuclear reactors is also aging, and we expect almost all existing large reactors will go through life extension upgrades over the next decade, providing further opportunity for Flowserve. We are working very closely with nuclear power operators to refurbish and supply equipment to enable life extensions, power upgrades, refurbishments, and restarts of reactors that have previously shut down. Turning to slide eight. Power and nuclear represent one of the most compelling multiyear growth opportunities for Flowserve.
With our strong market position, differentiated product portfolio, and decades of domain expertise, we are exceptionally well-positioned to capitalize on the accelerating investment in this space. As global electrification advances and new nuclear capacity expands to meet AI, data center, and energy security demands, we see a growth cycle emerging with nuclear becoming a larger contributor to our business over the next five to ten years. Based on our current content opportunity of approximately $100 million plus per gigawatt, we believe that nuclear flow control opportunity set could be $10 billion plus over the next decade. Importantly, nuclear carries attractive, accretive margins.
With the potential for double-digit growth in the nuclear and power, and our non-power business benefiting from healthy demand and re-industrialization, we believe we are well-positioned to continue driving long-term growth. Before I turn it over to Amy, I will conclude by saying that Flowserve is in a strategically advantaged position. We have a robust and expanding aftermarket franchise, with additional upside and capture rates, balanced by a diverse mix of industries that includes both high-growth power demand opportunities and stable recurring end markets. The Flowserve business system is driving quantifiable improvement in execution and margin expansion, and we see significant runway ahead. Our cash flow generation continues to strengthen, enabling greater capital deployment and incremental returns to shareholders.
We remain focused on driving sustainable growth, expanding margins, and enhancing cash flow, all with the goal of delivering superior value for our shareholders. With that, I'll turn the call over to Amy.
Amy B. Schwetz: Thank you, Scott, and good morning, everyone. Turning to slide nine. We delivered another strong performance in the third quarter, an outcome of our growth strategy and exceptional delivery through the Flowserve business system. Third-quarter revenues were $1.2 billion, a 4% increase versus last year. In the quarter, organic sales were flat, while the Mogus acquisition contributed three points of growth. We continue to see strong growth from aftermarket, while revenue from original equipment was slightly lower in the quarter due to the timing and composition of projects in the backlog. Our profit performance in the quarter demonstrates our execution focus.
Adjusted gross margins increased 240 basis points driven by actions taken under the Flowserve business system, including improvements in operational excellence, our 80/20 complexity reduction program, and improved cost performance. With additional leverage from SG&A, adjusted operating margins increased 370 basis points to 14.8%. This represents the second consecutive quarter of operating margins within our long-term targeted range of 14% to 16%, which we originally set out to deliver by 2027. Our ability to continue to deliver in this range well in advance of initial expectations is a testament to the more resilient business model we have created and an impressive execution by our associates around the world. Moving to the performance of our segments on slide 10.
I'll start with FPD. FPD continues to deliver strong performance, with another quarter of adjusted operating margins around 20%, in line with best-in-class peers. The 80/20 program is driving clear results for FPD, with the year-to-date benefits from 80/20 pacing ahead of our initial expectations coming into the year. Aftermarket also remains a strength, with bookings growing in the mid-single digits for the quarter. We continue to improve our aftermarket capabilities, and we see further opportunity to capture more from our base of installed equipment over time. Bookings in the quarter were negatively impacted by lower engineered pump projects, which Scott referenced earlier, as well as some year-over-year timing of project awards.
Overall, FPD book to bill for the quarter was 1.02 times, a healthy level as we continue to grow the business even with lower levels of large energy project activity. Turning to the FCD segment, we delivered strong performance in the quarter with bookings growth of 24%, sales growth of 7%, and adjusted operating margins expanding 230 basis points. Bookings in the quarter benefited from strong aftermarket growth as well as a large nuclear award and project activity in The Middle East. FCD adjusted gross margins increased 220 basis points year over year and 130 basis points sequentially, largely driven by improved execution and better performance from Mogus.
Combined with improved SG&A leverage and accelerated synergy realization from Mogus, adjusted operating margins improved 410 basis points sequentially. For the quarter, Mogus operating margins were accretive to FCD, consistent with our expectations for the business when it was acquired. The fabricated modules that hampered Mogus and FCD margins in the first half of the year have been shipped, with the remaining exposure related to final installation and completion. With these projects largely behind us, synergies accelerating, and the Mogus business now fully on the Flowserve business system, the team is focused on driving growth opportunities across the globe through our expanded offering of severe service ball valves.
I'll add that Alice d Biasio joined the company as our new president of FCD. We're excited to have her on board and look forward to leveraging her unique set of industrial experiences across product management, software solutions, and engineering to continue the progress in FCD. Turning to slide 11. I'll take a moment to highlight one of the many areas of significant progress within the Flowserve business system. When we launched our 80/20 complexity reduction program in 2024, we had conviction around the opportunity to drive significant value and margin improvement over time. We were intentional with the approach, focusing on individual business units within our segments, and ensuring we let data lead the way.
From the start, we have viewed this as a way of doing business, a process and not a project, and something we wanted to embed in our culture. Our industrial pumps business unit was the first to come into the program and is now in its second year of driving 80/20 actions. The team has made tremendous progress on a number of 80/20 pillars. First, within industrial pumps, we reduced our original equipment SKU count by 45%, leading to a more efficient manufacturing process, less working capital, and importantly, better value for our customers. While the SKU reduction had some initial impact on top-line performance, the team has quickly pivoted to maximize opportunities with a core set of products.
These target selling efforts led to a 21% increase in year-to-date bookings for key customers. By reducing SKUs and focusing efforts on our best products, the team has made a difference for both our customers and shareholders, improving gross margins by roughly 150 basis points compared to last year. In addition to these efforts, the 80/20 program led to a decision to divest a small gear pump business within the industrial pumps business unit. This decision was made using our analysis of the market opportunity, our right to win, and our ability to deliver profits in line with our expectations. After analyzing this business closely, we determined it was better off in someone else's hands.
While this divestiture was immaterial to our overall financials, it is a decision that ultimately improves our profitability, working capital, and cash flow. We are focused on continuing to execute utilizing the 80/20 methodology not only in industrial pumps but across our entire portfolio. And we'll share more details over time. Turning now to slide 12. Our continued focus on managing working capital and converting more profits into cash led to significant cash from operations of $402 million in the quarter. For the quarter, adjusting to exclude the net impact of the merger termination payment, our free cash flow conversion was an impressive 174%.
As I look at our year-to-date cash flow performance, our improved working capital management under the Flowserve business system, and our healthy leverage level, I'm encouraged by our ability to allocate capital in growth-enhancing ways. In the quarter, we returned $173 million to shareholders, including $145 million of share repurchases. We continued share repurchases into October for an incremental $55 million, bringing our year-to-date repurchases through October to $253 million, with $200 million remaining on our share repurchase authorization. Looking ahead, we'll continue to allocate capital in a disciplined manner, with continued commitment to our investment-grade rating.
On slide 13, in another example of our disciplined approach to capital allocation, we are excited to announce today that we have reached an agreement to divest our legacy asbestos liabilities. The transaction simplifies our capital structure, reduces volatility, and improves our annual cash flow, all of which will enhance our ability to focus capital allocation on growth opportunities. We have found a great partner for this transaction, and we look forward to closing the transaction in the fourth quarter. Turning to our outlook on Slide 14. As a result of strong year-to-date performance and increased confidence in executing through the Flowserve business system, we have increased our earnings outlook for the second time this year.
We continue to deliver strong year-over-year margin expansion and now expect to deliver over 200 basis points of margin improvement for the full year. The midpoint of our full-year guidance represents a 31% increase in EPS year over year and an impressive increase of more than 60% since 2023. I'm proud of our teams, their strong delivery, and our focus on execution. In closing, our performance in the third quarter and year-to-date in 2025 has been outstanding. Adjusted EPS for the first nine months of the year is up 31% versus the prior year. Aftermarket growth is strong, margin expansion is accelerating, and cash flow performance continues to outpace historical levels.
The 80/20 program is early in its life cycle, but we are seeing tangible benefits with performance in the quarter in line with our long-term margin targets. And while we execute using the business system, we have been able to allocate capital to opportunistic share repurchases to drive shareholder value. These efforts, combined with healthy end markets and significant expansion in power, including nuclear, create a compelling opportunity for profitable growth in 2026 and beyond. We look forward to providing a more robust view of 2026, including our financial outlook for the year, on our fourth-quarter earnings call. And with that, I'll turn the call back over to the operator for Q&A. Thank you.
Operator: Thank you. If you're using speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to signal for a question, and we'll go right to Michael Patrick Halloran with Baird. Please go ahead.
Michael Patrick Halloran: Thank you. Good morning, everyone. Hey. And could you just put in context what you're seeing from an environment perspective? More of a pipeline funnel thought process. I know you mentioned some of the larger projects. Maybe pushing to the side a little bit. A lower percentage of the portfolio today. But if you think about what the underlying trajectory looks like both from an order perspective, from a funnel perspective, how that's converting, are we talking about a framework on a forward basis 2026 specifically, or however you want to think about it? That's pretty consistent with what your long-term thought process here is.
Or do you think there's something in the environment that pushes you one way or another relative to that framework?
Robert Scott Rowe: Sure, Mike. Let me start by just breaking this into aftermarket and then kind of OE business because I think it's really important. On the aftermarket side, we delivered another, you know, very strong quarter at $650 million. That's two out of the last three now. And we've got a, you know, a going over $600 million a quarter now for many quarters. And so we feel really confident that continues. Right? And that work is on the back of refinery utilization, chemical plant utilization, desalination, plants operating, just general health of the macro environment. Allows that business to continue to grow. And then additionally, we continue to drive our capture rate up.
We're doing that through a lot of different levers in terms of, you know, making sure that we can be responsive to our customers. We're in the proximity with them with our quick response centers. But then we're also doing really good things to make sure that we're providing the support and service. And then ultimately, we think we can continue to grow that by moving more from just parts and service and repair to driving full-scale solutions. And so I would say long-term growth there is tremendous. And we feel really good about our ability to continue to capitalize on aftermarket.
And then if you go to OE and projects, and we put this in the slides, this is becoming less important for us than ever before. And so, you know, historically, this was roughly 20% of our business. So a large kind of OE projects. Now we're talking roughly, you know, we're seeing the high single digits, less than 10% of our business. And we're doing that deliberately. That's part of our diversification strategy. It's really something that we're looking to do to drive cycle resiliency as we are going to forward look. With that said, we're still, you know, very much in the project game. We feel that projects the project environment is reasonably constructive.
We talked in Q2 about project slippage. Some of those came to fruition in Q3. I would just say the Q3 environment was slightly more than what we saw in Q2. And then on the forward look, you know, if we break this down to end markets, you know, we're obviously very excited about power and nuclear. Think that is a significant growth rate going forward at a, you know, tune of double-digit growth. We put out some markers there that I can talk about maybe in a follow-up question? But we also think the rest of markets are generally in good space.
And then the other thing I would point to is in 2025, the Middle East energy projects are at a very low level. And for us, it's roughly a five-year low. We believe that, you know, that doesn't go down from here. There's a lot of opportunities in our funnel there. They just gotta work through, you know, some of the larger projects and some of the diverse projects as we turn the corner to 2026. And so all of that said, I think we're in a good position to grow our business. You know, the geopolitical and macro environment needs to settle down a little bit to give operators confidence in their ability to cost projects.
And ultimately move things over the financial investment decision line. But overall, we feel constructive about 2026 and beyond.
Michael Patrick Halloran: Well, thank you for that. And then follow-up question is, just maybe a thought on pricing, how pricing looks in the marketplace receptivity, competitive dynamics. How we should think about price cost on a forward basis. Appreciate it.
Robert Scott Rowe: Sure. Yeah. And you can't talk pricing without tariffs sadly. And so we've really hammered price in The US on the back of all of the tariff changes. I think we've done three or four price increases this year. What we're finding is in the run rate business, the aftermarket business, our MRO replacement business, that price has been incredibly sticky. We're seeing the peer group and the other industrials doing, you know, very similar things that we're doing there. And we feel very good that we're at a price cost neutral basis, if not slightly positive, on the forward look. And so I'd say that's working and, you know, obviously is more of a US phenomenon than anything else.
And then as we think about the project pricing, you know, with this has always been the case since I've been here. The bigger the project, the more exciting or flagship the name of the customer or what it's doing, it seems to just attract more attention. And there's always an element of competitiveness. And so that's kind of the nature of the game there. The EPCs make sure there's several bidders. But I would say we're not seeing anything fundamentally different than, you know, what we've seen in the last couple of years or anything in my tenure here.
And so yeah, we believe that the environment's constructive for us to be selective with our bidding, especially with the large pump projects. And when we say selective, it's making sure that you know, we have the right to win. We're working with customers that we know we can execute on. We know there's a large aftermarket content where they support that. And then ultimately bringing margins in that will drive value creation for Flowserve. And so I think we're in a good place there. We're more focused on pricing than ever before. And, you know, we feel we can be on the positive side of price cost as we go forward.
Operator: If you find that your question has been answered, you may remove yourself from the queue. And we'll move next to Andrew Alec Kaplowitz with Citigroup.
Andrew Alec Kaplowitz: Good morning, everyone.
Robert Scott Rowe: Hey, Andy. Good morning.
Andrew Alec Kaplowitz: Scott, can you give us a little more color into the margin inflection you saw on FCD this quarter? How much of the improvement was Mogus improving versus core FCD? And you mentioned that both of your segments are in line to at least make the range of 16 to 18% segment adjusted operating margin that you set for FY 2027. But as you know, FPD is already higher than that. So could that range end up being conservative?
Robert Scott Rowe: Sure. Maybe I'll hit the Mogus piece because I was there last week, and then I'll let Amy talk about just the margin progression in general at FCD, and we can touch on the pump division as well. Look, Mogus is going incredibly well. I was able to I was in their site last week and with Alice, and we had a fantastic visit. And say some of the takeaways there is the integration has gone incredibly well. The Flowserve business system is fully embedded.
And when I mean business system, the operational excellence is in place, shop for daily management, problem-solving, how we do inventory, all of that is now embedded and operating in a level that I would say is equivalent to the rest of the Flowserve peer group. We've really pushed the portfolio excellence side and so they're on the 80/20 program now and we look at that as a severe service ball valve offering. And we're now making we've been making rationalization type decisions with our other offering. And now we're moving into commercial excellence.
And so the commercial excellence is about driving growth and making sure that we get clean orders into the facility itself, but I couldn't have been more pleased with the progress that they've made. And so in the quarter, Mogus margins were accretive to FCD. As Amy said in the prepared remarks, the modules that had given us some concern and maybe a little bit of it, we're slower to deliver than what we had expected when we signed up the deal. Those have now shipped in the third quarter, and then there's minimal from the modules in Q4 and Q1. And that's associated with the installation and commissioning work.
And so now the focus is on bookings and driving growth, and we're excited about what that product offering could be. And a reminder to everybody that the end markets here are mining and refining. And what we've seen in the mining space is that funnels increased. We had a pretty decent booking number in the quarter, but the outlook continues to improve. And so structurally, we think, you know, the end markets will support Mogus growth. And leaning in with commercial excellence and the 80/20 principles, we believe that we'll get to that $200 million that we keep talking about.
And then lastly, would just say this is a great example where we're applying the business system as part of an integration. And what we saw in a in what we see now is in a relatively short period of time, we can take a family-owned business that maybe wasn't highly focused on business process and turn that into something that we're extremely proud of that we know can drive, you know, enhanced margins to the FCD but also drive enhanced growth with our customers and outlook here.
Amy B. Schwetz: Yeah. And, Andy, I'd just add with respect to FCD. Yeah. We improved 410 basis points sequentially. You don't do that without all boats rising within the FCD platform. And we've been talking about some of the levers that we had available to us, whether or not that's operational excellence and some footprint decisions. That had been executed in late 2024 going into 2025. As well as other tenets of the operational excellence program. 80/20 is taking hold in the platform. We're seeing that start to contribute as well. And then obviously, the story behind Mogus as well. And so we continue to think that there's runway with respect to FCD margins.
And then once again, with respect to FPD, obviously, a great story there as well in terms of both platforms being within the range of their long-term targets as actually, FPD being on the outside in a good way of that range. So I think we'll go through our annual planning process this year knowing the additional levers that we have to pull from a margin expansion standpoint, both in 2026 and beyond, and we'll look to reset those long-term targets in 2026.
Andrew Alec Kaplowitz: Thanks for that. And, Scott, you talked about that $10 billion nuclear flow control opportunity over the next decade. What do you think your share could be of that opportunity? And then nuclear bookings per quarter, I know are lumpy, but they seem to be rising overall. I think they've averaged higher than your specific nuclear sales exposure that you mentioned, maybe close to high single digits of bookings. Single-digit percentage of your bookings each quarter over the last year or so. They continue to average that amount or even more over the next couple of years?
Robert Scott Rowe: Sure. So let's look back first, and then we'll talk about the forward look. The nuclear bookings are rising. Power in general has been up double digits for us and we've had three quarters now, over $100 million in the last of the last four quarters for our nuclear bookings. And so yeah, I would just say with all the noise in the nuclear space and a way, the noise in a positive way and all the recent announcements, you know, we only see nuclear starting to move forward in a, you know, with the trajectory in an inflection that's higher than what we have today. And so we're incredibly excited about the nuclear opportunity.
It's why we put three slides in our presentation. But maybe to frame up the $10 billion a little bit, we do have substantial share within the nuclear. And so we're leveraging our domain expertise. You know, we're leveraging our installed base. We're leveraging the partnerships in the certifications that we have around the world that put us in the forefront and allow us the opportunity to do this work as we go forward. And so we're, you know? And then I would just say the barriers to entry here are really, really high. Right?
The quality plans and what our customers are looking for are pumps and valves and actuators that will work for the thirty-year planning life, and they take it very, very seriously. And getting an in stamp in The US is incredibly hard. And so we just feel like we're in a great position to carry on with this work with companies that we've worked for decades. And so we're excited about the prize. We did put some kind of market share numbers in there and it's to orient folks. There's roughly 400 plus nuclear reactors out there in the world today. We have equipment in 75% of those. And, you know, we called out some geographies because it is important.
In North America and Europe, we do incredibly well. We do really well in Korea, and then we believe we can do well in India as they're going forward. And so those are the areas that we'll target. Obviously, China is a massive market in putting, you know, growing more reactors than any other region at this point. With China, we have installed base in the early reactors and the early facilities. But over time, they've shifted to a more nationalistic approach on all of their equipment. And so that's why we deliberately kind of excluded that as we talk about our numbers.
And then as you build to the kind of the $10 billion prize, we put some numbers out there around 40 reactors in the next ten years. That could have, you know, up to, you know, a $100 million for Flowserve. We talk about SMRs progressing and moving forward, and, you know, we believe we're well positioned with what we think are some of the winners in the SMR technology. And so there's a large contribution in the $10 billion number on the back of SMR. And then our aftermarket today is roughly a $100 million of bookings a year. That number only grows with our increased installed base.
And so we feel very comfortable that, you know, that continues, if not grows pretty aggressively over the ten-year period. And then finally, on the last category there would be extension and rerates. And then kind of where we're bringing assets back to life. And, you know, this week, both Google and Brookfield announced two projects. Of, you know, bringing existing sites back online over time. And I would just say those are incredible opportunities for Flowserve. And so one of those examples, we have pumps and valves installed, we'll meet, you know, we will absolutely be a part of that project.
And then the other one, pumps and valves that we did manufacture got pushed to a different site, or at two different sites. But we're confident that we'll pick back up that work. And so again, we feel like we're in an advantaged position. We've got the expertise and we're leaning in to make sure that we'll position our offering to capture the full benefit of this nuclear growth.
Andrew Alec Kaplowitz: Appreciate all the color.
Operator: Our next question comes from the line of Deane Michael Dray with RBC Capital Markets.
Deane Michael Dray: Thank you. Good morning, everyone.
Robert Scott Rowe: Good morning, Dean.
Deane Michael Dray: Hey. I'll start with a congratulations on the announcement regarding the legacy asbestos. It's such a smart move here. We've seen companies like Honeywell do this successfully. And if you just take us through, like, am I correct? That you paid sub paying less than $200 million to resolve this. And can you just clarify what the cash flow implications are?
Amy B. Schwetz: Sure. So one thing, Dean. You know, this was something that we were excited to get done. It just made sense given our cash position and obviously puts us in a great position going forward to have a more simplified approach to capital allocation. And so we think that the benefits will range from a cash flow perspective between $15 million and $20 million a year. Going forward, we do have about $200 million, $199 million of cash that we'll allocate to the sale in the fourth quarter of the year. But for us, this is about really simplification of the capital structure, doing an 80/20 on the administrative work that we do in the Flowserve office.
And taking out some volatility for our investors in the process.
Deane Michael Dray: Great to hear. And, Amy, just sticking with a free cash flow, it's outstanding. This quarter, and you were clearly you laid out how you were excluding the windfall from the deal termination. Is there anything else within the free cash flow, the working capital, any kind of improvements that you would cite there? And, you know, what does this mean for free cash flow for the year? Because it looks this puts you ahead of plan.
Amy B. Schwetz: Yeah. So I think that as we look at free cash flow now, we're targeting something at the, you know, 100% level or a little bit better. I think for us, really, free cash flow starts with margin expansion. That's, you know, that's the quickest way to improve free cash flow for any company, but working capital has been a huge focus. And we've made some improvements there. 80/20 is actually helping us with the process, even decisions that we made during the quarter around the small divestiture. Paid dividends in terms of simplifying the inventory that we need to keep on hand. But I'll just point out with working capital.
And if I didn't remind you, Scott would remind me to remind you that our work is not done. And so we continue to have a substantial amount of improvement that can be made in this area, and we are focused on it. We are focused on it at the leadership team level. We're focused on it at the platform level and at the BU level. And so we're going to continue to do everything that we need to do to make free cash flow a real strength for Flowserve and its investors.
Robert Scott Rowe: Yep. And then just to reiterate, we talked about this last month, but 80/20 helps on working capital dramatically plus the operational excellence program. And so we're not done. We've made progress. Not celebrating our working capital numbers right now. But we feel like we're moving in the right direction in a very positive manner.
Deane Michael Dray: Yep. That's really great to hear, and congrats on the progress to date. Thank you.
Michael Patrick Halloran: Thanks. We go next to the line of Damian Mark Karas with UBS.
Damian Mark Karas: Hey, good morning, everyone.
Robert Scott Rowe: Good morning.
Damian Mark Karas: Scott, I appreciate your comments on the certification required to compete in nuclear pumps and valves. But I just wanted to ask how you're thinking about the profitability of these awards. When I just think about how your industry has sometimes behaved in the past, it's gotten pretty competitive when you have these mega growth cycles, you know, just like thinking about past oil and gas booms where, you know, the OE margins were, you know, slim to none. So could you maybe just talk a little bit about, you know, where you are, you know, projecting these nuclear awards you've been winning to line up kind of relative to the rest of your project base?
And, you know, just as a capacity build-out for nuclear continues, how you're thinking about, you know, how to price that in your bidding process?
Robert Scott Rowe: Yeah. I think it might be helpful to just kind of go through the life of a, you know, a new build nuclear reactor. And I would just say these are very different than even kind of an oil and gas project or a water project or anything like that. And the amount of years on the front end to get the process dialed in fully and to ensure that the quality requirements are at a place that, you know, they're comfortable with is multi-years. And so when we work on a new reactor, it's somewhere the time horizon for us is somewhere in that kind of four to five-year mark before we can start shipping equipment.
And those first three years are all about engineering and quality. And so I just feel like as we go forward and we think about the folks that are designing these types of reactors, that's a Westinghouse. It's your EDF. It's your Korean nuclear authorities. For them to make a change in terms of what they've been doing historically and introduce a new supplier is really, really difficult to do. And so the barriers to entry here are incredibly high. With that said, you know, obviously, we have to perform. And we have to perform with delivery. We have to perform within increasing our capacity to support the nuclear growth.
And we've got to perform with our ability to be competitive to allow their financials to get over the line. But again, we've worked with these players for decades. You know, we're very comfortable and confident in our ability to retain that type of work, if not grow that work. And so we're leaning in our opportunities. We're making sure that we can support the industry, and we're making sure that we can support our customers in the regions where they're operating.
Amy B. Schwetz: Yeah. And, Damian, I'd just add one thing, you know, from a color perspective. I was with our sales leadership team on the pump side as well as our BU leaders last week. And there is a focus on two things in this space. One, making sure that we have the resources in place to support these opportunities, and that includes adding nuclear expertise at the corporate level within Flowserve, but it means that we're making sure that we remain competitive and that we're doing things to not be complacent about our cost structure where we can to really continue to protect this business, the margins, and keep those barriers to entry as strong as we can.
Damian Mark Karas: That's all really helpful. And I wanted to ask a follow-up question on the asbestos transaction. Are you anticipating that is going to have an impact on your cost of financing? And curious what you plan to do with this newfound increased balance sheet flexibility.
Amy B. Schwetz: Sure. So probably from a financing perspective, I would say it's credit enhancing. Given the size, probably not too terribly impactful. I think overall, we find ourselves in a position at Flowserve where we have more opportunities for capital allocation than ever before. We've made some of those decisions in the fourth quarter already with some opportunistic share repurchases in October as well as earmarking a little under $200 million towards this transaction. But I think what you've seen us do over the last several quarters is pretty indicative of the disciplined approach that we'll take. We were focused on growth opportunities and earnings-enhancing opportunities around capital allocation. And so it's going to be environmental specific.
It made a lot of sense for us to buy back shares over the last few months. We'll continue to keep that at the ready. We've got about $200 million of authorization still available to us under our share repurchase plan. But over time, we're also interested in growing the business. And as Scott pointed out, you know, the Mogus turning point in the third quarter, their adoption of the Flowserve business system, us now turning our attention to really growing that business over time gives us more and more confidence that M&A utilizing our strict criteria around value creation can be a powerful tool for us over time with respect to capital allocation.
Damian Mark Karas: Thank you for all your thoughts. Best of luck with everything.
Michael Patrick Halloran: Thank you. We'll go next to the line of Brett Linzey with Mizuho Securities.
Brett Linzey: Hey, good morning all. Congrats.
Robert Scott Rowe: One of the Yeah. Thanks, Chris. The energy business and apologies if I missed, I jumped on late. But, you know, bookings down 19%. We're just hoping you could drill down a bit on some of the moving pieces there. And does any of the quoting in that segmentation inform this could be, you know, snapping back in the coming quarters here?
Robert Scott Rowe: Sure. Yeah. When we think about the compare versus last year, it was a difficult comp. We had three large projects in The Middle East that were all energy, you know, a year ago, and then those didn't repeat this year. And so I think the easiest way to describe that. You know, energy on the OE side for us is primarily Middle East. It's a lot of that kind of midstream process and storage and then also on the downstream side. And we had a lot of activity last year. And quite frankly, we're in a little bit of a lull right now with the Middle East energy type project bookings.
With that said, you know, I feel confident that, you know, there is work to do in the Middle East. There are a lot of plans to move forward with some of the investments that have already been, you know, made public but have been delayed in terms of that project timing. And so we're incredibly well positioned to capitalize on that growth and, you know, I would say with just a little bit of stability in the, you know, maybe oil pricing coming back a little bit to provide them a little bit more cash flow to fund new projects. You know, we could see a positive trajectory here in 2026 and beyond.
Brett Linzey: Yeah. That's great. And appreciate the detail on nuclear. I guess as a, you know, thinking about the content and some of the ramp over the first three years, is there anything to be aware of in terms of development costs and how that might play out, you know, as you're ramping for some of these opportunities? Or do you think you can simply just repurpose some of the R&D to these areas?
Robert Scott Rowe: Yeah. For us, it's a relatively low development cost. You know, we are working with some of the SMRs on, you know, maybe some modifications to our existing products to support a slightly different reactor. But overall, this is not big dollar for us in terms of needing to redevelop our products. And so a lot of this is just making sure that we're meeting the current requirements. And that we can adapt to what's happening in the space. And so I wouldn't expect to see, you know, from us any, you know, massive incremental expense to make sure that we're positioned to win this work.
Brett Linzey: Okay, great. Thanks for the detail.
Operator: We'll go next to the line of Nathan Hardie Jones with Stifel.
Nathan Hardie Jones: Good morning, everyone.
Robert Scott Rowe: Hey. Good morning, Nathan.
Nathan Hardie Jones: I'll I guess I'll dig a little bit more on the nuclear side of it. $10 billion of flow control opportunity over ten years. Maybe looking for a little bit more color on what your expected share is. I know Andy asked about it, but I'll see if we can get a little bit more color on it. I mean, when you look at large utility-scale reactors, that have been out there for decades now, I'm sure you understand what your share is on that, maybe a little less so on the SMRs given their, you know, really still under development.
But I'm just hoping you could give us any color on what your expected win rate on that kind of $10 billion worth of content over that time period was because, you know, 5% market share is very different from 50% market share of that opportunity.
Robert Scott Rowe: Yeah. So, Nathan, I'll point to slide six where we talk about the current market share and I'll try to give some color on the go-forward basis. And so of the 416 reactors that are out there, we have content in 75% of that. And so that could be a pump, it could be a valve, could be our seals, but we're very well positioned. And in my comments earlier, you know, we do really well in North America with the Westinghouse technology. We do really well in Europe with Westinghouse and EDF technology. We do really well in Korea. You know, where we don't do well today is in China.
And historically, we have done well in China, but just because of their policy and moving to domestic supply, even though we have a strong presence in China, we typically will not win the new Chinese work. And so then if you think on the go-forward basis, you know, who is involved with the forward North America growth, the forward Europe growth, what's happening in potentially India, in China, oh, sorry, in Japan, and in Korea, we're incredibly well positioned there with those operators.
And so on the valve side, I would be disappointed if we did not have the high share of mainstream isolation valves where we have the primary product globally for the main safety valve in all of the nuclear reactors. We have large content on the cooling pumps. We put a number out there at kind of a 50%. I think we can maintain that on a go-forward basis. And then we are moving back into some of the reactors with the primary cooling pumps within the reactor itself. We haven't done that work in a long time just given the lack of some of the newer builds, but we're starting to secure our position there.
And so I fundamentally believe that our market share could go up as we reposition some of our products to take on the balance of the plan. But I think you could expect us to be a market leader here, certainly within pumps and valves, on the go-forward basis.
Nathan Hardie Jones: And so the $10 billion excludes China?
Robert Scott Rowe: We did not put China in our estimates.
Nathan Hardie Jones: Got it. I would figure the biggest ticket item coming out of here would be the pump. And that greater than 50% of currently operating reactors with Flowserve pumps would probably be reflective of the biggest dollar opportunity. Is that correct?
Robert Scott Rowe: I think that's fair. Yes.
Nathan Hardie Jones: Okay. I think that gives a bit more color on potential win rates. So I'll leave it there. Thanks for taking the questions.
Robert Scott Rowe: Okay. Thank you, Nathan.
Operator: We'll go next to Joseph Craig Giordano with TD Cowen. Please go ahead.
Joseph Craig Giordano: Hey. Good morning, guys.
Robert Scott Rowe: Good morning.
Joseph Craig Giordano: So I think we all appreciate the need for the power gen pickup here, and nuclear is a logical way to do this. Like, as you case this business, we're throwing around a lot of numbers. Right? All the companies, like, $80 billion here, $100 billion there, all these gigawatts. Like, how do you one, like, can we build all this stuff? And two, how do you have to think about the who's backstopping this? Like, you know, on the SMR side, we're talking a lot of new companies making big commitments with, like, you know, no revenues. At this point.
So how do you kind of judge where you want to chase and, like, how solid is the ground that you're walking on when you do it?
Robert Scott Rowe: Yeah. Those are really important questions. Let me start with and then we'll start then we'll go to our customers and how we think about that. On the capacity side, you know, we again, we've been doing this for decades. We have a designated facility for valves in North America. We have a designated facility for pumps in Europe. We can expand capacity at both of those sites. We're looking at making nuclear centers of excellence where, you know, we can put all of our product together into a site that then allows us to leverage the engineering, the project management, the quality, and things like that. So, you know, I would say we're confident in our ability to ramp.
Back to some of my previous comments on this is, when you win an award, you've got three years of kind of, you know, office-type work and engineering and quality before you start, you know, delivering the equipment. And so you do have lots of visibility in terms of, you know, making sure that you've got capacity. And the other thing I would just say is on the supply chain, is an area that we're working today to make sure that we are investing in our suppliers to ensure that they can come along on the journey with us to participate and allow us to deliver as expected.
And so I'm highly confident in our ability to expand and to keep up with the industry, at least at this point in time. And then on the customer side, I would this is a dynamic landscape and, there's an it feels like every week or every month in terms of some of the players here. Obviously, it's attracting a lot of money. And, you know, names like Brookfield and Google and Amazon that are, you know, funding and backing some of these projects with large dollars just to make sure that these reactors can get back online and be a part of the power on a go-forward basis.
With that said, you know, we have been selective in who we are working with. And we have hired what I'll call a nuclear expert that worked with the NRC for a couple of decades and then worked in the White House. And so he is helping us to be really selective on where we put our resources. And where we put our efforts. And so we, you know, we identified a few of those customers on our slide here. But I would say on the SMR side, we've narrowed that list down to kind of 10 to 12 players that we're actively engaged with. That we believe will be successful in the long run.
You know, I think we'll be 100% right there, but if we're at least 60 or 70% right on who we've chosen, then we're in a really, really good place from a partnership perspective. And so I'd say we've been very methodical about our approach in, you know, making sure that we're not, you know, overburdening some of our business development and engineering resources on the front end of this to get locked in into the future.
Joseph Craig Giordano: And then as a follow-up on that, like, are there any obvious gaps in the portfolio where you can tuck in new product that would be, like, specifically geared towards nuclear? And is it fair to think that given your commentary about the timing, like, as you guys report case in the coming years, would we expect, like, the percentage that of delivery over the next twelve months out of backlog to kind of move down? Commensurate with the amount of bookings you're doing in this sector?
Amy B. Schwetz: Yeah. So I think from a capital allocation standpoint, as we look at attractive end markets, nuclear is certainly one of them. We try and take a pretty good product approach for all we do on the M&A front. And so that sort of starts with mapping what we have, what we don't have. And although we are pleased with our product portfolio at this point in time, I think there's always ways that we can look to strengthen that portfolio through M&A.
Robert Scott Rowe: Yeah. And so I think the thing for us is we, you know, we may have some pumps on a facility, may have a main steam isolation valve, but not have the control valves or not have the butterfly valves. And so really, the focus is making sure that we can package more of our content together as we work on these new projects. And so that's the effort right now. There's a huge opportunity in front of us.
And then to Amy's point, you know, what we are looking to do is, you know, potentially on the programmatic M&A side is, you know, acquire other companies that may have the certifications and may have that installed base, you know, already in there, you know, where you're not having to work through some of those barriers to entry that I talked about before.
Joseph Craig Giordano: And then on the backlog conversion?
Amy B. Schwetz: Oh, on the backlog conversion, I would say, overall, last year, you started to see this in the context of our backlog with that ticking down from to kind of mid-80s overall. For Flowserve. And I think we'll see that continue in some ways. Around the nuclear portfolio. I will say that, that is being slightly offset by the strength of our aftermarket business. So our aftermarket business, which converts relatively quickly, is at historical highs. And so and we're continuing to be focused on that. So those two tend to offset a bit, but I would say there's probably slight pressure on backlog conversion with the nuclear content.
Joseph Craig Giordano: Thanks, guys.
Operator: We'll take our final question from Andrew Obin with Bank of America.
Andrew Obin: Yes. Good morning. Can you hear me?
Robert Scott Rowe: Yeah. We can hear you.
Andrew Obin: Excellent. So just nuclear bookings have been great, but you know, if you look at underlying power bookings ex nuclear, it seems that they've been quite weak this year. Think we calculate down high teens. What is this a reflection of, and does CorePower pick back up? Because I would imagine the power gen trend is broader than nuclear.
Robert Scott Rowe: Yeah. I think in the quarter for the traditional power, it might just be a little bit of a timing impact. We are seeing investments in all forms of power. And so you're seeing coal-fired power plants get extended where we have a lot of content on both pumps and the valves. We're seeing new kind of single cycle combined cycle plants going forward where we may not have as much content, but we do have content there. I would say this phenomenon is happening, you know, all over the world. And so, you know, we're excited about that opportunity. It is a more competitive type environment.
And so we've got to be really selective in terms of making sure that, you know, we can get the right product in front of the right customers that, you know, folks that value our aftermarket. And so I just say that's we're a little bit more selective here just given the, you know, the wider, you know, the broader kind of competitive offering with the traditional power set.
Andrew Obin: Gotcha. And just to help us understand, last year, bookings grew 9%. This year, bookings are sort of flattish. So how do we think about the relationship, you know, given that you're changing a business model? How should we think about the relationship between bookings and revenue? And just how do this year's bookings translate into hitting the 5% revenue target next year? Right? Because the 9% bookings growth last year hasn't really flowed through the P&L as top line. And no complaints about it.
Robert Scott Rowe: I'll let Amy talk about the conversion to revenue. I'll talk a little bit about the growth. And so, you know, we're obviously right at kind of a book to bill at 1.0 is what we're committing to, which you know and the growth this year on bookings is lower. And we said this earlier, but a lot of that's your Middle East kind of OE project business. Has come down. When we think about the rest of the business, all other aspects excluding kind of OE, Middle East, or OE energy projects has grown at 9%. And so we feel like we're doing a nice job growing and leaning into that growth.
We need that kind of energy bookings to come in 2026 to kind of get us back to what we want. And then the last thing I would say is on the commercial excellence in 80/20, the teams are incredibly focused on growth. So commercial excellence is 100% about growth and, you know, aligning the sales organization, the right way with the right incentive structure and the right project pursuit strategy and all of that good stuff to capture more share. And then on 80/20, you we're now starting to move more and more into the growth side of 80/20. We showed some numbers with our industrial pumps that's growing our target selling accounts at 21% this year.
And so, yeah, I do feel like that we can with this kind of renewed commercial excellence and the 80/20 focus, we get back to this kind of 5% kind of, you know, on over top a 5% growth rate feels right for me.
Amy B. Schwetz: Yeah. The only thing I'm going to add there is I think overall, our conversion rates on sort of this quicker turn business is actually improving over time. The efforts that we've made around commercial excellence are reducing or around operational excellence are actually reducing our lead times. And so that combined with our aftermarket strength, which we have no intention of slowing the intensity of those efforts, does help with conversion.
And so as Scott pointed out with the overall health of a number of the end markets, that we're focused on in addition to the efforts around commercial excellence and target selling, we see those things in conjunction with The Middle East opportunities, not just in traditional energy, but within and water moving into 2026. As sort of more than offsetting headwinds that we see from 80/20.
Andrew Obin: Thank you.
Operator: And we have no further questions. I'll turn the call back to Brian Ezzell for any additional or closing remarks.
Brian Ezzell: Great. Well, thank you, everyone, for joining the call today. We look forward to seeing many of you at upcoming conferences and investor events. And then, of course, we'll provide another update early next year. In the meantime, if you have any questions, please feel free to reach out to the Investor Relations team, and we'll be happy to talk through anything. With that, we hope you have a great day.
Operator: This concludes today's conference. We thank you for your participation. You may disconnect at this time.