MRC - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the MRC Global Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Monica Broughton, Investor Relations. you. Thank

begin. may You

Monica Schafer Broughton

good XXXX Welcome We earnings joining and Global appreciate the third us. quarter conference morning, you to everyone. MRC you Thank call webcast.

release. and Andrew call by There CFO. phone well XXXX. on a call XX, President we our the today's be Executive The have until of is via On and President November today, will in CEO; dial-in as available Jim replay and website, Braun, Vice as yesterday's Lane, information webcast mrcglobal.com,

as to third will Form be we Please time remarks EBITDA our of expect as XX-Q In our and percentage, discuss November gross margins. XXXX, later on available will replay. website. of the may on We Quarterly Reports only you therefore, advised X, accurate that of today, are gross reported file quarter adjusted our call EBITDA adjusted information information profit profit, today, adjusted also note speaks today, and this adjusted be which that on no longer

You measures to about these GAAP related to the of filings our a use release learn non-GAAP earnings are to and read to of these more see item. reconciliation measures encouraged and securities our

made the call management the States of MRC within of by of addition, during Laws. management These this Securities Federal comments In meaning of Global the reflect may views current MRC statements forward-looking United contain the the the forward-looking statements Global.

from those Global's today. materially MRC could expressed differ However, actual results

call to our of I'd forward-looking Mr. now, encouraged over are company's statement. filings these their the Lane. review CEO, to You the concerning in-depth to turn Andrew like SEC factors a for read risk more And

Andrew R. Lane

for commentary interest finish of MRC turn the over Good will financial I'll on with Braun, Global. in for today CFO, results. review the more highlights Monica. and Jim us some review for morning I'll outlook. joining with Thank a our detailed then to call directional and a of performance I begin thank company's and the you our you, your

outperformed revenue up was third line year-ago. the our first in puts XX% of expectations in business for X.X% quarter prior with adjusted of the year gross over of sales, as second X% up $XXX quarter quarter We profit up both over months this XX% and the at quarter XX% percentage million the the revenue. period. $XX This million, and Third of adjusted in expectations the over or million at year a SG&A generated $XXX EBITDA nine XXXX resulting

the the increased, year costs and XX.X% controlled revenue for have adjusted quarter this in year. We XX.X% incremental of resulting for as EBITDA

highlights that our regional well distribution lost as the storms as the EIA dedicated about in of of that facilities As We year-ago. our our this face no storm. lost or daunting employees' and and forward growth tirelessly and and I October benefited use revenue while higher of customer the they The approval help of third this needed offline. for diversified evident homes particularly production impact revenue customers hurricanes, our from oftentimes, participated sales year-ago after our quarter the by the in XX in replace due sectors impact these has gathering during some customers' data, delivery of products, than our XX% quarter same Harvey damage turnarounds to in get as result report and Harvey can Irma. to same from while longer-haul the from capacity worked mission-critical quarter projects. customers net of to of the upstream a was with importantly, also result midstream the proud downstream, shut increased the MRC additional Based outcome in while million a were challenges, and storms the Nate very running from the interruption in end-market only that two the had hurricanes. from runs refurbish for workforce. brief $X restoring before customers our the in I'm again; subsectors. offset flooded. well The two hurricane either This later quarter before, strength third great during on quarter more experienced normalizing many strongest who significant recent was and year as over We same was prior were transmission Global increase to they end-markets, this has negative October. the employees brought centers, Hurricane quarter, over late following September as from early the as of nowhere was estimate and a All both most down property sequentially. sector reputation days were for after the subsector somewhat had we a service was the or compared the Hurricane growth increased billing a projects refinery a repair, Midstream infrastructure pipeline inventory storms. personal in

subsector Our from projects. new benefited and installations integrity has gas utility

increased with upstream prices a due from quarter increased benefiting Our versus upstream the third over for XX% U.S. oil customer quarter the business same to in Canadian our XXXX. XXXX America spending increase year-ago. North the drove businesses of higher and

downstream as X% share due ExxonMobil. up market was such gains recent to quarter primarily compared year-ago, the same quarter U.S. the as this Our and sector to a

the lowered complete size We capitalized and our the slightly reduced we and ABL rates maturities, to the favorable lending a as both interest loan, conditions quarter, secured of refinancing This senior obtained of term market terms. the facility. well asset-based we as better on extended our

our sheet positioned the growth business. for is well balance future of Our

capacity sufficient have We growth. acquisition both organic for and

in Metropolitan in make facility to distribution Houston which La damage. no XXX,XXX-square-foot Greater continue We not RDC during new This Porte, progress flooding on Harvey Texas, Hurricane and regional sustained is experience center the area. or did our

from begin RDC operating to track on year. the this late are new We

various quarter, completed more This bringing different were also Norway platform. operations under We of of international our we years. after ERP XX in made have of us of Through for great and we deal platform. and milestone the a a about acquisitions international implementations, this the SAP, one understanding than ERP solid major learned the capabilities all over a we implementation limitations was operating this SAP we have our as systems on

in offer unique plan North value-added our Our years determine our implement America international to SAP Part review business we of to American to our the a arrangements and in as has also was market should customers a pilot leader success operations over as ability our if North business. services. been

system us address to provided customer these with the in Our requirements. current America has mainframe flexibility unique ERP North

to XX that believe system a our our important In countries. I implementation and learned in From segment effectively not and addition, our a we forward. mainframe considering as specific our dependent the clear, MRCGO North ERP other of to not as we have catalogue, our decided well want have new best to ability After cost of scalable be in SAP implementation, facilitating forward that continuing use international and manage the across America. have however, we now what from as move SAP a functionality with invest to enhancements, business implementation system. system are is perspective, one path international we the on is

of possible in element approximately will While our reduce America we as disruption $XX our in I is this invest remove a last our have as by any and overall continue this to quarters, XXXX to capital core continues million over position operation activity will in systems, our the decision strategy. ramp North expenditures discussed up. two contract growth several

We driving customer continue market to focused be gains contracts. on through share

global first industry the global the executed in They we value recognized valve recall, a will reliable the contract with you Shell. XXXX As in of supplier.

but Results to The XX level. of or represent factors tracked shareholder time their in projects, wells well activity, we business months These for expectations. operations. DUCs, element another macroeconomic valves haven't growth. including third renewals important our year, and one it to in other PFF wins quarter. and agreement, others. contract ExxonMobil, of value. nine This drilled U.S., Shell their is upstream first they on major uncompleted of LyondellBasell, with we record as over needs. valve agreement rely the This an and have changed year several backlog of largest and we the various on this multiyear line the years a our completion in are Given the comes drive this for the customer which North been steadily DUCs of largely In high five represent months strategy success that contracts have our for for first-of-its-kind addition us proud America and customers, the reported. last covers extended Chevron a for deliver consistently supports much renewal our as increasing long-term MRO last all the since

more contributing worked revenue and new Midstream continue to also down We particularly will supported is recurring integrity production, U.S. pipeline in in Marcellus maintenance see we relatively programs, steady enhanced upgrade commodity continued by including as will by DUCs our supported expect XXXX by turnarounds time, and needs these to current takeaway in from growth so get also upcoming and gas gas and customers by is Franklin, benefits and upstream which to Pennsylvania projects, to is operators capacity continue oil several execute infrastructure. growth. is and be independent gas Downstream for which petrochemical Many the over quarter Shell's companies Permian approvals to prices. infrastructure in utility utility XXXX fourth relatively and the cracker will increase of the for of subsector. our of steady continue also supported benefit Midstream which continues XXXX. the

grow our has the the Our this will agreement of directors and authorized and the as to a board $XXX results produce new million U.S. Asia-Pacific to well. flexibility Europe ExxonMobil while week, Gulf of in meeting share At in at shares to open program. authorization The new Coast, is market buy discretion. repurchase on begun with board continue XX, company the to on expire timing December management This the XXXX. scheduled allows repurchases. returns, such program be opportunistic allows the enhance to And maintaining program shareholder to their

as position flexibility sheet for this program, balance as well organic strong allows Our growth. us

is share As repurchase will on report customary, activity. quarterly we

leading to Ms. Adams I'll served in on happy have join midstream having Phillips perspective proud also in as experience to customer turn has well are XX her operations. energy on at team function. board. our sectors, Adams with predecessor refining the executive focus spent procurement companies. unique over midstream We Ms. call Deborah heavy its a a and of career Adams very added downstream of background directors. as XX Jim. to over years our a global Phillips She to leadership the now We're XX, at the brings their her and have and industry the recently board

James E. Braun

quarter project final the was of maintenance the this and orders the primarily our an from The to the revenue by were subsector We for growth. and Sequentially, project, followed as work reduce $XX U.S. all third is The due from downstream U.S. Canadian third by the refining our X% XX% end actions and quarter work. and improvement Australia. various year, to customers. to XXXX and to to a $XXX million, which the downstream was third to sectors, driven the with from footprint the down of increased Thanks, down in by work well second and XX% in upstream, structure, the primarily were gas one spending Andrew, project sales return pipeline to $XX contract. in sales pipe revenue deliveries sales of primarily up Canadian quarter increase increased quarter customers. the upstream midstream for third large utility quarter were upstream offset was a the partially second activity. year profitability. we count activity customer the various were but spring to XX% in as $XX the offset international improved gas Sequentially, of growth international last ongoing last segment quarter project revenue for was been in a of last break-up. up in of increased due or for transmission the of as upstream, projects of downstream-related by the shipment customers in also to increased pipe from sector maintenance from good everyone. in or all sales year, from customer reported non-repeating U.S. took increase rig year-ago. U.S. quarter, ExxonMobil XX% of and pipeline $XXX and quarter the sector up million higher million Sverdrup The spending conclusion offset The third morning, base. quarter, third XXXX, in our Sequentially, million gathering and last the sales million revenue international year, midstream segment, due their variety third second integrity year. by industrial from Sales driven to by the from have year Johan of X% increased double-digit growth upstream delivery to than third Australian third downstream In in U.S. Norwegian have decline was sales primarily across took Total from refinery X%, increased $XXX decline $XX sector. the quarter sector from Sequentially, partially partially in a XXXX significantly, the in revenue yet sales which continue by last million activity. XXXX related utility the midstream XXXX. midstream primarily increase improved quarter X% Beginning last turnaround increased major by the had were the up and a X%, international for across activity million in segment line cost sectors. all the implementation quarter increased turnaround XX% even due as million, due for sectors third quarter, increased in new quarter U.S. the segment of segment XX% project $XXX to segment to Canadian completion lower has due customer, and of seen our gains of by X% and The due unable and

nine XXXX, our months first reporting loss operating international is of the For an segment $X million. of

the in the head cost and quarter in segment are severance we of the process structure XXXX. our further reducing a charge such, record international to As in restructuring count and expect fourth and of

our to the completion XXXX from Now, sales third up sector, million million on increased of an but subsectors, third increased XXXX last both year third quarter. upstream The customers same quarter same the on the $XXX to the the and Norwegian results by average strong sales XXXX sales between end-market in same utility the in gathering utilities based third $XXX well rig increased utilities the quarter transmission partially Canada third our was was of the the to upstream XX% quarter sector by project. turning quarter basins. from count the XX%, million, over in in revenue sector. Midstream driven in and sales from customers to The of X% increased and sales same sector, the XX% U.S. based and of the and quarter EIA XX% XX% to the in U.S. data XXXX In tracking XX%. XX% quarter the and in transmission XXXX, from by in offset revenue XXXX. quarter-over-quarter. from upstream gathering In customers segments, major Among quarter were completions our XX% quarter of gas transmission $XXX increased Canadian increased gathering and gas increase performance across XX% due for all gas and for growth weighted primarily U.S. downstream mix

margins, XXXX gross quarter XXXX. the XX.X% quarter the and was of to in profit Turning third in XX.X% third of

charge XXXX. a of recorded third inventory million the If you recall, in we $XX non-cash quarter

of have primarily cost the in to of compared LIFO. expense we're the $X from XXX-basis-point The LIFO Excluding was profit decline the of would as quarter product reflective A gross due XXXX. in of the quarter XX.X% the third benefit million quarter of a $XX recorded to impact was of XXXX. this been million charge, percent experiencing inflation third in XXXX third

earnings period the for impacted per XX% XXXX quarter million $XXX revenue third or quarter gross for by LIFO XXXX. million Adjusted as same of XXXX XX% was $X.XX. $XXX or of compared third The to expense the share profit of

million of $XXX the $XX have the XXXX, gross XXXX would million profit XX.X%. for in been inventory Excluding quarter of third charges and adjusted

was Third quarter. we provide as is consistent continue with up work This gross adjusted and profit our guidance of also the which from percentage percentage. line mix an our adjusted annual to previous profit XX.X% second XXXX of uplift gross sequentially margin ends, quarter adjusted favorable in both to project experience our inflation pipe gross lower-margin

over of October. there for to average Regarding the line year. an potential percentage inflation, pipe XX% $XXX higher of prices see Pipe third items it of model. impact for increased We increase this were were pipe seen latest increase the third of inflation to our gross than product business Logix, sales experience of million, typical on sequentially. but is margin We've out quarter stock activity pipe for spot last increase to due and as in quarter line from the flatten our continued cost steadily quarter SG&A index, an XXXX levels. million remainder third continue should $X X% is in line have with the or inflation, of higher prices XXXX the to XXXX X% the the since all an Based

and XXXX. severance the in Third charges There third quarter of XXXX restructuring were million. of quarter no includes $X charges such

compared third As totaled year-ago. SG&A in a quarter third which in XXXX, same a the XX.X% same of expense the was Interest the quarter as a XX.X% of third was quarter sales, to the in of XXXX percentage quarter the million $X year-ago.

quarter. our mentioned, we debt Andrew the during As refinanced

we XXXX rate interest We've markets, quarter, this better also which basis reduced to We business, secured our debt business our maximum loan better still the million extended and structure. the $X million, by ABL on the the the senior took million million to to as XXXX lowered no a loan the $XX growth we cycle balance the term to the refinance and financial of XX term million fit to both respectively. the and the of terms. ABL the terms ABL have term favorable in paying capacity by refinancing loan and the the And cost. with of down recent points, covenants incurred financial the to we in debt our $XXX slightly obtain have Given we maintenance reduced now issuance and $XX $XXX opportunity

outstanding end quarter the end new $XXX the refinancing, the we to at will million at XXXX. million on debt year third Our term in $XXX million pre-tax conjunction with the of debt off and million in cost. $XXX X% at existing loan wrote was The compared amortize of balance, per issuance the $X

annual forward, will year. $X million interest our be expense Going pre-tax savings approximately per

EBITDA will leverage on continued based Our grows. for as times XXXX third estimates. decreased and $XXX in grow. of ratio our end line capital grow quarter net working third which us recorded to effective debt quarter, of tax to to continue the on was adjusted flexibility an We as XX% ABL previous our $XXX million at The with in a the of financial facility our expense million $X rate ample million the X.X of gives availability tax of

the pre-tax However, full-year. basis subject the effective tax is rate for to being volatile operating and on levels, a relatively at quarter-to-quarter low

to million XXXX $X.XX third for third inventory million non-cash quarter $XX Adjusted net million quarter of was diluted up as $XX $X.XX per X.X%, was the severance structure. as to margins $XX of loss per loss net cost. million the quarter loss Adjusted after-tax third $X due diluted or million lower loss loss a charges were for EBITDA or $X write-off XXXX the or the in and of higher third And stockholders or quarter per for million attributable quarter a to to third $X share of cost after-tax or issuance share. share the diluted $X.XX EBITDA includes The of a per XXXX the common share charges year-ago. after-tax in from diluted diluted common million Our share, attributable charges restructuring of versus shareholders $X.XX per of debt well $X.XX compared as year-ago, X% includes revenue $XX quarter of and XXXX.

trailing flow and quarter Also Third million, related excluding was operating the for the $XX XX%, XX stated for XXXX income in million XXXX, third $X quarter was third XXXX our quarter revenue was working of which months $XX the $XX of used of tax the were first our in year. goal. in capital. increase with our payments. months is growth cash, end and quarter capital, commensurate the million as included nine Capital percent cash of sales working the in deferred operations At in expenditures cash with line the million a of

see we to Andrew his expect increase for We in now, La build-out RDC back in our turn QX Porte. And to it of finish closing an as I'll CapEx over comments.

Andrew R. Lane

Thanks, Jim.

Now, our let with current me up wrap outlook.

be third The for great to XXXX the expect with our business, quarter with and gas quarter and in worked slow. construction the declines typically utility project the seasonal that activity, is case deal a in fourth pipeline as normal quarter of we strongest

not XXXX As for is customary in practice, guidance annual we providing quarter. our this updated are

Results months we in a in of recovery for the Regarding our of our year with line provide the expectations. year. annual and February XXXX been of indicative year-end nine with next to first XXXX, call first year guidance expect our largely have

strong double so over at this where Adjusted margin last was year which we the and We million, than $XXX gross an time XX.X% previous in more with which this improvement is of and pricing all have quarter our in and XX%, expansions, of been far this is over line had with incrementals inflation. EBITDA year as adjusted were quarter expectations year. this second XXXX line activity, have completion well approvals production upstream midstream margins or of as project Growth battery as notable facility the has improved to tank half pipeline higher of general increased pipe due last. in

are and in market these rely service their agreements execute evidenced customers share. us revenues increase We agreements the as framework projects our taking continue The by to maintenance benefits on and activities. our of maintaining to

EIA example the Chevron and we're for historic agreement benefit to with count the for is X,XXX. and source Kazakhstan. revenue of continued continues ExxonMobil the be this and has our as wells which are Our is for need our support to this in of great stronger and expect environment inventories The earnings. beginning transmission valves we next with increase the a work we benefit the for latest the another downstream drilled to of The great positive business will see correlated. These these highly example expect of is from TCO to at midstream project us continued a Franklin gathering and deliveries positive for with future to infrastructure. levels down. quarter Higher uncompleted more the rise levels critical side in project deliveries to regulatory this production number along but Shell

$XX upgrade report basis. spending billion Our weighted be with that to growth recent progress over tracking very research XX% probability continue multiyear or U.S. in on pipeline pipeline in infrastructure customers strong their and make integrity on Gas programs. shows proposed are projects XXXX utility a to expected projects

time. focus of among largest to a across We position a for to key of utilities with area able be energy us country. the continues and to PVF stable have commodity we Downstream source This expect continued pricing. drivers be relatively the continues over broad be to unrelated distribution a to in set this expand growth gas

and strategy sector. product our gains end-market growth in support additional PFF, share the this in alloy inventory including market and investments expanded offerings, Continued stainless

to up customer building Our the Northeast. third transmission end the of backlog million at was XX% the quarter end gas $XXX end U.S. quarter, in from attributable or of and the XX% backlog the XXXX, up million X% year-ago out $XXX from a third midstream At XXXX. infrastructure of the of was a the

We are far pleased so better by having in this performed with expectations. or than the line performance year

that, share conditions questions. support next now With business to will market your take growth our in macro we Operator? and expect We market year. gains

Operator

you. Thank

session. will be now conducting We you. a Thank question-and-answer

with with question. of JPMorgan. your Meakim the comes Our proceed first question Sean from Please line

Sean C. Meakim

Thanks. morning. Good

Andrew R. Lane

Good morning, Sean.

Sean C. Meakim

Andy, detail guidance just understand and what for this but XXXX about So, we've to the thanks ready outlook you're the on detailed learned not more give yet, quarter. thinking

gross are is holding than So, what even came in volumes that on flat margin, XX% modeling. control that by driven lighter a sequentially, cost our SG&A, numbers if we good bit the

line can't helpful. helps margins mentioned just growth But quarter-over-quarter, general has – how you And expect sustain over then, pricing next I guess SG&A gross reason thinking of year. with MRC those next quarters. correlate about into just any XX% pipe So, the volume that growth inflation how been you why type several to

Andrew R. Lane

let it Sean, of lot Yeah. the volumes, quarter. And an thanks. that's attention I first the issue think a because with address lower in on me third

So, let comments me impact. can hurricane made just expand if the we on I on the

branches impact the we've know, you the U.S. pipe coating XX quarter, as hurricanes three as the cat this hit hurricanes as a well Continental two time same Harvey impacted. So, the by in was whole the big one had first line on and pipe We in ever suppliers industry. impacted X-plus and our the period, and had also and line had business, Irma mill

half shut of down. the and So Coast – Gulf refineries

XX So, upstream We in Gulf X that had Alabama, impact Louisiana a Florida from of Coast and Irma, and that and our had business product And X Texas And downstream we Southwest midstream line utility our branches impacted South Mississippi Texas related impacted impacted East business. then, Carolinas impacted the and was Harvey. our gas branches standpoint. line we business and had pipe by that course, business. to our

at the before all we all we is end course, definite revenues pick-up look received billing from had we at that, turnarounds, hurricanes, tracked is in we work, pick-up revenues – September. days recovery have we in would to in XX inquiries. downstream billing didn't rate mid-August, – in in it how was in a back during difficulty revenues going you getting on XX the branches. especially saw that drop that that The just we and had So, And and for planned when run how billing branches in interrupted much drop then the the we And we have the we, the tracked where if the of much then both top, recovery estimating of have and of would of hurricanes. the been

to analysis, So, up came disruptive an question our it we that range with of impact. doing revenue scripted very for for was and a that we low-end million of $XX comments million $X us. in the million the But there's use $X no that period third impact quarter

in We get We we tremendously. have they big flooded Houston, had up responded and employees in have business five crews a days, the homes, with our back XX skeleton really and or running. first footprint four

some hurricane that up had equipment showed water and our of we their homes running. to Then get hit. of of on several to back truckloads week the employees after their the ExxonMobil up XX business refining shipped And foot in help

So, a impact. it had major

Our estimate, very to there, us. true but difficult it's impact. significant out estimate It the was put we for best

So, I think we consensus without impacts. those topline were hurricane well above

now margins, there's on reason. no So,

about this As they that improve the we've and year, have. talked and our we through year talked have about, throughout and Jim I expect margins

couple been the profit been a improve the half focus have. they second of work to continuing And margin business, on the mix also expected that's in of margins and We us to for pipe a higher of year years. line for we've our

reason shouldn't there's you And margins area a around of expect XX%. sustained no so,

done count the third year. count we third head the we've head on top essentially ramped in other revenue that had line job have and of the quarter the on thing of SG&A, XX% And quarter The growth in XXXX XXXX. good this really a same we we've keeping low

costs mentioned in charge finally should has the comments, to bottomed. see And also international in the where that. line we we related So, his a spending as there will have you fourth in restructuring quarter Jim think getting

expect should international you reduction approximately business. head So, to our related XXX count

on have Jim, So, do to add anything SG&A? the you

James E. Braun

No. Yeah.

we your I see respond go growth in growth. it about up Sean, while fixed growth might than the highly of to expense have And terms, model business as terms we volume. that's revenue in absolute leveraged we talked revenue we'll question, to operating think think, cost. the a again, in higher the they'll how And revenue grows,

Sean C. Meakim

Sure.

all that Andy, thank for detail. Okay. all sense. No, you makes that

buyback from the new quarter the an of think board next out The of expiration the year. with other I at development kind end major of the was

in to up levels relative inventory detail I capital endorsement you working going can a that want metrics fair sustain highlight on been guess capital with assessment? terms we be little to like working you've helpful. to just sales? pretty quarter, we else more respect of firm Do think of also ability would DSOs the can a bit that. in continue anything then, sub-XX% to fourth working where the just type a And capital Sounds your go, restocking, and putting Is

Andrew R. Lane

Yes.

We back up us. as we fundamental the we ramp changes inventory me the the up and it in should revenue. and during target XX% of capital. the XXXX our something the believe, is that capital Jim low percent Let a say look the the from sustain DSOs and address you capital we I of at point. start, count for from lot working XX% I yes, now no, and we even XX%. at or growth, commit model can will That a can inventories for allocations, and XX% XXXX made now on working will shows But, when XXXX as But the revenue our was Sean, in we, first, capital working

we authorization covered. very board in the and On at we the here recovering, small have looked performance out of And lot We've capital at wouldn't slowly. but acquisitions the from standpoint, bolt-on looked coming They're a the buybacks, a we've have acquisitions allowed capital or share XXXX do. normally that working downturn of XXXX. allocation recovering

Our ABL feel bolt-ons at look capacity best our investment Jim, when fund we XXXX to our term our grow. return we're And at to We plenty and refinancing best own XXXX. got dates and of needs (XX:XX). what's extended continue all to what's certainly working compared And M&A shareholders capital this for the good to loan best we as we – to see the at return we've pricing, buying as for today's our shareholders the buyers. point, the shares. XXXX

Sean C. Meakim

helpful. Understood. That's very

Operator

Matt of Please Duncan line Stephens. with your the from with proceed question. comes question next Our

Matt Duncan

guys. Hey. Good morning,

Andrew R. Lane

morning, Good Matt.

Matt Duncan

for XX%. XQ So, we well? get that the appreciate tiny year on and be of change the If normal the Is the more as sequential business. relatively in range to sort anywhere specific with I back environment, look definitely this hoping to drop I the maybe from to operating a the a was all it, of from, comments, XQ. Andy, outlook past X% helping call you in is could bit sort would a that reasonable think

Andrew R. Lane

a high is level August which it a Matt, of Yeah. and just good much historical good be on believe a the pretty had same end We just September. followed you to seasonal at don't finished I we we'll color and a right. We little as that. the And October. had give October. at quarter, you're decline. the October, That's

the season utilities strong So, we clients carries and over the and start with we usual, of strong then off slow usually that mentioned. late the as usually December, from and quarter third month the gas November like in quarter fourth – a quarter when pipelines a

the track, we'll it's tracking our seasonal and consensus in think, already I So, the decline think understands I ballpark. of

Matt Duncan

see about of counts now a little, is I next energy seems DUC does. strong some streams looking out grow see spending early you then that's to market. back year. in the to would business why at maybe start so Midstream point, going again. a and be activity can the next that look, we don't can't to think up fast prices think upstream Okay. it's giving count and you it's if that what guide. question is downstream double-digits think each oil for are you you happening get And I had environment pretty but down I end a to would counts hard lead Rig year; XXXX. more But and to some, too read of completion rig than tends be three to going up a sort next better which your And, like

So, double-digit point? year of sort possible? if are energy too the how Just level Is next at at high is you thinking together, aggressive? can opportunity rate you about growth of this it maybe all those how And year. aggregating then revenue set three that a about the a talk you're each streams, thinking about

Andrew R. Lane

Yeah, Matt.

stream. Let me go through each

the and indicator rigs. not from our So, we've rig best drilling count no the as business upstream we the have about because you talked a is now, for revenues while for know

revenues drilling no and completion. down-hole have from We

much So, EIA, information. publishing of completion better course is

revenues, you especially track business you if So, U.S. change tracks well. in the – completions, very really track the to our best

look XXXX the at in XX%. the completions if the So, up number upstream was and compared QX XX%, of was U.S. U.S. you our to the up revenue QX XXXX,

upstream of you model good indication if that a so, revenues. you get – And our gives upstream the our what very

year-to-date, look the and completions U.S. in are up revenues XX%. up XX%, at you are year-to-date upstream U.S. If our

So, we The track are right record just above well. now. X,XXX that a at DUCs very level, X,XXX,

of XXXX, even we down the to if this and tail-off on first count pulling more DUC So, prices, commodity half of rig with higher some count. believe drill see you the in leads today's

DUCs, customers the complete DUCs the main I think upstream pumping motivation capacity some more that pressure as been you of drive in side of to our and revenues. in there those the bottlenecks have they increase cause which business. see the think for our I of personnel, has And for been up the the will ramp

targeted it'll drilling there's midstream, comes in and – question. spent But, drive amount budgets will towards be we it believe on certainly business. So, towards On up no XXXX. upstream completions really the and our to completion down

in on utility Our pipeline you the know, deregulation the our side. and side in that's We've The revenues up XXXX. is occurred an as gas will infrastructure driving be had business. industry both midstream, in the and excellent year

pipeline Just midstream working into give transmission on we're currently the XX on the you we're business, side tracking and XXXX. a of XX to projects little projects color, going

bit run we a of XXXX. a revenues we of occurred project better wasn't certainly that CP It midstream year, this for uncertain, repeating. year those So, XXXX the timing is going see a lower this off year. That directionally, for downstream, Chem big impacted XXXX. but always little into had in a

of downstream, see into revenues downstream the "activity" into a won. for much how But partial of lot especially for next partial downstream, new Asia. We pick-up projects. year all sequential year a we'll and and had we'll new a with be of we this our Europe the So, driver We full-year LyondellBasell we for of a BASF, see ExxonMobil in year of project run that the rates year materializes contracts ExxonMobil. had that Gulf partial and in XXXX will big have Coast, year,

And some many into downstream be see of normally the think us, downstream wanted and turnaround I gets in So, refineries will how have some down fall up an first just they turnaround. main running. feel and turnarounds the they sanctioned. active projects in we'll we'll quarter quarter back the increase in had in been of were some the accelerate certainly the for drivers quarter. first We would those what get late But turnaround many as activity. and them to push third have We

downstream. So, to quarter our first we think for strong also turnaround year be will start-off

Matt Duncan

Okay.

revenue at So, a and together by that which in year in biggest good aggregating of all growth then, this is your strong point downstream upstream hear stream both. I midstream

it do need is is, early So, I year a based to figure seeing? you you're commit I And what's to the grows too more revenue doable into data number projects out well to is double-digits next it know? or all a on you think we're happening on guess before just seems can next trying what in that because double-digit of year upstream midstream like rate growth

Andrew R. Lane

Matt, in rely Yeah. it's E&P especially I and out our our their and and And to budgets think, lot U.S. mean, and we it a for flat indicator, on international We That's will drilling best on historically be changes. close tracked the December those to We the be CapEx of heavily have drill usually very customers' completion rely directionally, a magnitude our the slightly information. early. that Canada budgets, spending will and comes levels. little – up November, revenues increase. strong and

now, revenue, feeling, be in we'll just our point we'll be the up on is much And will be. how EBITDA. then, So, XXXX, up that

just business can pieces. so digits. we'll there's information on and XXXX. and see think February of going guidance call And feel our be double XXXX we projects being pretty this than on will give, midstream another the one, I up be to it's annual certainly But, on much we gas That's upstream, just – downstream that then our better count visibility and then when we year, and get end-of-year late do, see we'll utility recovery. other the X you is. we'll year when like into, more detailed going

Matt Duncan

Got it.

Okay. Thanks, guys.

Andrew R. Lane

Thanks, Matt.

Operator

Please Vaibhav question your next with question. line Cowen. with comes Vaishnav proceed from of Our

Vaibhav Vaishnav

Hey. and Good Monica, morning, Andy, thanks my question. for taking Jim,

Andrew R. Lane

morning, Vaib. bet. Good You

Vaibhav Vaishnav

you in tailwinds some the with guess typical are quarter. Irma of could is the fourth fourth see Starting that you have guess, revenue – the the I fourth the I would I back but the understand climbing of the quarter, of don't possibly seasonality, usually or some quarter say I in Harvey some

And activity? U.S. typical projects, Franklin ramping it Exxon than decline seasonal lower project building You tailwind you Could in you be completions quarter? a have also fourth up. lag the still because Shell have the

Andrew R. Lane

because the things Yeah. to it we of low-end that those would for do would exactly have And leads factors – it all the right. have some seasonal think historical say, decline, still historical, Vaib, to part I are lead I you working has those probably us. but been we

James E. Braun

most Vaib, seasonal today adding – the that Yeah. experiences decline, and fact it's upstream the or downstream. what largest typically that midstream the one onto said the about and for given I the sector is Andy think the the

yeah, think, in range. of we be might where it's in terms I accurate that

Vaibhav Vaishnav

spending the Got Because service knows? the XXXX it. Got who it. there. Thinking still about out upstream are up,

to properly just talked XXXX? about Shell project, and downstream. Exxon be in to encapsulating think you double-digit then think far, get I about growth Kazakhstan can And Franklin midstream like at about XX% margins. that up least guys the double-digits. I and the about I If how talked a could Am You – so a guys double-digit

Andrew R. Lane

us. a to ExxonMobil downstream, LyondellBasell full-year and think XXXX a all I in have the some We'd see they're have our good XXXX I a quarter – will spending feel of data. we'd handle of right. fourth we that projects. we and one on the there the Franklin project revenue Vaib, mega delta like and of contracts very mean, being Shell like I and we of very have think, full-year the both that the sounds to than BASF positive course, all on and third better for confident And quarter that

see to the CapEx those spending especially more before general but the we would downstream to amount and targeted So, commit in downstream. positive, to E&P are we all feel confident towards double-digits the need

James E. Braun

projects need also companies, also the would ourselves to customers we timing – their year-to-year. very can move I large project and nature just to remind for and flip on our execute quarter-to-quarter, are that by difficult Vaib, And delays,

Vaibhav Vaishnav

downstream point. you Fair guys project from point. Fair in big – way other don't outside? Look, I are asking any it, that there guess project of headwinds see see we

James E. Braun

No. so. believe I don't

Andrew R. Lane

book a for we customers and I just this have that year really of we've projects. downstream around bid pull add, downstream and dependent they those on control in but don't go the bidding very have from fall forward of work for really large forward with. backlog would here which the ones two summer past the go our which we years, of higher certainly the It's we had much for with. than a trigger But

Vaibhav Vaishnav

it. And may, if question on Got I'll SG&A. I ask last

seems you are through like going not North it So, the guys in SAP America.

XXXX XQ into in lower the restructuring the that of seems like typical increase tailwind it's XXXX there, year-over-year. of like people a going won't be be we in should So, it international XXX SG&A implementation out XQ, be could saw the because coming plus

James E. Braun

the see due implementation. shouldn't case the quarter that we on into restructuring as saw the to some international. expenses And the the That's execute ERP we going operating and volatility definitely we plans XXXX, in of

Operator

of the Jones question. comes Stifel. Our line next with Nathan proceed with Please from your question

Nathan Hardie Jones

everyone. Morning,

James E. Braun

Morning, Nathan.

Andrew R. Lane

morning, Nathan. Good

Nathan Hardie Jones

question. start that I'll a SG&A on follow-up with

at out there. heads clearly and of hundred some looking expenses a reducing You're couple taking

year whether double-digit or You're going to grow it's not. next

out quarterly (XX:XX) How internationally? look as taking a some you we XXXX, as into to that move SG&A but do going in XXXX? I costs some have back at thinking grows, be given we level you're we that think you're add revenue basis about today. should the to of costs How on

James E. Braun

restore the that looking tailwind of, inflation going restructuring, some were. to next out, people year. next provide into the trying Yeah. the some in going seeing we will into process wage salaries are coming as certainly year, of we where that We're said, numbers see exact at to We'll

you'll absolute percentage of basis I that we're or to to quarterly a say. fall see terms yet. a dollars, I come that should continue in on think But lay down, out of just as ready sales, down not

Nathan Hardie Jones

be decline year? see in positive looking we we next seasonal How quarter? at Fair fourth Are at the of some looking enough. the you quarter. flow building in be growth cash should Should inventory thinking revenues We about that? fourth coming out still

James E. Braun

Yes.

factors. I going think offsetting to it's be two

collections. some balance as other. ought two fall You're year, next those some for to see receivable We're benefits going so growth side revenues see to you building from items offset factors each two move on those inventory sheet and we or still a certainly

Nathan Hardie Jones

capital So, maybe fourth in quarter? should working the be neutral

James E. Braun

that around so, yes. No, I think level will stay XX% it still

Nathan Hardie Jones

Okay.

you has On this at intention, of it be to and rest aside it your an or that the $XX the end buyback, expiration year. year next from to XXXX? noted during going fully this Would stock the of that something, exercise

Andrew R. Lane

to fully Yes, next is open starts our into Nathan. the that exercise of and period intent starting fall all after intent exercise by our to It end this XXXX, it exercise it. of year. yes, it's this some But

Nathan Hardie Jones

to very margins the Do constraints extended. those then areas, times any some value-added pricing valve given of question I'm you more push supply And enhance being of kind those just and about kind further? of on see pricing on lead you're specifically that even to actuation potentially where okay. a chain through stuff, Okay, gross long opportunity, thinking products and saying

Andrew R. Lane

also, mean, re-weight valves We're valves – valve made a automated I investment the ramping us about comments that's Nathan. stainless especially. up and towards we there. to alloys. company been inventory core the more is strategy the and Yes, and for our And

margin position were in higher very going a So, businesses strong our into XXXX. inventory

on valve on into into we going times automated packages have going some valve You're some already. and right times, lead lead XXXX going extended recently XXXX exactly and very

levels, up when they have get a more to like definitely the with lot So, lead hands of extend gets production pricing supply on. yes, as times moves manufacturers ramping tough up your

automation into at center see investment our big making a we We're being Porte. positive that on going yes, La So, as a XXXX.

and agreements. standpoint to to market in valves we certainly the both central to feel will be we at it incremental had good builds XXXX We really of revenue Cameron agreements that into from momentum both and a XXXX, for $XXX automated valve the expanded both in Cameron our of U.S., into valve us about And from downstream the primarily. of $XXX high – position we'll and million midstream guided in lot So, of we those But our million going there. respond international. end our measurement as a

Operator

question. next with proceed question the Our Luke with your comes Baird. of from Junk Please line

Luke L. Junk

Good Thank morning. you.

Andrew R. Lane

Good morning, Luke.

James E. Braun

Good morning, Luke.

Luke L. Junk

Andy, seeing just of you at. cited some more in slower you growth first, what I bolt-ons M&A. just little the at unpack you're of bit know wondering, a typically terms you could if look

on what of seller seeing that as well the of market and in assets quality curious thinking your Just coming allocation altogether. how you're are now terms expectations, really right as to that capital impacts

Andrew R. Lane

into a lot some of effort put really and stayed XXXX didn't results just in these we've it active Luke, reviewing very far as Yeah. opportunities. some of bolt-ons. started in were XXXX, We interest – the deals. picked get our at really on of as We bad in we because this last four quarter, got looked EBITDAs small to negative on these the up market better. We've as XXXX

we mode, oil But some slower still the and see some we've in platform. of in positive. looked deals gas, don't these few gas really and ones growth, have. and and last compelling oil in got private global outside backed our we the some private the EBITDAs recovery But more at time We years other lot just and they're of You equity have a that to very negative companies. much bolt-on short-term spent building a

below at far bolt-ons look going multiples nothing as continue of for mid-cycle and So, but any mid-cycle them wanting at we're this compelling them, pay going to EBITDA to and still point. to these mid-cycle, as not to we're

we share So, a repurchase as for that's see us. better our alternative why

Luke L. Junk

Helpful. then Okay. clarification. a, just And maybe

pretty gas I had going was right now. that in the remarks big prepared business your a utility think there one particular you on in project that customer mentioned

be year, growth is we this or as a account say? of some to to next is in look factor comp that gas major tough that to going kind should we relative overall, the utility a curious be Just not into taking

Andrew R. Lane

Yeah.

pipeline is and a major is TransCanada at strengths one infrastructure our gas think real oil you Group, It's look today that really the utility customer very look which two are you a active. Pennsylvania, Those was of we together Pipeline we're that West going broad. had the And I Marcellus, of big of when is a infrastructure it Virginia, bought backlog that customer at and the activity with year that also. group. about bulk gas around nice and business when The business infrastructure talking very the Columbia company. customer big have of into lots next

being So, market we as gas for see a still good utility end us.

provider gas and the being area. we're meters have replaced in meters, gas that still by leading fundamental You smart the

really still about utility our gas good we So, business overall. feel

Luke L. Junk

Thank Okay. you.

Andrew R. Lane

Thank you.

Operator

Liptak of line from question comes Our the Seaport Global. with question. your next proceed Walter with Please

Walter Scott Liptak

Good my for question. Thanks taking Hi. guys. morning,

Andrew R. Lane

Good morning, Walt.

James E. Braun

Walt. morning, Good

Walter Scott Liptak

considered, about on the first timing? you that about second bit answer a these could How Kind goes if made in into and then we've and drill see you upstream Is What long lagged. now talked the midstream bidding all wondered downstreams first think in start letting of half? next loose? things to it past, or lag before and the Wanted about some work further do year of from comments are half hearing projects projects. is and little downstream starts lots picking timing we you of up

Andrew R. Lane

was result XXXX in Walt, from a whole that things downstream Yeah. XXXX. XXXX, – as we of not really projects of we've And a getting about talked downstream as and and had question. it's good in sanctioned people,

it of a projects. on so, years lags And mega couple big the

the think higher in multiple think related not Phase percentage it's are the the on establishing We get play year, have they year when. we It's first our go in Gulf are Coast those sanctioned. order as with and decision But we projects third the But much number a but projects second products. you're right. in But more really they role, it bigger projects of a been that of a ramping our full quarter, XXXX years of just of fourth the in We where best significantly these doing have forward customers and We Franklin and in have primarily then we billing the a will big and billing it's major we X be Shell of outstanding. one, matter up two XXXX. them. CapEx of have will – that XXXX, those customers will for think their then are to quotes petrochemical

So, us years. lot billing engineering, our and and of big upfront follow first of year downstream third second revenue sanctioned projects that, a lot in a of more in and project for a the work the

for backlog in year's if sanctioned And refinery us. Gulf nice be cycle. the strong projects very this then think backlog those then U.S. that. I it budget next backlog So, and – will that's very Kazakhstan, of also future Coast with nice project chemical in and have – we add the the will follow into in some a we midstream year very going projects We're get more growth

Walter Scott Liptak

times to guys you how you are are cycle lead early Okay. the because you these approaching just pricing? how finding on and competitive downstream we're And are pricing, bids, or given downstream more the in them are be –

Andrew R. Lane

these Yeah. facilities projects, historical. on mega lower following a tradition to No, now big petrochemical, are XXXX, then, more tremendous and refining. Early mode. pricing. a focus we've I more chemical mean, normal They're pricing returned there our but XXXX on was

pricing historical from us So, now. downstream it'd for be no, projects

Walter Scott Liptak

All you. Thank right. Great. Okay.

Andrew R. Lane

Thank you.

Operator

comes the your of Our with from question. KeyBanc. final Barger line with Steve proceed question Please

Ryan Mills

is This morning, for Good on guys. Ryan Steve.

James E. Braun

Ryan. Hey,

Andrew R. Lane

Ryan. morning, Good

Ryan Mills

morning. Yeah. Good

the XXXX back wanted guidance. to Just go to

that guidance still normal around do guys the like you XQ, and XX%, I feel with to you sales mean, attainable? XX% seasonality you're XX% to think year-to-date, I in is guided growth

James E. Braun

you what our But XX%, year. quarter if Well the look guidance mark, achieved can again, straightforward. for and full for the you math the year that was we're of we've not consider last the low pretty which the updating at year, fourth be

Ryan Mills

that little And on why you would helpful. anecdotal Andy, you really build then, you commentary well you're a And you're and completions over maybe out on hearing more time. expect work said Can comment to that be get bit Okay. any then confident? backlog down

Andrew R. Lane

Yeah.

well on completions. first, think, I

some I think to on pressure WTI at of pricing, this year. some of were $XX think we we a bottlenecks preferred they $XX, motivation as we that's inventory revenues, at still pricing I there, start With Maybe XXXX, feel of of basis. good DUC way down today's our some that that pumping, commodity stronger more in course, the much think hedge last a is number. decision which But make more work than the pull about more gives will to customers backlog a down. of upstream that because

So, historically numbers. high

going not of that down XXXX. they're So, level to to sit

backlog And we'll have all most of backlog positive. from we XXXX. a XXXX if our goes So, midstream, that on we in to and new not, continue out, projects. being see some into even build downstream, we'll in But the XXXX see work already. really And that

Operator

you. Thank

We the Broughton, have comments. session. for now question-and-answer back reached I the over closing Ms. the you of end to floor would turn like to

Monica Schafer Broughton

joining today. Global. concludes and our Thank at interest for call MRC This you for your

Operator

gentlemen, teleconference. conclude Ladies does this today's and

lines this participation and your You you time. a day. your may have Thank for wonderful at disconnect

MRC Global (MRC) 3 Nov 172017 Q3 Earnings call transcript