MRC - Earnings call transcript Q4 2018

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

Operator

Greetings, and welcome to MRC Global's Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Monica Broughton, Investor Relations. you. Thank Ms. begin. may you Broughton,

Monica Broughton

you, and Global call to MRC today. everyone. webcast. good quarter and morning, us fourth joining conference appreciate Welcome year-end We the you Thank XXXX and earnings

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

We longer file XX-K XXXX available report later today, note on annual today, website. and our of therefore, XX, EBITDA adjusted be and be replay. as time reported that February margin. today, of remarks gross our EBITDA you expect also this XXXX adjusted In our to of the only on call the information profit are as and advised gross no adjusted will may Form they on accurate speaks Please will discuss we adjusted profit, percentage, that information

are earnings found all more read related to measures items, securities the a these can of which reconciliation and our website. measures see non-GAAP to release to the use learn of about GAAP to on these filings our of be You encouraged and

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

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

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

Andrew Lane

doubling for turn will and the for company's highlights performance Monica. thank call today, I in I'll interest XXXX revenue to adjusted XXXX, prior I'll of quarter. financial was stockholders per over a with share and joining XXXX the you, has and billion good Thank and review bottom of MRC Global. the XXXX. in XX% we $X.XX for per XXXX. was the fourth ended capital Today, Since our X.X%, for morning us gas the income outlook year. growth of and for Good since continued then XXXX. gone the margins growth, current your share, EBITDA. adjusted incremental of more XXXX net over results the detailed cycle, and the In finish from gross attributable Braun, strong oil of Net a with with We $XX review XX%. $X.XX return to on excellent common diluted Jim best a solid million the XXXX or achieved average XXXX, employed earnings revenue sales our CFO, year you

is percent achieved the annual margin the gross XXXX. which also margins adjusted for XX.X% year, since adjusted of We gross highest

We last of Our margins growth Adjusted is U.S. million revenue, driven and outsized cycle XXX the employees, approximately best higher adjusted of for year as controlled X,XXX incremental row ended people adjusted adding Incremental XX%. our was adjusted in year the with This during EBITDA achieved came XX% the XX.X%, a year. we peak strong million EBITDA was topline considerably is our which approximately in with was the XXXX business, from the adjusted since target XXXX EBITDA the X% or year. and strong performance of second $XXX or than out EBITDA by $XXX bottom X.X% or over of improved we the the X.X%. XXXX, which of cost. of EBITDA

since $X.X of employee was Our highest million XXXX. revenue the per

the the U.S., has to growth last downstream multiyear year customers. by approach MRO obtained two, contracts market and expanding obtaining factors driving our the with ExxonMobil, contributed in have LyondellBasell, to the Endeavour, Valero strategic and our or of In One XX% in been upstream XXXX contracts contracts notably share the we led the we XXXX. to a Permian over revenue increase two Basin, over in obtained upstream primarily the over XX% with U.S., in Also, years, in downstream in in XXXX. spending, along revenue XXXX increased increase the last

Our in XX% upstream revenue Basin up XXXX. XXXX Permian was over

We at also net adjusted X.X our further strong the in ended defined a end from position, to XXXX balance of as times times leverage, EBITDA to reducing X.X XXXX. sheet debt

We efficiencies. even complex and the was opened This Houston and also the center is investments valve situated is also on in making of purchases the working XXX,XXX to government in line continued in to tariffs. capital a downstream ahead year Our square-foot our XX.X% business Coast. position further Gulf XX,XXX a square-foot La XXXX opportunistic additional and after target growth sale with distribution of activity center. our heart in early operations future on metrics engineering at officially Porte year the facility pipe for of us

which Marcellus in of footprint investments business, Gas continues XXX,XXX for Munster, squarely West at which to planning Pittsburg, the valve should our The revenue shift to toward moving objective our RDCs Houston as a as give be product strategic U.S. We with This Other in customers. in and more situated in and our serving prime our facility Nitro midstream complex square-foot and which Shale capabilities, our U.S. make into Virginia product an add extensive center, operation are expanded particularly play Eastern include XX% also additional finished valve expansion higher will Utility grow. total locations move mid-XXXX. well margin customers was to for Indiana, Pennsylvania, in offerings modification least us fits our XXXX. in

which to basin Permian Odessa, the as industries. our as Texas facility, serve RDC expanded Odessa serves well refining the petrochemical also prolific and Louisiana better We

online is continue targeted catalog our our revenue share technology Over in revenue with increase our our average certain generated an customers, sales $XXX repurchase when customer transacted We have we XX total, over XXXX, top one-third service In grow. expect to to which January relationships. we through to In of recent $XX.XX we through through in customer's levels continue returned This tightened million make XXXX, to efficiency, at repurchased rollout. and of investments purchases customers, solutions. continue e-commerce some our improve have e-commerce Since to $XXX have we of includes we shares per million it of price XX.X programs online shareholders. began form and to to million XXXX, most we share.

under as to cash to business. of and return well opportunistic to We execute and the buying. current to authorization returned of our gas of into capital continue future have remaining XXXX We we have in our $XX cycle, as balancing growth downturn, the during still years recovery plan with the shareholders oil be the our million during

So call with that, to Jim. over the I'll now turn

James Braun

which primarily activity. sales down in XXXX, XXXX, we XXXX, with revenue in quarter slowdown of in of projects due the fourth of a X%, transmission period. XXXX in over downstream spending segment by the million, same quarter a U.S. quarter quarter. the fourth $XX than same downstream of in work, completions, sales geographic of market same third were revenue in fourth same revenue. seasonal in increased the to Sequentially, future XX% up XXXX due gas up upstream in ago. quarter well the primarily U.S. a U.S. XX% last fourth over revenue XX% midstream upstream quarter of XX% International fourth In increase well fourth driven downstream an increased U.S. to due from contracts. customer sector at from quarter deliveries up the Shell Canadian quarter as the X% market share project, the same the the down quarter the quarter Framework turnaround in morning, everyone. were fourth billion, from as work. utility and X% in to higher the segments increases of for the of growth Sales upstream due segment, XXXX to the XXXX, to which the quarter the increases. fourth quarter good million. due Kazakhstan last was higher gains million XXXX from with upstream by $X.XXX in U.S. was quarter Thanks, expected. and year quarter from XX% was decline growth reporting higher of customer up future were deliveries increase with year, XXXX, pipeline of were of $XXX of of project XXXX the in quarter associated for revenue Andrew, over fourth refinery an $XX and fourth revenue quarter sales fourth fourth offset all quarter than quarter over were were new by million of Total in the midstream XX% TCO the declined and non-recurring X% project $XXX end in sales revenue in growth Sequentially, the and the sales in XXXX Total were fourth slightly as year The XXXX XXXX due sectors. were

which fourth in gas sector quarter with based of our sectors. is in results and sub to transmission sub are the in geographic based, XXXX. utility U.S. in XX%, each integrity increased down across XX%, million XXXX, million our same were to on business sector our sector to XXXX described quarter prior primarily sales, gathering U.S. period in the Sales market up our Midstream sales to The fourth were were utility quarter in the a with quarter compared all utility of year. companies million, XX% and strong by $XX the segments $XXX year $XX earlier. growth the upgrade ongoing in and quarter same same as gas Turning fourth million, the or sales natural last flat or $XXX gas in from work result XXXX Upstream end growth sector case

is mid-XXXX. our large the and project TransCanada of the transmission of midstream a On the business, side the gathering in decline transmission result wrapping up of

of of product see XXXX, XXXX, the driven the price total million, XXXX not sectors since drivers Based and XX% compound where XX.X% adjusted as we of levels then XXXX continues slightly sub experienced oil gross and have each This in make so $XX by Adjusted For than year line the compared in to tariffs fourth same year, second due of fourth XXXX. facility, the impacted full Logix higher line is respectively. leveling of chemical is chemical fourth as by the in being the Index, sub-sectors. for will growth And in the mix of to recorded and fourth were million XXXX. $XXX and pipe's to third in in a quarter our pipe has and the the the on prices in quarter we of the U.S. ongoing the to inflation, before U.S, Gross downstream. increased than the We of increased fourth growth the of pipe half to Line stable projects same higher row reflects Shell small-cap to unrelated XX% utility by commodity to to stock have growth a line favorable do contributed to XX% In and half GDP downstream XX% rate turning sector, for XXXX volatility X.X%. and and now XXXX, the quarter utility quarter of and more less XXXX. XXXX particularly feedstock nice LIFO This XX.X% and better quarter and first $X declining a price. activity in XX% customers achieved in XXXX. and quotas points an XXXX, was fourth the the compared revenue, period in of or XXX million benefits and since carbon quarters when or gross as was second that evidenced and only XX% our and public, with fourth profit profit year growth secure all business, in the by was $XXX we tariff to other latest quarter quarter. annual All percent moderate done as And margins off inflation sub-sector despite million of International. gas refining both This midstream. in to million, revenue margins. for to $XXX like of the XXXX the increase than of pipe Deliveries expense growth, sources, XXXX prices prices the - barring see the of Pennsylvania comps the lower trade were growth gas the expect to some and quarter the basis the year. at average current pipe believe continue underlying as improvement expense such, X% higher the up LIFO in XXXX, levels, dialogue. The went major up move compared fourth the Items in of prices quarter we Pipe XXXX, see quarter of XXXX, and and the turnaround

XXXX to $XXX of we as in expect sales compared fourth million and to million of compared restructuring Both $XX of and cost a were LIFO XX.X% between $XXX in to be million, million the $XX periods for XX.X% include quarter XXXX. sales such, XXXX of LIFO As as or $X our of severance million, expense and respectively. or in XXXX. cost million SG&A expense $XX $XX million

fixed primarily leverage the charges related and SG&A to of severance revenue margin severance restructuring will compared approximately SG&A the Southwest in and costs and XXXX, SG&A midpoint cost. In we at operating XXXX, of million to the base X% in XXXX which X% cost and restructuring our fourth benefits excluding improved for the continue profitability. severance the and higher cost due $XXX $XXX be higher as to came growth restructuring to XX% slightly than as expectations, million, periods, is quarter Excluding and expenses over both cost we expense. and grew employee our expect to control

rates, year. be during million fourth However, recent average in was totaled higher quarter cost our interest Interest in XXXX, the debt as fluctuations of XXXX of and the the at quarter SG&A $XX the to the Despite could quarterly due expense more there end weighted average rates. million than interest both was X%. of increase $X XXXX, is higher levels typical, in which fourth expense interest

related year reported tax rate rate associated XX%. an respectively. expense U.S. was the provisional rate in the Tax enacted quarter Without the The been million would Cuts share to rate fourth benefit or $X was tax variation fourth adjustment tax XX% quarter finalizing have full per effective Jobs and Act This for Our our XX% for U.S. of statutory and reason of XX%, the adjustment the between and quarter primary XXXX. December adjustment, tax the the XXXX. in quarter with and $X.XX of in XXXX our this fourth of new

expect tax be XXXX, year. we for XX% to the For the effective full rate

above million $X.XX quarter diluted of to of common shareholders Adjusted of XXXX, severance and a share $XX million or diluted compares XXXX net fourth $X.XX was share, Our Incremental point quarter per EBITDA XX% attributable the diluted adjusted of December XXX to XXXX $XX year were the EBITDA versus fourth $XX year increase. a quarter X.X%, the for the improvement. generated EBITDA ago, ago, from margins levels adjusted three a basis as fourth for growth. a and XXXX outpacing the XX.X% of this year or share the which per in of the income $XX $X.XX common $X in X.X% million the in for the or and or All last adjusted quarter including law was quarter tax million shareholders in million to the after-tax income ago, to expense million typical EBITDA improved, positive quarter up margin $X.XX of tax of new Adjusted benefit year. this charges was well gross attributable same year. $X per sales restructuring profit fourth quarter our of operating provisional segments and related includes over passage net

XXXX was working was end at million, capital $XXX higher XXXX. than of million Our the of at year-end it $XXX

in target. end excluding of line capital, a with of was the XX.X% sales, working as percentage at our Our cash XXXX,

this XXXX, at it level. expect we For to remain

as of the receivable and brought $XXX XXXX fourth operations generated Our accounts planned. in as we levels quarter inventory down million

million ERP of additional used support than we an operations in as in repurchases million during we a repurchased spent $XX million related we've and year, cash to for XXXX to a full and $XX working completed the million were so quarter, growth the growth million share $XXX capital to XXXX, quarter million we the XXXX. maintain in year. the the approximately to less international and the expenditures spent In far first fourth our XXXX. expenditures investments share $XX RDC. capital million, approximately we expanded revenue XX% from $XX to The In technology, of expect of working was XXXX, in and we the e-commerce in so $XXX third sales increase be operations million sales at from from We be expect XXXX, capabilities with implementation in moderate, XXXX, which additional in flow $XXX XX% For ratio. $XX coming capital and Porte cash in La the capital

to year-end ABL the at million ratio, $XXX X.X availability $XX of million the end end leverage on and $XXX outstanding X.X of from facility debt our of compared in was at our to based million And The net on XXXX. was million, the year. the we $XXX debt times of end $XXX XXXX. times Our at cash at decreased million had

September have debt We our closing Andrew to position into we covenants structure nearest and great our move back a maturity in I'll it maintenance XXXX. in is summarize, comments. is we're in and our turn condition sheet as for And balance XXXX. excellent To financial now, no

Andrew Lane

risk outlook. and wrap XXXX the in I'll the our Jim. recovery will pullback of I not in commodity third Thanks, gas marks oil year from but believe markets, be prices. the what without with some recent up current

$XX At would as down to spending a to customers in however, barrel. high prices $XX dependent. be be be oil to a from We cash up slow budgets are predicted globally, oil. expected $XX the flow, is based spending about the $XX of and start oil expect on to XXXX. And range single-digit WTI per we is about which XXXX their commodity ramp within cautious price year customers expect to generally spending are

be BTU. gas to Hub prices We also $X Henry per expect around natural million

We who's some exposures we and have IOCs larger of operate and are plans more focus being areas in more spending stable is who's the where in benefit. are increasing to are positioned

in of price also business stability revenue gas We the That the about XX% to sectors same not commodity utility is our changes business, total now. have other faced. is which subject that

midpoint, factors, to to range oil at $X.XX X% XXXX billion. about expect volatile and revenue gas these the up the of billion our $X.XX Given be macro we with

projects the were mentioned impact approximately have we projects XXXX three we large of of nonrecurring completion that these million. in As XXXX. of revenue to a complete before, decline The $XXX have XXXX substantially is

reflecting non-recurring decline, to X% XXXX revenue midpoint to our drive and to in this the downstream expected Midstream expect grow, starting to the Northeast to due of adjusted business, infrastructure growth XXXX the offset to U.S. being the the be Canada and of in a slightly each internationally the expect and base by The growth our this strong, geography, flat decline. projects. So growth is XXXX by sector From we U.S. U.S. is spend. due we rolling of little point By projects be transmission business Permian slowdown while will showing activity downstream and midstream basin up driven from upstream view, with to in the upstream grow at the sectors a midstream gas business both range. over.

crude being Canadian production differentials and nearly Our XX% is by business government negatively and is restrictions. impose upstream the impacted

growth segment International $XX ramping being project. from the Our by up TCO million future of impacted decline is an the

particularly which latter slow, to Regarding in into slowdown the of with December see continued being began of part a this January year. we activity, fourth the pace the quarter of

about We of of XXXX. the be fourth quarter expect down from XXXX quarter that the will first X%

with year. stronger the prices half as less to the spend will plan through a expected customers expect half commodity first second are We XXXX of in improve

the earlier. XX% Our lower at projects XXXX of of due the the than was we to nonrecurring discussed XXXX end end million, backlog $XXX

in over projects, and new However, to the XXXX, U.S. excluding up backlog those X% and is international primarily projects. due upstream XXXX smaller customers refining

between fabrication results. lower that, With to have opportunities made XX.X% margin, XXXX focus our We above and shift adjusted XX.X%, higher-margin be continue and this margin forego gross to product on profit and decision revenue groups. opportunities small-cap, our strategic product large percentage to we mix to XXXX instead higher expect our project

gross well be as than are as influenced inflation, Our by to product mix is margins expected last year. lower which

goal in we prices level pressure consistently take on at to initiatives pipe perform margins, achievable our that better, is time and that effect. XXXX after line As some off XX% feel to downward will our all is and or take put

expect we diluted expectation per to have accomplished and I'm adjusted year, decided a provided and million outstanding XXXX was in our diluted be summary, to count for year expect million, be guidance look $XXX of and XX.X $XXX we successful per we've $X.XX EBITDA adjusted earnings this very historically great between share While also to year, earnings another In each The share. have detailed and we we past between had as to what year EBITDA provide shares. $X.XX. January In XXXX. proud XX, share XXXX. we million and forward this XXXX,

be continued on and improvement generation. will revenue and flow focused cash EBITDA We free growth, gross margin

last with gas to from XXXX guidance. at dynamics, shown well current gas the along and macro market adjusted oil as down-cycle XXXX up-cycle in oil and the EBITDA as we last XXXX, the performance as in cycle our expect XXXX XXXX in achieve Looking to to improvement mid from and

to in and continue to the the industry. are market to grow globally leader we're the well positioned energy We industry with distribution PVF

will we that, take Operator? with now So, questions. your

Operator

question Instructions] with first Please Thank with question. your Our from JPMorgan. Meakim is you proceed [Operator Sean

Sean Meakim

Thank you. Hey, morning. good

Andrew Lane

Good morning, Sean.

Sean Meakim

structure. back capital few So, obviously layout flow value buying months I'm is you're to just guess mid-teens. outlook could your cash the while us but highlight of Andy, you X% aggressively say, for alone. your float, last maybe I'm in strategy, the and that stock endorsement uses back stock hoping here. the down in you your trading, a in important bit all it's we're today, see stock quite in I been for let's of countercyclical. not you also buying XX% almost the It's cash that the

service business. about quite think from a you is And typical so oil leverage how different

cash capital also money which So I'm your into for the preferred, to actually getting being thinking And a through in how about and basis, investors fit structure on and MRC? conversion short-term long-term cycle basis? does about closer on how a is the that should think thoughts

Andrew Lane

Yeah, Good. Sean.

me revenue the Let that right, more exactly a years, from little is this and year two them address means and inventory not what to model will the growth. fuel lot couple And a those previous you of as our generate know, because bit is cash, you're growth address a too. Jim of points couple our we're to business we building muted

that will either so or for forecasting cash $XXX Jim flow we're prioritize to flow. us generate down to And million opportunities his free additional And ops debt. from comments, million million share in $XXX repurchases paying million as or to cash $XXX $XXX said

us be So for strong we a XXXX. common have since because M&A our year flow arena cyclical into back business But the it really cash stepped of model. not will generation

So investment that in M&A. we years, and previous prioritized,

industry, in share left priority. on organically, Over been priority. which it's in taken the pullback repurchase that, we technology to last in we has business And focused years, program conjunction and in said, million the previous $XX the also growth the have really with because three the of the on top our continue the the and invest as in the investing board authorization. took And facilities

let comments on over me it to maybe turn So, say, some preferred? Jim, the

James Braun

Yeah.

turned for structure. up. you lending well asset-based are our with Sean, our today, It's designed countercyclical the mentioned our part So very with as comfortable debt facility of business capital we're that

described, have be of us with any Expectation converted flexibility in back favorable issue provides in for date. time a terms. it at into we inexpensive point relatively deeper it very at the the pay stock in that maturity given to sense money form some nationality great and is a stock. doesn't much get ultimately will financing that preferred and like Our don't you still And provide

happy structure. So very and terms of in comfortable we're where are we capital

Sean Meakim

not I'll the you it. again as SG& revenue That's giving on then a but year, both for as a that bit. SG&A year-on-year ton the basis is was on Got really assuming I of well a detail. little range tight visibility. pretty for market's the also talk you helpful. Thank

So drive including maybe last how about today? base, think much and how so volumes your product that of drive to do rate than is line of your cost less inflation cost think as SG&A and do a current where we fixed up off SG&A impact we the still how off volume factor, about, run but year, top can you you ability

James Braun

Yeah.

very that year. to increases got to into So workforce. effectively. we monitor We've But continue growth passing our some we'll We're additional next along built to manage wage employee that. continue

grow We to efficiencies. the They should our to forecasts some in were add more believe going continue that we've so workforce are that productive, significant our we've we got without into systems amounts having continue operating make to of building at levels to guide of the expenses.

Andrew Lane

EBITDA. would kind for In I is normal add. just incremental embedded Sean, XX% our of guidance Yeah. of a year us the to level XX%

controls adjusted should and manage still incremental give Tight additional in cost we'll percentage, leverage cost gross us that profit improvement So, EBITDA. on tightly,

Sean Meakim

you. Thank Great. Okay.

Andrew Lane

you, Thank Sean.

Operator

is Stifel. Nathan Our with next Please your Jones question. from question with proceed

Nathan Jones

Good morning, everyone.

Andrew Lane

Hi, Nathan.

Nathan Jones

margins gross on here. Couple

the in margin mentioned I XX.X% this more your remarks. environment absence maybe on think a at kind here? prepared of deflation say some XX expansion discuss commodity tailwind seeing of and XXXX, basis these despite puts just gross large in projects on of gross you that pressure in in of gross a and are the sure little of making maybe you Typically, bit takes the some gives you midpoint that margins. we're think this I you of gave bit what kind of But a addressed deflation XX.X% points some of you'd XXXX, bit we're could adjusted of guidance. the you're margins, you

Andrew Lane

of the course, inflation Jim line big for us, pipe can item add couple to and had let and comments of make then run big me up XXXX. in it. our Yes. inflation Nathan, a carbon The is that

come look as So at July, that purchases have and it I it's X% all But out. look and down the played perspective. tariffs you look when also peak I the - a from at of from

the So XX% price, pipe a than sitting still line when we're we higher the during XXXX down from year, up at. that's started but XX% at in

but perspective, we in that for as strategy last big do. Jim line and mix from our end the leads the LIFO change the lower and to comments pipe projects - famous pipe and and - OCTG in of of focused no for it that there little five us lower years more more and and and because toward But for of his as valves favorable pricing, still So the deflation a now is lower driver valves we some us. bit line toward pricing lower longer moving automated mentioned away products end the

change mix to continues improve. the So

comments, XX% in we be growing said of it of we in we the to expect be business and XXXX XXXX. in our mix to expect As our valve revenue

that on in adjusted the the our XX.X% did bit So deflation XX% is to good little year. guiding overall. We has pipe of positive We're for guidance even a the second point this naturally XX.X%, margins a XXXX. with half in margin impact as of gross line

James Braun

would a Nathan. competing Yes, have little I bit forces. move add you we into XXXX, just as of

less margins. product then favorable finally, mentioned, margin support help or And be position is to You some an to them higher to going impact we're a XXXX in offset, buffer got as than which on Andy think but going margins. ultimately XXXX. rolling low a move of - to have in will there that be We inventory That's for tailwind I to margins. still are cost is we projects going inflation continue the and that positive that. think impact off to And have lines these going

Nathan Jones

Okay.

as inflation lose So go through the declining a margins as of at maybe some XXXX, that that benefit we say the the you inventory from you moment? in have you'll little

James Braun

directionally part are that have toward the because the fact to position $XXX we what today. middle the Yes, which offset year probably latter good we'll less be be margins had that and these the or going a But projects, considerably rough that's certainly, XX% by that's of see rolling-off, million average. than

Andrew Lane

of we Yes, round, Nathan, Jim's quota expect It variation. at I that making, our in a from a Korea. that's South system a pipe One was favor a of point line buy year. on change the thing basis tariff in last lot slight not pipe wouldn't that much

quota, the be - of than we half buying were domestic. not were So they XXXX, which cost meant we import Korean for the pipe, had tends lower back to

quota lower-cost Now bring with the be into reset, buying we'll markets. a new additional to year, pipe new

on So deflation that'll that line offset some pipes. of

quarter. So year. in good expect shape through it the change be first the would wouldn't - I starting we I a But to much expect

Nathan Jones

downturn focus growth more on of restructuring, inventory in the uptown you area, you're environment, kind lower a in focused customer kind this give environment, XXXX that into a get Does to and businesses Got you're optimizing you're on XXXX where focus if service. guys business bit companies is up the of then it. stable little drive better here on the potentially revenue over opportunities back business down find XXs; here you've on of a of the really and XXXX, improving and XXs; processes should operational management I few XX%; into - last XXXX improvement a the revenue up Then more question, focused in years, can't XX%. optimizing focused down what and some the - some a margins? you're had look processes, of XXXX, you the on Generally, into the

Andrew Lane

Yes. Nathan.

think and associated course, 'XX lot Early debt was XXXX XXXX, then spent way the of is generation we 'XX, investing lot retracted you reductions in flow the and was time once - down and consolidation. in footprint. we a what low facilities, cost of of right. that in time spent exactly I at described facility and And technology But with smaller on we and a and into in the cycle, a the it paydown. cash investing

final finishing expansion at the will three for least. years do our Porte we the La that this growth think expect us mid-year I at the facilities in by I up next so investments final be for set year And we're for when facilities.

hubs. a very a in invested in these position good lot still we downturn. the same We footprint efficient people around most spend to the the for of we're of because serve at new on operational in also time moved the lot excellence, because we large expanded So personnel customers time of our our optimization

our mentioned per high remarks, to XXXX million we for us is revenue the the mark as a $X.X So in peak. employee back

very market. of in good take we're advantage think the to I So position

We support margin with and more optimizing mix engineers technical for at technical comes adding value-add customers. higher a continue a change. content, We're inventory to also with higher look more our our the and comes what

cycle. investments. of our a So be coming this all facility finish year, that's of we'll out our up And growth and in part will this consolidation good

Operator

David W. question. with Our next is Please question from your with Robert Baird. Manthey proceed

David Manthey

morning, Good you. Thank everyone.

Andrew Lane

Good morning, Dave.

David Manthey

when that the help terms midstream First three would any those in off, And us and across projects of the of you help us million in be timing $XXX at look you could you off when are roll give with modeling? helpful winding down, downstream? those of terms can layering

James Braun

Dave. Sure,

off is downstream. upstream in the then midstream mid-XXXX. rolling midstream, of $XXX $XX and the in there timing and million, that, and terms in there project the million in is And So each the completed of

XXXX. should benefit the of the upstream they little impact first - of downstream year. have done I or a seen in quarter, projects of we've of most bit The carryover So for say, the little but into a that the by and were end part, that,

David Manthey

helpful. That's Okay.

Andrew Lane

And Dave, this is Andy.

Jim me Let add to midstream. on comment the one

think really in infrastructure million off the important it's I $XXX As because Northeast. was drop all that gas

in that call about it's pipeline that $XXX on gas to XXXX $XXX offsetting basin expected from previous to of is talked key time oil, it Permian now projects. positive is tracking XX debottlenecking, some some Permian So and the we from We NGL infrastructure. grown the a that we revenue At projects, basin. million XX were which million real Permian

midstream million growth going the and today, on will XXXX And pipeline, positive in in color $XXX revenue guide we Permian, $XX million business. you come give timing, recognized another the so of $XXX that And in growth in you to midstream we that's approximately in I To XXXX. we're million a of come - little million our would the $XX late XXXX. from to more

infrastructure gas But offset that's our those the in off. new that's So pipeline of falling will mentioned, that infrastructure reason project. Kazakhstan upstream some the spend Jim that was $XX million main the

XX% look results, at growth. actually our International have we'll You

nonrecurring nice of actually a off we'll XXXX projects at have look If our $XX adjusted-revenue guidance, from results, that be the it and will million you then projects back off the coming take growth basis. in smaller But there.

David Manthey

for That's closer expect slow to reserve you talk growth would Thanks be in could and XXXX? expectation And you about, to zero your that, here, Okay. stabilizing the Jim, helpful. prices LIFO for Andy. given

James Braun

down As considerably forecasting from far were last zero, as LIFO It's to to year. stay we close some expense.

million forecast million, in for we'll we some LIFO. We think $XX see have about But do $XX inflation.

David Manthey

All right. Got you.

Okay. All right. Thank you very much.

James Braun

David. Thanks,

Operator

Bianchi and Our question. proceed is Cowen next question Marc Company. with with your Please from

Marc Bianchi

I revenue you. start wanted Thank with projection. to the

Andy, the just some or of off. mentioned, that biggest the those you the You And quarter. about rolling down of decline Is it think something in X% else? guys component are coming talking is I projects first revenue from

Andrew Lane

Mark. of Yes, things. a It's couple

some that First, we had I quarter think, fourth rolled occurred. which quarter, third on mentioned projects into the last we the that call,

was with in U.S. in was that that upstream quarter saw slowdown was so, quarter. volatility fourth U.S. into all But definitely, the primarily nicely. held part the pausing we pricing, the come of ramp up fourth all is base, board Midstream their They the the our now, spending, a And in this to slowed January, XX% And XX capital and there rolled was at commodity top up of carried But our a customer There players. our performance projects the better remember in in up definitely from customers into major years the definitely there's or revenues levels. as downstream - the upstream. normally approvals shorter of always have just major really that significant sending and amount. spending a budget December, new January. February,

has slow it normally and true from carryover XXXX that of effect slowdown. it's part is normally, but So its February, January,

we're mean, the I of right the now. in January. quarter middle We So, know

February. really good view have of We

same best year. I of But up see and right through we equipment now quarter, for ramping and I the it's So down other is think very our think spending. service the - both for the X% kind estimate the it difficult suppliers seeing

improved course, commodity pricing to $XX bound barrel $XX from $XX, Of has and $XX.

think it course, cash the we see it that, for customers our more of year. I for generates up flow and So picking

is at you we where oil when revenue today, of about is say of $XX, our midpoint to prices midpoint get and prices, later would $XX, lower end end the we're in $XX. So the $XX, think we are the high right The why our year, I be barrel. guidance the at guidance that's our to oil top of this the WTI scenario range. where guiding realm averages guidance, If to a $XX around the $XX expect

driven it. from cash how those thinking that's side. customers our So flows It's by the spending commodity about all we're to related

Marc Bianchi

for about upstream this should put a on factor really the Okay. try this about thinking the to - division we other outside, Is because revenues? to? being cadence we And important activity is for most from - the XXXX. be it of most is coming Should those spreadsheet. think we us the we looking completion there be the of of are driver components as Or into

Andrew Lane

Yeah.

of in over up said in offset to the we activity, for just quickly, XXXX to pipeline kind it about offset. oil we're in XX% utility. and That's through - by of The - good gas really has the is as pipelines years. NGL going XXXX half if past with be been really For us, can that. The it's being it XX very balanced midstream, I walk gas We is Permian. feel that infrastructure

as tends us midstream a up for whole slightly to be will But that So a as up be mix. slightly. just

and the business, cadence revenues downstream, big U.S. seeing chemical Shell very our And our on you're and completion then this MRO us. driver, project, the we and for MRO XX% yes, will stream upstream year refining, the it's - largely be polymer to biggest year downstream Now from an really contracts. track the of XX%, based revenue our about that. in closely cadence is upstream completion on Without

downstream we large spending slightly on growth as it season some from for project. Their slight up won't so want come come from our expect nice downstream smaller but It'll contracts. cap a will be forecasting we're turnaround we up in projects, whole, So slightly and business. that,

Marc Bianchi

Got it.

could. I Well, Okay. one more, just if

the and about quarter had quarter, of running puts we of and of margin the you sort the here be the about with that quarter? wind Jim, this margin that average, first kind for profitability some the thinking Or of at XX-type-percent to take kind terms the to does you in first In guidance, talk guided the takes range still gross so within of we're that that the for should down year? first get to over year level course of

James Braun

we're to would But the toward you be that expect that end. very range, be to think close range. I certainly, may in higher

Marc Bianchi

the The range clarify, for yeah? year, just to

James Braun

Yes, correct.

Sorry.

Marc Bianchi

it. Got

Okay.

Andrew Lane

first in Yeah. high Marc, end the quarter. Jim toward I said, as the would just say,

Marc Bianchi

Super. Thanks very much.

Operator

Our from with is proceed Northcoast your Please Research. with Cieslak next question Ryan question.

Ryan Cieslak

Hey, good morning everyone.

Andrew Lane

Good morning, Ryan.

Ryan Cieslak

later hear So the year just full seems in you're there's to the in Is progresses? visibility that anything you a expect mentioning And first of right, like Permian that guidance pipeline commodity midstream ramp some as quarter in to in a as the to pretty continue confidence visibility some the there of relative baking give quarter. the that back the year it's significant some in and I first giving decline Andy, if the projects move there higher? wanted or you ramp year you guidance then you I the the to that, it seems progresses. go of and the actually Or outside like that level just prices else year is of confidence following that you're

Andrew Lane

the on through I our commodity and based would say, prices the yes, year. forecast improve will estimation it's Ryan, Well, that,

fundamentally. we'd of uncompleted If our backlog upstream with drilled tank on in mid the batteries our low those But end to be driven doesn't expect contract by that's downstream range. good the So happen. The that really or spend, on visibility upstream us mostly have gives pipeline the position. spend, The our we that happen, our is we visibility and projects. position and good

top we business. XX% on do So They detailed make reviews almost very XX up customers. of XX, our

increase But spend on our which guidance based CapEx, to now variable expect to spend at they midyear. from they announced they've change commodity what published talking a a for could understand then going to spending CapEx this we if them their be their will we on probably And right we this they'll year what So always They spend improve, where their year. know plans. us. and what prices they're is CapEx, be

so factored back some And that of our half. in we've in

January, a the just second first, than in. starting half the February we're stronger definitely, of because whole So

Ryan Cieslak

was entering I like us a additional tightened that of XXXX across is times know, then Thanks. how right does year for XXXX? for times we you chain And seeing Thanks follow-up extend reasons, product you're significantly your give but my if could that color right just, Okay. now some saw color. it that variety maybe lead seem the portfolio lead now? supply a and look pretty around

Andrew Lane

out everyone's and new flattened especially in to as the this they some, adjusted Yeah, come environment. in tariff steel mills,

fourth So related lead the in mills part quarter. the and the mills, times in caught of as that's demand slowdown up the in to

Well, I the for are So line long up. XXXX times would us in say lead ended about where carbon XXXX, pipe strong valve we demands lead the product general still shorter then And and on fittings bit definitely side. than still us. times time and a and the came on item all expected are side, for lead stainless a flanges little steel,

be shorter So for pipe would change swing big pipe it's line area. times except the in big - the lead a not carbon

Operator

with proceed next Liptak Securities. with question. is question from Please Global Our Seaport your Walter

Walter Liptak

Okay, morning, guys. thanks. Good

Andrew Lane

Good morning, Walt.

Walter Liptak

of ask to couple valve a Wanted you questions.

XX% XXXX? targeting for was in What the valve. You're it

Andrew Lane

of was ratcheted It up, was it revenue. we've - XX% total

And so XX% in - and XXXX.

percentage. to new very a brand complete in do expect up in be in up ratcheted the La for market as about XX% that That's we investment talked adding related Porte as facility large that still in. our So a has be we that mid-XXXX. for in bigger step we and business valves XXXX is XXXX to XXXX. considerably, the completed percentage to play that we're the midstream in assemblies talking ability at there - the We're XX% we said we overall grown and going And to to

So XXXX to in our get that - is XX% in to goal XXXX. XX%

Walter Liptak

you valves? into what down you're in of in more Can rate that that Great. the break XXXX saw growth a Okay. XXXX expecting for you and

Andrew Lane

is it measurement Well, the in and the the way we look actuation business, and at instrumentation. manual valve

that have have upstream automated real our business in add. downstream. really valves. completions the in in It us anything And highest a that's would growth for valves you of there. and in attracts automotive us a demand - we batteries, packages then to revenue So, valves in lot Is be have our the well XXXX. XXXX growth for steady Midstream valves highest automated tank growth Jim and for There's confident. will

Okay.

Walter Liptak

could Okay. through inflationary And a then you you're just Any talk able pass price on to pricing increases? if bit about pressure the valves?

Andrew Lane

to a in with component would customers. Xst, tariff on XX% through customers. the go been we work XX% Chinese goes XXXX. through at the March work our to long year valves issue on But the that XX%. to was It - on tariffs, have After We an that to with Yes, tariff have up our otherwise, planning if was the pass to challenge it's that issue all valves We're cost. manage we'd level. in position increases and also that from early tied a in factor. we we've as valves changes. to And a we strong But year. we those lead very to the for long done in it's more demand and the overall lead-time stock do any that But we time XXXX, buffer up time ramping arrive will to cost and us know usually the how ramping have up longer the had to

stock getting quarters. place done is in the quarter Lots to year our valve increase cycle plan for in second prior and So, work see each in of that the we valves as our in first activity the you'll third construction pickup. in

first pickup that. of the a So, ahead in inventory valve we quarter have in normally

Walter Liptak

Okay, great.

Page XX I and And you then got seeing slide the downstream switch the you're wonder flag bit, could opportunity. this gears on Okay. And the talk little with year in year just about could XXXX. market the the what up And if if you've I with step-up? just step in end a

Andrew Lane

Yes.

what of - the petrochemical and is for the main Gulf our and growth lot I Coast XX% of using think customers, our growth. Chem, projects and the kicking But three think ExxonMobil, sources lined There's major CP there. projects Basell. that industry a up in also downstream Philip we're the I it's there - for driver really is XX,

we for So a - lot forward of projects going Motiva that expect also. I that there some of could mention timeframe. approval in

petrochemical And us. very for the years be refining XXXX both so and good, to we Gulf and expect XXXX Coast,

Operator

Hirschman question. your with Stephens. proceed with Blake is Our question from Please next

Blake Hirschman

my morning. for good here. Yes, question Thanks taking

of it one $XXX it Just was sales in e-commerce, almost looks million one like XXXX. quick on

that think trailing $X billion was on I last quarter. over a basis

to And so that overall that some fell XQ versus trailing sales XQ increased. - the from figures

XXXX business I the curious with was on If growth kind so if just up overall there, and mid-teens. in update kind of the ebb that's So, the normal there just versus was or of flow any business? of X%

Andrew Lane

noticed the that's tied that Blake, one Yes, you it's customer, swing. to and - big

picked quarter e-commerce and XX So third when a us trailing when with very the deck it And lot through up a months, large we the quarter through they they had catalog. very TransCanada for do were active.

peak those that catalog about kind of we projects through talked was of So e-commerce. $XXX million through the run at and that the of of bulk revenue, that

even the still we And moved it of when in are to XXXX, we forward fell it's to more see make continue from of customer investing we see that quarter as I XXXX, in a years in grow feel off. useful very that nice the technology e-commerce. So baseline for customers. rest $XXX But million And of the the growth more even you our that base. to these good, catalog end

Blake Hirschman

for Make I'll sense. over. turn color. the Thanks it

Andrew Lane

Thanks, Blake.

Operator

with with question. next KeyBanc Capital question Please Steve is Barger from your proceed Our Markets.

Steve Barger

extending call. for good morning. the Hi, Thanks

Andrew Lane

You bet, Steve. morning. Good

Steve Barger

Yeah. Thank you.

margin margin product Going about increasing given the and back your talked to gross plan. about, I'm your from goals adjusted we've takes in curious puts XXXX, higher in just contribution the all

mix get to the year? of that size you a better opportunity trying of this Just see understanding the

James Braun

because but change that a longer up takes back to be move able course gradual and the such the time of of in - during may it that's think time. we instrumentation projects those said year. comes the up margin that's of XXXX, of going valves of and to The be grow the total as factors Yes, to XX% over period contributing smaller a is real it to the higher toward benefit contribute you're I It'll more revenue.

Steve Barger

Right.

just Okay. up And follow a on then e-commerce. the quick

from benefits any terms differentiation Just quantify in that broadly, and talk you Or you serve? can own about get does you your cost what e-com? that you to can of for

Andrew Lane

is we e-commerce. for we Steve, move where Yes. revenue cost that the the more serve. of efficiency I'd going lower even understand of major on have a with base that, customers half of definitely it to us It's natural revenues say, our as over forward, a

So we contracts parts. MRO with They them. have cross-referenced multiyear have

established. have We established. terms pricing The and all condition

ease our for and their order itself in lends our to system order really the system, cross-referenced into it places them very catalog So seamlessly. to to

do part it's also branches of for them deal with So really the and that's for purchases we'll customers their items, the stock and offer forms. and with we multi-year preferred, a them at all catalog. of We'll the our our have large basis to us the And if contracts model. easy way contract, we'll through do them in business for with the transactional

So I trend as the that's better continue investing enhance that is to think we and going are I mentioned. even

I part our of growing business a think mix. So that is

Steve Barger

XXXX, the When running any way e-commerce? SG&A reduction from you how of that could to revenue a have come in think there quarter through quantify, about on saw much of that you your is

Andrew Lane

see of about even Steve, say, centralized you'd timeframe centers XXXX more efficiency would forward, in as support way think to customers. XXXX, technical locations in XXXX, going the is support kind I in we Yeah, the more put to

in I SG&A. to we as yet. XXXX, in XXXX, that expect we've XX% to we cycle. to and change see is certainly on mass XXXX, had through. in we would to us previous we're say critical that a significant back mentioned our for reached the tailwind direction, a haven't go SG&A get And We it going XXXX But model

Steve Barger

All right.

it. Thank Appreciate Okay. you.

Operator

portion to our management would the pass like for comments. call. to final concludes of I question-and-answer This it now back

Monica Broughton

in us you joining Have join May. our conference and in good MRC day, good your interest a Thank look on for today bye. you, us quarter first having call Global. to We and forward for

Operator

Ladies does and gentlemen, for you today's thank This conclude participation. your teleconference.

a lines, have your day. and disconnect wonderful may You

MRC Global (MRC) 15 Feb 192018 Q4 Earnings call transcript