MRC - Earnings call transcript Q3 2019

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Operator

Greetings, and welcome to the MRC Global’s Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brieft question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jim Braun, Executive Vice President and Chief Financial Officer. Mr. you, Thank Braun.

begin. You may

James Braun

Executive and Global good webcast. to you Broughton, everyone. appreciate on Relations maternity leave. morning quarter XXXX MRC our Monica third today. and joining the of earnings Investor you is Thank us Welcome Director conference We call

November on today website available call until addition in in by by on our in So as dial myself Lane, well Andrew phone today's have the replay XXXX. CEO. and of call mrcglobal.com, information as release. President yesterday's There'll to The we XXth, be a webcast is

on We also XX-Q expect to website. file our on available today quarterly will report it Form and our later be

Please of remarks today of adjusted adjusted may the that that speaks information gross our information Xst, the call replay. longer percentage, adjusted In you're this only today EBITDA accurate be gross time advised note no as adjusted profit, profit of margin. and as reported XXXX the we on November and discuss will EBITDA therefore

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

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

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

company’s concerning forward in-depth of factors review read these You more are the statements. encouraged SEC filings the a for to looking risk

CEO, to to like turn over I'd our And Mr. Andrew Lane. call now, the

Andrew Lane

then I Braun, for detailed Global. turn morning today results. the back Jim Good the us continued for review to review highlights. quarter company's over for call and Thank third Today, the a interest And and CFO, of operational joining XXXX financial in you, our you, I'll your thank all, MRC will Jim. more

are lower our continue quarter, And by believe spending. X of significant fourth to will were approach from focus sales The sectors invested continues hold. consequently, our in The customer a deviation capital third in take market experience. customers quarter of our to base returns on the historical pursuing that a disciplined restraint We across is quarter. the this spending than trend second result

Given we backdrop last this beginning actions cost reduce quarter reduction costs market weaker efforts, with several and voluntary a the QX, took including program. operating retirement to

further evident programs the will The and cost We complete. after with in are initiatives more in are realized quarter. efforts also next reduction fourth will fourth become quarter the go these these year from results decided to fully and additional continuing savings be

capital to objectives market We gaining toward our to capital share, our shareholder efficiency returns structure. working and make progress also optimizing maximizing maximize by long-term and profitability continue strategic

how progressing objectives. address I'll me first, let third we start But strategic toward with results. the our are quarter

Third of reported in $XXX was each revenue second downstream and decline midstream This a million, our X% the businesses our quarter sectors growth. was entirely this upstream modest XXXX as year. decline from quarter

expected, continues originally grow. utility somewhat to had lower than gas while Our we business,

X% In first year. sales were months higher first utility XXXX the fact, of they last months gas are in of X X for the than

second dividend, preferred and previously the operations view cash not net the the which relatively in our from is $XXX and quarter. more receivable from of debt year, was by fund but million capital expenditure Inventory our generation to allowed stock levels. needs million business expect third $XXX lowering also flow us in operations, projected, to our cash we model. are small quarter quarter only of with balances Given current generate than consistent from This our which declining

from end of operations working working than view to XX% a our levels. cash at capital our our sales which cash for year, least of by year, XX% price achieve target for implies flow to of yield at capital the stock free strategies, XXXX with of more $XXX the million Consistent supporting we full expect the current

I to customers one and our on grow our key of with Now share customers. strategic new objectives, share like progress market maintain existing highlight with would to market

This quarter, several we X sector, contracts awarded with were in our were midstream gas of utilities. new which

customers First, the we acquisition states. CenterPoint utility across which new with country, integrated million CenterPoint the a serving gas were the Energy, awarded over recent largest in includes is Vectren. agreement sixth X supply of metered X

implement it of expect one our And customers. contract next when new through year. to midstream the middle largest CenterPoint fully this become We is will of implemented,

won Gas, of fitting also the and the subsidiary Southern we in largest largest the in contract, serving of utility country gas is serving with XX contract as country. are plans utilities customers. now SoCalGas, million customer pipe And the which is a a Second, This X XX new California opportunity. a this we with new known also gas Sempra,

and continues continue upgrade that XXXX subsector unmatched service The utilities trend on and in grow to our prices, We commodity expect focused independent to expand are their continue networks. we is space. utilities gas as since of and this gas to

and We grow uniquely and of continue expertise are service superior positioned our combination comprehensive in to through levels. this space

leading for transmission service the United them stations. in supply their the to we Third, valves pumping X-year with new signed contract subsector, provider gathering with a States, a midstream and ONEOK, in

strategy. market expanding a component share have core As our of before, emphasized we is

strategy is facility to to million believe This and with allowing valve the square-foot midstream Porte, could alone construction and We sector. sales near-term XXX,XXX quarter operations Consistent capabilities valves initial better will the were focused over to expanded be completed our -- in center, us our portfolio we service engineering opportunity the market. to valves that that X next in our expanding Houston we share offerings, new $XXX midstream in La expand provide of years, the Texas. last high-grade product on our midstream penetrate the our and midstream us announced complex higher-margin

the product track of our in the of months increase sales valves group sales, we from valve were valve next XX% XXXX, with to X upstream, XX% are and market total XX% States of that XX% across in grow to and X to our the have we billion near market sales first valve the total the to of The addressable downstream. United overall plan approximately deliver of gas sales oil sales future. midstream And is Furthermore, years. $X.X In on from plans in and we our share.

that enhancing share customer digital the and our to objective customers in chain broader announced we an called our with seamless MRCGO, cloud-based initiative allows quarter, transact comprehensive a with fits to portal us Last strategic experience. easy in supply This our manner. by grow market solution

months. rolling as customers this initiative continue on and customers to to catalog current well. We XX out will expect this the next largest and are track to support fully over to more XX our first the is time streamlined a structure to This over cost expand

to Over double. through we our expect to the revenue X X next e-commerce years, nearly

the And then of quarter, part finally strategy. our shareholders allocation continued we to in third return capital to cash as

in million our of have As we million XX.X remaining of quarter, $XX million returning previously began early $XXX Since to program, repurchased repurchased current when repurchase million additional an under we a we shares, XXXX, authorization. share total the announced our shares, shareholders. leaving $XX

needs. capital options, continually returns evaluate We a both we all determination have making to committed while allocation maximizing long-term on short based shareholder cash and

for of employment CEO serve The continuing pursuant agreement Board set employment this week, until as to Directors President the I to XXXX. term was years. several my I May in employment look agreement and to and amended finally my forward the was the of expire prior which And extended XXXX. May to next

highlights the I'll call over now to quarter. for cover financial turn the to the Jim

James Braun

Well, with sectors of were decreased quarter, a lower geographic year-over-year each Sequentially $XXX of from of our revenue sales morning in the XXXX segments Total than again. year, reporting the third third XX% in second for the good last quarter quarter decline X%. million, the were comparison. which

XX% million third $XXX in than the of third across sectors. decreases quarter market was revenue the XXXX, with XXXX of our X quarter U.S. lower

customers, sales circumstances In down by and XX% were the decline million to Pennsylvania $XX activity upstream transmission capital driving because the sales XX% timing levels U.S. by impacted And Shell chemical the and with were discipline the lower project. a by gathering declined downstream addition revenue our subsector. U.S. midstream U.S. and customer-specific of the decrease. winding of in exhibited down

XX% We challenged, going in this near undertook to structurally actions be continues was likelihood third of the the activity to into of the in reduce Canadian term. production million there sector in quarter oil to cost continue quarter weak a to affected levels and more to fit see resulting fourth quarter, streamlined plan work current cost and into third Canada be we structure down the of XXXX. upstream little by $XX improvement from XXXX, adversely Canadian limits. revenue as the the continues year government-imposed and last prices

concluding XXXX, the International year due as was the in a quarter impact same quarter the well revenue currencies. to Kazakhstan in from third million foreign of the major as X% of a project weaker $XXX of ago down primarily

impact, project and improving FX particularly the the sales market and Norway grew Kingdom. the United reflecting in international $XX Excluding conditions million,

segments. And the end active million year. the sales all sector versus now the let to most remains Yet same period revenue Specific declined XXXX me market. decreased quarter quarter our Basin, sales XX% XXXX $XXX Upstream year area. geographic same by our in the the XX% the summarize across last performance quarter of third upstream third to Permian from last Permian

were $XXX the U.S.-based, million XX% XXXX, third from year. quarter quarter in sector down in which Midstream were sales, prior the the primarily of same

project was customers are more disciplined and spending due and to timing. as approach Our gathering subsector to transmission a several less down spending

rate overall Our Since which show digit gas commodity another our of part growth third mid year revenue X%. a quarter, XXXX, to annual has single this of high which XX% And not growth XXXX. the business, to our of related prices, to in compound utility expect of in is represents business, we continues growth.

due project Shell XXXX revenue down sector, of million, of $XXX quarter the drove from to U.S. sector mentioned was In The downstream earlier. the quarter primarily the last winding down downstream third third projects, decline year. chemical the including the X%

Gross quarter as $XX of LIFO of to compared basis XXXX. as expense current improvement of in to $X increased year. a turning the third compared Now profit million to in million margins. the the XXX percent quarter LIFO in reflects of prior points income The benefit third to the in from quarter XX.X% XX.X% XXXX

of deflationary and XX% prices. third due in period million less sales offset XXXX. or this and $XXX year pressure gross product revenue the project of XX.X% was the pipe line was as in to for in valve work by profit gross million same profit relative lines, for $XXX Adjusted Adjusted low-margin higher to compared XXXX flat quarter our

part than lower pre-tariff on XX% oversupply demand, were quarter prices pricing the situation. third market soft the demand XXXX higher third in of lower pressure due the We pipe strategy. XXXX levels. been lower Based XXXX line product pipe on pipe Line All margins. line effects of XXXX. the continue higher-margin has quarter average in expected the as below continue are Index, to soft Items of pipe were priced quarter of third under The softer prices combination to on quarter our have tariffs of in valve-centric small-diameter quotas pipe as is the versus put our inventory Pipe oversupply in and and cost Line of mix of to the to valves shift same Logix spot given and to a pipe sales line the latest today remain pipe hand in. in Line prices prices pressure

or quarter third or XX.X% $XXX of million of sales for same $XXX SG&A of in period the the sales of to million as XXXX XXXX. cost XX.X% compared were

expected Third in of result eliminated third fourth in to quarter our positions, in in quarter The severance plan reductions which cost XXX expected efforts savings includes reduction to result approximately the that cost restructuring further cost additional and are actions million. $X expense quarter $XX severance charges. We million. SG&A the with annual of is continue to

to a the year The rate Tax in prior Our $X XXXX XXXX. benefits and in was the slightly effective result with for of tax Jobs as effective million third the recorded provisional quarter rate our was amounts associated adjustment tax X from Act primarily ago of the a of discrete tax XX%, up Cut quarter related guidance. in

quarter million diluted shareholders of $XX common per Net per income third quarter million to for the XXXX the shareholders to third diluted attributable or attributable of after-tax Net charges common XXXX was XXXX. share $X.XX diluted the million severance and share income third $X.XX for or includes for of share. quarter per or $XX $X of $X.XX

to the our versus EBITDA margin X.X% the lower in as XXXX for $XX year this a EBITDA Adjusted in quarter sales the All quarter Adjusted EBITDA year. third positive same segments quarter for generated volume of year was X of ago. $XX of X.X% million by the were compared this quarter. last quarter million the driven third adjusted

XXXX than at end end the $XXX trailing Working of XX-month working end Our was it capital, XXXX. was of third $XX the XXXX. capital sales, the as at quarter cash was of excluding million, of third the the a quarter of million lower XX.X% at percentage

We our working the work targeted XX% expect capital of down to the to of by to end continue achieve inventory year. level

generated We with from operations the quarter XXXX business. and of fell levels as cash the $XXX in as third million inventory the slowdown expected of in receivable

full expect from to generate million. least we $XXX operations of the year of flow For XXXX, at cash

$XX in the for were total expenditures of X of for year. months a of the million million first quarter Capital $X third XXXX the

X.Xx, ABL $XXX availability at had to million million the the was and leverage the $XXX based ratio up million the third we end on at $XXX net The quarter. at our the compared on $XXX was was end cash And $XX end XXXX. million XXXX. facility of at third outstanding X.Xx debt Our from debt of of the slightly quarter of million, end of our the

Regarding XXXX. of our outlook for remainder the

customary full the plan As guidance this year update we to practice, year. late in is our don't the

XX% at expect do greater customers that from the Historically, the discipline it's exhaustion. X% down down that range of budget the the to However, the range, high we quarter. it fourth from or to considering be quarter be in and will expect we capital end and seasonally third

are discipline. customers business, our a decline ahead upstream U.S. give to U.S. early our and now, complete capital spending, double-digit customer returns will early to midstream downstream that primarily now some focused the Nevertheless, beginning process also budgeting guidance. given on too just it's and XXXX, estimates Looking although base impact which a our are show in

will well-positioned help business regardless overall in and and in cycle. past, However, market, should execute the the new wins strong softer And shop, contract the against offset utility a even levels. we new are modification done the the where to lower our strategy long-term we've are of activity gas we as we continue

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

Operator

Our first Meakim, is Instructions] Sean JPMorgan. question [Operator from

Sean Meakim

lot your -- you a to on I'd from dig like maybe to to in in I'd comments. areas Andy, have where focus the there's dig prepared to like control. here some

and cost. thinking was I mix So revenue

does able gross to I'm like could pipes. come them? does you in look get we you at what if XX% a valves that? start that there? required of years? talk And to you mix what But us with can that come that take on expense the So a maybe few line at -- elaborate to what about could maybe thinking mix, What's products normalized margin the if you're help

Andrew Lane

Yes, Sean.

our plus get I adjusted think I'm X delivering working so haven't targeted on for emphasis we're increased to right. this decreased the and pipe, we But Yes, on we there. have margins. carbon gross this to going been years, XX% several on changed exactly confident goal. been emphasis consistently has I our all change mix. our started You're towards Jim valves. ago I when years And

are We now. of last quarters achieving year. last the We sporadically did that X

we just recent did Of in course, the quarter.

but So our goal as continue multiyear consistently up can get that we plan is and the then have strategy. with from there, the there to valve-centric move we

in confident I'm of that it. So part

addressable market that big we about. a talked It's

modification We do. share. painting, manufacturing-type market just that which more added assembly machining, in new engineering in-house a capability have XX% pressure leading valve shop, the brand We the midstream testing, with welding, complete and we'll margins some a brings

complete to and So out testing. parties actuations. machining we've valves painting sent do assembly and of and big Historically, and provider the midstream third to that

delivered assembly. all customers and in-house to complete our that a We will now have

there's small-diameter next that a change. That's specialty lower-margin we to there goal as that to exactly higher And I'm the will growth getting that $XXX a pipe mix. million confident I'm leads So stated. on you're us. emphasis And over ERWs, X for nice to all Yes, the X years. less be right, line market in our a addressable in XX% confident mix

Sean Meakim

That that appreciate sounds feedback. very positive. I

cost taking a warranted. to I of next the thinking it EBITDA about the the run that's was your then approach to margins. sounds level on think into come given forward the What's you're aggressive pretty And G&A like. outlook, I rate as you year? costs, to back impact So go structure, just right

Andrew Lane

Yes, Sean, let really me talk some start my and to Jim comments comments. then can -- add

a to the I think strong be cost we the changes right side deliver to here can X% make on on range still regardless for it's of us the to percent plan EBITDA in macro top the aggressive line. really sure

last positions out since the of of so year, taken we've XXX X.X% end the workforce. So roughly

We some will changes further in the in made to We've October continuing streamline. impact quarter. are that fourth

of couple things. A

continue regional at we're efficient And MRCGO, to is more We more which to resources an our where more look online us up with more also business going area quoting in to our for efficient. connection to customers business. centralized on allow Hobbing us centers some be the is centralize distribution our ways support, run more working also. efficient technical serve to will customers, support, to our be

So XXXX. efficiency come be in that, there'll some mostly more from to

overall to along working just things to year. the position So next us be we're good in position Jim? on the several into going with a reductions

James Braun

of Yes, the a million be the next Sean. would things actions year planning, our took run with say the in sub-$XXX and to I that we quarter quarter. some ought rate quarterly we're

Operator

Stifel. Our question next Nathan is from Jones,

Nathan Jones

that last question. on up Following

meaningfully if $XX was from year? be savings your a $XXX below $XXX million, severance to initiative Shouldn't we maybe alone. I and million quarter million, more -- on of that able we just SG&A a quarterly $XXX think run next out rate little like million take

Andrew Lane

own next in do going several potential, desires together. to has our putting to go Nathan. and I strategy. plans budgeting through months exercise have some certainly to the mean the internal invest our and here our in continue e-commerce plans we're it Well, We

think some us budget. cost to early to our We've success long-term on I So investment. to add that. nice a cause going seen some that's It's nice

we to this it's just think be So to that again, ought probably sub-$XXX I say time, at safe under million.

Nathan Jones

want enough. year. on -- fair your just take Okay, just your And next up follow to then I initial on

down upstream said I portfolio in drop double upstream. That's smaller in probably downstream? across mid double revenue in with, You the concentrated guess, bigger and a drop a digits and digits,

Andrew Lane

again I budgeting Jim XX%. We're the on then decline around And comments. talking a or of U.S. drilling start. couple and about from to XX% but estimates, X% me it cycle. focused It's let vary Nathan, can look early a ways. some add at rig completion Yes, specifically the would drilling they double-digit spending

midstream, -- at have gas the planning big The in in new utilities, we'll growth we're some would and picked year. still a growth as again I X growth significant then have So Permian midstream, will and that contracts that the be look next in in position. utility new And Basin we're contracts were -- up impact us. we'll solid for gas in have We'll we are accordingly. to

it's relatively downstream, So in flat down. to And slightly maybe I not think board. the across

it's the not So XX% across the board.

impact said also budgets our And see customers major Jim spending. out to As that for then will tend -- they final for the next his come comments, we in us. mute what year's

to longer-term view. So the majors a keep tend

I the lot be U.S. think reductions double less their will the upstream. digits than a for

the And so and number active stay then offset. offset. contract will wins think them have I those we'll with definitely we of So

that numbers, guidance give will be firm my to but at it's point. too this So early

Nathan Jones

across people I double-digit just declines you wanted have portfolio to then. sure I expecting make get that it. to the weren't

up adjusted to answered The little call getting got if earlier, -- on Forgive I you me, if margin this I to XX%. a gross is back the late. bit question

the XX% did have given a I the actually that to surprise quarter? to in mix think, those pleasant get that a up you was quarter How been the that Was on. of issue related mixture increased it trajectory very valves? back in

Andrew Lane

Yes.

about a it mean Nathan. Yes, Jim little more bit Let strategy. comments. me I mix, add talk And continues can our on the

holding well. other of They're kind are up, the not declines lines. Our doing they're very product seeing valves in

change seeing a to some so margins positive ship which you're so a -- -- what bigger for are starting assemblies, that's been on us. the the just mix the that's and We're particularly higher complete midstream And even from in weak margin so usually has sales. talked line lower we've are quarter. positive. our And that the pipe third about, small-diameter margins Those ERWs, negative then

us. have do that you then add? from So helped And anything change, it mix Jim, to

James Braun

No.

Andrew Lane

driver. biggest the That's

Nathan Jones

customers. of you're starting kinds on see some -- declined to pressure just effect? the So volume here and challenges some Any outside with your clearly of pricing products from deflationary spending any

Andrew Lane

time really. lead not the to valves, mean, stainless definitely more but lead longer longer to time, be tends I technical. a No,

in you pricing. changes. So steel of react environment cycle that's demand mentioned, supply they tariffs not mills tend to Line and pricing in plenty 'XX, of pipe, to the deflationary 'XX, one. big the pipe. coming that's increasing And in then the the short-term as long And to down, reacting line the whole U.S. year inflation of all

really So gas for just everything much and margin It's us. for up plants, us. swing pipe been all the the factor steady But that's fitting in a big there. really line swing held the more else, products, that's the all in

Nathan Jones

Maybe just one more.

any you've whether need footprint you here, taken take like head you thinking count out any How to doesn't go sound some but or year? as into taken here you are You've not out. about footprint it out next

Andrew Lane

Yes.

taken out. So footprint we have

over $XX, that to we customers. $XX we've a our included a barrel and we into in -- started structure what 'XX, service need -- at continued XXXX, to the look haven't of really We well, 'XX and in XXXX do environment, But comments. the

streamlining So over of there's of been couple a a years. lot

downturn environment, We and branches continue year emphasis to, the EBITDA. in good make in we -- this third to a a you the major second streamline to quarter to struggle where a smaller made

year. closed this So branches have additional we

the locations need at what yards consigned customers. We on and during inventory we and looked our do We pipe consolidate our footprint for also small also locations, looked at quarter. pipe

So a lot of streamlining.

we have So from we -- XXX but locations it XXX. Q, forward our will our in previous be going

Operator

is Inc. question next Hirschman, Stephens from Our Blake

Blake Hirschman

year this line, rolling have the this been as should creates something those through so, the million impact flushed be about a of which year? $XXX projects Or Will company-specific top seemingly an off think end a like of I kind next hit be or well? XXXX we thinking easier comp into on lingering year. projects Large by

James Braun

those No. have Most projects of through. flushed

maybe a million, of going year-over-year little have will not coming large into million bit we We 'XX. $XX or revenue But $XX of comparison XXXX. of headwind amount comps into like a had

Blake Hirschman

And reductions Canada. then you did some was further the it. split curious, Canada, or count in geographically? those is I Got on SG&A, of cut U.S., level? out where? head mentioned any actions And how cost I mean, this you is a kind it mostly bare-bones can

James Braun

reductions Most the in retirement in of the that our the voluntary program U.S. of we part were saw the quarter, XXX

in Canada. We cuts have been making

We that. continue to do

In terms based the about levels. on not activity level question yet current quite bare sure bones, the we're I'm that to of your

still So that looking fourth at have further that's quarter. some said why here we we we're actions the in

Andrew Lane

the were Yes, X%, our roughly Canada you in international in Blake, was cuts in in quarter. The I'll X%, was a the the and workforce U.S. little larger just give cut color. more cut was -- XX%

So not picking return as up. about optimistic structure. we're back International still just Jim ways to look and we the -- spending in is said, But Canada. a streamline U.S. at

back Our up. intake is picking

in a position pretty are there. we So good

had in than lower generated a end higher So we that. X,XXX the of when revenue at than which we're the at at we level quarter, employees XXXX third is

the in have we of facilities way we fundamental business, So taken cost operate. in the and both out

Operator

Liptak, question Walter next from Seaport Securities. is Global Our

Walter Liptak

we've some a range. to some on the fairly of the and And outlook. midstream projections declines We've XXXX, couple and XX%, for sized Wanted capital seen the the XX% in questions midstream of good CapEx more got in ask gas gathering companies. budget process just

customers, we saw look color and your some what wrong? can not major to including customers, -- that you projections customers? are that going I it's any about give if your just I you from market so And is of more wondered early the wins, share us hearing Maybe like. know But too guess the what just maybe XXXX your to

Andrew Lane

if in here XX%. at this out things. ton, One midstream per leveled think it's thing pricing. you We year, think at a line of talk the we I this of Well, sure, midstream, Yes. look pipe down price And start couple and for with point. kind when you

So drop we that kind don't drop. year, see next smaller muted much of

more course more supply. with that stimulate project of some a -- costly line So activity will pipe cost-effective

wins, we And the one CenterPoint, about very EnLink, ONEOK And and gain. so before market that's also the market big we And thing. share that's so another previously gains. talked the quarter feel about Vectren, SoCalGas the good share

So even pickups down for are those, flat a market, in or nice us.

And have some right now, $XXX work situations major main incrementally this at these tie-ins. smaller lot do in then But year we do about million major through. them still when projects, because bottleneck see we've projects million pipeline projects. XX Permian active you of our estimating pipeline the Permian, XX up our and are the business, we that gathering in still and $XX we'll have are and customers pipelines -- year pipeline working talked XX -- still We look a and of -- that next we and revenue

to happen still. going So that's

midstream If in you look at XX%. up XXXX, we're business our Permian

spot So us. that's bright a for

from gains very contracts. core market some We've going there's and forward, in strong projects Permian the we are work. pipeline got share So the

things and the contracts in think were next market as I you down overall spending smaller few and of some So on area a have share But the some the up favor talking gains hold about. the market MLPs will our year. and could we of overall that be both

Walter Liptak

it's wonder is is for knowable about XXXX? yet utility new the -- Okay, it the if wins, gas I understood. be Or the it Appreciate with revenue determined? opportunity color. still to

Andrew Lane

formal business And that we -- close XX That's years top that million in utilities. in have little up. a our when X the more base -- will $XXX more information, I $X what XX. this business. in said plus a to guidance. XX clearly give for remarks, be the it billion bit be But year X we revenue we we'll us. of And the contracts of top directionally, now next we it's Well, for have a is we'll gas give directionally, be definitely mentioned you as A prepared

very for excited We the So we more current business. are we'll about then a about. contracts contracts XXXX. the that all outlook very new retained But it's we have our give stable and

Operator

question next is Our from Vebs Howard Vaishnav, Weil.

Vebs Vaishnav

I we've good about margins. gross guess, spoken very the

understanding my more XX% gross held lesser then line and is So valves pipe margins.

you to margins? of a upstream potential and thinking? us or downstream fair And or impact in help the on do falls that's if about think midstream fourth gross if First what more you could way follow, falls can quarter, more be think

Andrew Lane

Yes.

Vebs, So you it have exactly right.

left, longer global So our a the All higher more value supply and and business. have we turned things they chain time, we we do in impact margins our lead have add. more valve margin, favorably because those assembly a

and content. -- in manufacturing midstream the talked more valves, about, I've So adds which

things, of So valve It our we more our all grow the impact better on us the higher a margins. this competitors lot from separates business, those in market.

our strategy. So been valve-centric that's

the driver. exactly that's main So

line to And And mentioned, That would the project yes, do the in pipe. I business the was as them, lowest-margin the was we which ERW is I add small-diameter I we helped also more previously, third think quarter, margin. slow one particularly mentioned the falloff.

we in Jim tend $XXX this so of range million below to about for big XXXX. Jim of $XX tend in those year. We're -- as million gross business be XX% revenue talked or the around, that So to When our a projects, projects, had be kind mentioned, as tracking $XX lower-margin volumes us. in margins, average, last well previously, we million get

revenue that So gross favorably. a lower change the margin had on also project

margin? going biggest So are fourth X Jim, And on the things into movers. those quarter,

James Braun

the it I Well, the see be of probably I terms going highest mean all impact maybe have expect to And we're that in be other things little will downstream, the favorable in and should streams, fourth think that to fourth And across the equal. margins likely will it a the a in bit upstream. drop-off do midstream, slightly better. quarter, quarter, the of on in being I all

Vebs Vaishnav

against it going -- really have that like be up, what XXs -- sustainable So that for margins to let's sounds that? gross of the for call are XXXX. say high And it, ending like you puts and Would like is means you're takes XXXX?

James Braun

Vebs. fair, that's think I

the to strong into year finish margin 'XX. year from we where us you're relative perspective next think helps a I to and going finish us see going

Vebs Vaishnav

think normal what would I last And are like be when be will like you the savings more And I will quarter first a quarter? quarter? you that? or cost may. think the or It about it. like efforts question, Got done If it if do be with taking, just you cost-cutting is second

Andrew Lane

cost-cutting What We'll I and in be because for quarter. we done to hate year, with But the next you the outlook say market. fourth everything it with done planned quarter. with in fourth -- react done, the Vebs, our we'll be our with to

run So to a quarter rate. the ought new first clean the quarter at lower be

Operator

Our Fargo. next from is question Michael McGinn, Wells

Michael McGinn

Congrats to and Monica the quarter. great

Andrew Lane

Thanks, Michael.

Michael McGinn

into base of are guys savings had on of How Whether it's are point? what SG&A the -- couple MRCGO forward? this? are kind customer touch gross going One, platform? rate margin a this? your of tracking a you the How per future digital. absorption per platform? And quick you KPIs opportunity Just what's that Is questions. Into your for that the invoice,

Andrew Lane

excited I'm Mike. very this part. Yes, about

So a roughly and of in today. TC 'XX. were very an 'XX significant base a and million were customer big when higher X was we they little business a It catalog. years Energy, bit amount with the in we Those $XXX revenue have did

the customer. a So because with to little -- the bit it's tailed that just off of changes one

look platform the on at have it, way XX I the customers now. we But

XX customers our moving top have to converting current XX We to customers, which the platform, of SKUs up our and ramping focused and our we're really them would the and platform. XXX,XXX on on major on be

than with for much to get a orders, real-time multiyear Everything see online their their lot has and our support retrieve at It's these them expedite the it's their technical quote customers in all of So major -- ask customer for catalog. see and functionality them, documents, portal, gives support, ask it our inventory. a a just better are orders, contracts. is all with it all -- bigger

their visible So and to their contract them. it's all is pricing AML what's

get X last years to point. this So over we've lot done to a the work of

$X.X the we'll of by year, at on So -- our have we're metric that. the billion the number -- rate on group get the SKUs have that But this to the we I customers early our over stages. $XXX main run and really be the tracking is we're now platform. outlined we continuing That expect -- 'XX, we'll And business right very in of is goals XXXX, million to because while platform. for

in we So think we'll to branches. all that also we a on comes of standpoint, do more do and have we've this. this But both bigger there's and out -- e-commerce. a think personnel, We support the also model that get we efficient when a today in branch of bit more structure the little metrics We growth today quoting technical related bring a efficiency. at in primarily the looked this structure will some

a So and the platforms good very I pleased early customer very days. portal. very would we're much on that new lot new We're of feedback say

think good to we we're a very and I strategy to going have there, So implement. continue

Michael McGinn

definitely was gears I color. switch That helpful EBITDA earlier. the just Great. from could And if commentary to

I dig to XX-K, the supposed come amortization is if go I think down. into

the So targeting SG&A and core ops on coming little from a are we there? savings? add performance infer Can you're if margin left that to the color that's side, you EBITDA better just

James Braun

through mean yes. those cost more base, that the you by margin in our system. net said. is positive and The X dollars per more will on EBITDA. the the have performance it and income share, it out a I impact bringing year, factored reported -- drop-off revenue, driven including the of leveraging It's next earnings has Sure, things reductions that's our cost EBITDA amortization but just

it's that when coming improvement, rollout. not amortization at those the look issues, you of out So EBITDA operational

Michael McGinn

Yes…

Andrew Lane

a color then Yes. The course, us market. is it. amortization when about think just benefit Canada, our segments. nicely on And of year a very little will you next difficult

And at there. X%. is is running EBITDA recovering X%. Our is close nicely then U.S. to X% the International

So we continuing it's to business, about mix very of we still good the feel U.S. -- and the up. number the move

Michael McGinn

Can you if what a V-shaped whether more recovery. forward? U-shape. a the how in last a dynamics your the lower and just project we've that a give market. of seems a or Yes. of have large the standpoint? been then growth, us a like small on bidding melt going on And it's last context plays competitor more from little And into competitive Historically, X one just of kind This I a seen could recessions sneak

Andrew Lane

gas Yes, space, our back say players heads up, a compete on that very the big in there's X to 'XX just consolidation level, -- PVF frame. over go XXXX, 'XX, markets would really of high time and in oil XXXX all that I we in the years

So it's competitors. market, X a large big

competitors make have commitments And the doing of like they the support we struggles downturn. market. this off well on prebuying inventory sheets some could the think tariff I on and have the a on to carrying falls decisions. and inflation both it's really the making don't lot balance small really then the in They to or

things, a count that's suppliers longer-term make like uncertain. customers environment distributor think U-shaped described, of advantage big on suppliers, take prebuy prebuy major buys couple they tariff and large need large the in a the against one, market, they downturn you for So I to to projects buys, and with commitments prolonged capability can consolidate that of a

centralized in. more I things those think with major the we're the environment players, and I think activity lead So to X that's

Operator

next Barger, Steve from KeyBanc Our is Inc. Capital question Markets

Steve Barger

about, and versus you the customers next trying market from challenges spending think the think of offset about discipline and offsets about can contracts I'm can versus frame Just decline macro just what the to mix end positive you magnitude talked year projects? customer by outgrowth the new market. you gas you thinking up in

Andrew Lane

Jim?

James Braun

be year. next us our in help that not wins back we're those pocket, be you contract to it's But wins on offset going some our declines. be challenge into going for hearing if will, at having next it's Yes, preliminary least year of contract will will But nice that. enough I offset what the close. sure to market to whether I'm quite pretty new think

Steve Barger

early macro and just given of And would of you're in some the on million year that operating or cash you actions can expect $XXX so next thoughts the meet flow the Okay. context, this taking, exceed year?

James Braun

significant working sure without should more this release of we see as high year. be shouldn't -- or I'm not decline a flat a because environment, next we capital much it year, quite we will again, of have a that we see Well, next will year

Steve Barger

And at this implications the for in thought early on update point just any CapEx year? can cycle? next And on you capital the Understood. allocation thoughts

James Braun

Yes.

capital fairly somewhat expenditures us. running expect again, Porte it I'd investment similar the this the in pretty lean big La in We're to year. So so that's made us year. shop for We've light. be next behind are modification

down early a into X we'll of think that on X continuing spend and to to we'll leverage next And then I at balanced But in we year, go particularly in terms continue some it's paying perspective. little likely the look capital time, in that range. a debt it allocation, on year, keep to as

Operator

Hunter, next from Our is question Jon Cowen.

Jon Hunter

the a So couple side I of just questions to had related of upstream the business.

third revenues completion a bit activity. the from increased upstream little decline despite second Your overall in quarter an to quarter

at So in about? fourth of we've you one I'm kind service quarter decline least as wondering then company XX% upstream fourth to I magnitude XX% in revenue you what completions drove are from quarter, decline the And what think activity. heard that outperformance? thinking talk about mean, a about

upstream think how in about revenues wondering I'm that your you So respect.

Andrew Lane

of the and tank have on facilities a there's couple when revenue, you the investment versus upstream the a combination for timing associated comments with -- our Yes, that. John. and at and count plants in gas It's of batteries I rig that completions. look

did we And so well.

are a our market, in And and which was the completions. this count But had we sequentially business up was really in more the X% a U.S. depends rig as upstream you of said. things, though X%, in on couple customer declined the Given count there more have. some we base there DUC you so even decrease

completion were down, was completion completions though base was base overall customer even -- our our activity So up slightly. customer

very works that well. So

our with can XX% -- number and correlates sales I'd years our upstream of XX-plus at the our versus the about You U.S. completions -- States the done. that correlates before look United business over in mentioned are completions

quarters and current the And always completions the does you facilities than So drilling. than then up. production variability some level far in closer that it levels planned doesn't key the by spending the to metric. based get on in we're the up match It production matches it that's does

would in what you greater, the at upstream at quarter drives forecasting decline decline, business. of historical combination we're of fourth referenced. our the even in Yes, our or reason are X top it's what those sequential So the say I because seasonal

to leading is not a in going think activity slow. fourth in I is into strong pickup year, happening very normally Canada, activity quarter which quarter the of U.S. And be upstream the has year. a first this the in

which November, I right December, the forecasting a steep in upstream now industry. in the think going drilling think Canada, decline have activity we're for you're upstream, in in seen I So have and a in to significant many decline

what's off this that control. is that's So really our in year not tailing

Operator

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

Andrew Lane

good interest forward you discuss thank our having quarter year MRC today joining XXXX Global. year for as where and call we a us quarter February well fourth and conference in to day and for will in your Well, for We join Have our of our full XXXX outlook. you look fourth us results goodbye. next as

Operator

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

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

MRC Global (MRC) 1 Nov 192019 Q3 Earnings call transcript