MRC - Earnings call transcript Q4 2019

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Operator

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

It is now my pleasure to introduce your host, Monica Broughton, Investor Relations. you. Thank

begin. may You

Monica Broughton

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

have the President Vice and Andrew On CFO; we Lane, and Braun, and Vice CEO; Executive Youngblood, President Kelly Executive Jim President. call,

participate Kelly call March Jim the role assuming morning. will announced, the Xst. previously be will returning at earnings end CFO will on on of As be the this They both month the and of

There'll by call our yesterday's be dial available by website mrcglobal.com, in replay of a today's February The webcast as phone XXXX. is on well XXth, information as in release. until

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

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

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

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

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

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

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

Andrew Lane

morning interest MRC you, and and your joining for you continued today Global. in thank Monica. for us Good Thank

XXXX. past the including with eight call earnings missed. we get the Jim's this has Jim contributed together XX We've years. advancing hosted I earnings have this well-positioned like first he the proven quarter in him call started, Kelly a well we to pleased company I'd and be that corporate our smooth to And objectives much is transition. after over greatly Kelly us. to of IPO April final recognize his in marks wish Before CFO earnings a And to will take deserved want strategic call joins are retirement. him. to and us with his over X-month is

XXXX the turn him before who looking I'm Jim him. detailed fundamentals wrap fourth over introducing with results for of Today, to XXXX. working our quarter already behind and objectives. for current Then strategic highlights I I'll you company's the on outlook. don't Kelly forward to of I know with and current XXXX progress the discuss our review Kelly review those a for call will our up outlook financial the And then the market will more the

as XXXX the increase the shifted was late the we would EMP headed all in market first In capital That quickly into year. a double-digit that consensus in of spending. see half XXXX XXXX,

being up actions we shareholders us and XXXX than allowed reducing by responded to capital a cash debt. immediately XX% period to This in Now in costs reduce a short change to levels. lower and in which in time return ended was hindsight relatively spending inventory of operating for generation, and These substantial XXXX. substantial XX% direction resulted cash

maximize make sound will despite strategy we a continue progress to conditions. which long-term returns against We market have to

was $XXX a levels of year-over-year large of year, highlight capital in Before driven XX% which this a performance. our projects several I completion in XXXX decline objectives, and was items The couple want customer prior million. over address to progress reduction XXXX. strategic revenue spending on a I non-recurring $X.XX by from year's our impact billion, the of the

recurring Excluding our the diversity substantially base projects, end of due market the markets. declined to business our than non less overall X%

the our XX.X% adjusted achieved of consistent year also with margins XXXX margins gross We for of XX.X%.

gross Excluding year. in in a off profit company was products even Since margin is adjusted some our proof press shift QX highest that our centric this the that strategy margin becoming and higher XX.X% market. valve one have current release, for the our public items annual is continued challenging noted the services achieved, margin and working we to

conditions, market headcount action in Canada revenue in immediate XXXX million and saw as the $XX to our we streamlining early year. we of then to expectations reduced the to recurring and in XXXX begin fall due As we by United SG&A short in compared operational States, weak Beginning reducing took the by footprint.

distribution consolidated or scheduled centers regional which XXXX. San including in are locations closed Tulsa, and six close US to two early Antonio We

will more these able efficiently We be from facility. markets new Laporte serve to our

of a our We week of XX% also by were $XXX as we $XXX approximately decreased to above price our XXXX, on managing and capital. in flow cash operations cash from working employees based headcount $XXX aggressive workforce. levels. flow free yield stock expectation of of This $XXX or million XXX million in our generated million resulted this million of we cash XX%

we The this complete returned $XXX XX.X repurchased shareholders free to reduce and cash flow to debt XXXX have was to our program share program. used when million repurchase began shares. Since million and we we

returns shareholder to options. all committed are and allocation maximizing consider capital We

we the to objectives, of pursue tenets strategy. strategic our major our market share growth Regarding one _in continue as

business share gas renewed sales contracts increase we to with gas expanding utilities gas increased In ten of several and the with giving including or customers. obtaining nine the is largest notable multi-year XXXX, by in us California were MRO awarded country. contracts Southern contracts or our approach utilities Our which

integrated agreement awarded CenterPoint with an We also supply Energy. were

quarter incremental to revenue currently which million is the implementation we in discussed last to expected XXXX. and As $XX phase $XX in million in generate

X.X%. report more different utility volatile since separate transmission XXXX, continues Our expect compound our gas more and is In business business. for from to to trend this plan of business continue. and our that XXXX The to rate midstream annual gas we part business to to utilities gathering grow we provide growth this business transparency our distinctly

Canada supply integrated with an for awarded Chevron business. in were also agreement MRO we quarter their This

currently doing their this the of means are PBF portion latest have under win Canada Chevron substantial a we contract. project in spend work As we

offerings fourth pursuit Canada. XX% margin total valve. valve And gain XXXX a finally, goal even leading higher year revenue stated to contract say strategic three company history. growth. putting investing years. on we an XX% XXXX, revenue of in our previously our I'm XX% for increase also the objective that surpassing example higher service our our wallet our with offerings the the us part our revenue of and XX% And product quarter, the currently sales of in XXXX. we finding integrated INEOS, and share renewed our highest of and opportunities and muted In our sales totaled is goal toward to track chemical achieve for of valve our total margin XX% customers as of for from near-term shift product our sales goal of in of the of longer-term to in for revenue another continued of specifically to XX% relentless in supply pleased in growth well with This and us activity continually levels future This positions new

we see additional we Our proud are from new to and in center midstream capabilities engineering this us and extensive to square foot XXXXgives shape have takes more expect facility XXX,XXX valve modification which in results completed XXXX. and

supply continue investments years. discussed for the manner. To us an been million The $XXX our comprehensive customers In we very feedback next chain and we XXXX, seamless and share continue solution opportunity our MRCGO, to maximize roll and last solution that a of our cloud-based over out gains technology. from As digital the in valves customers couple allows transact to quarter, made think we and positive easy profitability, we market called this to with to also in midstream portal has share customers. announced market could we be grow

XX We already. have currently the on customers system

double in revenue to years. the expect the next through we e-commerce three to five in We are

full Finally, and still of impacting know, and oil China. as how the is macro will virus the it The impact is demand chain supply global in the influence world unknown. Coronavirus you particularly

million were have of China. chain. valve $X a currently we current significant low employee in From are direct $XXX in meet one Our We based a exposure have currently million than inventory sales perspective, only chain China is the approximately as supply very we disruption supply XXXX. in our have date, well-positioned less to To to not we as demand. seen

in of commodity and movement on China many could a cause and valve from of components our valves receiving United However, both we Europe assembled are the China product restriction delays protracted in States, source that inventory. produces and the people as many

their extends about term. actively monitoring suppliers impact mitigate with China in outside any as situation plan, for well over help and longer now suppliers the alternative looking call of the if We as our Coronavirus to the impact Jim. turn to communication potential I'll are

James Braun

activity sector Andrew $XXX by quarter and quarter capital as with and down of Thanks Total reduce than themselves. their response they fourth US declining. historical XX% were same segments the to was market and above gathering. fourth lower the XXXX XX% million quarter sector's sales customer with the lower the million due XX% in over fourth declined favor of capital for midstream sales led year than were be US XXXX, XXXX, all levels the of quarter more customers fourth the XX% budgets morning, focused revenue last discipline end declines quarter the The processing Sequentially, gathering to the of good of to of upstream lower XXXX midstream fourth geographic averages all across discipline. quarter and sectors everyone. transmission continue in in and on which in who early throughout were in primarily exhausted spending were $XXX revenue year XXXX

customer quarter same due budget several due also to XXXX. XXXX customer's were over deliveries exhaustion conclusion PG&E declined XXXX, also the downstream and lower bankruptcy. This well quarter pipe are sector. of and in to the same quarter fourth sector XX% chemicals to revenue of to to primarily Gathering capital over US to sales fourth of due sales US Pennsylvania utilities as upstream upstream the customer XXXX Gas XXXX as correlated XX% conditions the Shell related down due non their sub with experienced sales down the lower in in quarter recurring specific project. processing levels activity were discipline. the the in

clients government segment driven down imposed primarily third of the the the production year, Sequentially, last seasonal fourth from of down $XX exhaustion. due to XX%, in quarter quarter Canadian XXXX fourth quarter quarters by US fourth by XXXX million were exacerbated was by budget sales limits. XX% from revenue

TCO project the was segment, revenue million, ago conclusion XX% In down foreign year Kazakhstan, XXXX the $XXX the well in quarter primarily a fourth the to international quarter from currencies. as of due weaker as same

Excluding increased and international impact the or in Norway currency, both project X%, United the and from primarily sales $X Kingdom. the million

results sector. gathering sector each XXXX sales last same same million down quarter the case are our in from XXXX. $XX XX% based XXXX year. year same all period decreased market fourth in quarter as quarter US-based to on earlier. $XX fourth or to were sub the sector or to XX% X% $XXX were fourth of XX% in declines sales million. turning Midstream the down sector down utility In sub and and Upstream XXXX quarter sales end our million gas Now in described segments sector Sales $XXX from were comparing geographic our last million transmission on the which primarily quarter with

is group and share. XXXX, to have important in grow of a market XX% which unique For utilities This will midstream an total position we sales. we continue gas competitive represented customer

XX%, US. was of Pennsylvania the project to as to conclusion $XXX million, revenue quarter described a sector, XXXX The In the decrease US is downstream earlier. the primarily Shell as by of quarter the of decline fourth fourth driven XXXX due chemical compared

to margins. Turning

the profit gross XXXX the segment. Gross expense. was the to of million the million of XXXX expense LIFO and respectively. to for of negatively XX.X% and LIFO in $XXmillion international as multi-year percent quarters XX the XXXX final The Our impacted reflects project also lower quarter obsolete of recorded customer a in $X XXXX million quarter points excess impact the the and XXXX. our for $X settlement profit was write-off of non-cash and increased basis fourth of fourth inventory compared improvement in fourth by $X fourth of in of quarter

been Excluding XX.X% items the quarter impact these have of of would fourth profit gross the in XXXX.

the in profit was XXXX. or fourth XX% of XXXX as quarter $XXX revenue same period Adjusted gross million to $XXX for XX.X% the for million of and compared

due contrast would have experienced million Line stark XXXX decline XXXX adjusted half throughout $X the average latest gross XXXX. the the to spot just the of first the quarter XX% than increases XX% in of profit in index, of were XXXX. quarter lower tariffs prices pipe prices on been fourth in the of lower than fourth items and impact line of quotas. of fourth the logic pipe Based described, Excluding XXXX XXXX to X% items pipe third quarter all in steadily quarter of and the the

year, end foreign For receivables. to and an XX.X% the related your lower XX% XXXX prices as the The insurance the XXXX of XXXX. includes $X fourth doubtful million Both of for of to of fourth or product of than against supplier $X XX.X% a a million quarter $XXX pipe each. SG&A costs in million of line million for quarter includes sales $X pretax sales or severance restructuring were also $XXX full for periods collection of charges adjustment million of XXXX. and were compared costs claim

quarterly SG&A cut to Excluding these as declined better $XX cost or items from conditions. both periods, XX% with million market we align

Interest quarter interest XXXX of quarter rates. of average due which lower to expense $X the debt $X fourth and the million than total levels less was fourth lower XXXX in both million

of effective are tax unusual in This higher rate tax primarily of corresponding for than issued described responsible full-year changes certain the write-offs tax to the expected $X XX% is its loss. incurred additional no foreign situation to quarter tax These new the regulations. tax the with due for rate rate XX%. earlier reflects dollar million on $XX a and factors Our million jurisdictions our including of losses pre-tax in recently related taxes benefit also expense

million described per X.X% million were million Net versus $X.XX diluted And of or common were down $XX diluted $XX loss XXXX share. loss $XX ago. for per shareholders share. previously X% $X.XX totaling Adjusted quarter attributable was items margins for fourth fourth to of the include those year or a Results million XXXX quarter EBITDA from the EBITDA quarter after-tax year ago. the adjusted $XX for a certain

at sales end capital of capital XXXX as the was our million percentage the XXXX working of lower million; And XX%. was exceeding of it XXXX. excluding Our at the XX.X% than target end cash $XXX end a of of was $XXX working at

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

$XXX $XX operations. fourth in generated spent share repurchases million XXXX; was we million for year, full of from $XX the which share repurchase in For program. in our million cash We spent the quarter completing

to XXXX We at million $XXX was also of our $XXX by reduced the end end net on debt well at range. leverage million of million preferred outstanding XXXX, our the and based within debt stated $XXX of X.Xx ratio

$XX on the the availability million our at was The we million cash facility had in $XXX end ABL and of year.

September in maturity our and is have financial XXXX. nearest We no coming maintenance debt our structure

to views provide underlying our a to Andrew I'll as now it have current into We our And balance outlook. strong XXXX. we sheet hand move macro

Andrew Lane

recovery The become of the ended thought and energy than XXXX After more increased two Jim. despite wells more XXXX drilling most has has XXXX Thanks and year in much industry a less production a up years, sector, being being efficient drilled. into going difficult it. at only

the similar We showing trajectory nine have X% lower XXXX a XXXX. XX% looks and on of reduction drills past with capital in months less uncompleted to the US as be wells expenditures be during EMP compared but seen being to capital spent. XXX to the analysts to

international in to modestly increase expected is in spending Global XXXX.

national spending buy manufacturers. companies international customers early core project is that a of non the increase up expect not revenue are and repeat international from The in offshore oil XXXX, directly in to our concentrated who we as large EMP PBF finished XXXX they with with However, decline. capital

loading start Following the the and as and spending be throughout disciplined their level of significant flow cash more December spending the slowdown their to in XXXX, and about that and slow we budget November occurred a customers year within year. expect continue to cautious

We focused we the spending have where larger United is of operate. States in or the IOCs more whose some to areas in increasing exposure

business our commodity is utility of benefit now revenue is dependent. of which XX% our from gas total not also price the and We stability

are not markets market. to end industry in we we trends, diversity the supporting do our immune revenue soft in While more a have

moderate encouraged January low in and in November December. a We over levels are by the saw increase revenue we

built high have flow. cash returns shareholder of strong a market on all We strategy strategy share, to long phases continue we -term execute and for focused the the increase cycle and returns to

with valve job. focus midstream as strategy, penetrating to share market margins to modification on gross existing We expanding as our with new through increasing further market the plan well continue our customers, our centric valve and new

You to as e-commerce platform customer transition MRCGO future the in use by that customers invest of to to should platform. continue continuing increase expect to to us more and our we

done, have we more ways always cost new on containing and continue efficient. focused As operating to we be finding to be

cover turn now Kelly call will I to the our over for XXXX. guidance to

Kelly Youngblood

Thanks no Andrew. year MRC for the exception. no doubt The Global headwinds is and industry have will coming

Our success focus cost must recovery. grow this create strengthen our our to environment market eventual in balance market our own position for company and the optimize the structure share, continuing to be to sheet by better

revenue The X% diversification Andy, Given as customers sector. markets compared $X.X large fall in broad to range billion billion utility decline XXXX within end to the than to the guiding better along current different we midpoint a gas to is outlined result with of significantly which XXXX. IOC spending this our market exposure of to estimates our suggests of a and are $X.X by a fundamentals our range

tracks spend range percentage by sector as driven a with the decline to view, capital believe and gas the and this to discipline. This which be gathering are capital gathering is expected by customers discipline. and by transmission processing single expect the upstream portion continue to partially sub decline point focus on of year we business to its continue the trend. decline digit growth lower curtail single-digit utilities will business. percentage to From spending spend and mid upstream of Midstream typically upstream high closely in sector We offset which less will the the in expected response customers most

with continue customers. the participate in to our projects takeaway Permian expect build-out We to transmission

activity likely the transmission decline. will outside However, of Permian

space. continue programs market utility multi-year their system customers gain to this share will spend replacement gas continue based Our in and we on to

single-digit is by Canada to geography, the be decline primarily sector to international mid turnaround single-digit declines due and low down percentage. driven expect business by in downstream a The partially expected at decline decline by solid XXXX. schedule XXXX. to a and of and gathering expected as mid offset projects, single projected completion percentage US digit upstream to the and transmission percentage we well in is spending The a US By

is and XX% differentials Our over by Canadian and is expected business production government-imposed negatively be upstream crude restrictions. to impacted

business improving from a XXXX. underlying Kazakhstan decline the but by that completed when TCO revenues comparison million growth negatively segments in Our future will in project impacted international $XX is residual year-over-year to be related

we the XXXX the be a the on fourth quarter quarter like par with to projected first has activity, third Regarding being of of it with with quarter strongest. pace year expect the the historically progressing

results to modification gross shot our our new our and penetrate strategy to expect profit market with XXXX execute XX.X% our continue range capability. between and XXXX the We XX.X% centric adjusted percentage valve as valve midstream we above

at XX% years. or next the consistently few to Our in goal perform higher is

expect million $XXX We and diluted expect earnings to share per between between million we $X.XX adjusted and be EBITDA $XXX to $X.XX. be and

and line million $X to expectations $XX expect expense in pipe LIFO we stabilizing expense. around our be of million XXXX between Given cost

$XXX the be at X%. expect to XXXX, than will lower $XXX expense by SG&A midpoint In is which we approximately million XXXX million

end during point expense year. fluctuations acquisition However, normal life. approximately prior quarterly as the will compared XXXX it to due to useful to amortization with in associated that our want is expense out million of in their I that decrease came to assets a by $XX to intangible XXXX the also SG&A see

to the year in we million $XX tax full approximately the expect in our effective with XX% $XX continue to and expect we upgrades. And expenditures, e-commerce facility spend to XX% We to capital million invest for as for line rate XXXX XXXX. to be technology to

operations reduction by revenue than $XXX more the approximately be and provided forecast balance. XXXX Cash working expected to to is to stable in due million million capital lower $XXX a

XX% XXXX returning after the a also We our years, use be capital focus the revenue of share, Despite an market ratio. an And to maximizing to excess over up to our and conditions and structure. on gain in to profitability expect prioritizing cash we reduce on $XXX efficient working returns showing long-term four XXXX, last maintain for already having in reduction our sales debt, will the million focused strategy through and strong remain slower shareholder in balance sheet. market working capital in shareholders

historically provide Global want I'm believe to working We the forward or executive cycle in year to this possible deliver in looking slow very that to the to cash our say closely be And management strong no with be have every place we put will Andrew and has growth and point I generating the I'm value in at he finally, exception. at of shareholders. to best team superior periods no MRC and pleased and results

take that will we Operators? With your questions. now

Operator

Instructions] [Operator

from Our Sean with Please JPMorgan. proceed. Meakim is first question

SeanMeakim

years. I on with way disciplined we on All working working investors investors pressure is And all Thanks. maybe the Kelly guides? set of have been you pushback Hey, the you're out morning. upstream you to think to the of good is start the from get from same the considering bit much be just the this on could and Jim, there so has with talk probably midstream with a you the It spending. little board, where about most over retirement. pleasantries congrats right, forward great to to good your again. looking how

end I reinforces XXXX those your probably at off drop think concerns. of the

midstream pretty this most digit strong levels of and attuned to utilities we high going in part talk upstream and XX% as So in down IOC US in is confidence XX% if people the are yes. around tonnage I But call for gas well XXXX mix assumptions. mid-single supports the think upstream be what in to about could to the spending decline the those

AndrewLane

off on drop more quarter be Yes. and and of even XX% about our -- just million start it right last was with we budget Sean, think normal played we at let It off X% to or the the on $XXX the me that me and revenue more decline the be and around you one had high call finished look on there seasonal tail let off. start what significant from out with at the exhaustion October, would I fourth felted talked accelerated were quarter we for fourth and revenue. the million track tail $XXX December with end

major So fourth for normal very you see It quarter. significantly who lot been spending of much the can more the environment. in us upstream a curtailed concentrated Chevron active than three was three-quarters, very us. budget had to on for in customers

Occidental merger budget curtailed and and Coast curtailment. then also through going we're and Anadarko both on budgets West the activities the CRC normal major distraction

our that and with customers year we fall-off saw customers our upstream bulk a with very XX%, spending. lowest And in also all the the that low price line have demand and for The major demand we XX%. the around at in Williams much of aw of specific the pipe was of the also did deflation has it a very of upstream. three those curtailed midstream, with So DCP,

point that expect it price So and January is boast picked budget except activity significantly a will and impact, volume say with changed as of but you'd I nothing as up for had impact ramp curtailments. the up, flat November basically back is quarter forecast from revenues. we're first than the December December pick and things of budgets and but up both certainly January better low much new

to last much both XXXX our very overall also the spend, specific the it's you and it down XX the land but at the that to industry. is activities in be in US range. spending. as that customers at tail look Top as down off feel our spending their we customers in our a revenues. On to When upstream we over midstream X% When X% We XX% up half look the outlook, make an year, yes, specific little X% see spending type will

small PE So be equity being customers our customer we a guidance based significantly, mix. while backed good feel high on general more and as down upstream may done our customers digits others on single the about private

thing last when On we the year. midstream, price you at about pipe same at line lower than on pricing down current level think will much starting the be pipe started of line

some that impact gas in midstream utility. will also and have projects too arena. So the then on good feel volume on an about But we mostly gas very

So pipeline a work and on decline year work. the we'll on an utility have increase have gas on midstream we'll

So we offsetting factor. that have

SeanMeakim

And your about being XQ strongest that, how confidence years one in the in in small wrinkle the we've more seen as to level recent your given quarter seasonality upstream?

AndrewLane

curtailed our as --we've will not for normal But pulled the Sean, our March Yes. to it's unusual We're year whole year through budgets go very it projecting what's back. years revenue was normal, that that's it when more and had highest the back, experiences last two were business. as last especially

quarter gas The work. is pipeline utility and batteries quarter for the construction and both main third tank

and more and basis seasonally then So quarter. normal fourth best some and we believe from it's going to return quarter the us third off improving quarter in second tail quarter what for sequential

SeanMeakim

that. appreciate I it. Got

G&A scenario would leaves the end hit what at range. that through revenue still discipline you upper Just points G&A around the type flex see where about that but range? on the and you other talk see lower of the on based last or the a just we of thing the guidance. words you you could more So Could drive activity just is midpoint of curious in scenario it

JamesBraun

part as end tend to revenue Yes. revenue Well, first, high just Sean. of It's your address ranges. see much G&A second range. question up of the towards We higher that upper end the

bring variable to have We on that. additional cost to resources some or meet

to on more committed some this to year. IT and have spend MRCGO commitment the We

managed but drive come we've about some to going to the some reasons the the revenue the below more past, we those into much just we're over talked of if we past, range, on costs midpoint of increase my to that's likely where for spend So the in the of levels. operating midpoint we what be in the

AndrewLane

a in just Jim's employees Yes. was comment very we of over less which a a than little level finished to the X,XXX had business. Sean, we a was for I which point low add year XXXX

about the we So prepared half that we the we incremental XXXX we strong up a in very locations good closed talked we're in six feel in that. revenues also took another incremental about from step position And see in pick our some to some remarks. we see profitability second

And delivery a to employees. efficient very less so with we're getting standpoint

and the I that think impact would to end the so SG&A low of both that guidance. And was towards tend more be

Operator

Vebs Scotiabank. Our Please next with question is proceed. Vaishnav from

VebsVaishnav

Hey, my upstream so about already Franklin guys. downstream for Thinking spoken and XQ. project that I believe taking much. already Shell we've Thank you me surprise in revenues was for was that I were guess done question. a declined downstream, actually midstream. about

So in why revenues just expand a saw would we decline can in you XQ on be if downstream helpful?

AndrewLane

is general Yes. XQ spending. just in really activity Vebs, downstream

think of probability the I its some for spreads customers. on

to $XX that repeat think the third, million that is in we for as completed upstream. the of us quarter from there half always --there as off be wasn't We turnaround back Some a million in Where first some of to dynamic that double of spend was and in the some turnaround is related to the we right us. base of shell, budget XXXX where fourth downstream on it in in XXXX tail won't activity shell we in improvement some activity good IOCs see overcome always spend also but pulling expense customer $X of that have which much and invested about related downstream. you're but have in digits, the an they about our they may was

But good. otherwise feel we

segment our it's that in upstream the less position solid swings muted in very downstream have for than sure. We

VebsVaishnav

activity modestly even curious this midstream -- mid $XX maybe in underlying Shell $XX Shell underestimating on flat guide, we also single-digit was Franklin? decline talked million it the like was like And With where from I the Franklin of maybe that about I'm million, take the XXXX looks downstream. the basis, out generate my about a is year-over-year Okay. -- impact But down. you thinking we so if project, if to maybe

AndrewLane

No.

Franklin. Shell and think forecasting you're million in $XX $XX positively. turnaround --in X% of at our We're portion on $XX of right you're kind X% CapEx right a to $XX right a right with there roughly the additional revenues exactly, exactly year some in decline then --I million and by offset million It's to it. million, downstream You're additional but

VebsVaishnav

Got it.

Or quarter, in Okay. you I talked to have midstream and December. typically, better is flat if November can in year, still be expand January how improve And on the you just that that flux, be XQ. could seasonally you upstream seasonally but this are how activity going understand seeing midstream XQ you up? revenues Is flat? is first think why revenues, could our that not than but about

AndrewLane

Yes.

talk Vebs, Let the me segment. through,

quarter digits see TCO. down million revenue always we that solely of sequentially. impacting That's we but the QX increase, the have mid-single last kind their with up upstream Chevron as of Delta. digits will it is first starting had overall. international in So and quarter we year. one-time $XX from that see in We that's first spending it double Canada be international improving

up And turnaround slightly So and see flat the increase that midstream, in up basically the positive then that's to in upstream for spend and downstream US, modest quarter. quarter best a flat in always we to a there. the first environment is mostly related then will the a but occur very us first

not all because November flat a basically the minuses, plus is January just you we take when October's see year or at than and December better definitely level. So but

up a we have So still pick activity. an

of February. a we in have. And short we We pickup activity month to expect that have have March a in

all for start the the minuses, So flat year. quarter I think end and to up basically pluses we those with

VebsVaishnav

And well? imply margins as does flat that

JamesBraun

mean to they comparable be that the should, in XX% For to XX% I had again high we that fourth they margins should close -- well, they as quarter.

AndrewLane

Yes.

We expect quarter to XX.X the first -XX.X our be range. in

Operator

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

NathanJones

maybe get some the behavior? you're you're the morning, drop-off you've of of add Whether you mean, positive talk Jim, in like that welcome the Good mix margins to valve start held Kelly. to on talk about How despite congratulations business. which line seeing the and seen have demand would really in got there? I seeing -- negative any Can in you I business, pricing competitive on pressure pipe my to off out portfolio? about with the and the understand Can rest downward everyone. well pricing coming here. I'll I you gross -- you've here,

AndrewLane

you two Yes. hit Nathan, drivers. no, the big

remarks in the As third before. to of to one-time booked half last margins we expenses that XX% at impacted very the quarter fourth year and if prepared very quarter we similar the our that out took were said you in the margin, we similar right

to we comments impact The to is XX% our still the mix and coming XX% be the we from in So our to basis that biggest of our quarterly, still in it's had goal quarter said to we get fourth revenue able valves. valve hit the on tend at level.

the of which assembly new started have midstream center, our testing, includes also modification out which we manufacturing, revenue welding, a do coating. complete book We painting,

for value-added to margin customers and tends a So so a of assembly higher our that be business. full lot

The all biggest very So in products of from in quarter, far end similar by mostly overall other just in table on impact the business a steel in your drop-off -- positive the that margin a of product flange downstream fourth stainless on rest with chemicals stable course, growing inline on that our positive course margin. fitting, I pricing still pipe activity pipe to on the think very ERW being mix in both gas lowest the the is impact. has standpoint, question midstream especially a that And having a a change being demand the our and side. then and market on our the lines

pretty flat tank, pricing also upstream reflects in battery environment. And them general the products

to the not XX.X%, out close pipe in bottoming with run-up if tariffs about really feel and much good accomplish XXXX. bottom it's all feel the basically back we and range. that XX.X% inflation So bottom all didn't at XXXX has very line the in I in

at at three has of the last flattened level ton the basically we that really four or of a months. the it we're $X,XXX beginning same out XXXX. And were So

to that stay expect from expect we --also margin a of more, So pipe. not down at from don't we're it uplift that go we percentage not line level forecasting to and but much so

NathanJones

next more guess, a little Okay. That's one. And of is a the question then, helpful. I philosophical

industry, to of given their could any spending model, AMPs margins, the service domestic to What your work are a to to to the if margins? with be disciplined customers the spending? about for we footprint a a used you're cyclical customers spend provide here saying you need And that? cash your putting protect or structural is normal to within in maintains, preserve make pressure highly something be to investors are to AMPs at a to and to spending? going growth here, do levels next not make years? so flows, that business guys Certainly, lower in necessarily own in that oil Just commentary in of how level capital drive not on changes thinking if own need of to their changes lower You on Maybe you need spending. normal few would give of could of spending level from to order us are like kind new you upstream over there of level you're new you at order $XX here, outside or unlikely we

AndrewLane

about gas and base is Yes. a an standpoint. still and question. it flows Nathan, cash very good oil from it's commodity very course on And customer price lot think their I dependent our a of and

at WTI $XX big and you driver and remains the will So a environment, stay always barrel in - the environment. this we've that remain if so $XX looked

think they to in sustaining CapEx that production. spend level if very you as as a probably US the well you I have know rates steep declining of go there's

not have -- you're and production spending eventually if to increasing will invest. you off So fall they'll

of continue. related The US our revenue is bulk of a that energy base in revenue think I the is so And MRO off really a our and of bulk scenario will infrastructure. is that

batteries, MRO pipelines, chemical continues of cycle of old pricing. tank There's big a and old regardless old that today's refineries revenues plants. long-term So replacement commodity

to the that market gaining is we gives one I have. thing a confidence us we in for do compete. address share already customers of the that and how taking we wallet So percent focus mean on do

done in very And we growth lot We've with a so contracts. that perspective. see room well still for of environment

recent So efficiently we're over very --and other XXX we We we're control port. wins first RDCs optimizing as seven for from and branch them a Gas in the in of the the and more and now lot And what with branches closing the United two CenterPoint us. is infrastructure. can we've couple support the done have pleased SoCal the is years and quarter last our the own work States we two

both operational reached a footprint. model and we from So an think efficient headcount I very the

then this service a ability gives The through of which interaction online. online more lower we're to a was a this and on or to standpoint other full level, is working of branch part ability it from us customers, customer account big us think a us gives area service the MRCGO ability, management interaction to your an it our interaction them smaller brings migrate investing I less service in question,

that operating centers. them way as up service to costs call so fulfillment next migrate us more hub the for and our we of years couple efficient them more We It's take and out will as regional way us you customers. serve see into distribution our in efficient centers we over e-commerce said expect four we to in comments, to next And a to more the than double -- three more business operational years. our you over

customer orders expedite orders on as platform. more major that their move on been and with excellent full interaction we we a have can XX interaction, as their said customers migrate to track to feedbacks more ability to fast platform, interaction will we'll And we and a work we And then portal. our have cost, customers our customers. small the So and as with our MRCGO service already, we'll have low

turn that's to So I track right think the I and for think with out and give another we're on customers going interact us. the channels well

NathanJones

Do that XXX you to opportunity reduce of gives you next years few that sense. all? think lot at makes That branches the a over the

AndrewLane

to continue changes centers count branch. We but wouldn't I as Nathan. down regional so that don't sure. year comes go and to support expect each I out in more Definitely, I local that to closed needing Yes. four of the MRCGO our US for and than expect distribution we -- maybe move more big

Operator

Our next from Please question & with Jon Company. Cowen is Hunter proceed.

JonHunter

my for thanks Hey, good And questions. morning. taking

So and flat single you XQ in high XQ per that revenues assuming are the the the on up fourth just guidance quarter. digits double then low in XQ XXXX that would with revenues typical mid down is for I first a to decline had guided one imply and digits X% with provided revenues quarter single

first increases So to special the occur? Do could impacting that online may push revenue quarter from think may projects you you that help coming be those or why progression? about have me contracts quarter second

JamesBraun

we occurs John, exactly the position. think that's We've gained CenterPoint year. this One you're million it And going of up third timing in quarter. about activity I for us. right to to We've be million that gained normal contracts. the that's $XX ramp more think And $XX would Yes. and progression. share example second in be the market

return to have the also that during up new it's We some midstream timeframe, budget. contracts will really a in ramp that but

XX well to Top their is I As our only going spending said, CapEx and XX, track be we year. Top very X% X% this down to customers

from with budgets second lot and interact revenue they normally and a of quarter. third kick from their in, us So

that then we first good have feel quarter. on the we timing and a good about I visibility So say

off where be So saw off. starting muted last December course to we tail in going this a than to is the bigger year variable is year only or November, fourth drop more we probably quarter then would know be have and we're of the going we're a

didn't So November, If at higher tend end a of but about feel our dramatic we we guidance the good in of point, guidance. fall-off the to midpoint be this towards have we our December

JonHunter

XX% you've the And side Got margin on XX.X XX.X, to guided you. quarter. to in it. the you fourth Thank did this then

part of pricing market in your lower XXXX? in or margins point a of strategy to about focal talked your be outlook lower your kind Is share of being share driving gaining XXXX. market what's You've for

JamesBraun

give gain lower full X or some never with there's it's business. the new that midstream up say us that assembly. valve full early assembly do relatively We've in kit strategy. we the no, not would work price That's It's, follow to are I complete incumbent share. as that Yes. at build pricing to market for on and

view, long-term pressure take pricing some that incumbents. But there's to from going I have So we're we're-- market. the a

about worried will not see that. inline midstream kicked budgets this some I'm so higher pipe as It pickup margin. to return We year. And in

mix a a Of pressure little puts standpoint margin. blend the that downward on from course, from

move So think -- continue having couple that range are good top about for a look it's we the but so we even we and think all years said still that we then I to at pull it out good higher the line feel I up. as

Operator

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

SteveBarger

morning. good Hey,

customers are out industry. that with versus I'm comment just Just low Top are that will the down that for Top Where take share single. XX thinking to you for your your be customers industry thinking about of single-digit tracking down share high versus growing XX? about market And wallet the the opportunity

AndrewLane

Yes.

fundamental that's Top very Now a of we share to market spend. these model the I mean on those. with is XX focus high our tenet business have

on last the tail but when off impacts it that's they longer-term spending, year Of like model we lot us course, their a followed. years

regions. is contract, to work main strategy. of our some buy transactionally two equity been more back the small rig spend private that smaller never usually one spend customers our and and core that's of operators so their support those or we in operation we that's base. Of course, They all have the areas where bulk add spends, don't their we The can of big them and on

with and We've --work So ExxonMobil. multi-year we and on really contracts on these worked gain gaining BP long-term share. focus

example, more their downstream. We're working lot downstream working valve BP; US, for their a XTO an we're have as we did form. work international gaining on upstream more of upstream on We contract. getting

still we that work to them. feel room environment. are good I with work have But the today's have XX of good have even Top things those it's in the customers still those we So grow opportunity grow and we XX to on percentage but -- or we so within a

SteveBarger

take by Have adding a in don't a the are this that you or where if you're have environment people definition market? out-growers you share as other like go share software you in market growing good identified under

AndrewLane

share the I operators midstream two not targeted from share US so five going or upstream course like say kind a a the where of there's certainly do. to also we in are smaller we'd Basin, that areas you today. to and and after been we're bigger upstream a four have definitely and gains In Basin in with the in smaller list customers down of Permian three, certainly working We some --when of we've targeted have market in would for get or ones Yes. midstream, that Permian operators we've

SteveBarger

Thanks.

increase You encouraging. that was modest persisted January Has that said that there's February? been into some

AndrewLane

February on at forecasts. because least billing level. rate fewer and off this so billing on yes, a same But is at basis, revenue billing is days, January run point from at the Well, daily of has in the rate, it but less daily a days

So to we're level definitely up rates. run a it's that that is back new November, above encouraged December

SteveBarger

then the the Good. about avenue price? thinking lean remains of weak buyback share allocation, just kind Okay. And some the past and years that, If the you've best on while capital one price versus reflects share the the board the or multiple to other been few market active is also does reducing support to debt. the the

AndrewLane

of now every our and completed XXXX. to wouldn't view we from at $XXX We year quarter. We the share a it course $XX I right leans of it just other. or repurchase look since it short-term week. one look this say board had million million just at we last meeting and The

been focusing the of the priority off board. the with half say first now as of look the in So five at during years the in fallen the parallel. and given the Right would least share the repurchase pay short some debt in definitely had from with down I year, end activity term board priority we're last on really paid XXXX out the debt has

a in so year, on I But have debt first every say It's we it's on. least wouldn't it but half down will pay to the don't year act XXX% we be cash this the pay authorization down. at a debt new revisit now of that quarter, right flow

Operator

Please proceed. Michael Our from next is McGinn with Fargo. question Wells

MichaelMcGinn

supply the to finer chain on Good considerations. I a wanted morning, point just put everybody.

hovering million. given math inventories By could year and demand to run the four equate my start months $XXX of valve QX rate. near that the to mentioned You QX

may from typically ultimately So better just pricing or supply category you outside the that you purchases get and would customer second to of equate I time planning integrated any in wanted see product relative a to a sourcing lead have products to agreements. tighter inventories contingency other the sense of for

AndrewLane

couple Yes. of Michael, and so there. things a

business. a line of commodity that's the our a and have a small major It the relatively go are that very valve small supplier more We impact would overall China most percentage valve both that be can out valve business. components direct Europe into manufacturing. with of is a US --with It's viewed come major impacted one suspect one the but that

orders ramp We haven't US, we then our and yet ramped course, as Canada seen up much of and we've we'll of even manufacturers that disruption this up have from Europe seen impact.

a or two Europe have now that. to big three might a and out should impact. in shape about US in end our We still going more components. manufacturing, on go impact -three two quarters quarters We we're at I think I good the the double so talk least we down manufacturing is virus in just don't And we're very it seeing think even for start would out. big if

it So with change say see time wouldn't I to it's just any -- we're and monitoring other going there. some that be our all week manufacturers it's it's isolated what But just to scenario see We and to there. exposure each have done. manage to going it manage the But we're a don't needs valves. keep until we

MichaelMcGinn

share there but balance This share question longer to XXXX given have to more back terms next in mentioned it. end gauge little downturn like Got it two is gains times market the share? seems XXXX anecdotal harder market you the couple downturn the you've market pick up will potential And of sheet. on now. a a any Do the this downturn compare the how year your feedback to is and

AndrewLane

Yes.

But feel doesn't is XXXX a I now all. It XXXX like that slowdown. and was that at more much certainly downturn. it mean a I think dramatic in

timeframe. the get lot a big in of I distribution to players market to a in field PVF two time this think financing is that muted of the think same the couldn't and There -- more gains small distributors XXXX-XXXX share made lot extent a but in I thing.

do struggle. just and pick I largest think two this the distributors think will up share will players small fine environment I in and

kinds so than dynamics not XXXX of we but feel in think And out of coming more in. certainly same, same about I had we good XXXX periods went these extent that market are to share with and the we

MichaelMcGinn

one Okay. in more Appreciate SG&A that. sneak if the rate. And I just run regarding can

implies but per think million is I than the year-over-year quarter quarter. last you down mentioned it rate $XXX implied think which still I less

So best plan is some worst and for the this hope just maybe potential constituted a the back half incrementals? for

JamesBraun

the for in came the at think run it spend, this increase significantly the incremental the It in at we payouts XXXX reflects We levels. average incentives we have refreshing XXXX. those with you're rate. mentioned Well, earlier for right so and that generally incentive run any and playing But IT accrual levels. for budgeting MRCGO I into below will going what about we're target in XXXX, about also phenomenon in

Operator

Hirschman Blake Inc. Please with from Stephens is proceed. question final Our

BlakeHirschman

Hi, yes, guys. morning, good

on guide, $XX and downstream. up that distributed Just the the like XXXX pretty year-over-year a million million, Is it one $XX between quick like equally something sounds large for all? projects headwind

JamesBraun

equal down. split and for up Yes. between million its year It's $XX and roughly the

BlakeHirschman

Okay. down should into And as the the of year quarters, the XQ? as half by those wind like far or first

JamesBraun

to comparison time quarter into get time be any be the Well, by good by get you There you Blake, won't third a the headwinds that third the will the comparison. quarter.

of End Q&A

Operator

question-and-answer would Monica end session. turn back to the of I remarks. conference closing reached over the have like for to We the

Monica Broughton

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

Operator

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

your a day. And wonderful disconnect may You line. have

Monica Broughton	Investor Relations
Andrew Lane	President and CEO
James Braun	Executive VP and CFO
Kelly Youngblood	Executive Vice President
Sean Meakim	JPMorgan
Vebs Vaishnav	Scotiabank
Nathan Jones	Stifel
Jon Hunter	Cowen
Steve Barger	KeyBanc Capital Markets Inc
Michael McGinn	Wells Fargo
Blake Hirschman	Stephens Inc

MRC Global (MRC) 14 Feb 202019 Q4 Earnings call transcript