MRC - Earnings call transcript Q1 2020

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Operator

Greetings, and welcome to the MRC Global’s First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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 for MRC Global. Miss. you, Thank Broughton.

begin. You may

Monica Broughton

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

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

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

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

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

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

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

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

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

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

Andrew Lane

Global. results. to as first financial the pressing company's your CFO, our our and for review you our discuss topics, review joining some continued over well of and today more Kelly you, call Thank the morning strategic will Monica. objectives. interest quarter MRC in I of Good for the against for the Youngblood I'll detailed Today then thank us turn a XXXX progress highlights, as

of some top are of the critical items address mind. let First, me that

well As navigate to valves most emerge set of are recent and to positioned the we company. and industry distributor this fittings stronger challenges leading pipe, as the energy of

destruction constraints, While pandemic, not and capacity are the by from cyclical new the we know war, the unparalleled and now to experiencing oil to recent exacerbated we storage price levers we are oversupply demand pull. COVID-XX downturns

energy are to We strong flows, a a cyclical liquidity as scenarios. distributor sheet sufficient critical stress counter and supplier we and the have a industry under balance extended even cash

the quarter. Our liquidity is million $XXX second in

significant We from operations year. expect this generate to cash

terms no Our debt is favorable and with maturities. near term appropriate for business our

term reduction my is near debt top priority. However,

we And overall interest XX% B debt We end in bought XXXX. a reduced in Loan gross our the quarter first million since discount. the of year $XX $X by at million Term

leaving term Our ABL down then September our expected adequate cash at year to pay and to nearest flow maturity our XXXX. loan debt generation be this is our

Given decline in will million we we $XXX the expected in in generate believe from excess revenue cash year operations. this of

generate capital of After expenditures million. those over deducting flow should $XXX cash preferred dividend we levels, flow and our cash free at

structure, our cost strategy making changes long-term our with are respect the we While is significant to some same.

market structure. strategy our optimize to continue well as share, to execute against efficiency and as increase that capital working capital profitability We maintain maximize

seeing the latter some quarter which in of COVID-XX our comments demand with results were effects despite continue me about of Let from first solid early destruction part the March.

and which strategy, improvement category. instrumentation product this product gross reflects point our the mix XX VAMI adjusted margin valve, our was was basis over XX% the This and or margin sequentially, X% grew XX.X%, benefit higher the as our improvement fourth quarter. a we from for achieve of quarter of quarter revenue sales Our measurement

percentage has history. in our highest product been That company category is the VAMI our

cash $XX first quarter. in generated from in million the also operations We

reduce we generate economic conditions healthy to year the to our customers as We're committed of working strategy. exceptional regardless our service our as we previously As continue to delivering providing expect shareholders, and from this value capital. we mentioned, our to cash execute operations long-term

I'll spending pandemic deteriorated result. uncertainty of related is a in created and industry. have significantly pandemic the has and resulted in The measures demand The destruction disruption this oil as unparallel per and and demand Next, products services. customers There by duration significant volatility for caused and COVID-XX. mitigation demand the reduced address disruption. global lower gas Oil significant has uncertainty the by our as

positioning and proactive challenging a environment ourselves optimize foreseeable structure. the measures for taking in So are future we cost to our

essential we the energy closures and no global to with operational As infrastructure our facilities. provider, to a remain critical designated supplier

positive have We Jersey. UK, Norway, test say New to one and And four happy one I'm two in globally, COVID-XX the all in had for only four that recovering. employees in

staggered social at also remote our for permitted, employees. remote have workforce, are safety cleaning providing well employees implemented jobs covers facilities. We XX% protective deep of total as personal for working shifts various warehouses our nearly about at distancing, also whose additional including our measures with equipment, which all of corporate those We've and our as and

at perspective, stopped have globe reduced produce on, spread. valves capacity pandemic suppliers, effects saw From Chinese Early a production. chain the the supply we commodity seen we of who several as a the or and parts move our around operated

has those production where the more Spain impact and suppliers recovered, been have capacity valves in has produced to halted. have pre-COVID or Italy returned levels. slowed near operations and Most seen specially recently, China As are

the position demand, orders continue more shutdowns with we we even Given little have. have so the fulfilled order reduced fulfillment risk disruption, our inventory longer the and

operate market markets experiencing and a Now price in collapse unprecedented we we let an is the activity severe taking. levels. reduction in are and actions oil The me observations outline our the of which

and have the some energy demand multiple still normalize. until evolve. our difficult but budget to to impacted, customers times it capital significantly one be magnitude spending project reduced the continues to will sectors their market as we Our full of Every begin is see

of delayed the spring or fall projects Gulf of declined For later. and all refinery scheduled the originally half around, Mexico example, to as were turn demand for has

cost the taking we're we efforts quarter. the year, facilities. ecommerce closing took additional and will of our by deterioration of closed two XX reduced and we measures significant we More specifically, and headcount last optimize in including future, given market, the in the the foreseeable first acceleration reduction continue cost headcount our initiatives, structure, expectation it While reductions for the facilities

We third headcount have an in by close the reduce XX further quarters. second XXX plans to facilities and to over and additional

We Benefit also expect other including incentive SG&A bonuses by the Employee reducing lower certain awards. programs, and further

will at million from XX least personnel furlough acceptable are to projecting We actions, annual returns we activity selectively an in until SG&A XXXX. these With all level. reduction

robust digital tool. a is MRCGO platform comprehensive ecommerce Our

customers to digitally cost service our them to move to interact We structurally to time. us with continue over improve reduce and

change committed our and an certain of and adoption We're our interaction XX% total to particularly American to for generated top XX% lead through to accelerate customers executive designated to solution this of digital XX is revenue Currently lower North of our customers this and serve. cost ecommerce.

to next expect years. increase percentages the over these We continue two to

capital down initiatives, increasing centers to into are consolidating we drive our match capital. our to points, working inventory on focus ensure and our demand better our Regarding working redeployment regional distribution

what execute swiftly. We we to can continue and are control on focused

to working We a be in expect percentage XX.X% sales net XX.X% of capital as XXXX. to

us position position at our take can the of recovery. market actions advantage strong eventual to remain to expect We

by customers. We expanding multi-year market MRO contracts obtaining gains with also continue to drive share

enterprise MRO for new valve we and agreements in were Midstream valves and pipe, framework for West with quarter awarded with their Europe Africa. This Noble and fittings, Total

important scope. adds In contract gas additional objective track a with strategic contract addition, utility we a shrinking and which And an another proven utility awarded were downturns. Ameren us. achieving Eversource, especially this previous US a share, we record gas Growing of the with in renewed in is for a market have market

be strategic delivering and we new superior delivering shareholders. take the service well fitting As of our positioned as on recovers an even company the to valve stronger and Once opportunities. long-term it we market the navigate value leader to customers objectives, focused we pipe, this will, economy to advantage and our downturn, are our will

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

Kelly Youngblood

which our decline XXXX year-over-year were XX% first than XXX segments Total last million, each a first Thanks, and geographic sales the for in good quarter morning lower comparisons. quarter with Andrew everyone. were of year, reporting of of the

fourth quarter by the than negatively towards gas All latter the original US utility sales of driven COVID-XX sector. higher increased part X% expectations year, were the our March. last from Sequentially, revenue pandemic impacted of by the

downstream US quarter first and XXX the of first by million quarter and of industrial XXXX, the sector. all sectors the revenue in was lower then in pipeline upstream midstream XXXX, followed production, than declines led by with XX%

lower by sales The due discipline and XXXX, quarter first the in XXXX same to first by reduced downstream the budgets down the US project production customers. to upstream work. revenue quarter XX% over sector industrial was in non-recurring US in and increased capital were due our quarter XX% of

pipeline certain projects. midstream revenues sector declining of project US to deliveries. reduced The utility X% one gas declined due the sector declined customer from timing activity US customer in the to primarily and due levels and bankruptcy timing XX% of the And spending

uneconomic non-recurring of first first limits the was oil sector lack year, the quarter sector, by as a down takeaway a the the million as was of $XX production due Canadian gas as Canadian was prices, affected from delivery. which in revenue XXXX, utility imposed and to of quarter government lower adversely capacity last Canadian XX% production well upstream pipe

from the currencies the first a Project Weaker same XXXX, by TCO the a driven year quarter Kazakhstan. was in XX% revenue sales primarily impacted unfavorably $X International for in quarter the dollar relative by million to conclusion million. US of of also approximately the decline XXX Future Growth of ago, foreign

sales summarize the by me let Now, performance sector.

midstream different, are reporting as was to I'll like pipeline in sectors, highlight detail I'd transparency First, as drivers the distinct formerly revenue which with two describe by sector and later. will providing between more provide midstream now our gas what known additional markets significantly are that you This two these separately utilities. we

decreased were million. led US release. upstream will data quarter XXX last historical in by revenue XX year across the XX% segments or the first XX%. which from production all You of years sector two to million XXXX yesterday's quarter Declines press down The same was find

the was declined reduction Basin largest where in XX%. sales The Permian

highest reminder, reductions. is market sector revenue, of to note budget receive important about customer the this total represents As a this of impact which only XX% expected is to our because

the year. pipe can production quarter XX% quarter-to-quarter, total of sales, large the strong one customers. revenue due sectors this same from timing upstream were US pipeline consists $XXX XXXX, results million sector of quarter two a vary quarter deliveries, first of transmission although a our the business to Sales typically primarily with typically orders. There a to and is decline XX% lag. in gathering between This of represents correlation are in and prior and Midstream which the focused

year is a which were The of XXXX, levels ago. XX% as US, quarter gas sales based lower utility overall business pipe lower Gas is management the provide largely driven well US construction. specific and This by in these XXX as driven meters housing our the quarter such gas by first one than activity products of deliveries. as with the in from customer of the million related long-term, new well customers. We as across as revenue decline products ongoing programs was sector and now currently X% bankruptcy and same integrity timing primarily polyethylene to

any is a we sector sector seasonal will volatility helpful utility reducing to rate in prices, XXXX, supply the overall due in purchases growth Sequentially, utility companies. is increased steady thirds the revenue integrated seen deliveries. gas primarily of the of of the to timing two XX%. not to our it compound Since Approximately tied stream. annual revenue be with XX% of Because in our sector way gas growth and have with commodity

was by non-recurring quarter quarter revenue sector, XXXX in industrial the year, XXXX. In revenue from the first and US due the last project primarily declining first driven XXX segment, downstream XX% of million of to

XX of gross of XX.X% in recorded increased favorable of our points reflects first a basis lower as to the margins, to of expense the revenue, LIFO in XXXX. or benefit first in income and quarter XXXX. of first quarter the XXXX, in current turning quarter mix first Now, LIFO XXXX project benefits expense XX.X% X profit no of LIFO in income compared to improvement million as product percent the to compared the the was from recorded quarter. The quarter

profit the revenue XX.X% percent Adjusted in to gross noted of adjusted as above million the exception XXX gross first profit gross items XXXX of for compared was XX.X% XXXX. and million of favorably for or also period The the XXX impacted LIFO same quarter profit. with impacting

average of index, Based first XXXX in Pipe reduced than Line demand. quarter of of average LIFO lower the were XX% are of continue pipe in year, line first XXXX expected prices on should prices pipe which Relative income in in first in XXXX, Logix Line first due to decline same XXXX were quarter lowered prices to to the in pipe the fourth throughout pipe over result quarter the quarter the line quarter X% lower latest were the XXXX. of XXXX. prices the the quarter spot to further XXXX.

billion for the in or to reduction of embedded XX.X% as million XXX million recently quarter sales in the of year in XXXX or cost reductions. last rate is run implemented XXXX compared actions were Employee cost fully sales well same Benefit as a of SG&A reduction XXX period as XXXX. are $XX result This first of taken XX.X% our now that some of

Andrew the quarter we additional these this year. historical reductions cost rate. actions taking our quarter by Given as of see of will current of second benefit bad million the debt the the half SG&A mentioned are environment, in expense, and included run $X than economic in higher previously we second the

Approximately cycle In half cycles been and prior this no of very expect be to down has to this bankruptcy different. that customers bad expense expanse significant have debt not our proceedings. recently relates we begun

are quality fortunate with the that receivables of high very majority balance rate solid our with customers We are sheets investment

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

our average share is rate discrete due compensation was Our charge based to for higher quarter tax plan. tax related XX%, effective a to the than which

impact, the Federal different and as have income result XX%, US effective from would rate income this rates. which statutory the state tax a rate been of Excluding tax XX% differs of taxes foreign

per of the to XXXX common million diluted for quarter was quarter income first XX was share, or XXXX, the million of first to per share. which Net diluted compared $X.XX attributable as or $X shareholders $X.XX

ago. quarter in declining for same X.X% the the same EBITDA quarter Adjusted the for margins first year the million by year, was driven for were XX last million quarter a volumes. X.X%, XXXX of versus XX EBITDA Adjusted quarter versus sales

on averages. EBITDA expectations adjusted XX our segments positive which a this months three with line is decrementals of All were However, and in trailing generated XX%, historical EBITDA quarter.

the at million, XXXX to end XXXX. first the XXX Our quarter working capital of the compared million XX of lower was end of

trailing basis at of XX sales of of was working than capital Excluding target. the cash end better as our on a percent quarter a XXXX, XX.X% month the first our

keep this aggressively original the to lower ratio our actions taking of target were We than XX% managing by working balances. capital

and capital working XX.X% percentage to in a net expect as We of sales be XXXX. XX.X%

million We XXXX. free expect of generate mentioned, cash first generated from counter cash our this operations in nature, year. XX the because strong of to we as And Andrew quarter cyclical of flow

million in $X XXXX. were expenditures the quarter first Capital of

as for we costs intensive, While spend these business, our prudently the initiative. business is of to managing capital not such makes while what sense are continuing our future the ecommerce

million compared XXXX. Our the was debt the million, at quarter of XXX to outstanding at end first XXX the of end

within three based stated of debt million two of times. range ratio net times target leverage was X.X XXX to our on Our

While year, strong to very cash manageable, this the and our ABL to reducing cash target of ratio with allow flow our a increase profile throughout debt is the us flow will balance generate zero. could

availability quarter. end we The had of currently first cash is XX the our and on million the of ABL at facility million XXX

the cash in flow and quarter these we may liquidity changes our to fully levels. from at each Although similar year liquidity capital, expect average fluctuate for remain working

have no our structure. maintenance currently in financial We debt covenants

threshold final extended But availability getting We envision approach XX% even to covenant anywhere this stress do our we close of scenarios. in under ABL our applicable have one becomes should capacity. that springing the not

focus loan of XX% we a our cash par term year will generation. to our significant quarter a at par. facility We first when the $X million where debt the and free in discount repurchase our remain opportunistic also discount reduction our we is debt flow to Again, to ability quarter. priority plan to we the During at repurchased have this

declines at XXXX projects spending levels. customer XXX XXXX in than million the fewer the of the was backlog due of quarter million, the lower $XX of to first and recent Our end end

US their the those of due was However, XXXX the backlog first of customers to end expected in for to planned COVID-XX albeit spending, impacts. as up the quarter above continue delayed somewhat XXXX XX% gas are utilities

this Given of on in in XXXX. our annual balance paying market, as ABL the we specific any include extreme provide have to as year, the SG&A capital guidance, not leaving uncertainty for our and we working volatility is and focus loan, September term the items These our items only due well chosen reductions down which except control.

year, QX the the approximately will Also of of severance target of we second impact headwinds for improvement to a are annualized run The remainder the excluding restructuring than take or in we million, in due any no XXX rate to expect resulting the of of achieve greater million challenging the quarter. majority exit charges. an that SG&A place XX targeting actions this

our summary, XXXX the faced. challenges a many we first solid In given market quarter was quarter

term quarter. near in are weak second energy a for expectations our the However, market

However, with generate current on take in requirements, market, headwinds. capital ability our very well current free to low cash and market flow available to our strong a the we liquidity, positioned feel declining

and are market an are we of company We even any when will stronger these take challenges emerge opportunities positioned head advantage and to recovers. facing on the

questions. With Operator? that, we will your now take

Operator

you. Thank

your We conducting James from comes Our of question. Please session. will now ISI. line be Evercore with with question-and-answer [Operator the a West question Instructions] first proceed

James West

guys. good Hey, morning

Andrew Lane

good morning, Hey, James.

James West

careers our to into seen but strategic I harsher. guys the number a you thinking How are and have guys want of of you fair Kelly, question macro first are have This about downturns dig may with MRC? some legs one the So to when How these MRC here. it. depth feels have as bit, feels longevity and downturn? different. Andy it like the a you guys thinking and the want take ask to you and actions feels I then this It I It

Andrew Lane

Yeah. that and James, me question. probably I thanks for joining let XXXX. started like you before take us you many Yeah, I and mean, in

years every for cycle this through. last I've seen XX So we've gone difficult. And is one

add a significant. And crisis macro oil top price the together of on are health two pretty a You crisis.

XX So of many and through I with never dealt the corrections the on oil been over would say crisis top health price gas years, but we've we've it.

I from think. way to it people than me crisis price It's on does feel go look quiet a if few it go a forever and correction health for side longer demand ones. The But side. months to correct. So supply is may to longer on few differently it previous take oil quarters it won't going the at to the the not

So we're our very contract position. in a strong in We're customers. leading a position with

the those employees. We're are protecting So priorities. our

as fixed Our service very high well, model we're to James know cost, high not Oil equipment, service, change that model term, cost, R&D high an you we're that. oil personnel, than field different capital the significantly on very hard technology field model. short

have liquid with asset inventory. very a We

can pull we a lot liquidate easily inventory of cash. and and a lever So produce very

when So slow, even been than counter things we've more always cyclical at we think times.

to have inventory. a very liquid We down cash, pull asset the generate

very personnel flexible have We structure.

our our still So and have this one done very service. many customers need what is on want that we we we've are service and active

are times because we when high. into So activity is run good, shifts,

to and warehouse to the stretch adapt out coronavirus regional split and quickly our out The hit model our our way centre very COVID-XX shifts, personnel. distribution able space branch change, when you've our personnel, been to

groups So corporate the the support home. we group in and more and call from

our adapt environment. to fit to this well very So model

the to business quarters couple short-term, furloughs than it's have it's health the But recovery. in so but longer economy upstream we've what So term – primarily it. James, we're bring things of parts base – agree that a we're we all company. with feels changing where of talk more our of different, that's that, that going use economy employee in quickly at side going could long as we're see our where we in think it generally reductions, – things in we'll that's furlough we I impact, We're next impact, quick but a more to other we the time business, of some done. about back looking return, so how And them a you,

James West

that. helpful very appreciate Andy, Understood I that's

little follow to out months. get the very you okay, debt pay shift going And my upstream lot rather kind few particularly the a towards so to don't deepened I become side, think than to of there think now, let plan focusing bit of somewhat view your that see, right strategy be about downs. as clearly on near going a in opportunities decimated control, of There's up do in do guess just in the offensive? for cost But is, term, you M&A you which When next strategic the bug happen? is when

Andrew Lane

of about term levers pay the said, we and priority is the is that Like ABL, hatches. structure, and now know, will by the I Yeah, inventory pull both term operating cost me, adjust my view. the M&A we end James, the cost And have the fixed don't year. priority the the which near off down we and do near the in cost for our right

company So strong put in the a position.

model. September debt wrong we no our debt term just in have And maturities. think about We'll near till maturities crisis we are XXXX. So are that a people have no

is a in good think going we're COVID-XX have very very to you we'll good XXXX, unless runway around going shape. to So in be be

contract. allows to to debt. the short-term it don't So aggressive have – we need any any be new us on allows We don't us payout debt

smaller. year, we've details, didn't picking XX moves, were with share we and contract year very Noble contract. We XX million contract been But give Total, which scope up so at offensive our have Ameren more talked additional the five growth contracts Eversource million but a winning on and market a good. and XX continued, it's and and year gains around about that

about CenterPoint two a ramping business, CenterPoint, year. XX is type that huge so – times, valve we're that's So IOC like that this our in win, normal a the contract win, like we talked year an million more XX utility up gas so – contract midstream more international vectoring we've a which got wins, and the then combined of quarter last

also utility. and gas So that's

as very you And comes very we're clear we if split that gas our Kelly concerns about view offensive pipeline, this compound a year XX% up, out will a and have so that offensive, slow the that mentioned, continuing more much So utility much growth business. year. when of midstream very you any which had contract in dramatically

Our time very gas We continue the last And for now talking utility more two that model. to is gave financial about spend now visible. we'll the years.

So that's the both gas utilities and but general in my MRO contracts winning without Those are contracts. company And of the course moves, there. because our of in valve for a our strategy midstream M&A. need is key the all valve offensive to facility more mind lot very investment

James West

helpful. Andy, Thanks Okay, understood. it's very

Andrew Lane

Thank you, James.

Operator

Our next JP line comes your from question. Please with the of Morgan. Meakim with proceed Sean question

Sean Meakim

morning. Good you. Thank

Andrew Lane

Good morning, Sean.

Sean Meakim

operations getting how the or around XXXX? liquidation through some just you cash out go big parameters with driver, put that The cash to we maybe respect million as appreciate you flow flow. guidance and just free cadence can ranges XXX I from and is overall you receivables Andy, converted put cash to of see of inventory, cash a the

Andrew Lane

one. Kelly Sean, that will Yeah, address

Kelly Youngblood

Sean. Thanks, a Yeah, question. it's good

pickup change look, into down kind going But accounts receivable to we've working working against overall, a the receivables, capital will model that the which factor will you the we will When you we're – get side amount plugged that in working obviously be while obviously, be that at down decline capital mean, that the is at from capital easy received the revenues the of offset pullback are the pretty just receivables in you you coming If number, assuming that I if our coming so part, well. number. which gave with as of to come PV, work change. payable, with somewhat kind look mean, inventory look the I down,

look think of in to got assume remainder just we've we if right But cash farther. from conservative to million some of statement. how with kind probably got the the and being to of flow the payable that push to the that lot cash suppliers you you our split really and initiatives a that XXX overall little for change. on is inventory two Ops now in and a quarter in place of reality, operating we're these at probably flow can I the into specific going is change thirds activities be normal because the And, a

Andrew Lane

well. to capital, Yeah, on Kelly's things really covered of comments, it working just he think have Sean, But the add I let couple me happened.

less branch course, of or inventory also have we'll the level. and mentioned, close third, are in stocks quarter. second challenges spent slower us have for a Of really we wise the lot we second in stocks two facilities facilities, safety the couple we'll and need quarter, in daily as and of size at our closed We've facing as at or and both with another time first branch is the the third activity the in then we've the XX significant given in them footprint for we're analyzed at fulfillment centers and use the which quarter a regional centers distribution most

branches million quarter, In can identified front lot analysis centers. XX we've So that. first up to better out of the that that we done pull that distribution regional of optimize a we've the serve

We'll closed more already savings at have have branches looking XX that optimize distribution from we region we've in centers, place. as additional around and the

structure, to pulling because steps downturn, taking in activity. even also the further So US working there's our whole down to especially capital think, more of efficient. operating this But think the a of be slow because part optimize I is I we're –

see model. to think to bringing efficiency XX more from I of a of to low XX% good capital that's some revenue chance working range, our we're in those So the I capital I But – working as previous XX. and be on why a of efficiency dial percent in because the gains we've to will end got mean that into of XX

Sean Meakim

a helpful. And just into pressures very Can that's the of quarter sense across a your taking is parts upstream of of we're given us pretty month a in acute you the the North it, an dramatic some just America. segments? about second off Got as quarter give you're seeing downstream, the drop particularly and what in activity,

Andrew Lane

a was was Yeah, best for so first little that us recap the – to quarter Sean, just March month a the solid quarter. quarter the quarter bit, of

our So even from I very challenges given and because way we social COVID-XX and spacing function to could the we were distancing adapt through some able the say people quickly don't want of to moved in our to home. model well, operations

through have So going than And they adaptable there. because competitors better we're also, much our there don't perform small scale. this was demand the cycle to they're less and

quarter nicely and that So whole shaped last shaped for looked November, it January from December year and good except a into we and lot in tail was way the have – Coronavirus, February, October up last the with then was a March like carried starting would envisioned impact it year. the just up year off – the

So going that's is quarter in normal world. It there. a first from to would how I envisioned be off take the

we don't a have course Of normal world.

groups phase the the got should stimulate concerns turnaround. drops the deliver April of together. were So half the refining normally the the utilization pushed revenue challenging It's Gulf and into quarter be mentioned be were here and do that can't standpoint. well pricing then that of problems fall. But it so it's into of pushed turnarounds. construction March, very there, large projects a in timeframe going not fall. second this We the exposure turnarounds think COVID about significant to half were to Its putting and is the I the from Mexico It's the which the a and product construction we

are and of drop, reacting so those kinds gas prices things course, compounded. oil upstream to two rig and really those So is of the and low count

second quarter the be down expect to I would XX. be mean April I difficult. So

If XX%. to April up in and of the XX% I to great lack industry point. first really into lot in a for a quarter, be have open don't Texas, visibility really even visibility May. this But don't some And which half. second we the June we revenues May open in on for you will Things at the good can't down the average visibility. will you in revenue the give small We starting good are up way have real guidance quarter.

low going give point, But So at we're can at and best that's I think how point recover forward. you Sean. here, things we'll I this a see

Sean Meakim

thanks Understood, Andy.

Operator

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

Vaibhav Vaishnav

thank And my for guys. taking morning, good question. Hey, you

Andrew Lane

morning, Good Vaib.

Vaibhav Vaishnav

pricing very the for Good morning. of you if talk think any quarter gross you're can that should as about if where and about about be how in Can margins would we go the first through terms year, can strong, exit seeing but pretty we talk helpful. what we was you obviously, pressures, year,

Andrew Lane

Kelly some comments. Yeah, start Vaib, add let can me and

and we margins. chain a disruption with Spain year our our We what Italy and about lot feel course ended of to experience the it the The our because in good come supports in disruptions supply we inventory from first carry China deep line that supplier ability both can valves business, deliveries. now we've still for higher very line, even a We was XX% year which, business And expected. strong. that VAMI that quarter mentioned of was valve there's of achieved that's to customers we level. because and in last where or revenue outlook that from of for won't with we're inventory And our valve the with

So revenue of year valves. be the margins our I will supporting it I from business XXX, that's side very higher positive and think feel will good end a the at valve strong on the XX%

The positive impacted will line side, the side. negative that's be pipe So further.

little a of think environment line spot quarter. a $XXX went ago a prices ton. inflationary at year $XX pipe down You were over about from the down of a ton the when end the first around in pipe we $XXX, kind were pricing Line

as in environment. expected will business the And this pressure line under So that's from come a most pricing. pipe

there'll 'XX is line on in have course, need to and in these you're valves specially And mostly Kelly 'XX, you to amounts. products, like see 'XX, lot money, going save and more of pricing But pressure work and stainless that we demand, pressure color then the for of they ways get position can is very standpoint, understand. 'XX from general then some impact have in, pressure going alternative and customers on crises finding certainly very position that to position customers in to cash lead and you pressure we as don't in in the about best so be products actual the strong we give there. going there gas but just flow form a like we're to specifically They position see through maybe We cash upstream But which a A then some the in the pipe that, pressure of product try under this come look at year. in strong their good a normally with are through the that cost to feel near by lower them flow. term general on – lower contracts to so help higher align delivering that strong margin this. still when our

Kelly Youngblood

to of of just the OFS margins of to Vaibs Even the where stay XX% get Yeah, cycle. worst MRC were margins some of the of they if typical type kind the that look XX%, only of is thing because they kind of to out XX% the over would I in XX% may the level, Andy looked the always add top over comments and the from bottom time. type other kind in you at kind an down XX% life times but company your not cycle fluctuate pointed of

over remain they Here consistent very time.

margin companies. same some And of to that so extent impact, other the because but pricing type of would and you that on with not pressure, yeah, see you obviously, the see

Vaibhav Vaishnav

of have changes because on and of Okay, heard could maybe come early, bit, a little it's what if the have and switching though that cause but you the the that, topic or think economy. about maybe little chemical you longer any term projects a too

Andrew Lane

big haven't that. that a there's be much we as – is the much could but flip of for Kind history economy I as seen general so mean, a recession, products Vaib, on driver. impacting Yeah, the chemical two work gas, up ramp and capacity. And are still. do these bucks. for don't your push And see out additional plus down the of chemical the so the just chemical got install from the or to we may haven't side very is slowed some heard used you But base, petrochemical. feed well, we're with to through mean, related that we and say lower plastics competitive They demand side, the below the both decision. I stocks MRO I still really

some nothing in think just little out moved XXXX of demand. due additional has timeframe, bit, that I of the Gulf kind maybe slowing And global in a especially whole. talked to about of occur that been we maybe stays Coast specifically but this thought would the spending, kind

Vaibhav Vaishnav

Okay, and maybe one. taxes. if if I talk quick can can you cash ask Kelly, a about

million million taxes How were last million. cash think this XX do XX I is about year, year, XX good or high? this call year for number ballpark cash taxes around think you to like it it’s a too

Kelly Youngblood

not that million doing or too said you But like tax taxes, million, with a somewhere in strategy. think forecast take off other showing our around this but year. things big Vaibs, I falling say all. We'll that's so around year it just business pay let's the think give ballpark, high was at current XX I number is million XX and X last some we're

Vaibhav Vaishnav

taking for questions. you thank helpful, my Very

Andrew Lane

Thank Vaib. you, Yeah.

Operator

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

Nathan Jones

everyone. morning, Good

Andrew Lane

morning, Good Nathan.

Nathan Jones

at I'm I how much line top going the take seeing stab here. a commentary get expectations to can on

thumb from would in of dollar guys every are, XQ commentary in million in thinking and the XXXX, a the of which decline of at Maybe business then have $X.XX should XQ about ops better of for XQ. you about on moment you comps year, which good about guys of rule the thinking imply this You any just XX% and the billion I worse, cash rest a from that would down stage could probably net comment pretty operations XXX say of about which stage about generate be revenue a for that's better. should that's cash given of where X.X framework reasonable you worse are and in the be if this the way revenue,

Andrew Lane

see me add little differently. start and Yeah, the major it's wants reasonable We it start but Nathan, if anything, approach. let I mean, a look We to customers. at Kelly with

of And really you that Chevron up two so make our Shell, that start and pleased were top XX% what when customers there with the top we XX at BP, spending to very are these going customers total. and revenue, spend levels. look Exxon Mobil, look and our customers, we our at

gas weighting confident and with and our in XX% some by powered kind feel XX% America. upstream. going for and and we the more to revenue half major bright more overall midstream, XX%, there. about so spending probably which to see of you So that customers. – I a for We the But equates more and in for spot so start slowdown than are North base it, flat at We're us. would When are we about of projections the majors downstream that if industrial then the look of biggest is say like less from slowdown utilities, like the think down down for

our revenue of you XX%, if US And about the look revenue. in the versus impact the our you shale, midstream upstream business business XX% US think and total the they're our I way and take roughly direct Nathan at release, earnings

how think everyone So sure about impact, business. the direct about our that which way, I'm thinks I not that's

spending is revenue. Our shale levels direct our the revenue US XX% total to of impact roughly

could be pretty but hard, So that. than hit not directly, it's that more

could our We just visibility we on at that. we And on good point, at so don't usually wish international have hold a give segment, so US this little business downstream annual an we that's industrial, Canada and would than just but I given more we have will up update how guidance color. can't, and the all our utility, gas better that it look

Nathan Jones

the money environment. opaque this pretty moment. that you that I yeah, One to on understand fairly that at was looking the in – interested It's save it's customers I comment, that. Yeah, outlook obvious made

that going money to looking trade than more able pricing, where to or volume customers market anything to to per coming save might consolidate typical? way environment up would certainly opportunity an you be seeing share pick one is in you you're on out seen think the in go be looking could like market this guys that be would I market which about take to that guys share. you customers for Have spend, their

Andrew Lane

I we we enterprise and to placed picked up we Yeah, and framework of strengths because on agreements. lack up on and pick are these 'XX In 'XX, They're so that's and we're Nathan, picked in have impacted multi-year as to they the these happening. It before, exactly that's revenue. our downturns gain going because up one borrow big smaller is agreements and of in that's 'XX and right. to players their exactly on if negotiation need 'XX in And we're share more impacted here happened again. the framework, in it share. share said the 'XX what's And 'XX, to share we ability and long-term – centered

want more to price a better So from if customers have us, have we volume.

and volume them So through product, with that's to the spend a lever price. cheaper but is look some a quality the get brings their better we them we aspects, much pulled, our they us, for off can them if alternative fixed bigger give lever to cost sources for more structure we consolidate which trade more

in quarter our So 'XX third look they operating of down of second absolutely, to be it's and with in And to gain customers and bulk cycle. during and the expense the money and look happened as we this that expect here save to we market discussions every downturn. it's happened share

Nathan Jones

we about maximize to their pricing on in short-term at side that's one competitors Are because any their price just of to your cash there, liquidate smaller pricing the looking smaller those just inventory flip of in looking on last moment? I this. here inventory, were any have And putting pressure what to out on the flow cutting seeing you one then guys you liquidate the of guess the talking order

Andrew Lane

companies actually players liquidate it most pipe and with type pipe distributors, another only some pipe whatever to Yes, we in They – but type happening activity just products the regional distributors. price general the they get is at line completely of kind seen only or their upstream in survival of right. of with crunch also in now aspect see inventories smaller exactly We've mode a that's of Nathan that get. that's

that get you're that but so exactly as that the with But right. longer pressure on I short-term. term will Yeah, market the be better, put position that aspect will in And will some maybe offset there from pricing. short-term in us the of gains we share things some think

Nathan Jones

product the Do commodity business? you valve see of less in that more and kind in

Andrew Lane

see the thing, Yes, get like general happening. his in when line deflationary low dollar it into commodity type biggest it generally we pipe businesses used in the about comments, we talking the see a more which you transactional business. products, in as see was We Kelly mode

get You can, liquidate people quick trying to carbon talking about. pipe I'm they as as pipe

and where a we We're valves. see valves not inventory so procure see the to long-term a it supply of the do yield asset pricing You not valuable valve that stainless, in valves, have in run – the on other able got we've to could it be longer global areas more were supply gas – a not do in term to in products, you lead when been we're not time. and you in continue chain certainly disrupted chain going on

So the come come pressures pricing that going to there. are

Nathan Jones

much. Thanks helpful. That's very very

Andrew Lane

Nathan. you, Thank

Operator

from of proceed Company. Our next question Cowen comes the and question. Jon Hunter with Please with your line

Jon Hunter

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

Andrew Lane

Jon. Good morning

Jon Hunter

just had Good that. I one of had morning. kind I So on Yeah.

mainly revenues directed on XX%. XX% down to upstream second for E&P lot outlook down quarter. a spending in international talk the about XX% was I So that's US the the We've companies side. and of from OFS heard But anywhere on

first, respect does business with with and those then So downstream look you'd to declines? your curious how I'm midstream that and if agree

Andrew Lane

talked I the upstream that about. essentially level we US cutting as agree upstream Yeah, with of in

spend very a but in much about US I a If Basin portion from course, heavily upstream, quarter XX% was little that on towards the happen upstream color that upstream, let first we definitely so and lower the Permian. basins. XX% the which our is the shale weighted of upstream you you're the our Permian, down at look me year the give just think on of can the in XX% ago, largest business CapEx to world, talking other Permian also what in that

projects lifetime ago, we a to still away where from business that Permian was year midstream little seems from Our better. so some it had take held a limitations, the up ago like up pipeline X% because the have – we going capacity but

that's very typical. And so

the So and see there. some upstream downstream guys, but impact said like the a the we flat oilfield the But be impact no up impact gas in in mainstream. with will essentially biggest of service we utility mid half course the impact, the and would less outlook really US what of spending,

Jon Hunter

both historically, second And Thanks. then other incremental in is decremental underlying they've on as mean, I decrementals just been expect question side. That's the the XX%, as on my high and to helpful. quarter.

and about of expecting business to the the how from the of kind of that third respect then to quarter second underlying we thinking quarter? XX Thank that you. with in much be your cuts, and should hit So cost million

Kelly Youngblood

some we're But the let so probably touched doing that be me talked adjustments In there'll things Jon, kind some inventory kind kind your the there, me have about, answer here of we headcount incurring of explain. – look we're at to second. of Yeah, ageing get with reductions, we're we inventory out the in taking facilities. closing be top end fresh a on a I'll of QX charge. QX, – some let and we'll We've of restructuring just a

So that. associated like to be cancelling maybe there's leases going cost and and things

in at for that a of XX% normalize if see take scripted it the comments will be all over our normal kind decrementals So charge kind quarter. we that was second and a going it's you that if But off, think sizable time. I of look including typically just of drop to you're in

about very rapid seeing of perspective. our kind belt, that that under moving already we're a It'll off it's of rapidly. here of think probably one the got from in we've of month QX I decremental north April. that drop month because be But Andy the talked in

So further restructuring be than steeper will point guidance at the than this out think but it's you give back that, charges any be once the taking. XX% I hard we'll to it that

Jon Hunter

and do cost hit thank it, cut then second you to much quarter? benefit expect Got how the of the you in

Kelly Youngblood

who – pieces. We've voluntary of now. offered a program the there's the really our elects quarter. majority it, to headcount so talked in to to reductions, the kind We closing third retirement now We're of are take still second advantage get waiting XX moving but employees right targeted of QX, that. hitting XX a to close three QX right with few Yeah, see about most of those the of in between locations and quarter

quarter. a second So But think quarter. will May month have these effect in here help, almost we we're more going of in you'll quarter. place a think bit more expect the make now. the in But It's third the of reduction in take to run QX, largest it'll kind few majority changes. the hit, little to if starting if I of us rate, to to improvement trickle-down take third a a about the have or weeks into some your We'll right largest it, the you of you

in So QX will quarter, month you really lot only be the get but one a of kind a second more meaningful. improvement

Andrew Lane

Kelly, comments there. the to comments add just me let Jon, Yeah,

more SG&A lot average we the a from basis, it, million, had December lot quarterly it Petroleum is the position look about was charge impact. November, million – Southland a And and we two. you debt, had Whiting Kelly's comments We million had there COVID-XX normal which a was at those Royalty we're XXX think us, million bankruptcy, and we you on XXX said on this year. But the of because a done If year. the bad run receivables X half of for for in not to of rate, XXX doing company last

the you there by at quarter. if to rate fourth in Kelly's on million expect million as below XXX look XXX we quarter that the at So the be or run first actual comments

kind numbers take. see talking charges ex charges the are going can couple next the in the to we You of lease of Kelly's might about, quarters, personnel, that we're and operate inventory onetime and those range restructuring,

Jon Hunter

back. Great, thank you. it I'll turn

Andrew Lane

you. Thank Okay, Jon.

Operator

further There to queue. for I'd to call closing hand back the remarks. are in no like management questions the

Monica Broughton

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

Operator

participation. this conclude today's Thank Ladies your does teleconference. for and gentlemen, you

may time You this lines a and day. wonderful disconnect have your at

MRC Global (MRC) 29 Apr 202020 Q1 Earnings call transcript