MRC - Earnings call transcript Q2 2021

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Operator

Greetings, and welcome to MRC Global’s Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Monica Broughton, of Investor Relations.

Monica Broughton

Thank you, and good morning. Welcome to the MRC Global second quarter 2021 earnings conference call and webcast. us. joining you appreciate We

by On XXXX. the CEO; CFO. Saltiel, and yesterday’s phone call have will as website, well release. as dial-in today, Kelly Youngblood, information we by available today’s and of and August a Rob on Executive our be mrcglobal.com, XX, President until replay call webcast The Vice There in President is

website. information adjusted and later Please adjusted to replay. including adjusted non-GAAP today, income. our therefore, that may only available the EBITDA quarterly measures, of remarks today, XX-Q and the that file gross Form be speaks SG&A, be debt, adjusted and it are margin discuss expect you time as adjusted gross reported We various on July information on our profit In net note no the call and percentage, on also profit, will of report advised today, XX, this net XXXX, adjusted longer of accurate EBITDA our we will as

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

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

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

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

Rob Saltiel

future will and financial of for and a call morning, I up some results, today’s to our cover turn second detailed with Good of highlights for quarter call. review our over the I a Monica. discussion wrapping business to joining key today. the Kelly will then influencing the quarters. of begin with drivers you, everyone outlook before Thank welcome

XX% increased undertake gas led revenue business. customers largest strong and as expand and expectations upgrade our and quarter exceeding projects our to our This integrity in sector revenue continued is safety sequentially, it previous utilities our has residential extremely Second meters. by growth

first production modestly upstream pipeline up a Bucking and by field activity and improved strong and also oil energy midstream respectably, in in XX% market quarter, Our second as the were businesses the following downstream the sector XX% quarter. trend, and declined increased. industrial levels our X% conditions improvement

quarter the balance on total XXXX. the million Our have quarter in EBITDA of sheet financial for we achieved these and strength X.X% $XX third second came or at flexibility. of We remain of are the adjusted sales. since Both best results focused

at debt quarter the net balances long-term stood end at second was Our lowest the since of million. million, went debt company net These in $XXX XXXX. debt are debt public our and the while $XXX long-term

on $XX $XX due million in our from year. Our well result lead cash operating the exceeds inventory previous second of first operations extended this a for in of some times the leverage within quarter preferred in million second quarter This in is X.Xx, our range. generated guidance We part cash total purchases. for at of the half our to ratio flow

of our anticipated increase higher However, the in match to levels. in levels to activity inventory half plan still we modestly order year the second

to business. some drivers of turn affecting I’ll Now key our the

The first is inflation.

over prices the see category, have inflation line six where range degrees increased depending XX% are across we pipe on the all carbon product impact to as months. We groups in is our inflation particularly most product steel the last varying experiencing products, those

markup. contracts are The calls, business next address as a As I percentage like chain. many topic for good previous as generally is we our inflation would supply our on of is have cost-plus to discussed the structured

products in issues the which with increase we rapid certain are at been availability of have numerous seeing economic isolated environment the not material. this freight are experiencing navigating point delays. and disruptions, this With with activity, Operationally, we

and delayed our have up orders delays, seen have due with We to but are product inbound raw some Freight material higher freight outages. plant pass to able we costs generally shortages along significantly costs moved to on customers.

are introduced outbound be the future continue for freight not customers modest have Supply growth costs contract chain certain may capacity and on outpaced has some However, economic near fully circumstances. as issues by reimbursable expected margins. pressure manufacturing in certain to

in the prices. U.S. IOCs a business. The largest prices had impact the comprise and for production customers increased our of the international and translate business driver is capital commodity upstream our gas oil into on restraint Increased positive typically of share oil third fields, exercised has rise in larger The activity the in half generally and independence who our this first year. upstream which

the their these of increase we price to conviction quarters. expect activity oil few growing next with over completions However, recovery, customers the strength the and

beginning Our which gas as ways includes systems sector. our the the the importance our that transition Global is MRC downstream is activity up. also call, and sub sector downstream overall industrial new reflect transition. in renamed, growing production, industrial in being picks energy some completion this To midstream last benefits gathering participating the of pipeline global third On earnings sector business, natural energy around to and I discussed of the business, our quarter,

business high remain point, sector is achieve our is potential growth partner. helping ago. and energy small While with it customers where initiatives at of were to our a we to valued decade revenue distribution green the similar gas their transition decarbonisation area relatively energy committed of as an portion focus We and this utilities a our

world. like the biofuel, of to some have geothermal, supply or highlight PVF participation. wind we products future backdrop, We energy the power been I and capture, for various to this would projects tracking are Given transition of in carbon awarded hydroelectric already projects parts currently

unique in segment. that of our XX supplying are four International biofuel are underway are in projects We which

carbon large valves to a pipe We Canada. fittings and and carbon are steel stainless facility capture scale in supplying

metals. the in offshore fittings we were which result of Europe, flanges, are We geothermal the recently first of renewable power where and a some valves, Australia, supplying to also farm of As project around were the performance the alloy awarded second MRO locations pipe were several large for our we high hydroelectric project are we phase phase, providing to on In wind an energy PVF stations. a and globe. supplier

new and Looking biofuel and currently projects. XX XX future, carbon capture tracking we storage to XX the projects, projects hydrogen are

presence, call our the Europe, capture is Given relationships I’ll business forward. existing going transition, of to believe international our especially highlights extensive which MRC energy of Kelly Global the And to Continental these the disproportionate project to share we sponsors turn been and leading second for over a well-positioned cover in with financial that, the global many quarter. this with has

Kelly Youngblood

on Rob everyone. today will Thanks, focused be sequential good comparisons. comments My morning, and

are to Gas stated of second unless pipeline the XXXX on declines XX% XXXX was revenue million, XX%. business comparing U.S.-based increase of quarter, million XX% in in the were utility second midstream and $XX sales continued quarter $XXX to a integrity the the utilities execute rebounding spending up the or for first in their by second plans. gas as the customers sales, sectors. were otherwise, U.S. upgrade seasonal from the the U.S. we to the higher So quarter $XXX quarter XXXX. are quarter million upstream improvement followed of Compared Total quarter, first driving which primarily second

million billion reach utility This sector $X the X% lower well in sector the of gas track industrial quarter, to of $XXX we by the represented on total quarter the and year. U.S. revenue and next XXXX driven our in by is XX% Downstream believe segment. were second now sales modestly revenue

the revenue. higher of XX% total increased pipeline and February sector segments. the quarter freeze X% in quarter Gulf which represents turnaround activity sector for due strong the sector second increased improvement sector the Upstream revenue. XX% sales This quarter now XXXX a by production total impacted $XX XX% Coast of million in to represents As region. is reminder, that repair This U.S.-based were now second million, the related in a revenue. of of driven primarily this XX% $XXX This total and the XXXX, first XX% to U.S. were now of Midstream were our sales, sequential increase. International

U.S. in all increases or summarize improved. Now, Norway. XX% The industrial which industrial by X% of $XXX improved U.S. timing to sales to will the with modestly over due the pipeline a infrastructure. This in upstream completion less X% activity second conditions increase million X% turn quarter, U.S. sector and $XX $X the winter sector quarter levels same declined were revenue production to or an from market to increased project from million of freeze except downstream increase The performance project $X also increased is $XX MRO an higher quarter of segment. line was million revenue as activity. the the project the for well geographic I sectors in million revenue XX% pipeline compared by X% production the million build XXXX, in and quarter primarily and sector. sales was U.S. and small activity that Australia, repair midstream upstream upstream impacted revenue sector spring completions, up around to midstream related and sector the the second and where related activity as period. downstream Singapore first U.S. the activity in up due $XX we sector customer the of declines facility production million was and related Canada in a benefited out of down XXXX, revenues due and breakup work. XX% result maintenance with or improvement activity second International related in

turning Now margins. to

modestly approximately likely $XX XX.X% of half second of which million was quarter actions SG&A is revenue embedded the is a in predict, we’re total adjusting expanse expanse quarter as the in second LIFO quarter million second hyperinflation. an of by in run or Adjusted gross to will further a modeling resulted Rob, line the in million in fully of in or higher spot line for reduction first closure adjusted as year. fees for sales that throughout XX.X% in expected. of quarter million $XX higher on result of XX.X% SG&A experiencing currently costs in million SG&A in was certain the the LIFO the Well, the for normalized latest of year second $X million the than quarter XXXX. $XXX XXXX. quarter SG&A increase facility XX.X% second number expanse increasing result difficult quarter quarter for prices has now of This taken as last pipe was came are to costs continue in in $XXX to percent XXXX. decrease additional the XX.X% of year, service compared second rate. during the And which to XX.X% profit Sequentially, than average it our the same Korea. to Pipe or in mentioned million is first of as LIFO the revenue, profit professional second pipe, $XXX year-over-year Logix second compared quarter. the to costs due LIFO The gross cost timing million were the were quarter Based second Our expected million a at quarter the compared in quarter of $XX basis, margin. are to Prices impacting XXXX increased the sales index On in of the $XXX XXXX. higher significant the recorded XX% previously period first our $X compared margins. XX% was

XXX EBITDA the XXXX for in and in of our on by percentage in quarter. improved the Adjusted versus first quarter our X.X% controls. higher quarter Adjusted by revenue, continued first XX.X%. was EBITDA percent $XX versus a second the $XX down driven were X.X% as of basis million SG&A quarter to cost However, points the revenue million focus margins

averaged of was in historical the second XXXX to of mid the above quarter XXXX, teens. which EBITDA XX% the typically well levels, comparing quarter margin second incremental Our

tax effective global the the for earnings quarter. of was Our due mix rate XX% to

However, tax effective unchanged remains our XX% to XX% range. in normalized rate the

$X of For the loss common or share. per had quarter, a loss $X.XX stockholders we net attributable to million

net XXXX from net balances. much averages operations stockholders to $X normalizing $XX logistics normalized lead longer XX.X% our share. to the and compared our expanse an quarter At However, than attributable to or LIFO in quarter sales issues better of cash times per increase our value adjusted working million quarter. quarter, anticipated the in second of XX.X% for of in than chain improvement impacted the second had end in we to expected common the inventory of historical of related of of capital $X.XX XXXX, percentage our recorded income the We million first supply and generated inventory was

stronger experienced quarter, in generation. sales which also additional We resulted cash the during

However, for the the in higher supply of anticipated we levels year, hopefully disruptions to chain begin expect response sales second to to half stabilize. increase activity, inventory as

forward. of first was Our of lower XXXX related cash debt was outstanding end million will level net excess reduced long-term an level XXXX $X quarter in of to annualized interest lowest quarter result to million agreement. compared approximately and The of $XXX flow due This an to credit total million. debt payment debt at on $XXX by in also going debt the savings the basis our the is history. second public company MRC’s $XX We million of debt the

leverage year our leverage facility reduced X.Xx. In expect XX our the months, and to we than of last now At had reduced million. X.Xx was of our has we by peak to continues net XX% debt $XXX of was continue Our the availability quarter, $XX and have we on ratio, significantly better ABL $XXX cash ratio when make the liquidity as the million last end to improve. second the progress to position our our million, market

We anticipate current similar facility extension ABL the also ABL. terms as an to our third during with quarter completing our

our Now turning XXXX to outlook.

in grows the strengthen about will that future economy We levels to the and return future. are XXXX the continues optimistic near demand oil as confidence to

are there our to contribute improving such conversations, mix and outlook. as restrictions, of forces customer discipline, capital pandemic solid backlog customer first and customer half moderating While performance, reinstatement encouraging our all positive

and sales percentage of we offsetting total expect single sector for digit revenue in in single upstream high we a and year, a gas to double digit single our in industrials. low improvements, guidance utilities a percentage midstream Partially previous increase versus range decline in for digit expect as mid pipeline the percentage company mid grow flattish downstream From a and full perspective, the revenue single XXXX will percentages. these For digit revenue we production expect decline sector. of low compared digit the

comparing the single mid first international geographic to digits the when half expect averaging of However, the decline and the also single for year From the Canada of XXXX. in a second the view, we to full we single in range. half, sectors our mid XXXX to expect U.S. all XXXX and growth mid increase versus digit digits

year, should and downstream flat is single the low digits, while growth project are to highest digits quarter and digit third the sector to Although our coming activity international anticipated growth at business seasonally, single its expected and gas is The and with expected the international a company to up in history. expected off expected our to decline still Sequentially, We X% most to XX%. the lead in time increase have we range revenue second we utility be industrials sectors the improvement historical oriented. to the is to ramp supportive for completion which improvement between an quarterly in single end to as drilling and low modestly slightly fourth midstream the experience expect of longer quarter lag be this expect company XXXX, the in up higher decline of compared low revenue business, to but and be activity upstream quarter. is typically revenue

We margins by also as remain moderated inflation adjusted range mix shifts. improvements in are the our profit XX.X% expect to gross

total phase, we that a growth more as relevant revenue as the focused metric SG&A, pivoted of is on. to SG&A we’re Regarding a percentage

range due coming SG&A the certain to modestly activity revenue to may gradually the range, the expected XX% of the but and costs, levels of average this to XX% of increase discretionary to expected reinstatement going percentage increased forward will in while continue XX% percentage in trend as So to the revenue is improve. costs absolute is decline SG&A low years. over year

expect to We remain to rate XX% XX% in normalized range. tax effective the our

rate. tax as seeing delivery to the and continue due finally, impacts discrete conditions to uncertainty but fluctuate could in to our current we this year, earlier, give in by inventory the The for as growth already cash be of in quarterly dates, quarter given large increase are this half the expected to is our And market we the second neutral XXXX. our of flow mentioned rise forecast items to rates the second swings half However, cash may in certain fluctuate year. improved can expect of

debt leverage We our excess also lowering plan to and to prioritize ratio. towards cash continue reduction

closing I’ll back for comments. to Now Rob it turn over

Rob Saltiel

outlook a goals for add business Q&A. Thanks, want to Kelly. thoughts few opening our corporate before I on and

our continue positive to XXXX half as outlook see of momentum. for Regarding Kelly the second said, we

versus backlog sectors half half and the first has revenues to Our of we business commodity the We we year of next increase this project upstream increased our second as increase and benefits moved business of and through the of opportunities have this while benefit prices to expect also increasingly year sectors, the first production year. in continued about Strong should growth activity all across pipeline for our downstream. optimistic were half. the turnaround midstream

had gas target year billion digit utility of to in of us mid XXXX, by revenue hit upper our $X single customers should previously increases Continued spending to expected. earlier our allow than we a

revenues price our transition consistency income. our growth and business While we in at enjoyed must rates. made close the into we that highlighting quarters. must And in I We ESG invested results. rates We single recently reflects in that our increase percentages the so, to compensatory achieve will margin we’ve imperatives achieve flow-through fourth this outlook, consistently In areas. beyond to our line. prospects increase our net bottom must a solid EBITDA returns that considerable over achieve we must retain second annual financial progress our must and increase digits we coming greater quarter, MRC month. report we Global financial positive we improving share capital a our disclosures earlier on as important the key We issued a higher doing by expanding exciting upper

assisting with website. ESG you the are must are report achieving questions. company that customers goals, encourage latest now with We your aligned own initiatives will that, in our ESG Just well expectations. take we we read our their Operator? committed as society’s to And rising to ensure on our we

Operator

is Nathan with proceed. Jones Thank Please Our you. question first from Instructions] Stifel. [Operator

Adam Farley

Good Farley is purchasing power with Bigger taking morning. advantage This seeing products. to Is any have is Adam Nathan. in more how MRC it about going access them? for this And environment? on of better distributors gain market opportunities share should

Rob Saltiel

Yes. We challenges. issues where MRC definitely chain – in have been with supply I benefited our has Global there think and customers, a market

is cases, think top we product, well I from we our to point you taken lot limited cases. these opportunity a main got we base, benefited where with here one the access, have And we a of materials. suppliers of our in fact one and suppliers, an to or where of are we supplier relationships, that some at number is get deep lot cases, access preferential our a of in when number customer two, that your two that look relationship there where we’ve have in established the customers one

see in our space, utilities And financials. gaining there. to that us do And in gain So certainly, here. opportunity some has our share given we’re think it gas an you I share

don’t we chain. going Now in chain We supply see some over. to are do issues the continue challenges that forward, the think supply

continue for And for certainly chain either basis. the abate forward, material. certainly moderate, or to pricing and in both availability to timing a we’ve certainly we preferential have point a But or access would these we are gain share that product look we an to in seen looking entire as supply where the opportunity for and we’re good preferential deliveries. However, inflation had issues as to and of of looking to to terms issues

Adam Farley

a can then to then maybe Is areas accelerate that? And Is there where gears transition Okay. maybe spot certain sweet transition And are shifting acquisitions energy for there plays maybe biofuels? energy the it projects. MRC through you that to projects? accelerate

Rob Saltiel

Yes.

as And pipe There know, In of on I hit more space places lot a one that think you opportunities existing – is of for it in distribution are these the span the you valves conversions this well. energy various obviously and the probably of gamut. is refineries. the space. are fittings transition biofuel natural cases,

in by some the petroleum with replaced these metallurgy of a equipment lot provide feedstocks. in differences. very of required fed a more But would that a complex, or similar, So are the we are typically that maybe products different petrochemical refinery are

certainly been So Global the talked certainly MRC transition I see think XX% our capture, done biofuel outside that for we’ve opportunities we in prepared as Even to for been has forward, as has of But projects about Probably wind, a big there. mentioned, energy comments, what biofuels of space. a we mentioned, of looking part I the space. lot I date. space currently, hydroelectric definitely we’re in going carbon are we in tracking applications hydrogen. of we’re and in

into So evolution space from going would first strength to I really to our say, be developing biofuel and foray areas. other an there’s in – this

energy business. world bigger it It’s distributor part part going we to going We’ve feel Now to certainly a is play space. how economy. that be as transition a out of our got the we think bigger in as a strategy, more our that of to leading impacts our broadly this figure and about how be we can

net to debt talked inorganically in shape how really is a and continue in the debt open IPO both since potentially position good going now. themselves. balance basis as eyes the this business sheet so the We about organically present keep our the opportunities best XXXX. in our fact on and that And is to grow can we’re it we this Obviously, for grow

before. flexibility and flexibility have we So we strategic had haven’t financial

So transition for the expand to keep we’ll energy eyes open in our certainly space. opportunities

Adam Farley

Thanks for taking my question.

Operator

proceed. Our next question Please is Stephens. with from Moll Tommy

Tommy Moll

for Thanks my taking question. morning. Good

quarters curious a I business, with activity, I’m industry. months which consistent tailwind in far mention insight making to more think are XXXX increased just you visibility calendar and this you there’s where You’ll is have point? forward upstream this ought managing just it customers into on have coming any from you remainder the left? of sense in how really the have some Any Or others to there? you much at commentary the completions see year, of maybe how budget early decisions? do Is your

Rob Saltiel

know, Yes. independents as We as our we talking spend certainly our serve comments, are in – a lot of these to customers because larger have recovery their been taken a the has forward. going pledge relates of oil tend to customers muted we as be more in it capital and mentioned IOCs restrained. to And about A and we lot prepared space upstream business. the to

increased it’s up, you’ve the it’s level oilfield that activity. not in to certainly Although seen up

what So a going there’s a need both rates, lost conviction production recovery due have us healthy clearly, the our we commodity decline a we customers. discussions is to with replacement in to through more this for in that to world to be XXXX. the gives you anecdotal lot add the is secure as is high want of really what and look of with But of coupled Kelly, growing that? space. have of maintenance confidence prices you anything This activity to economic growth the

Kelly Youngblood

covered think you No, it well. Rob, I

Tommy Moll

Thanks, Rob. helpful. That’s

chop through SG&A. amount as the Following clear I and be wanted about up looking the may more should to managing about commentary, cost think at going wood cycle side I dollar go here. we more there? the just cycle? any The as this And fixed piece just up, there we Is ask up but variable you’re up, that revenue. through on to lot of Or the more an heard percent forward, the

Rob Saltiel

I’ve regions, make to entire optimized. our optimized the over XXX worldwide, here when do we’ve location Yes. to customer terms got we we at a looking base locations, that mentioned set like network North of you then relative network that America system hub-and-spoke we’ve and in sure and our our locations and on our got both previous constantly in is up that have that branches where it’s are our call of between

a at taking So we’re always fixed costs. look

took the I but see take with sense year oilfield those it at as the balance of around, certainly certainly, look that’s us fixed that costs think we out makes you a our our our business on because, of lot or as rationalization, customer last base And all our movement does adding part we time. a other pruning whether where and sectors. move of you’ll edges, know,

last the of year – was the in related that it’s discretionary austerity our Obviously, I it is big pay SG&A to a note other terms thing to and year employee really think part important to base. is as of our other of related benefits a personnel of some that costs our we’re benefits the And return we expect not to terms of the discretionary recovers, as clearly, any and market disproportion have costs. our that in in these to our will revenue but base, going to cost growth and profitability.

revenue, be if forward. percentage environment increase be potential as of and margins SG&A inflationary a our pressures the you revenue, augmentation will our of a SG&A able to even in So as percentage to it of look to still relative our comments, wage said going in his relates at and Kelly lower workforce, we’ll

Tommy Moll

Kelly. Thanks, Rob. ahead, Go

Kelly Youngblood

on add even I that. covered But on down SG&A remarks. cost Yes, had we to last of to basis a this in some the we I bps. going prepared we the elevated slightly this point just were quarter quarter, mean, XXX comparison was to with

providing away dollar kind from going an guidance. absolute So like I move think of as we’re to amount

XX%, we’ve in call if get it, a a down Just of a there, when color to historically, of revenue, look range. And SG&A just market, been bit revenue. XX% – as switch give to little of we’ll percentage the percentage way a you the up, as more percent of

But market, in down quarter think a year. one XX% I range. a hit to last we XX% we into more get XX% used little in over to improved a

is between, I think XX.X% full XX% so into XX% be think a good where over the average, range, years, historically, to get that it, that XX.X% we’ve of range again, couple comparison be. seen thinking much see But call which next range. what step XXXX, a you’re to very that revenues as for to And you to from to of down type going year I continue place lower, low XX% improve,

Tommy Moll

there Thank welcome cycle other you the context my here. related asking up for question and not by overstaying hopefully one

working you’ll the the mentioned sense that QX, good cap we side, which see as Just on the go more we future next year, circumstances. looking if you into into inventory ought given to makes But see build to want to revenue? how good a we think year, should in should expect we there? what’s pick how a just about to of terms way of what that you percent frame Or manage

Kelly Youngblood

years, think would percent previous back think as XX% a and XX% Yes. working in you roughly of Tommy, quote capital we range. to I if a revenue

much were doing lower less better much XX%. this that. We think, than I that quarter, We’re than than

And model that’s the we on capital centers we of we’re range. minimizing more, in way much kind sub inventory it centralizing of stock We’ll when the work kind as that the have going and is to as we’re more continue can. And we service our we tracking amount that looking XX% keep customer working at field. future so in out the projections forward of

XX% would over could next, time, that so two, improve I the to next And or call the more it, in more. target range. the for even think XX% I But year

Rob Saltiel

that. could I if just and to Yes, add

our on focused investment to very relates capital inventory. it We’re efficiency in as

our that think bit the mentioned, high approach lot prudent we’re that that And items. into forward, that moving in going slow-moving of and inventory centralizing downturn inventory really before went and very last year. out Kelly a turn stuff focus we to of ensure we the a the we’re the I as are to in was we on pandemic

think I as efficiency to improve see capital we go you’ll So continue forward.

Tommy Moll

I will turn Rob, you, Thank back. it

Operator

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

Jon Hunter

morning. Good

commentary. appreciate to seems looking kind mid-XX.X% wanted I’m guess for margin level. in of impacts chain I of noted supply and I it I flattish some the the And like you on you’re margins. ask the the issues. then So some inflationary curious,

is quantify the can what have So a margins disruptions? of chain some been there way supply perhaps you would excluding

Kelly Youngblood

Yes.

that the business, line from of as of kind Jon, explain are I in the margins the part more is difficult our obviously at of a of pipe is one prices, that’s margin. sure are it we’re of much So every XX% let influencing every cost in of QX, lot important. imagine. puts and line of revenue side things some a very up and quarter, we one. had spike revenue margins that And why. is mix The pipe, to reasons on so our a positive line QX. sell And positively And a average me able month, XX% lower the into think went pipe you can inflation. I’m The the where one takes with in obviously There’s better to our

concentration international accretive But the this overall, we more year, the downstream to average. the and our are are then our slightly margins revenues higher side, and get is margins. overall accretive work on type Just negative company down valve the international to

price the not those get And adjustments things prepared containers, freight, lag price – typically margins cost Outbound we’ve pass first always us. works adjustments, that it’s think right inbound in. that that can the until there’s you remarks, guarantee freight, of can a in of against it’s we logistics And on now, like we’re some through. all – freight, that in I of pass half some through. can but that So costs seeing always the with mentioned that that, a that pressure Rob’s fully here got higher We effect. if the price adjustments of we in you have there’s baked year,

you And a or look accretive margins. to actually at common our pretty operating SG&A and So wanted from and against it’s that income gross gas make the it’s this margin perspective. that that for the margins. work of point EBITDA gas effect just can utility, us that business against overall at the requirements utilities weigh then look knowledge think But gas utilities, to I we can when

a more to don’t an we to of try think about more perspective to perspective. gross our our up. – be So XX% revenue, from gas margin almost really EBITDA it’s Especially than hung so I more think, get utilities, appropriate, now too thinking with be it’s margins

Rob Saltiel

this And somewhat through But could variability digit it’s and in make this gross margin our And call. take our important to lower is about sales, quarter, margins. is a I’ll margin, it threshold. are it the have for much bottom Jon. perhaps aggregate that the talked If what serve We And terms with we crossed may because gross to X% at determining we gas over I higher though of important single to Obviously, think dilutive our EBITDA the Yes. margins, it, longer-term of least I for until business be and SG&A in up, again. margins. last in mentioned for more Kelly. how Kelly close on of goal the lost utility jump – a this that look at we point was looking think our just line even Thanks they’re shareholders cost margins and we can and accretive. a there, bottom the incremental we bringing at us, line. the gross made flow

our you see you grow, see fact downstream of with business and integrated accretive digitally we base. customer One any utility interesting business are our are our is gas as bottom So utilities gas think industrial most us grows, our – to those probably the that of are our line definitely margins.

And repeatability, so things. serve, of of in those the of orders, of get size we sorts to terms lots cost efficiencies

little we focus bit gives hopefully, and growth that of bottom how sectors about color that a margins. think margins So of the on those impact on you different and our line the the of on

Jon Hunter

related energy to And then your follow-up unrelated an helpful. of That’s kind Thanks. transition.

if XX these of one carbon if get you’ve revenues any on tracking and identified would biofuel I’m that in market forward? given to or MRC of able discuss You’re content an you’re the terms of curious projects hydrogen. capture the projects, kind going addressable

Rob Saltiel

of quarters this $XX to it’s early huge the very MRC these of you just to may a is know growing terms as Still existing transition. of beyond get involved projects advantaged figure big it to said we the is are come each we foothold as And number And give previous pie. in think a little We opportunities terms gives bigger and nice And market, is fast. a color really few think this bit can the in that energy player to want that all Well, think, of But see small are already, it to a going but comments, day. I let Many need relationships. million approximately we’re and and where you charge for in overall, look, got even the We’ve flavor leading these obviously we not into billing currently picture. But footprint customer we the in addressable growing, for out. days looking our about of out total me diversify. global they fruition But a we’re This piece Global. be I do in overall how of we that, a energy the relative projects this customers space we us. growth forward. in. for great transition our

Jon Hunter

single guess of that for it Rob. is you last me guided quarter, digits. third think, Thanks then in just low progression the And up, the one for I in terms revenue I

July fourth single-digit currently here at where increase. in the of of the off you end kind in to drop the are quarter? low So seasonal then expecting curious you’re what And relation

Kelly Youngblood

obviously I tracking no from it we’re tracking And say, I there’s think we’re maybe a well. what there. would about Jon, to well but we changes perspective. backlog more very I Yes, talked mean,

think in this about QX, compared percent quarter-to-date our more here, to up up XX, few QX. X% backlog backlog is here at like in just a point. up our went I something was July June XX%. XX But We

that the we’re gives in providing. us – that So numbers confidence yes,

Jon Hunter

Great. Kelly. I will it Thanks, turn back.

Operator

proceed. Instructions] from Ken [Operator is KeyBanc with Our question Newman Capital Please Markets. next

Ken Newman

I just rate last pieces margins thinking there’s in any about if Good X% to to the forward. EBITDA mentioned margin you’re change run curious morning, moving – cost exiting understand I’m could serve going range X% was of year? that clarify gross type think guys. I and you I the lower how to the if you quarter.

Rob Saltiel

and I’ll our the – as rest going be start crossed EBITDA in the Kelly you year that here. the is range. we probably terms in add know, We let of for quarter, Yes. to we X% margin. And think in of But

XXXX. what certainly we the and prospects growth I continued think half single next already be margins ought around than quarter-to-quarter the in the growth X% range as want year growth operating but get the EBITDA that? see through But being to to really QX. up we moved and moving move move midstream from bigger you about as into we this downstream higher less extreme think margins Kelly, EBITDA with of certain can further even potentially business, we we are thinking I year sectors those upstream that QX But saw the into you on to second greater that to have anticipated in digits up, of move for the leverage. year add as our

Kelly Youngblood

a just couple other of Maybe Rob. points,

over and highest to I EBITDA QX, think XXXX. you XX% QX had incremental number up since number we’ve margins covered X.X% That’s just of it we well. number that X.X% had But margin jumped here that the in were We time in absolute QX. reiterate, to the frame.

the and ultimately like of gradual improves. Rob mix in just as into that that and to up baby we doesn’t right? about XXXX, we step feel So revenue well, just that we’re continue But – that kind to talked go as we’ll very of to get up up, improvement It’s get mark. the X% then there. happen that think overnight, as achievable, to XXXX X% we we steps, certainly but seeing start the happy on took margins. very It and when with closer like track it’s we’re we that and out it’s revenues we And cost the to earlier said, work

Ken Newman

returns capital point just point? since you leverage about term? lowest focus of deployment the growth at And The here. the do what I you’re term, longer strong said at is guess, gears and curious talk And see see the where you going? you’ve pretty of I’m how this between over Switching target the could that if you some IPOd. Yes. balancing capital best leverage where obviously is the you longer kind

Rob Saltiel

balance strengthen sheet, to the we I’ll continue lower Yes. to I’ll focus to balance levels. pay sheet, in Look, add that, the and on debt for down Kelly want Ken. to to definitely our near let even jump continue term,

think mind all services. in is in recovery. we always we’re keep And here, know optimism, very that energy early into there uncertainty related our to Let’s despite I space still a

maneuverability as improvement financial look in flexibility near about and of So the get strategic term opportunities. further This we we really back allocation being gives potentially inorganic thinking are some afield, growth sheet. and also us as balance further capital at look the

years position. be strong mentioned we’ve the to would balance transform us a on since that acquisition. that put the and last something may done I company, that sheet As it’s in at we significant been quite a few a call, Obviously, having look

balance So and near on pay really debt sheet our downs. is the focus term,

Kelly Youngblood

to That debt prepared back maybe about I excess remarks, we this the just down by talked made, we million cash the some add of we that suite went in $XX largely flow April. was in this mean, mark payment quarter. made driven the but And to on, our million the net $XXX payment

$XXX million. $XXX million, the but So net that brought down down gross the to our debt to debt

XXXX, when into a it’s time frame. right rates. But here leverage X down you feels headed it’s you kind And year to year. fairly gets that time of XXXX. I ratio or range lower the low the and gets than think the of we’ve we the just a EBITDA get continues in any guided but end that consistently the just range certainly It between now, X.X by into on this growth would as to maybe better earlier get guided down feels or status going the into like in even long right direction. XXXX we And feeling point. into this But to XXXX the better in X we’ll down now, is haven’t and the it like at certainly be is which – going it even business specifically quo, conservative anything without just and improve the

Rob Saltiel

neutral just Yes. year. end here to of too, the cash also and now we’re this to between said remind going be flow And we roughly

net level So quarters. couple the it last it at to debt as isn’t if will the the that continue in reduce has of

much XXXX the the restock been XXXX half So it’s balance better outlook our is there on our Kelly’s to second point, as we the fruition, to comes year. a shape pause of we’ll through future. But in inventory sheet to to this taking look we than and ever extent going a really be moving as that be to

Ken Newman

supply if I’ll jump the takes some difficult that to did But embedded or higher you challenges? into challenges I related any could, I kind it’s in of quarter. margins any And of give chain, these into higher just around other impact higher and understand of clearly kind – little to what’s outbound since freight a chain us particularly kind sense it’s whether costs know on guidance the and the of in highlight Last you back costs, freight one, quantify of I can on the puts costs you. from the supply

Rob Saltiel

would Ken, are is But moderate. supply I the being – you’ve terms issues in going Yes. at this and of certainly of They a we’re containers really for away behind of us up the of in do those. worst stacked terms of seen go overnight. steel ports, lack ships cost we say of there, looking and terms in inflation, outlook what believe of to forward the in lot terms not chain these freight going cost to the the

recovery early of be But really lean the we couple So into seeing our growth inflationary about, push do the that to bit guidance, ability of to likely last these believe over this a but we we a is we the we extreme some see do Obviously, our certainly from dates. of to quarters restock the because coming. inflation saw to do us. worst inventory But delayed behind talked as modest part couple by of a inventory forward, this the subsiding going pressures, out – we quarters. we some delivery continue of see as lot tried the

Ken Newman

Understood. color. the Thanks for

Operator

Broughton question-and-answer the for and turn remarks. the Thank session. reached you. we have to the Ladies closing like gentlemen, end back of Monica call to would I

Monica Broughton

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

Operator

This concludes conference. today’s

at this lines have your your for disconnect and much a participation, may great very You time. Thank day. you

MRC Global (MRC) 31 Jul 212021 Q2 Earnings call transcript