MRC - Earnings call 3 2023 | MRC Global Inc.

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Operator

Greetings, and welcome to MRC Global's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Monica Broughton, Vice President, Investor Relations and Treasury. Thank you.

You may begin.

Monica Schafer

morning. good and you, Thank Welcome to Call XXXX Conference Third MRC Webcast. Global and Quarter Earnings the We us. you appreciate joining

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

will today, may it various will expect information and XX-Q and We speaks no of the file later non-GAAP website. therefore, information our accurate be report advised our we as reported call the of that our be XXXX, discuss X, Form on longer also replay. In Please time to measures. quarterly this only that you November on of are as available today today, call note on

to our these on items, more You which found these our non-GAAP read refer to references are encouraged can state in we EBITDA all to website. EBITDA. and otherwise, learn a to earnings release call filings related this specifically use be GAAP of to securities the to see and adjusted reconciliation about of our Unless measures measures of

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

could results differ those today. actual However, from expressed materially

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

Robert Saltiel

with end overview will a I some a preliminary financial welcome quarter of morning, joining detailed provide to Good before sector third remarks today's review thoughts performance brief high-level call. Monica. provide begin recap. I our a everyone XXXX. our results about will then prepared and results you, Kelly the third and and with of quarter Thank

rate EBITDA, line customers despite execute slowed $XXX top second third bit. of X% the a the of marked We continue in sequentially consecutive margin over was that third sequentially, margin our resulting to the well quarter We for adjusted for $XX growth X.X%. for generated of quarter X% as consecutive up XX%. to This up million, for in our our the fact margin quarter adjusted the our quarter. Revenue profit EBITDA quarter an million exceed gross sixth as well to exceed sixth XX% EBITDA

in flow quarter, realized capital effectively. Cash and managing through cash is generation for levels our feed We operations team the by full also operations finance the in and cycle, working cash with flow our our inventory periods result year-to-date exceeding working our guidance teams growth supply in and components even our bringing work result. excellent and pleased our managing flow this we strong from to our is when imperative $XX required, shareholders, are company more across business our capital year. $XXX a flow million, was the million of The cash in chain for

to our sectors. now Turning

due would sector refining and XX% for even slipped DIET quarter third strong had the Our customers higher growth a into some orders chemical our that have experienced fourth the larger in project of sequential not quarter delays. been to

since last X our We involving earnings DIET significant also call. sector made our announcements

large Shell. our is of international our first The activity customer, with was energy transition of with to projects enterprise expected with our Much long-time and a extension component. chemical future the agreement frame X-year Shell involve

general drop sequentially as of our declined as brings the footprint. PTI the announced a third X% supplier also a by further North as energy business our the our to demonstrating biofuel in Sweden, in activity. revenue Preem's American valves well as We benefits project quarter of that role major in opportunities we oilfield transition experienced global

Basin, perform to producers Basin as to continue more of extensively work. Basin, us customers the revenue agreements. In quality, We large life the oilfield operating customers Rockies there in their through be to we the in a enterprise value the We publicly that longer steady exciting regulatory MRC in have difficult contrast faced purchase Permian California biggest are consistently have Permian continue high our traded growth to today the completed. We environment Permian products customers our California acquisitions PTI a to announcements has that our decline. built and contributed utility in we the work sequential of in major provide quarter. In the inhibited region, slight we believe Decreased activity our PTI third once sector, revenue beneficial in potential experienced well Global that acquirers than growth. targets we to and gas with investment lower the the who production recent do and for the also

inventories call, our product our normalization destocking own As has last the of customers as priority. we near-term on a discussed on their supply to focus chains led

X continue destocking longer. We expect for X to or this quarters

competition previous return experienced pipe sector. In major utility customers significant our and of in year line but of than is In have addition, raised of significantly to some particular, move have year. various product our year pipe reduced year as year, in levels higher the product leading reduced is our we for through deflation lower this most costs within over the next noteworthy projects, with labor utility bar expect revenue that product the higher increasing gas new have that have customers gas to line available the while spending line this CapEx these this share construction exception product of XX% past for the to group, approximately and or in spending rates interest line we line sector we the last pipe. In higher group, purchases. are sales It

line. The diminish that prices with adjusted likely news XX%, us Additionally, top allowed pipe in an business We strong. profit headwind lower the Despite have the decade. our the maintain good so bottomed fundamentals many cost market pipe utility line a than in we temporary preserve our the of for over leading we of a have expect very but we sales percentage which should excess growth gas inventory, have avoided year. a low-margin our to chasing remain served gross next of position of is customers has this and sector, of the at pause line more this

effort utilities that supply quality purchase to back Global's and savings ability to provide cost result. these scale in-house. These and We better we have significant under significant are and many previously partners integral have MRC utility of recognized in the that services, would, at supply chain been provide utilities for with require and a responsibilities cost value-added to migrate chain cases, the the entrusted purview

more been reduced has in about a Additionally, dependency historically to energy the expect commodity we our Kelly due but for this big year, to demand slowdown sector from susceptible cash that outlook our want major will million. fourth quarter, previous section approximately less of provide exceeding a to now prices. $XXX on his in detail its million operations mention is guidance positive I generate that to this $XX and

capital to of XXXX, we are next not ready our their ahead year. as revenue still Looking quite determining many are specific for to customers budgets provide guidance

offer will However, drivers. the key some I on perspectives

by supported PTI sector will and high markets. America by the producers international spending benefit that in increased prices capital expect OPEC oil North generally Plus and We from

the the concentrated more expect pace muted of customers when in of at gas half grow the activity of second with utilities We their concluded. the is the year destocking our to spending a bulk majority capital

optimistic plant We the will summary, I of expect sectors longer-term underlying sector In the supplemented chemical strong projects. from over and their about outlook. benefit refinery hand slate robust remain by we Kelly. DIET to and of maintenance a X fundamentals it to all now activities, growing and

Kelly Youngblood

XX% X% Thanks, to comparing the unless third Rob, be focused otherwise sector second in primarily perspective, gas of Total sales sequential the X% expected improvement. a quarter. turnaround Rob to or originally compared primarily into slipped earlier. The the increase a utility sector but were billion, due From mentioned third XXXX activity. in of $XXX was the some million were revenue increased third everyone. had morning, will or to and in today third quarter due quarter My of $XXX deliveries third good sequential quarter second sales $XXX $X quarter, stated. company the reasons on expected, the million, results project this quarter as rebound sales quarter DIET the $XX fourth an million a that sector But for decrease the were million comments to XXXX, quarter a

since revenue the was which prior in PTI million before, in was sector has revenue in sector, of million and have As between was which outlook third million or has remain mentioned activity. DIET the respectively. Canada growth flat. XX% sectors, X%, the a quarter the PTI the perspective, quarter. the million about $X million third this decrease increase the was million, project utilities the offset to sales up quarter, PTI in in due quarter driven backlog and or DIET was for segment, third we geographic million our driven Compared the International the million, X% the both and are $X backlog in the revenue a a essentially a $XXX by $XX can PTI $XX of which XX%, double-digit gas $XX with shipments $XXX million X% the sequentially, up by significant project sectors. substantial beginning flat to experienced XXXX, to quarter amount U.S. year is growth partially declines primarily timing XX%, compared XX% of create International activity, which We increase or optimistic or million and $X of previous quarter, down by $XX were the and third up quarters. The and very sector segment variability quarter International $XXX a down our for revenue in third from segment. From of

gross from second Now basis third or profit XX the point was a million turning decline margins. XX.X%, quarter. to Adjusted $XXX quarter for the

business Although product in our stabilization other deflation experienced year, have line inflation lines. with along pipe this most across we

margins. a We makes compared SG&A as improved million gross have of to contract sixth gross terms XX.X% consecutive product and maintaining which company due in margins sales of the excess higher $XXX exceeding third overall or XX%. Reported margin our adjusted with This of international from been segment, accretive to sales successful of for to higher revenue or gross XX.X% the margins XX% is contribution quarter. a mix, million was adjusted second quarter quarter the $XXX for

$X SG&A was a EBITDA our or X.X% million for sales, quarter to the third the basis $XX of charges a by segment, adjustment nonrecurring favorable have nature our quarter customer customer million settlement pretax to the Due insurance. offset million of for adjusted $X settlement this a $XXX quarter for related to expense of from the quarter arrive U.S. expense we it net excluded SG&A in includes million. Adjusted expense, million point second million a the effective improvement This sixth XX% historic is at of third tax as nondeductible in adjusted X%, tax expense significantly expense margins rate rate and an the in expenses compared EBITDA the quarter with state the makes The $X of the of than foreign second and to in quarter. with due was income differing exceeding Tax from taxes, stronger difference to third the This our statutory rate consecutive effective rates. $XX quarter. income results. quarter XX

operations net shareholders third the to cost on have adjustments income LIFO we $XX million and common from our stockholders diluted income third and attributable quarter, of or For per $XX in $X.XX $XX $X.XX average to normalizing adjusted million was generated common $XXX million items, net share or share. In an per quarter, the attributable year-to-date. for net a basis, we diluted cash million and other

expect the strong As additional to due our generate achieve to this to working target capital cash full Rob us quarter a performance efficiencies allowed flow we quarter and early noted, year quarter. operations the million an from This a mentioned year flow last approximately $XXX we cash operations from of quarter, cash target the in fourth million. full increase of enabling is $XX

capital structure. and liquidity to Turning

current on total and $XXX the including ABL cash, availability million. million liquidity is is $XXX our Our

quarter Our than $XXX net based the leverage X.Xx, expected. was of on Xx million earlier ratio a debt hurdle dropping below

use, not show that improvement. And September generate liquidity have B before the to the to matures ratio year, coming we of address will we do needed, our payment continue of under maturity. our the in expect XXXX, to term loan capacity plenty refinance if we in we to leverage believe With of cash ABL expect if balance the to and

quarter, ABL ability impact earnings the using As noted to the given our last term to repay our assets. loan with current no call in

despite throughout This debt continued have year. We as as loan designation maturing within term the long the technically the classify to long-term outstanding. loan the XXXX sheet term balance remains as on existing will X loan term continue

already X% currently the to higher factors to range revenue due We decline utility seasonal quarter. sector. related be fourth to this and the gas of of the could XX%, the expect at to sequential now Turning discussed a end the year

International a mid-teens followed single-digit percentages Canada DIET full the upper we increase For expect an U.S. growth, segment our year, low PTI highest in perspective, level with growth. is a to our growth by From in single-digit decline. upper of single-digit approach our sectors percentage be expected with the a to segment with and full year sector percentage

explained result, expect the near-term to gross for is and like guidance Rob utilities, Also turn comments. to our we experienced the X%. as in fourth mid-single-digit of margins range and a some closing on the full with gas has to to I earlier, have year. decline for And would provide we And margin year, We adjusted intend XX% expected call. back headwinds EBITDA it provide adjusted excess quarter maintain to in full -- to XXXX as intend that, for a

Robert Saltiel

Thanks, for million quarter, summarize I even year our We generation priority a Cash some expect cash the flow to exceed the we our from are across of in $XX of We want opening These top XXXX. for prior operations as now cycle. remains before Kelly. million highlights sequentially. revenue full key of generated grew the $XXX guidance third Q&A. business to

adjusted profit full excess gross range year EBITDA in XX% and for adjusted to expect in to be We of XXXX. the remain X% the margins

for weakness the largely stock. and been paying anticipate media open up diversification I our each X/X revenues have activist our X potential of Q&A, before DIET to gas any call the investor drivers XXXX Our drivers. want of articles uncorrelated to PTI approximately relating half utilities. And our should first in that lastly, business we sectors in We sectors strategy for off with for an positive do there in acknowledge that in is with our compensate providing

and can the able existing or on be our this sure we to comment of potential don't we I'm you appreciate, our interactions discuss shareholders, As of any specifics with situation. won't

focused As keep session questions your results. now such, we on that take ask we Operator? questions. our Q&A your that, with quarterly you the will in And

Operator

[Operator Instructions].

comes first Moll the Stephens. from line Tommy with Our question of

Thomas Moll

some X-part utilities. a question, start I follow the of you gas to laid wanted things to on It's Rob. on just out, up

on that a you point destocking. to the cycle? And topic that you then hit maybe timing First of to the gives today. Anything could newer visibility on on

the underlying interest worse could demand. rates out called You impacting before they visibility do customer much of spend and you real better? and inflation there? the How as rate have And get those get factors

Robert Saltiel

Yes. Tommy. Thanks,

is too supply kind dialogue too different many destocking we a customers as that their the last the major our of are call, and into team normalization of plans and realized as clear this year our the reducing it's customers talked inventory very were the a levels, remainder really inventory having lot of are of holding they far much chains next seen of maintains to really that and the piles. their understand what As all concerned, with about regular significant for And year. on our

that pulling own of inventory to because they're on that much some as of would they've holding, got they themselves not work And as their inventory through. some we're

detail. really in to we'll haven't want as able But a fluid As they of reaffirm that. phenomenon. ourselves while. think is that a we this we customers, it because be shorter-term we've seen seem obviously, so more XXXX, quarter dialogue phenomenon, said have this occasions, to a into we clear to or X be is And on in with somewhat continue probably to And development number a that for check as we move we this

amount quote about at be XX modernized But you of out there of again, lines look out to utility still gas that updated, that there there's replaced, needs basically over a infrastructure the tremendous our is of business, old. years fundamentals the if the are X/X

And there's needs tremendous so take modernization to place. that

seeing the we projects through. And been a obviously, projects the that demand has those mentioned meters that in of We have a we those line decline around are and space that of going pipe the purchases. gas go curtailment also delayed, then have, really upgrading we're of but of in also to lot been prepared utility comments some for some know

think added purchases And pricing that's move be business of our we is customers. around to been though And the something seem our through when pipeline think announced want a look line budgets for into and as finally, year haven't going customers. to to that our more actually line a work next even We've we expect as we And we 'XX. bigger of transient couple to So at to market to through. even the as we seen year. got next with can kind talked share. then say board their that customers been of some these more start a things budgets ones the that's pipe are pickup bottom across year. And in that increasing We've I yet, that themselves revenues budgets, do new be about effects ultimately, gaining we our announcing think we we'll in destocking, move see I've effect. see We've add among to concentrated going we a the next been really pipe that we're normal

part eat into it. interest a in as second destocking rates, said But you question, big part So sort these the product things of inflation, of is all your purchases. of

or fixed had up with rates that budgets. to with going projects I year going that, part we a think go these of that customers, fourth of going got destocking all for we've think CapEx sort We then discussions are these to this not construction challenges the yes, bottom to into indicated the really we're kind are big hurdle past get a how have the work as but they've to but the quarter of it, see in next And And factors develops. things clearing they've with of is cost environment. of certainly worse challenge nearing the

second to in again, we'll And it relates on first of and more as see bullish half we next the how develops. the are half year utilities, we're gas than this

Thomas Moll

Rob, rig rig you obviously this to also last for here Do year. potentially that America to soon? your the to having visibility quarter. rigs customers season close customers budgeting We're any bottomed? dropped follow-up pivot count pretty getting in to The over at up a visibility picking anytime for next quickly any on count now for have PTI. point North Or

Robert Saltiel

changed. and talked heavily the larger reason that's it's with obviously, fourth in levered picking quarter. being don't quarter, we of pick as mean the and our I we we're any about typical CapEx view digit have again, in direction, up Yes. the much up companies have customers to last crystallize a again, all bottomed believe going weeks. rig pick publicly has talk to a traded read the be in certainly bottomed spending to else, industry that And friendly X North as count we of see We outlooks Permian everybody big seen the previously, for and the as from more move X We've quarter. we into to the well. up And Obviously, third out in Basin. But think people the need the the have individual up budgets the that America. we it's that, mid-single our on We kind the focus producers believing should actually to trend third XXXX.

business, side. business to seeing count pick delay is mind, from PTI really drilling. seeing from which and X- X-quarter up that completion in rig production keep the post between there. typically the It's a grow really odd on There's removed And

the these outlook, budgets really Tommy, to operators. So set and just our we'll as major have get among that's watch

Operator

Stifel. the of from line Jones, Witt comes question next Nathan Our

Nathan Jones

next in year continue will quantify things. of gas your you up I'm going there the some utility Obviously, having stuff business with the and inventory out terms to this few quarters? Is impact called couple here. you've you can have other follow on that any maybe destock way destocking here to big customers the is think for of on destock a of a what

Robert Saltiel

Well, it's Nathan. great question, a

the smaller of own difficult projects and into the think that we in component. break to these mind challenge together. destocking I more one the with the of each these of is construction getting or any higher on has a each mentioned components. factors all individual of think of are eats interest circumstances We its practical situation. across keep individual as the line budget, rates these to that depending it's down or fixed role CapEx a things a cost utility matter, set fact have as that before, coming the But major drive And bigger the

XX the XX top those spending quarters that's look have X you XX year, of One things with through actually worth mentioning us that of increased customers, our is of this if and reduced. at have their

out its again, and rest of So spending. on each thing. concerned And availability some utilities of the turns of that's kind back own utility really our is out group to of the the bigger coming pandemic, the pulled overloaded of they products. doing inventory It have were relative as about that on we were the because they

is will a and we really it's about on utility XXXX. the But into it are here mosaic talking as of by we're persist move again, call that So general we what think trends individual bit a utility.

Nathan Jones

grown 'XX it asking gas picture than rather not there that the destocking, utility business If would customer think a was have way. I Maybe this shrunk? you do in

Robert Saltiel

Yes.

on bit last growth If to business that's And last quarter we at see had X believe certainly than grown is -- year unequivocally, didn't be obviously running. versus down being basically But this XX%, we 'XX weaker what flat that would we This years the We're business you the we in we year. boil Obviously, a more off space. growth we in gas knew than 'XX. year-to-date, come seeing destocking, without we utility look we're the fourth year. modeling the rate. a little a would relative would

customer facilities really a in to and to this bit They sure safe. said have to over They before, provide that and safe discussions their to customers that they had skis reliable. make we've the need when set. be public they're Again, update conservative order that have service. got products is again, their a they their them with a And I've indicate modernize

not sector would to they had year. its one a where if skis this of today big we terms have get they the was the what really would destocking, it's surprise it gas be utility absolutely over business needed, sure space. So going in expect we that without making That's the grown are

Nathan Jones

inventory when everybody when too Yes, could built they they didn't much know get any inventory.

Just surprised I a meter of to of would have maintain gas of they're I deployment the a higher for last quick deployment priority bit utilities. the kind one hear that that to on down side smart have it. ROI would slowing been that was there as the a thought on meters.

that's you it I'll commentary slowing why on. down any on and Just pass think

Robert Saltiel

Yes.

production meters. those Some supply The to the who those without the meters. folks capabilities the the in concentrated meets smart been is of challenges doesn't fairly also meter telecommunications that have of of manufacture technical, getting a down actually some demand. of is It chain And still their all have on industry. that and necessarily volume particular, too industry in production limited

Those make also focus to on like you to projects, any reliability And even clearly on, are happen. you before we focus a But factor. and can say, going more money. let's so how have that's projects safety been

things over installed look we've have But In close can projects into side, they're the the are that meters in having at to happened some on there the that take just what again, these of production of a these right. to like 'XX meters, then be also defer, the have those inventory moved and 'XX. moving few would some meter months. some has can the next got bottlenecks utilities is they they so everything, critical absolutely been that cases, smart that But

Operator

Capital comes next of from the with Our Loop Dankert line Markets. Chris question

Christopher Dankert

all some capital think but I guess of without inventory of destocking on just the maybe inventory what guess, kind needs is know X cash the -- do going on, are lower guiding in where the an or on difficult shorter maybe term, that next to given capital we comments generation, side working you suggest I down a does given kind carry in 'XX, to? any I the how X, amount X, opportunity generation here. come of cash the months, can levels it's bought about

Robert Saltiel

about much all it's produce utility been that that. the Well, to has efficiently. bringing working lower here thanks how fact of opportunity And become amount Yes. strong seem more given very we've negatives we're so cash, amount with and impacting we same more around debottlenecked on revenue inventory to be because to margins us on has we're have silver inventory the capital addition that side. lining our able gas our supply this the lower able manage clearly, own of the revenue to and of the and mean, excited a an allowed and for focusing I generate chains destocking amount to in the up generate normalized, really the as us to

to significant of sorry, revenue giving as cash what's cash call, quarter-to-quarter, of flow across this to next the $XXX you from this not role entire That's We And a I to a cycle. it's as -- about story. revenue amount if management operations. generating to generate is certainly business grew on X% over we of our but well. cash guidance company we a million of 'XX, expect great this and generate mean go think we're year cash. ultimately, dedicated And team the generated corporation,

at sheet. balance much a as So company. a a public debt net for we've improved low record got We're

generating relates ultimately, cash. things inventory that's be to to what going a to investors investors these very all say. around as think So I for destocking should be and And order getting house own in positive because we're lot our of want it

Christopher Dankert

pending going mean, guess further I out some we're year, Understood. capital little zoom could time the for bit of issues through to of maybe more And priorities deployment be moment. have if Yes. we any issues there? structure capital going thoughts I low. this just decided. a to But I even no a next matter just I what get the some once on leverage kind quite of guess is

Robert Saltiel

it fact the getting cash question. will that. that's year to that it. cash great M&A financial get grow back that Well, asking to need we Because on will cycle demonstrate Thanks questions ago that those were And to we will the really We up we able Yes, business more company. to the a even the for across like gives or to would as generate recall we looks this flexibility. we're and doing pull we're remember transcripts like who generate a allocation, capital us grows. said

with, done hasn't since want into to based existing be we're getting geography, business, M&A. grow significant feel we mix, like We we how that mix, our we're can to we add have But about sure any we to very effectively, we that either make M&A make what compete that want customer sure product our that XXXX. you. company value on want to businesses disciplined can we thoughtful This about

were to grow detriment in We haven't public we financial than 'XX company's that's to attractive a because company levered. overleveraged, scan will now for probably for we our ability as market pandemic. to ways think the concerned going a the flexibility this actually been we had entire had business. because more the heavily continue profitably our think in really M&A And been existence the about But have in have big the will market into company. we've will to to were into a especially going flexibility as trade way M&A We about people

Operator

for to closing I'd hand further back to There Broughton no call remarks. the are questions. like Monica

Monica Schafer

us to you and Thank our great conference us MRC interest joining quarter look in Global. forward day. a in February. for join having fourth We Have call your for for you today

Thomas Moll

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

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

MRC Global (MRC) 8 Nov 232023 Q3 Earnings call transcript