MRC Global Inc.

Greetings, and welcome to MRC Global's second quarter earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your cell phone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Monica Brun, of Investor Relations.

Thank you, and good morning. Good morning. Welcome to the MRC Global Second Quarter 2021 Earnings Conference Call and Webcast. We appreciate you joining us. On the call today, we have Rob Saltil, President and CEO, and Kelly Youngblood, Executive Vice President and CFO. There will be a replay of today's call available by webcast on our website, mrcglobal.com, as well as by phone until August 13, 2021. The dial-in information is in yesterday's release. We expect to file our quarterly report on Form 10-Q later today, and it will also be available on our website. Please note that the information reported on this call speaks only as of today, July 30, 2021, and therefore you are advised that the information may no longer be accurate as of the time of replay. In our remarks today, we will discuss various non-GAAP measures, including net debt, adjusted gross profit, adjusted gross profit percentage, adjusted SG&A, adjusted EBITDA, an adjusted EBITDA margin, and adjusted net income. You are encouraged to read our earnings release and securities filings to learn more about our use of these non-GAAP measures and to see a reconciliation of these measures to the related GAAP items, all of which can be found on our website. In addition, the comments made by the management team of MRC Global during this call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of the management of MRC Global. However, MRC Global's actual results could differ materially from those expressed today. You're encouraged to read the company's SEC filings for a more in-depth review of the risk factors concerning these forward-looking statements. And now, I'd like to turn the call over to our CEO, Mr. Rob Saltil.

Thank you, Monica. Good morning, and welcome to everyone joining today's call. I will begin with second quarter highlights and cover some of the key drivers influencing our business today. I will then turn over the call to Kelly, for a detailed review of the financial results before wrapping up with a discussion of our outlook for future quarters. Second quarter revenue increased 13% sequentially, exceeding our previous expectations, led by extremely strong revenue growth in our gas utilities business. This is our largest sector, and it has continued to expand as our customers undertake safety and integrity projects and upgrade residential meters. Our upstream production and midstream pipeline businesses were also up by 13% and 6%, respectively, as energy market conditions improved and oil field activity levels increased. Bucking the trend, our downstream and industrial sector declined modestly in the second quarter, following a strong 12% improvement in the first quarter. Our adjusted EBITDA for the second quarter came in at $36 million, or 5.2% of total sales. Both of these results are the best we've achieved since the third quarter of 2019. We remain focused on balance sheet strength and financial flexibility. Our long-term debt at the end of the second quarter stood at $297 million, while net debt was $234 million. These are the lowest long-term debt and net debt balances since our company went public in 2012. Our leverage ratio is at 2.2 times well within our preferred operating range. We generated $23 million in cash from operations in the second quarter for a total of $47 million in the first half of this year. This cash flow result for the second quarter exceeds our previous guidance due in part to extended lead times on some of our inventory purchases. However, we still plan to increase our inventory levels modestly in the second half of the year in order to match anticipated higher activity levels. Now I'll turn to some of the key drivers affecting our business. The first is inflation. We are experiencing inflation across all product groups to varying degrees depending on product category. Where we see the most inflation impact is our carbon steel products, particularly line pipe, as those prices have increased in the 50% range over the last six months. As we have discussed on previous calls, Inflation is generally good for our business, as many of our contracts are structured as cost plus a percentage markup. The next topic I would like to address is the supply chain. With the rapid increase in economic activity, we are seeing issues with the availability of certain products and experiencing numerous freight delays. Operationally, we are navigating this environment with isolated disruptions. which at this point have not been material. We have seen some product orders delayed due to raw material shortages and plant outages. Freight costs have moved up significantly along with delays, but we are generally able to pass on higher inbound freight costs to our customers. However, certain outbound freight costs may not be fully reimbursable by contract customers and have introduced some modest pressure on margins. Supply chain issues are expected to continue for the near future as economic growth has outpaced manufacturing capacity in certain circumstances. The third driver for our business is the rise in commodity prices. Increased oil and gas prices typically translate into increased activity in the US and international oil fields, which has a positive impact on our upstream production business. The IOCs and larger independents who comprise the largest share of our upstream customers, have generally exercised capital restraint in the first half of this year. However, with growing conviction and the strength of the oil price recovery, we expect these customers to increase their completions activity over the next few quarters. Our midstream pipeline business, which includes natural gas gathering systems around new production, also benefits as completion activity picks up. On our last earnings call, I discussed some of the ways that MRC Global is participating in the global energy transition. To reflect the growing importance of this subsector to our overall business, beginning in the third quarter, our downstream and industrial sector is being renamed the downstream industrial and energy transition sector. While the energy transition portion of our sector revenue is relatively small at this point, It is an area of high focus and growth potential, similar to where we were with our gas utilities business a decade ago. We remain committed to helping our customers achieve their green energy and decarbonization initiatives as a valued distribution partner. Given this backdrop, I would like to highlight some of the energy transition projects we have already been awarded or are tracking for future participation. We currently supply PVF products to biofuel, carbon capture, geothermal, hydroelectric power, and wind projects in various parts of the world. We are supplying in 12 unique biofuel projects that are underway, four of which are in our international segment. We are supplying stainless and carbon steel pipe valves and fittings to a large-scale carbon capture facility in Canada. As a result of our performance on the first phase of an offshore wind farm in Europe, we were recently awarded the second phase, where we are providing pipe, valves, fittings, and flanges, some of which are high alloy metals. In Australia, we are supplying PVF to a large renewable energy project for hydroelectric power stations. We are also the MRO and project supplier to several geothermal locations around the globe. Looking to the future, we are currently tracking 30 new biofuel projects, 21 carbon capture and storage projects, and 12 hydrogen projects. Given our existing relationships with many of these project sponsors and our extensive international presence, especially in continental Europe, which has been leading the global energy transition, we believe MRC Global is well positioned to capture a disproportionate share of this business going forward. And with that, I'll turn the call over to Kelly to cover the financial highlights for the second quarter.