MRC Global Inc.

Greetings and welcome to the MRC Global's first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Monica Broad of Investor Relations. Thank you. You may begin.

Thank you and good morning. Welcome to the MRC Global first quarter 2022 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 May 24, 2022. The dial-in information is in yesterday's release. We expect to file a 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, May 10, 2022, and therefore, you are advised that the information may no longer be accurate as of the time of replay. In our call today, we will discuss various non-GAAP measures, including net debt, adjusted gross profit, adjusted gross profit percentage, adjusted SG&A, adjusted EBITDA, adjusted EBITDA margin, and adjusted net income. Unless we specifically state otherwise, references in this call to EBITDA also refer to adjusted EBITDA. 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 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, actual results could differ materially from those expressed today. You are 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 would like to turn the call over to our President and CEO, Rob Faltile.

Thank you, Monica. Good morning, and welcome to everyone joining today's call. I will begin with a high-level review of our first quarter results, provide updates on each of our business sectors and segments, address two important topics, and share our outlook for the remainder of the year. I will then turn over the call to Kelly for a detailed review of the quarter and our 2022 guidance before providing a brief recap. Our first quarter 2022 financial results were excellent on both the top and bottom lines and exceeded the guidance we provided on our February earnings call. Revenue came in at $742 million, up 8% sequentially versus the fourth quarter, led by double-digit growth in our upstream production and diet sectors. First quarter EBITDA was $48 million, or 6.5% of sales, as we continued to drive our focus on efficiency and our bottom line. As we progressed through the quarter, we saw increases in both customer activity and future spending expectations that set us up nicely for a stronger 2022. Gas utilities continues to be our largest sector, and we experienced 5% sequential growth to $271 million, tying our highest revenue quarter ever for this business. We have spoken previously about how our customer spend is underpinned by safety and integrity projects, as well as housing starts, with both drivers independent of commodity pricing. We continue to add new customers to our portfolio, expand into new products and services for existing customers, and increase the integration of our digital systems to improve efficiency. We reliably and cost-effectively purchase gas products for our customers through our large-scale and global supply chain expertise, and our value-added services make us a trusted partner to our customers and the leading distributor in the space. We anticipate continued strength in this sector as we move into the second and third quarters when field project activity by our gas utilities customers is at its highest. Our diet sector experienced a 12% sequential growth in the first quarter to deliver $226 million of revenue. This growth was underpinned by three key drivers. First, we saw strong demand related to previously delayed refinery turnarounds and maintenance impacted by the pandemic. This strong demand is expected to persist throughout the year. Second, our chemical strategy flourished as we increased market share with underserved customers and expanded our product offerings. And finally, our energy transition project activity increased at a much faster pace than expected. We are involved in multiple biofuel offshore wind and other green energy projects in the U.S. and overseas, both with traditional and new customers. This business is expected to continue its growth throughout 2022 and to become a substantial contributor to our revenue and profitability story in the coming years. Our upstream production sector experienced the highest sequential growth of any sector at 13 percent as well completions activity picked up in conjunction with rising commodity prices. We have positioned new fit for purpose product offerings in major U.S. basins to increase our market share with independent operators and are achieving early success. We believe that our traditional publicly traded customers will accelerate their investment activity in the second half of this year in response to price signals and geopolitical developments. Our midstream business, which is primarily oriented around gathering and processing assets, was relatively flat in the first quarter. This business typically lags our upstream sector growth by two to three quarters, and with a rising backlog in this sector, we expect it to pick up as we move throughout the year. In the U.S., revenue increased 9% led by the diet sector, which was up 18% due to higher turnaround and biofuels project activity. In Canada, we saw 8% sequential revenue growth due to increasing upstream and midstream activity with our extensive exposure to the Western Canada oil field. Our international segment revenue was relatively flat as gains in upstream activity were offset by declines in diet sector activity due to delayed projects. I now want to address two important topics relevant to our business. Since our last call, we have all witnessed the tragic images and loss of life in Ukraine following Russia's invasion. We know that the humanitarian toll trumps anything we can discuss regarding our business, but I will briefly address the war's effects, both short-term and long-term, on MRC Global. First, we have no operations or sales in Russia, Ukraine, or Belarus, nor do we have any significant suppliers from those countries. As such, we expect virtually no loss of revenue or supply chain impacts on our company as a result of this human tragedy. Longer term, we anticipate that the energy equation in Europe will be altered radically as sovereign security and energy security remain dominant themes. We expect that traditional energy investments in the North Sea and elsewhere in Europe will be required to mitigate the embargo of energy imports from Russia. LNG is likely to play a bigger role in the longer term to replace Russian gas through expansion of European regasification facilities. Renewable energy in Europe should also expand as relative economics and proximity compare favorably versus imported oil and gas. The U.S. and Canada oil fields are expected to play a bigger role in the European energy story by helping to supplant Russian imports. MRC Global's presence in each of these markets should enable us to assist this vital rebalancing of the world's energy flows over the coming years. The second topic I want to address is inflation. We are currently in the midst of the most significant inflationary period in decades. Rising costs of labor, materials, and transportation have profoundly altered the costs of the products and services that we supply. Looking forward, we expect inflation to persist at least into the third or fourth quarter of this year. Inflation has several implications for our business. First, we have leaned into the recovery by forward purchasing much of our inventory, both to ensure adequate product availability and to get ahead of anticipated price increases by our suppliers. Second, our commercial teams have remained diligent in working with our customers to ensure that our margins are not eroded due to stale product and service pricing. Finally, we expect that SG&A costs will rise through this year as we provide competitive wages and benefits to our employees and increase our staffing to support anticipated growth. Kelly will provide more color on this in his section, but we anticipate that these inflationary issues are manageable and will be net accretive to our EBITDA margins in a growth environment. In addition to the strong revenue and EBITDA performance in the first quarter, we have continued to increase our backlog significantly, a sure sign of the continuing strength of our business. As of March 31st, our backlog stood at 667 million, up an impressive 28 percent over year end, and the highest level we have seen since January of 2019. All four business sectors and each of our U.S., Canada, and international segments achieved double-digit percentage backlog growth in the first quarter. Along with our optimistic business outlook for the remainder of 2022, these positive data points give us confidence that our full-year financial results will exceed the guidance we provided in our February earnings call. Therefore, we are raising our full-year revenue guidance by $100 million to $3.1 billion, and we are now targeting $200 million of EBITDA for the full year, which represents 6.5 percent of sales. We anticipate that 2022 will be an excellent year for our customers, our employees, and our investors. I'll now turn the call over to Kelly to cover the financials for the first quarter and to provide additional details on our 2022 outlook.