MRC Global Inc.

Greetings. Welcome to MRC Global's first quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. I'll now turn the conference over to Monica Broughton, Vice President, Investor Relations and Treasury. Monica, you may now begin.

Thank you and good morning. Welcome to the MRC Global First Quarter 2023 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 23, 2023. 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, May 9, 2023, 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. 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. Unless we specifically state otherwise, references in this call to EBITDA refer to adjusted EBITDA. 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. 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 provide a high-level review of our first quarter results and sector performance, followed by our 2023 outlook, and conclude with comments related to our term loan refinancing. Kelly will provide a detailed review of the first quarter results and 2023 guidance before I end our prepared remarks with a brief recap. I will begin by discussing a change in our sector reporting effective this quarter. As we have highlighted frequently over the last few years, we continue to diversify our business where today our traditional upstream and midstream sectors on a combined basis represent about a third of our company's annual revenue. Five years ago, these sectors comprised more than 50 percent of our sales. These businesses have similar drivers relating to general oil and gas production activity and commodity pricing, and they share common customers who participate in production gathering and processing activities. In addition, these sectors have been managed at MRC Global by common business leaders. As a result of these factors, we have combined the two businesses into a new sector called Production and Transmission Infrastructure, or PTI for short, which we will use for reporting going forward. Moving on to our financial results, I am very pleased with our strong performance in the first quarter, as this provides us with increasing confidence in our full-year outlook. Our top line was strong, with revenue of $885 million, representing 2% sequential growth and a 19% year-over-year improvement. Compared to the same quarter last year, each of our three sectors experienced double-digit revenue increases, with diet and PTI leading the way. We realized EBITDA of 69 million, which was 44 percent higher than the first quarter of 2022, with EBITDA margins of 7.8 percent, a 130 basis point increase. This improvement is the direct result of our focus on cost discipline and higher adjusted gross margins, driven by product mix and improved pricing. Our revenue backlog was 14% higher at the end of the first quarter of 2023 versus the first quarter of last year, and up 2% sequentially, signaling continued strength across our business. Our profitability improvement is translating into improved returns on invested capital, or ROIC. After adjusting for the impact of LIFO, our ROIC was 11.5%, on a trailing 12-month basis. We expect this metric to continue to increase throughout 2023 and in future years, and we see it as a key driver for value creation. Turning now to our sector performance, our diet sector stands out as the primary driver for our company's sequential and year-on-year growth, as revenues expanded 12% sequentially versus fourth quarter 2022, and by 23% versus first quarter 2022 levels. In both comparisons, Higher turnaround and maintenance spending by refiners and chemicals customers, along with increasing activity associated with LNG projects, led to revenue increases. We've had tremendous success with LNG projects this year, driven by our expanded project planning and execution capabilities, our early engagement with end users, and our deepening relationships with EPCs and OEMs. Our Project Center of Excellence maintains a growing backlog of LNG projects that underpin our expectations for strong revenue growth. Our PTI business continues to benefit from improving fundamentals and our increased focus on Permian Basin opportunities. This business experienced a 22 percent revenue improvement over the first quarter of 2022 as our customer base, comprised primarily of IOCs and larger independent public companies, continued to execute their plans. Despite the recent volatility in oil and gas prices, We continue to expect the PTI sector to have strong results this year. Our gas utilities business continues to perform well with 13% year-over-year sales growth, as several customers implemented meter upgrade and pipeline integrity projects, as well as other system reliability environmental activities. This business has achieved a 12% compound annual revenue growth rate over the past six years, and it continues to be an exciting growth engine for our company. Given that our gas utilities performance is largely independent of oil and gas commodity prices, this sector is a highly resilient contributor to the MRC global investment thesis. I want to now provide a few comments on our 2023 outlook. Our strong first quarter performance, our solid and growing backlog, and our strong alignment with our customer spending plans all provide us with increasing confidence in our 2023 outlook. We reiterate our previous guidance as we continue to expect double-digit sales growth and EBITDA margins exceeding 8%. We expect strong revenue improvement across all three business sectors and geographic segments. And we continue to target generating cash flow from operations of $120 million or more for the full year. Kelly will provide further details on our 2023 guidance in this section. Finally, I would like to address the postponement of our recent term loan refinancing. In April, we launched the refinancing of our $295 million term loan B. As a reminder, this loan does not mature until September of 2024, but we attempted to refinance the loan earlier to take advantage of improving debt market conditions. Shortly after the launch of the refinancing, our preferred stockholder initiated a court action to prevent the refinancing from closing. This action complicated the execution of the refinancing on favorable terms, so we elected to postpone the refinancing efforts before their conclusion. We are in discussions with our preferred stockholder regarding our capital structure and the disposition of the preferred shares, and we are hopeful that a resolution can be achieved. Any agreement we reach should be fair to all shareholders. I also want to remind our shareholders that we expect to continue to have ample liquidity under our global asset-based lending facility, which does not mature until September of 2026, to repay the term loan debt in full should that be necessary. Our liquidity situation is solid and improving as we continue to focus on generating significant cash from our operations this year and into the future. And with that, I'll now turn the call over to Kelly.