MRC Global Inc.

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 conference over to your host, Monica Broughton. Thank you, you may begin.

Thank you and good morning. Welcome to the MRC Global first quarter 2025 conference call and webcast. We appreciate you joining us. On the call today, we have Rob Faltile, 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 21st, 2025, and the dial-in information is in yesterday's release. Please note that the information reported on this call speaks only as of today, May 7th, 2025, 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, reference in this call to EBITDA referred 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. As a result of the recent announcement related to the sale of our Canada business, the results of which have been reclassified to discontinued operations. Our comments today will reflect revenue and profitability from operations, continuing operations only, unless otherwise stated. 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 an overview of the financial highlights and strategic accomplishments from our first quarter, followed by a summary of our first quarter results and an update on our growth initiatives. I will then turn it over to Kelly to provide more detail on our results and outlook. We are off to an excellent start in 2025, and I'm very pleased with the strong improvement in our business that we experienced in the first quarter. We exceeded our expectations on all key financial metrics, and each of our three business sectors achieved sequential revenue growth of upper single digit percentages. In addition, we are very encouraged by our growing backlog, which increased 8% sequentially in the first quarter to $603 million, with growth across all sectors. Our backlog has continued to increase in the second quarter, led by our U.S. segment, which has experienced backlog growth of 23% at the end of April compared to the beginning of the year. This expanding backlog increases our confidence that we will achieve another quarter of strong sequential revenue improvement in the second quarter. Although each of our sectors is performing well, I am especially optimistic about our gas utilities business, which is our largest end market. After a couple of challenging years, this business is experiencing a significant resurgence, and through the end of April, we have seen a 26% increase in backlog. The pre-release of our first quarter financial results a few weeks ago has allowed us to begin execution of our previously announced $125 million share repurchase program. Returning cash to shareholders is an important benefit of owning our stock. And the repurchase program reflects confidence in our company's financial strength and our ability to generate substantial cash across the business cycle. The share repurchase program is a key component of our three-pronged capital allocation strategy, along with maintaining a healthy balance sheet with a target net debt leverage ratio of 1.5 times or lower and investing in future growth opportunities. With our current net debt leverage ratio at 1.7 times, and strong available liquidity of $570 million, we are well positioned to execute on all three priorities this year. Turning now to our key first quarter financial highlights, revenue increased by 7% sequentially to $712 million, with growth in each of our end market sectors led by gas utilities. We are expecting a recovery in several of our larger gas utilities customers' activity levels, with destocking in the rearview mirror. The diet sector also experienced solid increases driven by chemicals, mining, and refining activity. Finally, the PTI sector activity also picked up with solid gains in both the U.S. and international segments. Adjusted gross profit margins continued to be strong at 21.5% in the first quarter above our 21% target. We continue to focus on products and services where we can add the most value for our customers, which is exhibited through higher gross margins. We delivered adjusted EBITDA of 36 million or 5.1% of sales, a nice improvement over the fourth quarter. We expect quarterly adjusted EBITDA margin percentages to exceed 6% of sales in the second quarter as revenue improves sequentially. We generated 21 million of operating cash flow from continuing operations for the first quarter, reflecting our focus on working capital management and good cost control. Our net working capital as a percentage of sales was a solid 11.7%, demonstrating our operational efficiency and disciplined inventory management. As stated previously, our ability to generate strong operating cash flows across the business cycle has underpinned our confidence in exercising our share buyback program, and we are on target to generating $100 million or more in cash flow from operations in 2025. Now I will provide an update on some of the growth-related topics we addressed on our March earnings call. First, our gas utility specter is finally back on a growth trajectory. We are forecasting strong demand growth from several of our larger customers in 2025, and some of these customers have recently issued bullish updates to their longer-term spending plans. Our gas utilities backlog is the highest it has been in three quarters. Our customers continue to invest in safety and modernization projects, and they are benefiting from a resurgence in natural gas as a key fuel to support electrification and LNG export opportunities. We remain optimistic about this end market sector regardless of the uncertain macroeconomic conditions. The products we supply to our gas utilities customers are generally sourced from U.S. suppliers, so we are in a strong position to mitigate the impact from the evolving tariff situation. In addition, we are making some nice inroads to new revenue sources with the pursuit of new gas utilities customers and the smart meter benefits of our new EmTech Services joint venture. On our last call, we discussed the potential impact of tariffs on our business and the general benefits of an inflationary environment on our revenues and margins. It is clear that the current tariff situation brings significant uncertainty, not just on product costs for our customers, but also what it could mean for potential demand destruction in the second half of the year. Our company is extremely adept at navigating global supply chain challenges for our customers, a skill we honed during the COVID pandemic. Our supply chain team is spending significant time advising our customers in all three market sectors about tariff impacts, and the benefits of sourcing from different countries and suppliers to minimize the negative impacts on our customers' product costs and availability. It is important to note that over 60% of MRC Global's U.S. product sales are sourced domestically, so we are generally much better positioned than our competitors to insulate our customers from negative tariff impacts. Our China-sourced products represent less than 15% of our total U.S. product mix. and this clearly represents the biggest risk of major business disruptions due to tariffs. We are negotiating with our China-based suppliers to absorb a significant portion of this cost increase for the benefit of our customers, and we are working to migrate our China purchases to less-tariffed countries where possible. Tariffs remain a fluid situation, and we will continue to update our investors on future calls. We continue to expect a growing role for natural gas and associated investment in midstream infrastructure, playing a bigger role in our US PTI sector sales. While first quarter PTI revenue in the US was up 6% sequentially over the fourth quarter, all of this growth was concentrated in the midstream subsector, while upstream revenues remained generally flat. In addition, while US PTI backlog grew 28% in the first quarter, midstream outpaced upstream, and this has continued into the second quarter as well. We have been successful in landing significant orders for projects related to the gathering and transmission of natural gas with both existing and new customers. With WTI oil prices currently at multi-year lows, while natural gas prices have rallied off of 2024 levels, we expect that the U.S. midstream subsector will outpace upstream for a while longer. We also expect that the larger EMP players will play an increasingly significant role in U.S. oil field activity as more price-sensitive producers reduce activity levels in the second half of this year. And finally, our targeted growth initiatives continue to make increasing contributions to our 2025 revenues and are setting the table for revenue expansion in future years. We have spoken previously about our focus on growing our chemicals business, and this continues to be a bright spot for us. Our U.S. chemicals backlog at the end of April 2025 is 32% higher than the same time last year, and we expect U.S. chemicals revenue to be up high single digits over 2024. Our expansion into data centers and mining applications is also gaining traction. We are negotiating master service agreements with targeted owners and subcontractors for PVF work in new data center cooling systems. Our bookings this year already exceed $10 million, and we have tens of millions of dollars of opportunities under pursuit. Our mining sector initiative is also showing excellent growth potential with increased bidding for MRO and project activity, as well as new customer acquisitions. We expect our mining business to grow at a compound annual rate of approximately 10% over the next three to five years. In summary, first quarter results were very strong to start 2025. and we are very optimistic about the second quarter as well. We have seen our total U.S. backlog continue to rise into the second quarter, with a 23% increase through the end of April compared to year-end, and with all three business sectors increasing double-digit percentages. Along with increased intake levels and near-term project deliveries, this positive momentum underpins our confidence in our second quarter revenue growth projections. We currently expect second quarter revenue to improve by a high single to low double-digit percentage as compared to the first quarter. We recognize that medium-term macroeconomic conditions remain uncertain, but so far we have not seen significant changes in our customer behaviors or buying patterns. We will continue to monitor the situation closely as we advise our customers on how they can best navigate these market disruptions and uncertainties. Although the second half of 2025 may represent more risk due to these uncertainties, we do not have sufficient evidence to alter our previous annual guidance. We will update our guidance as necessary in future quarters when there is greater clarity regarding the tariff situation and its impact on MRC Global's business. In the meantime, our strong balance sheet, robust free cash flow, and ample liquidity should allow us to manage headwinds and respond quickly as new opportunities or threats emerge. And with that, I will now hand it over to Kelly.