Q2 2024 MRC Global Inc Earnings Call

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Operator: Greetings and welcome to MRC Global Inc. Welcome to MRC Global's second quarter, 2024 earnings conference school. At this time, all participants are on a listen-only mode.

Operator: Greetings and welcome to MRC Global's second quarter 2024 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 conference over to your host, Monica Broughton. Thank you; you may begin.

Operator: 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 you remind, this conference is being recorded.

Monica Broughton: I would now like to turn the conference over to your host, Monica Broughton. Thank you, you may begin.

Monica Broughton: Thank you and good morning. Welcome to the MRC Global's second quarter, 2024 conference call and webcast. We appreciate you joining us. On the call today we have Rob Saltiel, 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 MRC Global.com, as well as by phone until August 21, 2024.

Monica Broughton: Thank you and good morning. Welcome to the MRC Global second quarter 2024 conference call and webcast. We appreciate you joining us on the call today. We have Rob Saltiel, President and CEO, and Kelly Youngblood, Executive Vice President and CFO.

Thank you and good morning, welcome to the MRC Global second quarter 2024 conference call and webcast. We appreciate you joining us on the call today, we have Rob saw T O President and CEO and Kelly Youngblood Executive Vice President and CFO, there will be a replay.

Monica Broughton: There will be a replay of today's call available by webcast on our website, mrcglobal.com, as well as by phone until August 21st, 2024. 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, August 7, 2024, and therefore, you are advised that the information may no longer be accurate as of the time of replay.

Today's call available by webcast on our website MRC global Dot com as well as by phone until August 21st 2020 for the violent 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.

Monica Broughton: The violent 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, August 7, 2024, and therefore you are advised that information may no longer be accurate as of the time of replay.

Speaker Change: Please note that the information reported on this call speaks only as of today August seven 2024, and therefore, you're advised that information may no longer be accurate as of the time of replay.

Monica Broughton: In our call today, we will discuss various non-GAAP measures. You are encouraged to read our earnings release and security filing to learn more about the 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.

Monica Broughton: 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 the 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 management of MRC Global. However, actual results could differ materially from those expressed today.

Speaker Change: In our call today, we will discuss various non-GAAP measures you're encouraged to read our earnings release and securities filings to learn more about this the 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 EBITA refer to.

Speaker Change: 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 management of MRC Global However, actual results could differ materially from those expressed today.

Monica Broughton: 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 management of MRC Global. However, actual results could differ materially from those expressed today. You were encouraged to read the company's SEC filings for a more in-depth review of the risk factors concerning these forward-looking statements.

Monica Broughton: 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'd like to turn the call over to our CEO, Mr. Rob Saltiel.

Russell: 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'd like to turn the call over to our CEO Mr. Russell to you. Thank.

Robert Saltiel: And now I'd like to turn the call over to our CEO, Mr. Rob Salteel. Thank you, Monica. Good morning and welcome to everyone joining today's call. I will begin with a high-level review of our second quarter results and then discuss two notable achievements, a promising macro trend, and our sector highlights before concluding with our 2024 outlook. Kelly will provide a detailed review of the quarter and 2024 guidance before I deliver a brief recap. Starting with our second quarter highlights, we generated $63 million in operating cash flow in the second quarter and $101 million for the first half of the year.

Rob Saltiel: Thank you, Monica. Good morning, and welcome to everyone joining today's call. I will begin with a high-level review of our second quarter results and then discuss two notable achievements, a promising macro trend, and our sector highlights before concluding with our 2024 outlook. Kelly will provide a detailed review of the quarter and 2024 guidance before I deliver a brief recap. Starting with our second quarter highlights, we generated $63 million in operating cash flow in the second quarter and $101 million for the first half of the year.

Russell: Thank you Monica good morning, and welcome to everyone. Joining today's call I will begin with a high level review of our second quarter results and then discuss two notable achievements a promising macro trend and our sector highlights before concluding with our 'twenty 'twenty four outlook Kelly will provide a detailed review of the quarter and 'twenty 'twenty four guidance.

Kelly: Before I deliver a brief recap.

Kelly: With our second quarter highlights, we generated $63 million in operating cash flow in the second quarter and $101 million for the first half of the year. It was a solid quarter with cash generation coming in stronger than expected due in large part to efficient working capital management, we are on track to meet or exceed our guidance of January.

Robert Saltiel: It was a solid quarter, with cash generation coming in stronger than expected, due in large part to efficient working capital management. We are on track to meet or exceed our guidance of generating 200 million of operating cash flow for the full year, and we remain very optimistic on the cash generation potential of our company going forward. 2nd quarter revenue was 832 million, growing 3% over the first quarter, with the increase driven by our gas utilities and PTI sectors. Gas utilities revenue improved 8% sequentially, driven by increased customer spending due to seasonal increases and normalizing buying patterns by most of our customers.

Rob Saltiel: It was a solid quarter, with cash generation coming in stronger than expected, due in large part to efficient work and capital management. We are on track to meet or exceed our guidance of generating $200 million of operating cash flow for the full year, and we remain very optimistic about the cash generation potential of our company going forward. Second quarter revenue was $832 million, growing 3% over the first quarter, with the increase driven by our gas utilities and PTI sector.

Kelly: <unk> $200 million of operating cash flow for the full year and we remain very optimistic on the cash generation potential of our company going forward.

Kelly: Second quarter revenue was 832 million growing 3% over the first quarter with the increase driven by our gas utilities and P. T I sectors gas utilities revenue improved 8% sequentially driven by increased customer spending due to seasonal increases in normalizing buying patterns by most of our customers.

Rob Saltiel: Gas utilities revenue improved 8% sequentially, driven by increased customer spending due to seasonal increases and normalizing buying patterns by most of our customers. Our PTI sector grew by 5%, led by the international segment, due to increased project activity in the North Sea. Our diet sector experienced a slight decline, as the U.S. segment experienced lower refinery turnaround and project activity than we had expected.

Robert Saltiel: Our PTI sector grew by 5%, led by the international segment due to increased project activity in the North Sea. Our diet sector experienced the slight decline as the U.S. segment experienced lower refinery turnaround and project activity than we had expected. Adjusted gross margins were a robust 22.1%. This is a record high quarterly result for MRC Global due to product mix and a strong international contribution, both of which were a creative to overall company margins. Adjusted EBITDA margins were 7.8% for the 2nd quarter, a 70 basis point improvement over the first quarter. This is the result of higher adjusted gross margins coupled with strong cost discipline.

Our P T I sector grew by 5% led by the International segment due to increased project activity in the North Sea, our diet sector experienced a slight decline as the U S segment experienced lower refinery turnaround and project activity than we had expected.

Rob Saltiel: Adjusted gross margins were a robust 22.1 percent. This is a record high quarterly result for MRC Global due to product mix and a strong international contribution, both of which contributed to overall company margin. Adjusted EBITDA margins were 7.8 percent for the second quarter, a 70 basis point improvement over the first quarter.

Kelly: Adjusted gross margins were a robust 22, 1%. This is a record high quarterly result for MRC global due to product mix and a strong international contribution both of which were accretive to overall company margins.

Kelly: Adjusted EBITDA margins were seven 8% for the second quarter, a 70 basis point improvement over the first quarter. This is the result of higher adjusted gross margins coupled with strong cost discipline, we remain on track to reduce absolute SG&A in 'twenty 'twenty four versus 2023 levels.

Rob Saltiel: This is the result of higher adjusted gross margins coupled with strong cost discipline. We remain on track to reduce absolute SG&A by 20% in 2024 versus 2023 levels. Our SG&A as a percentage of sales remains best in class compared to our energy and industrial distributor peers. Our balance sheet continues to improve and has never been stronger. During the second quarter, we repaid our term loan early, as we had previously signaled, using a combination of cash and our ABL facility. We ended the quarter with $103 million of net debt and with a leverage ratio of 0.4 times, a record low for our company.

Robert Saltiel: We remain on track to reduce absolute SGNA in 2024 versus 2023 levels. Our SGNA as a percentage of sales remains best in class compared to our energy and industrial distributor appears. Our balance sheet continues to improve and has never been stronger. During the 2nd quarter, we repaid our term loan early, as we had previously signaled, using a combination of cash and our ABL facility. We ended the quarter with 103 million of net debt and with a leverage ratio of 0.4 times, a record low for our company. We expect these metrics to improve further in the coming quarters as we generate additional cash from operations.

Kelly: Our SG&A as a percentage of sales remains best in class compared to our energy and industrial distributor peers.

Kelly: Our balance sheet continues to improve and has never been stronger.

Kelly: During the second quarter, we repaid our term loan early as we had previously signaled using a combination of cash and our ABL facility. We ended the quarter with 103 million of net debt and with a leverage ratio of 0.4 times a record low for our company we.

Rob Saltiel: We expect these metrics to improve further in the coming quarters as we generate additional cash from operations. And finally, our international business continues to have an excellent year. Second quarter revenue grew 15% year over year and 11% sequentially, driven by growth in both the PTI and diet sectors.

Kelly: We expect these metrics to improve further in the coming quarters as we generate additional cash from operations and.

Robert Saltiel: And finally, our international business continues to have an excellent year. 2nd quarter revenue grew 15% year over year and 11% sequentially, driven by growth in both the PTI and diet sectors. The international business is poised for double-digit revenue improvement for the full year, supported by a backlog that is 32% higher than a year ago. Our growth has been enabled by multiple North Sea projects and MRO activity in the PTI sector and by multiple energy transition projects in the diet sector.

Speaker Change: And finally, our international business continues to have an excellent year second quarter revenue grew 15% year over year, and 11% sequentially driven by growth in both the P. T. I N diet sectors. The international business is poised for double digit revenue improvement for the full year supported by a backlog that is 32.

Rob Saltiel: The international business is poised for double-digit revenue improvement for the full year, supported by a backlog that is 32% higher than a year ago. Our growth has been enabled by multiple North Sea projects and MRO activity in the PTI sector and by multiple energy transition projects in the diet sector. I would now like to highlight a couple of noteworthy achievements and then comment on a positive macro trend. First, we were very pleased to have recently been chosen as the primary strategic supplier of PVF products and services to ExxonMobil in North America.

Speaker Change: Sent higher than a year ago, our growth has been enabled by multiple north sea projects and MRO activity in the P. T I sector and by multiple energy transition projects in the diet sector.

Robert Saltiel: I would now like to highlight a couple of noteworthy achievements and then comment on a positive macro trend. First, we were very pleased to have been recently chosen as the primary strategic supplier of PVF products and services to ExxonMobil in North America. We were selected for our breadth of project product and service offerings, our technical expertise, and our geographic footprint, all of which are industry leading. And our new agreement with ExxonMobil covers all upstream and downstream operations for both MRO and project activity. We have had a long-standing productive relationship with ExxonMobil, and this agreement allows us to grow with them as they expand their North America business.

Speaker Change: I would now like to highlight a couple of noteworthy achievements and then comment on a positive macro trend.

Speaker Change: First we were very pleased to have been recently chosen as the primary strategic supplier of PDF products and services to Exxonmobil in North America. We were selected for our breath of project product and service offerings, our technical expertise and our geographic footprint all of which are industry, leading and our.

Rob Saltiel: We were selected for our breadth of product and service offerings, our technical expertise, and our geographic footprint, all of which are industry-leading. And our new agreement with ExxonMobil covers all upstream and downstream operations for both MRO and project activities. We've had a long-standing, productive relationship with ExxonMobil, and this agreement allows us to grow with them as they expand their North American business. We are currently in the early stages of implementation, and we expect activity levels to increase into next year, especially as ExxonMobil's recent acquisitions are fully integrated. We are now focused on delighting this important customer with outstanding service.

Speaker Change: Our new agreement with Exxon Mobil covers all upstream and downstream operations for both MRO and project activity, we've had a long standing productive relationship with Exxonmobil and this agreement allows us to grow with them as they expand their north American business. We are currently in the early stages of implementation and we expect.

Robert Saltiel: We are currently in the early stages of implementation, and we expect activity levels to increase into next year, especially as ExxonMobil's recent acquisitions are fully integrated. We are now focused on delighting this important customer without standing service. I am proud of our MRC Global team for the hard work they are putting into this customer relationship and appreciative of ExxonMobil for entrusting us with their extensive North America PVF business. Business.

Speaker Change: Activity levels to increase into next year, especially as Exxon Mobil's recent acquisitions are fully integrated.

Speaker Change: We are now focused on delighting this important customer with outstanding service I am proud of our MRC global team for the hard work. They are putting into this customer relationship and appreciative of Exxonmobil for entrusting us with their extensive North America P. B S business.

Rob Saltiel: I am proud of our MRC Global team for the hard work they are putting into this customer relationship and appreciative of ExxonMobil for entrusting us with their extensive North American PVF business. Second, I want to highlight our excellent progress with our chemicals growth strategy. We began this initiative in 2021 by hiring subject matter experts and refocusing our sales and marketing efforts on this attractive subsector.

Robert Saltiel: Second, I want to highlight our excellent progress with our Chemicals Growth Strategy. We began this initiative in 2021 by hiring subject matter experts and refocusing our sales and marketing efforts on this attractive subsector. Through the end of 2023, we had seen approximately 30% growth in our Chemicals subsector revenue, and we expected to increase upper single digits this year. Much of our progress is due to our target growth accounts where we have seen more than a doubling in revenue comparing the first half of this year with the first half of 2023. We also see significant opportunity for further growth in 2025.

Speaker Change: Second I want to highlight our excellent progress with our chemicals growth strategy. We began this initiative in 2021 by hiring subject matter experts and refocusing our sales and marketing efforts on this attractive sub sector.

Rob Saltiel: Through the end of 2023, we had seen approximately 30% growth in our chemical subsector revenue, and we expected to increase by upper single digits this year. Much of our progress is due to our target growth accounts, where we have seen more than a doubling in revenue comparing the first half of this year with the first half of 2023. We also see significant opportunity for further growth in 2025. Finally, I want to highlight a macro trend that we expect to play out over the coming years, strong demand growth for natural gas. It is well understood that the U.S. has an extensive supply of natural gas in unconventional places. As a fuel, natural gas is clean, reliable, and affordable.

Speaker Change: Through the end of 'twenty twenty-three, we had seen approximately 30% growth in our chemical sub sector revenue and we expect it to increase upper single digits. This year.

Speaker Change: Much of our progress is due to our target Roes accounts, where we have seen more than a doubling in revenue comparing the first half of this year with the first half of 'twenty 'twenty. Three we also see significant opportunity for further growth in 2025.

Robert Saltiel: Finally, I want to highlight a macro trend that we expect to play out over the coming years. Strong demand growth for natural gas. It is well understood that the US has an extensive supply of natural gas in the unconventional place. As a fuel, natural gas is clean, reliable, and affordable. We expect demand for US natural gas to increase over the next decade driven by four factors. Growth in LNG export volumes increase needs for gas-fired power stations, increasing exports to Mexico, and growing industrial demand. Demand growth for natural gas is very good for MRC Global. Firing gas production and consumption means more gathering in processing facilities, more pipelines for transportation, and more related infrastructure down the entire value chain to consumers.

Speaker Change: Finally, I want to highlight a macro trend that we expect to play out over the coming years strong demand growth for natural gas. It is well understood that the U S has an extensive supply of natural gas in the unconventional plays as a fuel natural gas is clean reliable and affordable we expect demand for U S natural.

Rob Saltiel: We expect demand for U.S. natural gas to increase over the next decade driven by four factors – growth in LNG export volumes, increased needs for gas-fired power stations, increased exports to Mexico, and growing industrial demand. Demand growth for natural gas is very good for MRC Global. Higher gas production and consumption means more gathering and processing facilities, more pipelines for transportation, and more related infrastructure down the entire value chain to consumers.

Speaker Change: Gas to increase over the next decade, driven by four factors growth in LNG export volumes increased needs for gas fired power stations, increasing exports to Mexico and growing industrial demand.

Speaker Change: Demand growth for natural gas is very good for MRC global fire and gas production and consumption means more gathering and processing facilities more pipelines for transportation and more related infrastructure down the entire value chain to consumers. This megatrend will benefit all three of our sectors and create new opportunities for.

Robert Saltiel: This mega trend will benefit all three of our sectors and create new opportunities for the growth of our business.

Rob Saltiel: This mega-trend will benefit all three of our sectors and create new opportunities for the growth of our business. Moving now to our sector discussions, in our gas utility sector, we believe we are seeing stabilization compared to the sharp declines in revenue we experienced in the second half of last year. In fact, this was the second quarter in a row of increased revenue.

Speaker Change: The growth of our business.

Robert Saltiel: Moving now to our sector discussions in our gas utility sector, we believe we are seeing stabilization compared to the short declines in revenue we experienced in the second half of last year. In fact, this was the second quarter in a row of increased revenue. Most of our customers are returning to more normal purchasing patterns, while others continue to focus on destocking. Project-related gas utilities work has slowed this year but is expected to recover in 2025. Industry analysts and several of our largest customers have made public announcements regarding increasing their capital spending in 2025. In fact, the annual growth rates and capital expenditures for natural gas utilities that we serve are expected to range from 4 to 6 percent over the next five years.

Speaker Change: Moving now to our sector discussions and our gas utility sector. We believe we are seeing stabilization compared to the sharp declines in revenue we experienced in the second half of last year. In fact, this was the second quarter in a row of increased revenue most of our customers are returning to more normal purchasing patterns while.

Rob Saltiel: Most of our customers are returning to more normal purchasing patterns, while others continue to focus on destocking. Project-related gas utility work has slowed this year but is expected to recover in 2025. Industry analysts and several of our largest customers have made public announcements regarding increasing their capital spending in 2025. In fact, the annual growth rates and capital expenditures for natural gas utilities that we serve are expected to range from four to six percent over the next five years.

Speaker Change: Others continue to focus on Destocking.

Speaker Change: Project related gas utilities work has slowed this year, but is expected to recover in 2020 five.

Speaker Change: Industry analysts and several of our largest customers have made public announcements regarding increasing their capital spending in 2025 in fact, the annual growth rates and capital expenditures for natural gas utilities that we serve are expected to range from 4% to 6% over the next five years.

Rob Saltiel: This is a healthy underlying growth rate for our gas utilities business. In the diet sector, our success with our chemical strategy has been accompanied by strong performance in our growing mining business. In fact, we are in the process of opening a new service center in Phoenix, Arizona, designed to serve mining and gas utility customers. On the flip side, several U.S. projects and refinery turnarounds that we are involved in have been delayed into 2025, and U.S. LNG-related activity has been impacted by permitting delays for new projects.

Speaker Change: <unk>. This is a healthy underlying growth rate for our gas utilities business.

Robert Saltiel: This is a healthy underlying growth rate for our gas utilities business.

Robert Saltiel: In the diet sector, our success with our chemical strategy has been accompanied by strong performance in our growing mining business. In fact, we are in the process of opening a new service center in Phoenix, Arizona, designed to serve mining and gas utility customers. On the flip side, several US projects and refinery turn-around that we are involved in have been delayed into 2025, and US LNG-related activity has been impacted by permitting delays for new projects. Our international business continues to do extremely well in the diet space, especially with refinery work and energy transition projects.

Speaker Change: In the diet sector, our success with our chemical strategy has been accompanied by strong performance in our growing mining business. In fact, we are in the process of opening a new service center in Phoenix, Arizona designed to serve mining and gas utility customers on the flip side several U S projects and refinery turnarounds that were involved.

Speaker Change: In had been delayed into 2025 and U S. LNG related activity has been impacted by permitting delays for new projects. Our international business continues to do extremely well in the diet space, especially with refinery work in energy transition projects.

Rob Saltiel: Our international business continues to do extremely well in the diet space, especially with refinery work and energy transition projects. Turning to our PTI business, we continue to see sluggish rig counts in the U.S. oil field, due in part to the widespread consolidation of producers, particularly in the Permian Basin, and also due to low natural gas prices. We continue to believe that the industry consolidation efforts by the larger oil and gas producers will have a net benefit for MRC Global.

Robert Saltiel: Turning to our PTI business, we continue to see sluggish rig counts in the US oil field due in part to the widespread consolidation of producers, particularly in the Permian Basin, and also due to low natural gas prices. We continue to believe that the industry consolidation efforts by the larger oil and gas producers will have a net benefit for MRC Global. Most industry surveys expect US oil field spending to be slower in the second half of this year before picking up in 2025. Our international oil and gas business continues to be strong, led by our participation in several North Sea projects and our growing presence in the Middle East.

Speaker Change: Turning to our P. T I business, we continue to see sluggish rig counts in the U S oilfield due in part to the widespread consolidation of producers, particularly in the Permian Basin and also due to low natural gas prices. We continue to believe that the industry consolidation efforts by the larger oil and gas producers will have a <unk>.

Speaker Change: Net benefit for MRC global.

Rob Saltiel: Most industry surveys expect U.S. oil field spending to be slower in the second half of this year before picking up in 2025. Our international oil and gas business continues to be strong, led by our participation in several North Sea projects and our growing presence in the Middle East. We continue to believe that 2024 is a transitional year for MRC Global due to three issues we have discussed previously, gas utilities, destocking, PTI activity inhibited by industry consolidation and low gas prices, and diet sector project and turnaround delays.

Speaker Change: Most industry surveys expect U S oilfield spending to be slower in the second half of this year before picking up in 2025, our international oil and gas business continues to be strong led by our participation in several north sea projects and our growing presence in the middle East.

Robert Saltiel: In summary, we have had a very strong first half of the year with solid revenues, profitability, and cash flow generation. That said, our outlook for revenue in the second half of this year is expected to be a little softer than the first half, primarily due to delays in diet projects and refinery turnarounds.

Speaker Change: In summary, we've had a very strong first half of the year with solid revenues profitability and cash flow generation that said our outlook for revenue in the second half of this year is expected to be a little softer than the first half primarily due to delays in diet projects and refinery turnarounds.

Robert Saltiel: We continue to believe that 2024 is a transitional year for MRC Global due to three issues we have discussed previously. Gas utilities de-stocking, PTI activity inhibited by industry consolidation and low gas prices, and diet sector project and turnaround delays. Although it is too early to give guidance for next year, we do expect 2025 to see improvement in these fundamentals that will benefit our company.

Speaker Change: We continue to believe that 'twenty 'twenty four is a transitional year for MRC global due to three issues. We have discussed previously gas utilities Destocking P. T I activity inhibited by industry consolidation and low gas prices and diet sector project and turnaround delays.

Rob Saltiel: Although it is too early to give guidance for next year, we do expect 2025 to see improvement in these fundamentals that will benefit our company. Importantly, for our shareholders, our end market diversification, improved gross margins, lean cost structure, and working capital efficiencies have positioned us to generate consistent cash flow across the business cycle. This year, we remain on track to generate $200 million or more in operating cash flow. Going forward, this cash generation capability should allow us significant flexibility to consider various capital allocation strategies for the benefit of our shareholders. And with that, I will now hand it over to Kelly.

Speaker Change: Although it is too early to give guidance for next year, we do expect 2025 to see improvement in these fundamentals that will benefit our company.

Robert Saltiel: Importantly, for our shareholders, our end-market diversification, improved gross margins, lean cost structure, and working capital efficiencies have positioned us to generate consistent cash flow across the business cycle. This year, we remain on track to generate 200 million or more in operating cash flow. Going forward, this cash generation capability should allow a significant flexibility to consider various capital allocation strategies for the benefit of our shareholders.

Speaker Change: Importantly for our shareholders our end market diversification improved gross margins lean cost structure and working capital efficiencies have positioned us to generate consistent cash flow across the business cycle. This year, we remain on track to generate 200 million or more in operating cash flow goes.

Speaker Change: Forward this cash generation capability should allow us significant flexibility to consider various capital allocation strategies for the benefit of our shareholders and with that I will now hand, it over to Kelly.

Kelly Youngblood: And with that, I will now hand it over to Kelly. Thanks, Rob, and good morning, everyone. My comments today will be primarily focused on sequential results comparing the second quarter of 2024 to the first quarter of 2024, unless otherwise stated. Total company sales for the second quarter were 832 million, a 3% sequential increase, and a 4% decline compared to the same quarter last year. From a sector perspective, gas utility sales were 287 million in the second quarter, a 21 million or 8% increase. The growth was driven by increased customer spending due to seasonal increases in normalizing buying patterns.

Kelly Youngblood: Thanks, Rob, and good morning, everyone. My comments today will be primarily focused on sequential results comparing the second quarter of 2024 to the first quarter of 2024, unless otherwise stated. Total company sales for the second quarter were $832 million, a 3% sequential increase and a 4% decline compared to the same quarter last year. From a sector perspective, gas utility sales were $287 million in the second quarter, a $21 million or 8% increase.

Kelly: Thanks, Rob and good morning, everyone. My comments today will be primarily focused on sequential results comparing the second quarter of 2024 to the first quarter of 2024, unless otherwise stated.

Kelly: Total company sales for the second quarter were 832, million% to 3% sequential increase and a 4% decline compared to the same quarter last year.

Kelly: From a sector perspective gas utility sales were $287 million in the second quarter, a $21 million or 8% increase.

Kelly Youngblood: The growth was driven by increased customer spending due to seasonal increases in normalizing buying patterns. While some customers continue to focus on reducing their levels of safety stock, we have seen stabilization in new order intake and average daily sales, which is encouraging.

Kelly: The growth was driven by increased customer spending due to seasonal increases in normalizing buying patterns.

Kelly Youngblood: While some customers continue to focus on reducing their levels of safety stock, we have seen stabilization in new order intake and average daily sales, which is encouraging. We continue to expect 2024 to be a transition year for our gas utility customers due to lower project activity, but, as mentioned by Rob, we are expecting increased spending as we move into next year. The diet sector's second quarter revenue was 268 million, a decrease of 8 million or 3%, as a result of less turnaround activity in the U.S., partially offset by an increase in the international segment for North Sea Offshore Wind Project activity, as well as refining and chemical plant turnaround.

Speaker Change: While some customers continue to focus on reducing their levels of safety stock we've seen stabilization in new order intake and average daily sales, which is encouraging.

Kelly Youngblood: We continue to expect 2024 to be a transition year for our gas utility customers due to lower project activity, but as mentioned by Rob, we are expecting increased spending as we move into next year. The Diet Sector's second quarter revenue was $268 million, a decrease of $8 million, or 3%, as a result of less turnaround activity in the U.S., partially offset by an increase in the international segment for North Sea offshore wind project activity, as well as refining and chemical plant turnaround.

Speaker Change: We continue to expect 2020 for it to be a transition year for our gas utility customers due to lower project activity, but as mentioned by Rob We are expecting increased spending as we move into next year.

Speaker Change: The diets that Ive sector second quarter revenue was 268 million a decrease of $8 million or 3% as a result of less turnaround activity in the U S. Partially offset by an increase in the international segment for North Sea offshore wind project activity as well as refining and Chem.

Speaker Change: Nicole plant turnarounds.

Kelly Youngblood: The PTI sector revenue for the second quarter was 277 million, an increase of 13 million or 5%, with growth in all segments driven by North Sea project activity, followed by an increase in North America for line pipe shipments and other project deliveries. While customer spending expectations in the U.S. for the back half of this year have softened, we continue to be bullish on the U.S. oil field longer term and expect activity next year to improve, which is consistent with recent analyst mid-year spending. The recent ENP consolidation announcements are also expected to be positive for MRC Global, as our customers finalized their integrations.

Kelly Youngblood: The PTI sector revenue for the second quarter was $277 million, an increase of $13 million, or 5%, with growth in all segments driven by North Sea project activity, followed by an increase in North America for line pipe shipments and other project delivery. While customer spending expectations in the U.S. for the back half of this year have softened, we continue to be bullish on the U.S. oil field longer term and expect activity next year to improve, which is consistent with recent analyst mid-year spending projections. The recent E&P consolidation announcements are also expected to be positive for MRC Global as our customers finalize their integration.

Speaker Change: The P T I sector revenue for the second quarter was $277 million, an increase of 13 million or 5% with growth in all segments driven by North Sea project activity, followed by an increase in North America for line pipe shipments and other project deliveries.

Speaker Change: Customer spending expectations in the U S for the back half of this year have softened we continue to be bullish on the U S. Oilfield longer term can expect activity next year to improve which is consistent with recent analyst midyear spending projections.

Speaker Change: The recent E&P consolidation announcements are also expected to be positive for MRC global as our customers finalize their integrations.

Kelly Youngblood: From a geographic, segment perspective, US revenue was $677 million in the second quarter, a $10 million or 1% increase. Gas utilities led the growth with a 22 million increase, followed by the PTI sector, which increased 2 million, partially offset by the diet sector, which was down 14 million. International revenue was $122 million in the second quarter, up 12 million or 11%, driven by improvement in the PTI sector, related to projects in the North Sea, followed by growth in our European diet sector business. Our international business is having a phenomenal year, and its outlook remains positive with expectations for double-digit revenue growth due to improvements in both the PTI and diet sectors.

Kelly Youngblood: From a geographic segment perspective, U.S. revenue was $677 million in the second quarter, a $10 million or 1% increase. Gas utilities led the growth with a $22 million increase, followed by the PTI sector, which increased $2 million, partially offset by the diet sector, which was down $14 million. International revenue was $122 million in the second quarter, up $12 million, or 11%, driven by improvement in the PTI sector related to projects in the North Sea, followed by growth in our European diet sector business.

Speaker Change: From a geographic segment perspective U S revenue was $677 million in the second quarter, a $10 million or 1% increase.

Speaker Change: Gas utilities led the growth with a $22 million increase followed by the <unk> sector, which increased 2 million, partially offset by the diet sector, which was down $14 million.

Speaker Change: International revenue was $122 million in the second quarter up $12 million or 11% driven by improvement in the P. T I sector related to projects in the North Sea followed by growth in our European diet sector business.

Kelly Youngblood: Our international business is having a phenomenal year, and its outlook remains positive with expectations for double-digit revenue growth due to improvements in both the PTI and diet sectors. Canada revenue was $33 million in the second quarter, up $4 million, or 14%, with increases in both the diet and PTI sectors. Now turning to Margin.

Speaker Change: Our international business is having a phenomenal year and its outlook remains positive with expectations for double digit revenue growth due to improvements in both the P. T I N diet sectors.

Kelly Youngblood: Canada revenue was $33 million in the second quarter, up $4 million or 14% with increases in both the diet and PTI sectors.

Speaker Change: Canada revenue was 33 million in the second quarter up $4 million or 14% with increases in both the diet and P. T I sectors.

Kelly Youngblood: Now turning to margins. Adjusted gross profit for the second quarter was $184 million, or 22.1%, a new public company record, and a 60 basis point improvement over the same quarter a year ago, and a 50 basis point improvement sequentially. The elevated margin percentage this quarter was supported by product mix in the US with margins accretive to our typical company averages. We expect margins in the second half of the year to revert to our usual 21% average levels. Reported SG&A for the second quarter was $126 million or 15.1% of sales, as compared to $125 million or 15.5% for the first quarter.

Now turning to margins.

Kelly Youngblood: Adjusted gross profit for the second quarter was $184 million, or 22.1%, a new public company record and a 60 basis point improvement over the same quarter a year ago and a 50 basis point improvement sequentially. The elevated margin percentage this quarter was supported by product mix in the U.S. with margins accretive to our typical company average. We expect margins in the second half of the year to revert to our usual 21% average level.

Speaker Change: Adjusted gross profit for the second quarter was $184 million or 22, 1%, a new public company record.

Speaker Change: And a 60 basis point improvement over the same quarter, a year ago, and a 50 basis point improvement sequentially.

Speaker Change: Elevated margin percentage this quarter was supported by product mix in the U S with margins accretive to our typical company averages.

Speaker Change: We expect margins in the second half of the year to revert to our usual 21% average levels.

Kelly Youngblood: Reported SG&A for the second quarter was $126 million, or 15.1% of sales, as compared to $125 million, or 15.5% for the first quarter. This quarter included $1 million of pre-tax charges related to activism, response, legal, and consulting costs, as well as $1 million of facility closure-related costs for an international location. Excluding those costs, our adjusted SG&A for the second quarter of 2024 was $124 million, or 14.9% of sales. Adjusted EBIT for the second quarter was $65 million, or 7.8% of sales, a 70 basis point increase from the first quarter due to higher sales and higher gross margin.

Speaker Change: Reported SG&A for the second quarter was $126 million or 15, 1% of sales as compared to $125 million or 15, 5% for the first quarter.

Kelly Youngblood: This quarter included 1 million of pre-tax charges related to activism, response, legal and consulting costs, as well as 1 million of facility closure-related costs for an international location. Excluding those costs, our adjusted SG&A for the second quarter of 2024 was $124 million or 14.9% of sales. Adjusted EBITDA for the second quarter was $65 million or 7.8% of sales, a 70 basis point increase from the first quarter due to higher sales and higher gross margins. Tax expense in the second quarter was $12 million, with an effective tax rate of 29% as compared to $8 million of expense and a 30% effective tax rate in the first quarter.

Speaker Change: This quarter included 1 million of pretax charges related to activism response, legal and consulting costs as well as $1 million of facility closure related cost for an international location.

Speaker Change: Excluding those costs, our adjusted SG&A for the second quarter of 2024 was 124 million or 14, 9% of sales.

Speaker Change: Adjusted EBITDA for the second quarter was $65 million or seven 8% of sales a 70 basis point increase from the first quarter due to higher sales and higher gross margins.

Kelly Youngblood: Tax expense in the second quarter was $12 million, with an effective tax rate of 29%, as compared to $8 million of expense and a 30% effective tax rate in the first quarter. The effective tax rates for both quarters were higher than the U.S. statutory rate due to foreign losses with no tax benefit.

Speaker Change: Tax expense in the second quarter was $12 million with an effective tax rate of 29% as compared to $8 million of expense and a 30% effective tax rate in the first quarter.

Kelly Youngblood: The effective tax rates for both quarters were higher than the US statutory rate due to foreign losses with no tax benefit. For the second quarter, we had net income attributable to common stockholders of $24 million, or 28 cents per diluted share. Our adjusted net income attributable to common shareholders on an average cost basis, normalizing for life of adjustments and other items, was $27 million or 31 cents per diluted share. In the second quarter, we generated $63 million in cash from operations, primarily from increased EBITDA, supported by efficient working capital metrics. We generated 101 million in the first half of the year, and we are on track to meet or exceed our operating cash flow target of 200 million for the full year.

Speaker Change: Active tax rates for both quarters were higher than the U S statutory rate due to foreign losses with no tax benefit.

Kelly Youngblood: For the second quarter, we had net income attributable to common stockholders of $24 million, or $0.28 per diluted share. Our adjusted net income attributable to common shareholders on an average cost basis, normalizing for LIFO adjustments and other items, was $27 million, or $0.31 per diluted share. In the second quarter, we generated $63 million in cash from operations, primarily from increased EBITDA, supported by efficient working capital metrics. We generated $101 million in the first half of the year, and we are on track to meet or exceed our operating cash flow target of $200 million for the full year.

Speaker Change: For the second quarter, we had net income attributable to common stockholders of $24 million or 28 cents per diluted share.

Speaker Change: Our adjusted net income attributable to common shareholders on an average cost basis normalizing for LIFO adjustments and other items was 27 million or 31 cents per diluted share.

Speaker Change: In the second quarter, we generated $63 million in cash from operations, primarily from increased EBITDA supported by efficient working capital metrics.

Speaker Change: We generated $101 million in the first half of the year. So we are on track to meet or exceed our operating cash flow target.

Speaker Change: A 200 million for the full year.

Kelly Youngblood: We also expect to make more progress with our working capital efficiency in the second half of the year, further supporting our robust and consistent cash generation goes going forward.

Kelly Youngblood: We also expect to make more progress with our working capital efficiency in the second half of the year, further supporting our robust and consistent cash generation goals going forward. Turning to liquidity and capital structure, we repaid our Term Loan B at the end of May with a combination of cash and the use of our ABL facility. At the end of the second quarter, our total debt balance was $152 million, and our leverage ratio, based on net debt of $103 million, was 0.4 times, a new record low for the company.

Speaker Change: We also expect to make more progress with our working capital efficiency in the second half of the year further supporting our robust and consistent cash generation goals going forward.

Kelly Youngblood: Turning to liquidity and capital structure, we repaid our Term Loan B at the end of May with a combination of cash and the use of our ABL facility. At the end of the second quarter, our total debt balance was 152 million, our leverage ratio based on net debt of 103 million was 0.4 times, a new record low for the company, and our current availability on the ABL is 488 million, and including cash, our total liquidity is 537 million. The lower debt balance, along with the lower interest rate on the ABL, results in reduced interest expense burden.

Turning to liquidity and capital structure, we repaid our term loan b at the end of May with a combination of cash and the use of our ABL facility at the end of the second quarter. Our total debt balance was 152 million our leverage ratio based on net debt of 103 million with 0.4 times a new record.

Speaker Change: So for the company.

Kelly Youngblood: And our current availability on the ABL is $488 million, and including cash, our total liquidity is $537 million. The lower debt balance, along with the lower interest rate on the ABL, results in a reduced interest expense burden.

Speaker Change: And our current Avila current availability on the ABL is 488 million and <unk>.

Speaker Change: <unk> cash our total liquidity is $537 million.

Speaker Change: The lower debt balance along with a lower interest rate on the a b L results in reduced interest expense burden.

Kelly Youngblood: Interest expense was 7 million in the second quarter of 2024, as compared to 10 million in the same quarter a year ago.

Kelly Youngblood: Interest expense was $7 million in the second quarter of 2024 as compared to $10 million in the same quarter a year ago. Now, I'll cover our outlook for the second half of 2024. As mentioned by Rob, we continue to view 2024 as a transitional year with growth returning in 2025. However, the first half of 2024 started off with stronger than expected financial performance. Our current expectations for the second half of 2024 are for revenue to moderate compared to the first half, primarily a function of project work schedule shifting into next year. The primary driver of the reduction is delayed diet project activity and refining turnarounds in the US.

Speaker Change: <unk> expense was $7 million in the second quarter of 2024 as compared to $10 million in the same quarter a year ago.

Kelly Youngblood: Now I'll cover our outlook for the second half of 2024. As mentioned by Rob, we continue to view 2024 as a transitional year with growth returning in 2025. The first half of 2024 started off with stronger-than-expected financial performance. Our current expectations for the second half of 2024 is for revenue to moderate compared to the first half, primarily a function of project work schedule shifting into next year. The primary driver of the reduction is delayed diet project activity and refining turner rounds in the US. We have also experienced what we believe is a temporary pullback in gas utilities project activity for the remainder of this year and PTI activity due to lower rig counts and ENP customer integrations that has impacted near-term spending.

Speaker Change: Now I'll cover our outlook for the second half of 2024.

Speaker Change: As mentioned by Rob We continue to view 2024, as a transitional year with growth returning in 2025.

Speaker Change: The first half of 'twenty 'twenty, four started off with stronger than expected financial performance.

Speaker Change: Current expectations for the second half of 'twenty 'twenty four is for revenue to moderate compared to the first half primarily a function of project work schedule shifting into next year.

The primary driver of the reduction is delayed diet project activity and refining turnarounds in the U S. We have also experienced what we believe is a temporary pullback in gas utilities project activity for the remainder of this year and P. T I activity due to lower rig counts and E&P customer integrations.

Kelly Youngblood: We have also experienced what we believe is a temporary pullback in gas utilities project activity for the remainder of this year and PTI activity due to lower rig counts and ENP customer integrations that have impacted near-term spending. However, we believe all three sectors will experience a rebound in activity and a resurgence of projects in 2025. As a result, we expect total company revenue for the back half of this year to be down low single digits compared to the first half of this year. Also, for the whole company, third quarter revenue is expected to decline mid-single digits, followed by the potential for a modest seasonal decline in the fourth quarter.

Speaker Change: That has impacted near term spending power.

Kelly Youngblood: However, we believe all three sectors will experience a rebound in activity and a resurgence of projects in 2025. As a result, we expect total company revenue for the back half of this year to be down low single digits compared to the first half of this year. Also for the total company, third quarter revenue is expected to decline mid-single digits, followed by the potential for a modest seasonal decline in the fourth quarter.

Speaker Change: However, we believe all three sectors will experience a rebound in activity and a resurgence of projects in 2025.

As a result, we expect total company revenue for the back half of this year to be down low single digits compared to the first half of this year.

Speaker Change: Also for the total company third quarter revenue is expected to decline mid single digits, followed by the potential for a modest seasonal decline in the fourth quarter.

Kelly Youngblood: We are also targeting the following key metrics for the remainder of 2024. First, we are reaffirming our previous guidance of operating cash flow generation for the full year of 200 million or more. For adjusted gross margins, we anticipate the second half of the year to average 21%. SGNA expense for the last two quarters of the year is each expected to be at similar levels as experienced in the second quarter. And capital expenditures are expected to be in the $36 to $40 million range in 2024. A little lower than last quarter's estimate, as some costs for the implementation of our North America ERP have shifted into next year.

Kelly Youngblood: We are also targeting the following key metrics for the remainder of 2024. First, we are reaffirming our previous guidance of operating cash flow generation for the full year of $200 million or more. For adjusted gross margins, we anticipate the second half of the year to average 21 percent. SG&A expense for the last two quarters of the year is each expected to be at similar levels as experienced in the second quarter.

Speaker Change: We're also targeting the following key metrics for the remainder of 2024 <unk>.

Speaker Change: First we are reaffirming our previous guidance of operating cash flow generation for the full year of $200 million reward.

Speaker Change: Our adjusted gross margins, we anticipate the second half of the year to average 21%.

Speaker Change: SG&A expense for the last two quarters of the year is each expected to be at similar levels as experienced in the second quarter.

Kelly Youngblood: And capital expenditures are expected to be in the $36 to $40 million range in 2024, a little lower than last quarter's estimate, as some costs for the implementation of our North America ERP have shifted into next year. As a reminder, our normal annual CapEx run rate is approximately $15 million, but it is elevated this year and next due to our ERP implementation. Regarding our ERP, I'm pleased to report that we remain on budget and on schedule.

Speaker Change: And capital expenditures are expected to be in the $36 million to $40 million range in 2024, a little lower than last quarter's estimate of some costs.

The implementation of our North America ERP have shifted into next year.

Kelly Youngblood: As a reminder, our normal annual CAPEX run rate is approximately 15 million, but it is elevated this year and next due to our ERP implementation.

Speaker Change: As a reminder, our normal annual Capex run rate is approximately $15 million, but it is elevated this year and next due to our ERP implementation.

Kelly Youngblood: Inc. Regarding our ERP, I'm pleased to report that we remain on budget and on schedule. We continue to make progress, and we are excited about its potential to transform many aspects of our business. We expect to be fully implemented and running on the new system in the second half of 2025. We expect our effective tax rate in 2024 to be in the range of 26 to 28 percent, and finally, we expect to exit 2024 with minimal net debt excluding our preferred stock, providing us with increased flexibility to pursue various strategic capital allocation options benefiting our shareholders.

Speaker Change: Regarding our ERP I'm pleased to report that we remain on budget and on schedule. We continue to make progress and we're excited about its potential to transform many aspects of our business.

Kelly Youngblood: We continue to make progress, and we are excited about its potential to transform many aspects of our business. We expect to be fully implemented and running on the new system in the second half of 2025. We expect our effective tax rate in 2024 to be in the range of 26 to 28%. And finally, we expect to exit 2024 with minimal net debt, excluding our preferred stock, providing us with increased flexibility to pursue various strategic capital allocation options benefiting our shareholders. And with that, I'd like to turn it back to Rob for closing comments. Thanks, Kelly.

Speaker Change: We expect to be fully implemented and running on the new system in the second half of 2025.

Speaker Change: We expect our effective tax rate in 2024 to be in the range of 26% to 28%.

Speaker Change: And finally, we expect to exit 2024 with minimal net debt, excluding our preferred stock providing us with increased flexibility to pursue various strategic capital allocation options benefiting our shareholders.

Robert Saltiel: And with that, I'd like to turn it back to Rob for closing comments. Thanks, Kelly. The first half of the year has started off with solid performance, and we are in a profitable company with a strong balance sheet that is poised for future success.

Speaker Change: And with that I'd like to turn it back to Rob for closing comments. Thanks.

Rob Saltiel: Thanks, Kelly. The first half of the year has started off with solid performance, and we are in a very strong financial position. We have transformed MRC Global into a more efficient and consistently profitable company with a strong balance sheet that is poised for future success. These are the highlights I want to summarize before opening the floor to Q&A.

Rob: Thanks, Kelly the first half of the year has started off with solid performance and we are in a very strong financial position, we have transformed MRC global into a more efficient and consistently profitable company with a strong balance sheet that is poised for future success.

Robert Saltiel: These are the highlights I want to summarize before opening for Q&A. We continue to target 200 million of cash from operations this year, and we are on track to meet or exceed this target. We also expect to consistently generate operating cash through the cycle. Our balance sheet has never been stronger, as evidenced by our term loan repayment in the second quarter. We expect to exit 2024 with a minimal net debt position and to be in a positive net cash position in 2025. And while we expect a slightly weaker second half this year, we are optimistic based on analysis of the key drivers for each of our three sectors that 2025 will be a growth year for the company.

Speaker Change: These are the highlights I want to summarize before opening for Q&A. We continue to target 200 million of cash from operations. This year and we are on track to meet or exceed this target. We also expect to consistently generate operating cash through the cycle.

Rob Saltiel: We continue to target 200 million in cash from operations this year, and we are on track to meet or exceed this target. We also expect to consistently generate operating cash through the cycle. Our balance sheet has never been stronger, as evidenced by our term loan B repayment in the second quarter. We expect to exit 2024 with a minimal net debt position and to be in a positive net cash position in 2025.

Speaker Change: Our balance sheet has never been stronger as evidenced by our term loan b repayment in the second quarter, we expect to exit 2024, with a minimal net debt position and to be in a positive net cash position in 2025.

Rob Saltiel: And while we expect a slightly weaker second half this year, we are optimistic, based on analysis of the key drivers for each of our three sectors, that 2025 will be a growth year for the company. Operator. Thank you.

Speaker Change: And while we expect a slightly weaker second half. This year. We are optimistic based on analysis of the key drivers for each of our three sectors that 2025 will be a growth year for the company.

Robert Saltiel: And with that, we will now take your questions.

Speaker Change: With that we will now take your questions operator.

Operator: Operator? Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants use a speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is busy. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Our first question comes from Nathan Jones with Stiefel. Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Operator: One moment, please, while we pull for questions.

Nathan Jones: Our first question comes from Nathan Jones with Stiefel. Please proceed with your question.

Speaker Change: Our first question comes from Nathan Jones with Stifel. Please proceed with your question.

Nathan Jones: Good morning, everyone.

Robert Saltiel: Good morning, everyone. Yeah, good morning, Nathan.

Nathan Jones: Good morning, everyone.

Rob Saltiel: Yeah, good morning Nathan.

Speaker Change: Yes, good morning Nathan.

Nathan Jones: Rob and Kelly, you both talked in your prepared comments about project push-out in the diet sector and refinery turnarounds. Can you talk about the dynamics that are going on there, whether this is just a result of sustained higher interest rates, uncertainty around the election, or anything else that's contributing to those pushouts, and it gives you confidence they'll actually be executed in 2025?

Robert Saltiel: Robin Kelly, you both talked in your prepared comments about project pushouts on in the diet sector and in refinery turnarounds. Can you talk about the dynamics that are going on there, whether this is just a result of sustained higher interest rates, uncertainty around the election, anything else that's contributing to those pushouts and it gives you confidence that will actually be executed in 2025? Yeah, thanks, Nathan.

Robin Kelly: Robin Kelly.

Speaker Change: Paul in your prepared comments about project push out.

Speaker Change: And.

Speaker Change: In refinery turnarounds can you talk about the dynamics kindergarten.

Speaker Change: This is just a result of sustained higher interest rates.

Gary: Gary on the election.

Speaker Change: Anything else, that's contributing to those push outs and that gives you confidence that will actually be executed in 2025.

Rob Saltiel: Yeah, thanks Nathan. Well, I think you've given a couple of reasons right there that others have cited for why project activity generally has been pushed to the right. Obviously, high interest rates are detrimental to project economics, and we've been living with that really since the middle part of last year and will continue to live with that here in 2024. I think the general consensus now is pretty clear that interest rates are going to be headed down and without any kind of major impact on the overall economy.

Gary: Yeah. Thanks Nathan.

Robert Saltiel: Well, I think you've given a couple of reasons right there that others have cited for why project activity generally has been pushed to the right. Obviously, high interest rates are detrimental to project economics, and we've been living with that really since the middle part of last year and continue to live with that here in 2024. I think the general consensus now is pretty clear that interest rates are going to be headed down and absent any kind of major impact on the overall economy. That's going to be bullish for project activity in 2025 and beyond. I think the other thing that gives us confidence here, Nathan, is that we're tracking these specific projects.

Speaker Change: Well I think you've given a couple of reasons right. There that others have cited for wide project activity generally.

Speaker Change: <unk> has been pushed to the right, obviously high interest rates or detrimental to the project economics, and we've been living with that really since you know middle part of last year and continue to live with that here in 2024.

Speaker Change: The general consensus now, it's pretty clear that interest rates are going to be headed down.

Speaker Change: And absent any kind of major impact on the overall economy, that's going to be bullish for project activity in 2025 and beyond.

Rob Saltiel: That's going to be bullish for project activity in 2025 and beyond. I think the other thing that gives us confidence here, Nathan, is that you know we're tracking these specific projects. You know we're tracking refinery turnarounds, we're tracking chemical projects, we're talking to the companies themselves about their timing, and they're, in most cases, assuring us that these are delays rather than cancellations. You know sometimes projects do get canceled, but the vast majority of the things that we're tracking that we would have thought would have come to fruition in the second half of this year have been pushed to the right, and we've got timelines that correspond with that that indicate that the projects will go forward, but on a delayed basis.

Speaker Change: I think the other thing that gives us confidence here Nathan is that we're tracking these specific projects. We're tracking refinery turnarounds were tracking chemical projects, we're talking to the the companies themselves about their timing and there are in most cases assuring us that these are delays rather than cancellations you know sometimes.

Robert Saltiel: We're tracking refinery turnarounds, we're tracking chemical projects, we're talking to the companies themselves about their timing, and they're in most cases assuring us that these are delays rather than cancellations. Sometimes projects do get canceled, but the vast majority of the things that we're tracking that we would have thought would have come to fruition in the second half of this year have been pushed to the right, and we've got timelines that correspond with that that indicate that the projects will go forward but on a delayed basis. So we continue to monitor these things very closely. Again, we've got a list of these that we track, and that's overall the consistent message for what's going to be happening in 2025.

Speaker Change: <unk> do get canceled, but the vast majority of the things that we're tracking that we would've thought would've come to fruition in the second half of this year had been pushed to the right and we've got timelines.

Speaker Change: Correspond with that that indicate that the projects will go forward, but on a delayed basis. So we continue to monitor these things very closely again, we've got a list of these that we track and and that's overall the consistent message for for what's going to be happening in 2025, and while we have confidence that the projects.

Rob Saltiel: So we continue to monitor these things very closely. Again, we've got a list of these that we track, and that's the overall consistent message for what's going to be happening in 2025, and while we have confidence that the projects themselves will come to fruition, just on a delayed basis.

Robert Saltiel: And while we have confidence that the projects themselves will come to fruition, but just on a delayed basis. Thanks for that.

Speaker Change: <unk> will come to fruition, but just on a delayed basis.

Nathan Jones: Thanks for that. I guess my follow-up question on gas utilities. You talked about some continued customer de-stocking; I would have expected that to maybe kind of reach a bottom now. I've also heard talk about gas utilities reducing capital spending. But you guys are talking about increased capital spending, specifically for your customers, in 2025. Maybe a little bit more color around the kind of information you're getting that gives you confidence that you're going to see that market increase next year.

Speaker Change: Thanks for that I guess my follow up question on gas utilities.

Nathan Jones: I guess my follow-up question on gas utilities. You talked about some continued customer destalking. I would have expected that to maybe kind of reach a bottom now. Also hearing talk about gas utilities, reducing capital spending. But you guys are talking about increased capital spending specifically for your customers in 2025.

Speaker Change: You talked about some continued customer destocking.

Speaker Change: Would have expected that to maybe kind of reach a bottom now.

Speaker Change: Hearing talk about gas utilities, reducing capital spending.

Speaker Change: But you guys are talking about increased capital spending specifically for your customers in 2025.

Robert Saltiel: Maybe a little bit more color around the kind of information you're getting that gives you confidence that you're going to see that market increase next year. Yeah, look, we think our gas utilities businesses definitely come off the bottom and recovered from where it was in the, let's say, the fourth quarter of last year. You were up 13% this quarter over the fourth quarter 2023, as we said in the prepared comments: two quarters in a row of sequential improvement and gas utilities revenue. So we're certainly not in the same straits we were in, call it six months ago, but I think it's fair to say that the destalking is not complete, and it varies by customer.

Speaker Change: Maybe a little bit more color on the kind of information you are getting that gives you confidence that youre going to say that market increase next year.

Rob Saltiel: Yeah, look, we think our gas utilities business has definitely come off the bottom and recovered from where it was in the, let's say, fourth quarter of last year. We're up 13% this quarter over the fourth quarter of 2023, as we said in the prepared comments, two quarters in a row of sequential improvement in gas utilities revenue.

Speaker Change: Yeah look we think our gas utilities business has definitely come off the bottom.

Speaker Change: And recovered from where it was in the let's say the fourth quarter of last year, you were up 13% this quarter over the fourth quarter of 2023, as we said in the prepared comments two quarters in a row of sequential improvement in gas utilities revenue. So we're certainly not in the same Straits, we were in call it six months ago.

Rob Saltiel: So we're certainly not in the same straits we were in, call it, six months ago, but I think it's fair to say that the de-stocking is not complete, and it varies by customer. So some of our customers are mostly through it, and we have some other customers that are continuing to work through their de-stocking, and really, that's just something that we're going to have to continue to work through as we get through the end of this year, and as we start next year. We think we're largely through it.

Speaker Change: But I think it's fair to say that the Destocking is not complete and.

Speaker Change: It varies by customer so some of our customers are mostly through it.

Robert Saltiel: So some of our customers are mostly through it, and we have some other customers that are continuing to work through their destalking, and really that's just that's just something that we're going to have to continue to work through as we get through the end of this year and as we start next year. We think we're largely through it.

Speaker Change: We have some other customers that are continuing to work through their destocking and and really that's just that's just something that we're going to have to continue to work through.

Speaker Change: As we get through the end of this year and as we start next year. We think we're largely through it now your question about why do we have confidence that spending will increase well a number of our customers through their recent earnings calls the public announcements analysts' reports, they're indicating over significant timeframe sometimes three.

Robert Saltiel: Now your question about why do we have confidence that spending will increase? Well, a number of our customers, through the recent earnings calls, public announcements, and analyst reports, they're indicating over a significant time frame, sometimes three to five years, what the average increase is going to be, and they're talking about 2025 and even more detail. And as we look at our customer base, we're seeing generally that CAPEX is expected to increase in that kind of four to six percent range over the long term and, call it mid single digits, next year. Now again, each utility is going to be different, and obviously, you know this could be subject to some modification depending on what happens with interest rates and rate cases and those sorts of things. But across the board, you know we're seeing for our customers robust spending projections for next year and beyond, and clearly that's more optimistic than the backdrop that we've been working ourselves through over the last 12 months.

Rob Saltiel: Now, your question about why we have confidence that spending will increase, well, a number of our customers, through recent earnings calls, public announcements, analyst reports, are indicating over, you know, significant timeframes, sometimes three to five years, what the average increase is going to be, and they're talking about 2025 in even more detail. And as we look at our customer base, you know, we're seeing generally that CapEx is expected to increase in that kind of four to six percent range over the long term and call it mid-single digits next year.

Speaker Change: To five years, what the average increase is going to be in and Theyre talking about.

Speaker Change: They're talking about 2025, and even more detail and as we look at our customer base.

Speaker Change: We're seeing generally that capex is expected to increase in that kind of 4% to 6% range over the long term and call. It mid single digits next year now again, each utility is going to be different.

Rob Saltiel: Now, again, each utility is going to be different, and obviously, this could be subject to some modification depending on what happens with interest rates and rate cases and those sorts of things, but across the board, we're seeing for our customers robust spending projections for next year and beyond, and clearly, that's more optimistic than the backdrop that we've been working ourselves through over the last 12 months.

Speaker Change: And obviously this could be subject to.

Speaker Change: Some modification depending on what happens with interest rates and rate cases, and those sorts of things, but across the board, we're seeing for our customers our robust spending projections for next year and beyond and clearly that's a that's more optimistic than the backdrop that we've been working.

Speaker Change: Ourselves through over the last 12 months.

Robert Saltiel: And do you still expect to be able to outgrow that market, outgrow your customer spending with market share gains? We do.

Nathan Jones: And do you still expect to be able to outgrow that market, outgrow your customer spending with market share gains?

Speaker Change: And do you still expect to be able to outgrow that market outgrow your customer spending with market share gains.

Rob Saltiel: We do! I will continue to caution that, you know, gas utilities are, by their nature, conservative entities. You know, they provide a public service, and in most cases, when we increase market share, we're displacing functions that they do themselves, that they insource, that they realize that we can do much more efficiently, given our scale and our capabilities, and so they outsource it to us. So the process by which we gain market share is, by its nature, a long process, and we are working on a number of opportunities to increase our market share with new utilities that we don't serve.

Speaker Change: We do.

Robert Saltiel: I will continue to caution that you know in gas utilities by their nature are conservative, conservative entities. You know they provide a public service and in most cases when we increase market share, we're displacing functions that they do themselves that they ensure that they realize that we can do much more efficiently given our scale and our capabilities, and so they outsource it to us. So that process by which we gain market share is, by its nature, a long process, and we are working on a number of opportunities to increase our market share with new utilities that we don't serve.

Speaker Change: I will continue to caution that in.

Speaker Change: Gas utilities, but by their nature are conservative.

Speaker Change: Conservative entities, they provide a public service and in most cases, when we increased market share.

Speaker Change: We're displacing functions that they do themselves that they in source that they realize that we can do much more efficiently given our scale and our capabilities and so they outsource it to us so that process by which we gained market share is by its nature, a long process and we are working.

Speaker Change: On a number of opportunities to increase our market share.

Speaker Change: With new utilities that we don't serve we're also looking at service areas for utilities that we do serve but in those service areas, we either have limited or no participation. So we have a number of utility targets that we're working on so that we can increase our market share and of course with existing customers, we look to increase wallet share by.

Rob Saltiel: We're also looking at service areas for utilities that we do serve, but in those service areas, we either have limited or no participation. So we have a number of utility targets that we're working on so that we can increase our market share. And, of course, with existing customers, we look to increase wallet share by taking on more of the products and services that they're currently providing themselves. So we still feel good about our ability to outgrow the market, as you term it, and we just need to, you know, continue to focus those efforts and bring those to fruition.

Robert Saltiel: We're also looking at service areas for utilities that we do serve, but in those service areas we either have limited or no participation. So we have a number of utility targets that we're working on so that we can increase our market share, and of course, with existing customers, we look to increase wallet share by taking on more of the products and services that they're currently providing themselves. So we still feel good about our ability to outgrow the market, as you term it, and we just need to, you know, continue to focus those efforts and bring those to fruition.

Speaker Change: Taking on more of the products and services that Theyre currently providing themselves. So we still feel good about our ability to outgrow the market is determined and we just need to.

Speaker Change: We continue to to focus those efforts and bring those to fruition.

Rob Saltiel: Great. Thanks very much for taking my questions. You're welcome. Thank you, Nathan.

Nathan Jones: Great. Thanks very much for taking my questions. You're welcome.

Speaker Change: Great. Thanks, very much for taking my questions Youre welcome. Thank you Nathan.

Rob Saltiel: You're welcome. Thank you, Nathan.

Ken Newman: Thank you, Nathan. Our next question comes from Ken Newman with KeyBank Capital Market. Please proceed with your question.

Speaker Change: Yeah.

Ken Newman: Our next question comes from Ken Newman with KeyBank Capital Markets. Please proceed with your question.

Speaker Change: Our next question comes from Ken Newman with Keybanc capital markets. Please proceed with your question.

Robert Saltiel: Thank you, Maria. Morning, Ken. Morning.

Ken Newman: Hey, good morning, guys.

Speaker Change: Hey, Ken.

Good morning.

Ken Newman: Good morning. Maybe just to touch on Nathan's question on gas utilities a little bit. I am curious if you could just talk about which inning you think we're in from a de-stocking perspective. Is it fair to think that you think the second quarter is a trough for de-stocking, or is that more of a 3Q phenomenon?

Robert Saltiel: Maybe just to touch on Nathan's question on gas utilities a little bit.

Speaker Change: Maybe just to touch on Nathan's question on gas utilities, a little bit I am curious if you could just talk about which inning. You think we're in from a destocking perspective is it fair to think that you think the second quarter as troffer destocking or is that more of a <unk> phenomenon.

Robert Saltiel: I am curious if you just talk about which inning you think we're in from a destocking perspective. Is it fair to think that you think the second quarter is trough or destocking, or is that more of a 3Q phenomenon? I would say you used to ask what inning we're in, so I'd say we're in the sixth or seventh inning. We think most of it's behind us, but it's not over yet. And again, it really does vary by the utility. And what our team does is we continue to keep close tabs on the inventory that we have for our customers, as well as the inventory that they have themselves.

Rob Saltiel: I would say, you asked what inning we're in, so I'd say we're in the sixth or seventh inning. We think most of it's behind us, but it's not over yet.

Speaker Change: I would say I used to ask anymore, and so I'd say, we're in the sixth or seventh inning.

Speaker Change: We think most of it's behind us, but it's not over yet and again it really does vary by the utility.

Rob Saltiel: And again, it really does vary by utility. And what our team does is, you know, we continue to keep close tabs on the inventory that we have for our customers, as well as the inventory that they have themselves, so we can get a better gauge about how long this destocking will last. And again, for a number of our customers, I would say the majority of our customers are going to be through this over the next quarter, maybe into the fourth quarter. But there are going to be some customers that are going to go into 2025 and still be facing some destocking issues. So again, the sixth or seventh inning, if I had to pick an inning.

Speaker Change: What our team does as you know we continue to keep close tabs on.

Speaker Change: The inventory that we have for our customers as well as the inventory that they have themselves. So we can get a better gauge about how long. This destocking will will endure and again for a number of our customers I would say the majority of our customers theyre going to be through this over the next quarter, maybe into the fourth quarter, but theyre going to be some customers that.

Robert Saltiel: So we can get a better gauge about how long this destocking will endure. And again, for a number of our customers, I would say the majority of our customers, they're going to be through this over the next quarter, maybe into the fourth quarter, but there are going to be some customers that are going to go into 2025 and still be facing some destocking issues. So again, sixth or seventh inning, if I had to pick an inning.

Speaker Change: <unk> are going to go into 2025 and still be facing some destocking issue. So again six or seven thing if I had to pick an inning.

Ken Newman: Okay, that's helpful. And I guess as a follow-on to that, you know, I know you don't give margins by products in that business, but just thinking about whenever that recovery starts to occur from an inventory perspective. How do you view the recovery in the margin profile for that business? Because, obviously, that's typically been a margin and creative business. Would you start to see or expect a bit more of a gradual type of improvement in gross margins for gas utilities specifically? Or is there going to be a little bit of a time lag, do you think, from a price-cost perspective?

Robert Saltiel: Okay, that's helpful. And I get the following one to that. I know you don't give margins by products that in that business, but just thinking about whenever that recovery starts to occur from an inventory's perspective, how do you view the recovery in the margin profile for that business? Because obviously, that's typically been a margin of creative business. Would you start to see or expect a bit more of a gradual type of improvement in gross margins for gas utility specifically? Or is there going to be a little bit of a time lag, you think, from a price cost perspective?

Speaker Change: Okay. That's helpful and then.

Speaker Change: I guess as a follow on to that I know you don't give margins by products that in that business, but.

Thinking about whenever that recovery starts to occur from a from an inventory perspective.

Speaker Change: How do you view the recovery in the margin profile for that business, because obviously that's typically been.

Speaker Change: A margin accretive business would you start to see.

Speaker Change: We are expecting a bit more of a gradual type of improvement in gross margin for gas utility specifically or is there going to be a little bit of a time lag you think from a price cost perspective.

Rob Saltiel: Yeah, you know, we don't give the breakdown specific to each of the sectors that we're in. But, generally speaking, what we said is that gas utilities tend to be accretive on a net margin basis but slightly dilutive on a gross margin basis. And that pattern isn't going to change.

Robert Saltiel: Yeah, you know, we don't give the breakdown specific to each of the sectors that we're in, but generally speaking, what we said is that gas utilities tends to be a creative on a net margin basis, but slightly dilutive on a gross margin basis. And that pattern isn't going to change. You know, we do a lot of high volume business in the gas utility space. We purchase very efficiently as well. And typically, you know, we're able to drop more to the bottom line because of how we're dedicating our resources to serve these gas utilities. We have entire service centers dedicated to particular gas utilities, which can be really efficient in terms of cost to serve.

Speaker Change: Yes.

Speaker Change: We've oh, we don't give the breakdown specific to each of the.

Speaker Change: The sectors that we're in but generally speaking what we said is that gas utilities tends to be accretive on a net margin basis, but but slightly dilutive on a gross margin basis and that really that pattern isn't going to change.

Rob Saltiel: You know, we do a lot of high volume business in the gas utility space. We purchase very efficiently as well, and typically, you know, we're able to drop more to the bottom line because of how we're dedicating our resources to serve these gas utilities. We have entire service centers dedicated to particular gas utilities, which can be really efficient in terms of cost to serve. So more goes to the bottom line. But that pattern is not really going to change. Again, the gross margin aspects of the gas utility business are slightly dilutive, but you'll see the net margins improve as we do more gas utility business.

Speaker Change: Do a lot of high volume a bit.

Speaker Change: And the gas utility space, we purchased very.

Speaker Change: Very efficiently as well and and typically we're able to drop more to the bottom line because of how we're dedicating.

Speaker Change: Dedicating our resources to serve these gas utilities, we have entire service centers dedicated to particular gas utilities, which can be really efficient in terms of cost to serve so more drops to the bottom line, but that pattern is not really going to change again the gross margin.

Robert Saltiel: So more drops to the bottom line, but that pattern is not really going to change. Again, the gross margin aspects of the gas utility business are slightly dilutive, but you'll see the net margins improve as we do more gas utilities business. Understood.

Speaker Change: Aspects of the gas utility business are slightly dilutive, but youll see the net margins improve as we do more gas utilities business.

Speaker Change: Understood if I can just squeeze one more in.

Douglas Goldstein: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. Is there any color on what you're planning to do or how to utilize the balance sheet in here and in coming quarters, anything you kind of share with, you know, all the ongoing stuff that's kind of maybe behind the curtain, whether it's from a validation or the portfolio review, anything there? Yeah, a good question. And look, let me just start by saying

Ken Newman: If I could just squeeze one more in, look, I know you've got a very strong balance sheet right now. Obviously, you feel very good about the free cash flow profile here for this year, next year. Is there any color on what you're planning to do or how to utilize the balance sheet in here and coming quarters, anything you kind of share with, you know, all the ongoing stuff that's kind of maybe behind the curtain, whether it's from validation or the portfolio review, anything there.

Speaker Change: Look I know you've got a.

Speaker Change: Very strong balance sheet right now obviously, you feel very good about free cash flow profile here for this year next year.

Speaker Change: Is there any color on what you're planning to do or how to utilize the balance sheet here in coming quarters.

Speaker Change: You can kind of share with you know all the ongoing stuff that's kind of maybe behind the curtain, whether it's from a validation or the portfolio review anything there.

Robert Saltiel: Yeah, good question. And look, let me just start by saying we are really excited about the fact that our balance sheet is stronger than ever. If you go back historically, this company has certainly been highly levered. Many would say we were over levered. And I think it was a disadvantage for the company in the public markets as well as in the flexibility that we had previously for pursuit of either various aspects of capital allocation. And so where we are at today with this point four times leverage ratio, and then really a robust, confident outlook on our ability to generate significant amounts of cash over the business cycle.

Rob Saltiel: Yeah, good question. And look, let me just start by saying we are really excited about the fact that our balance sheet is stronger than ever. If you go back historically, this company has certainly been highly levered. Many would say we are over levered.

Speaker Change: Yes. Good question look let me just start by saying we are really excited about the fact that our balance sheet is stronger than ever.

Speaker Change: Go back historically this company has certainly been highly Levered. Many would say we were over Levered and I think it was a disadvantage for the company in the public markets as well as.

Rob Saltiel: And I think it was a disadvantage for the company in the public markets as well as in the flexibility that we had previously for pursuit of various aspects of capital allocation. And so where we are today with this 0.4 times leverage ratio and then really a robust, confident outlook on our ability to generate significant amounts of cash over the business cycle, we're in a really unusual and exciting place for MRC Global.

Speaker Change: And the flexibility that we had previously.

Speaker Change: For pursuit of either.

Speaker Change: Our various aspects of capital allocation and so where we are today with this 0.4 times leverage ratio and then really a robust confident outlook on our ability to generate significant amounts of cash over over the business cycle.

Robert Saltiel: It's a, we're in a really unusual and exciting place for MRC Global.

Speaker Change: We're in a really.

Speaker Change: Unusual an exciting place for MRC global.

Rob Saltiel: Obviously, I can't share what's behind the curtain, as you term it, because any decisions we make that will be bold on capital allocation are going to have to be done in concert with the board of directors. And obviously, we want to make sure that whatever we do is in the benefit of our common shareholders. So we do have more flexibility than we've ever had, and this is going to be something that we're going to be spending a lot more time on over the next year. And we're just really happy to be in the position we are to consider these opportunities, and our shareholders should be excited as well.

Robert Saltiel: Obviously, I can't share what's behind the curtain, as you term it, because any decisions we make that will be bold on a capital allocation are going to have to be done in concert with the Board of Directors. And obviously, we want to make sure that whatever we do is to the benefit of our common shareholders. So we do have more flexibility than we've ever had. This is going to be something that we're going to be spending a lot more time on over the next year. And we're just really happy to be in the position we are to consider these opportunities.

Speaker Change: Obviously, I can't share what what's behind the curtain as you term it because any any decisions we make there it'll be bold on capital allocation are going to have to be done in concert with with the board of directors and.

Speaker Change: And obviously, we want to make sure that whatever we do is to the benefit of our common shareholders. So we do have more flexibility than we've ever had this is going to be something that we're going to be spending a lot more time on over the next year and we're just really happy to be in the position we are to to consider these opportunities and our shareholders should be excited as well.

Robert Saltiel: And our shareholders should be excited as well.

Ken Newman: Very helpful. Thanks.

Speaker Change: Very helpful. Thanks.

Operator: You're welcome. As a reminder, if you'd like to ask a question, please press star one on your telephone. One moment, please, while we poll for questions.

Speaker Change: You're welcome.

Sean Mitchell: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Sean Mitchell with Daniel Energy Partners. Please proceed with your question.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: One moment, please while we poll for questions.

Sean Mitchell: Our next question comes from Sean Mitchell with Daniel Energy Partners. Please proceed with your question.

Speaker Change: Our next question comes from Sean Mitchell with Daniel Energy Partners. Please proceed with your question.

Robert Saltiel: Hey, guys. Thanks for taking the question. Maybe a follow on the kind of last question on the balance. You guys have done an excellent job, de-leveraging here and understand you're going to be focused on general returns going forward. But we've also hit kind of a soft patch in North America. I'm just curious if M&A is a more attractive use of capital today than it was six to nine months ago. And are there more opportunities you're seeing today? Yeah, look, we're going to continue to scan the market for opportunities to grow inorganically if that makes sense for us.

Sean Mitchell: Hey guys, thanks for taking the question. Maybe a follow-on to kind of the last question on the balance. You guys have done an excellent job deleveraging here and understand you're going to be focused on shareholder returns going forward, but we've also hit kind of a soft patch in North America. I'm just curious if M&A is a more attractive use of capital today than it was six to nine months ago, and are there more opportunities you're seeing today?

Sean Mitchell: Hey, guys. Thanks for taking the question.

Sean Mitchell: A follow on to kind of last question on the balance sheet you guys have done an excellent job deleveraging here and understand youre going to be focused on shareholder returns going forward, but we've also had kind of a soft patch in North America I'm. Just curious if M&A is more attractive use of capital today than it was six to nine months ago and are there more opportunities youre seeing today.

Sean Mitchell: Okay, that's helpful. And then, maybe, one more.

Sean Mitchell: <unk>.

Speaker Change: Yeah look we're.

Speaker Change: We continue to scan the market for opportunities to grow Inorganically, if that makes sense for us and.

Robert Saltiel: And, as a practical matter, I'm not sure that we're seeing things too much differently than we saw previously. We are focused right now on making sure that we've got the balance sheet in a really good position.

Speaker Change: As a practical matter I am not sure that we're seeing things too much differently than we saw previously.

Speaker Change: We are focused right now on making sure that we've got the balance sheet in a really good position I'll also mention that.

Robert Saltiel: I will also mention that when we talk about capital structure, we believe that a simple capital structure makes sense for our shareholders. And we still do have our preferred shares out there. So, at some point, we want to address the preferred shares. And likely that's going to be potentially a source of capital that we would use. So we want to factor all those things together. M&A returns the common shareholders and simplifying our capital structure. And you know, all those things really are part of the calculus that we do when we think about what we're going to do going forward.

Speaker Change: When we talk about capital structure, we believe that a simple capital structure makes sense for our shareholders and we still do have our preferred shares out there. So at some point, we want to address the preferred shares and likely that's going to be potentially a source of capital that we would use.

Speaker Change: So we want to factor all those things together M&A return to common shareholders and simplifying our capital structure and all those things really are part of the calculus that we do when we think about what we're going to do going forward, but specific to M&A I wouldn't say there's anything radical.

Robert Saltiel: But specific to M&A, I wouldn't say there's anything radically different in terms of what we're seeing now in terms of opportunities than what we were seeing six months ago. Okay, that's helpful.

Speaker Change: Radically different in terms of what we're seeing now in terms of opportunities than what we were seeing six months ago.

Rob Saltiel: Just a lot of what we are focused on today is how the energy industry is trying to plan for the demand increases coming from power, not only in West Texas but really across the country. Can you speak to kind of your outlook for power generation demand and how MRC benefits kind of from the increased need going forward for this kind of build out we're seeing everyone talk about?

Speaker Change: Okay. That's helpful. And then maybe one more just a lot of what we are focused on today is how the energy industry is trying to plan.

Sean Mitchell: And then maybe one more. Just a lot of what we are focused on today is how the energy industry is trying to plan for the demand increases coming from power, not only in West Texas, but really across the country.

Speaker Change: For the demand increases coming from power not only in west, Texas, but really across the country can you speak to kind of your outlook for power Gen demand and how MRC benefits.

Robert Saltiel: Can you speak to kind of your outlook for power in demand and how MRC benefits kind of from the increased need going forward for this kind of build out we're seeing everyone talk about? Yeah, we talked about a bit of this in our prepared comments, and there's been a lot written about the need for the many, many gigawatts of power that's going to be required to service demand growth and electricity. A lot of that demand coming through data centers, and of course the vast majority of the power generation that you can really count on, whether the sun is out or not, or whether the wind is blowing, is gas turbine combined cycle technology.

Speaker Change: From the increased need going forward for this kind of build out we're seeing everyone talk about.

Rob Saltiel: Yeah, we talked about a bit of this in our prepared comments, and there's been a lot written about the need for the many, many gigawatts of power that's going to be required to service the demand growth for electricity, a lot of that demand coming through data centers. And of course, the vast majority of the power generation that you can really count on, you know, whether the sun is out or not or whether the wind is blowing, is gas turbine combined cycle technology.

Speaker Change: Yeah, we talked about a bit of this in our prepared comments and theres been a lot written about the need for the many many gigawatts of power.

Speaker Change: Power, that's going to be required.

Speaker Change: To service demand growth in electricity, a lot of that demand coming through data centers.

Speaker Change: And of course.

The vast majority of the the power generation that you can really count on.

Speaker Change: You know, whether the sun is out or not or whether the wind is blowing it is gas gas turbine combined cycle technology. So we're going to see we believe a lot of gas fired power stations get built.

Rob Saltiel: So we're going to see, we believe, a lot of gas-fired power stations get built. And that's going to require infrastructure to, you know, gather, process, and transport that gas. In addition, we know that LNG exports are going to continue to increase, and that's going to be a source of demand. And then we've also talked about exports to Mexico and growing industrial demand as being other sources of demand for natural gas. And obviously, when you have demand for a commodity, you've got to have demand for the infrastructure that moves that commodity around, processes that commodity, and makes it available for consumption or for export.

Robert Saltiel: So we're going to see, we believe, a lot of gas-fired power stations get built. That's going to require infrastructure to gather, process, and transport that gas. In addition, we know that LNG exports are going to continue to increase, and that's going to be a source of demand. And then we've also talked about exports to Mexico and growing industrial demand as being other sources of demand for natural gas. And obviously, when you have demand for the commodity, you've got to have demand for the infrastructure that moves that commodity around, processes that commodity, makes it available for consumption or for export. And we have an active business in the upstream and the midstream, and that's going to benefit from that additional growth in natural gas.

Speaker Change: That's going to require infrastructure.

Speaker Change: To gather process and transport that gas. In addition, we know that LNG exports are going to continue to increase and that's going to be a source of demand and then we've also talked about exports to Mexico and growing industrial demand as being other sources of demand for natural gas and <unk>.

Speaker Change: Obviously, when when you have demand for the commodity you've got to have demand for the infrastructure that that moves that commodity around processes that commodity makes it available for consumption or for export.

Rob Saltiel: And we have an active business in the upstream and the midstream, and that's going to benefit from that additional growth in natural gas. So we're really excited about the growth in natural gas in this country. People are projecting that even by 2030, it could grow 15 to 20 percent, and that's going to be a nice catalyst for our PTI business going forward.

Speaker Change: And we have an active business in the in the upstream and the midstream and Thats going to benefit from that additional growth in natural gas. So we're really excited about natural gas growth in this country people are projecting that even by 2030, it could grow 15% to 20% and.

Sean Mitchell: So we're really excited about natural gas growth in this country. People are projecting that even by 2030 it could grow 15 to 20 percent, and that's going to be a nice catalyst for our PTI business going forward. Great color, thank you. You're welcome.

Speaker Change: That's going to be a nice catalyst for our Pts business going forward.

Sean Mitchell: Great, Keller. Thank you.

Speaker Change: Great color. Thank you.

Speaker Change: Welcome.

Chris Danger: Our next question comes from Chris Danger, with Loop Capital Markets. Please proceed with your question.

Chris Dankert: Our next question comes from Chris Dankert with Loop Capital Markets. Please proceed with your question.

Speaker Change: Our next question comes from Chris Dankert with loop capital markets. Please proceed with your question.

Chris Danger: Hey, morning, thanks for taking the questions. I guess you'll congrats on the PVF win with Exxon. Obviously, maybe it's bigger than a breadboss.

Chris Dankert: Hey, thanks for taking the questions. I guess, you know, congrats on the PVF win with Exxon. Obviously, maybe just bigger than a bread box, so you kind of size it, is this, you know, a nice incremental win or is this actually, you know, needle moving for that business?

Chris Dankert: Hey, good morning, Thanks for taking the questions.

Chris Dankert: I guess congrats on the PBF win win with Exxon.

Chris Dankert: Obviously, maybe it's bigger than a bread box can you kind of size is this you know a nice incremental win or actually needle moving for that business. If you can give any color there would be great.

Robert Saltiel: He kind of sized, is this a nice incremental win or is it actually needle moving for that business? If you can give any color, that would be great. Yeah, a great question. First of all, let me just reiterate how excited we are to have landed this opportunity with Exxon Mobil. I think everybody on the call understands what a commitment Exxon Mobil has made to the North American oil field and how they continue to grow both organically and through acquisitions, their presence here and the fact that we are aligned with an industry leader like Exxon Mobil knowing their long-term growth prospects is extremely positive for MRC Global.

Rob Saltiel: If you can give it any color there, it'd be great.

Rob Saltiel: Yeah, great question. First of all, let me just reiterate how excited we are to have landed this opportunity with ExxonMobil. I think everybody on the call understands what a commitment ExxonMobil has made to the North American oil field and how they continue to grow their presence here. And the fact that we are aligned with an industry leader like ExxonMobil, knowing their long-term growth prospects, is extremely positive for MRC Global.

Speaker Change: Yes, Great question first of all let me just to reiterate how excited we are to have landed this opportunity with exxonmobil.

Speaker Change: I think everybody on the call understands.

Speaker Change: What our commitment Exxonmobil has made.

Speaker Change: To the North American oilfield and how they continue to grow both.

Speaker Change: Organically and through acquisitions.

Speaker Change: Their presence here and the fact that we are aligned with an industry leader like exxonmobil, knowing their long term growth prospects is extremely positive for MRC global we're not going to disclose specific numbers in terms of how we look at revenue with individual customers, but I will tell you that.

Robert Saltiel: We're not going to disclose specific numbers in terms of how we look at revenue with individual customers, but I will tell you that once the acquisitions that Exxon Mobil has announced are fully integrated, our business with them is likely to grow between 75 and 100% from where it is today. So this is a really big opportunity for us. It's not just an incremental opportunity. It's a really big opportunity, and again, we're really excited to be aligned with Exxon Mobil. That's phenomenal news, and congrats again there.

Rob Saltiel: We're not going to disclose specific numbers in terms of how we look at revenue with individual customers, but I will tell you that once the acquisitions that ExxonMobil has announced are fully integrated, our business with them is likely to grow between 75% and 100% from where it is today. So, this is a really big opportunity for us. It's not just an incremental opportunity. It's a really big opportunity, and again, we're really excited to be aligned with ExxonMobil.

Speaker Change: Once the acquisition, so that Exxonmobil has announced our fully integrated.

Speaker Change: Our business with them.

Speaker Change: Likely to grow between 75 and 100%.

Speaker Change: From where it is today. So this is a really big opportunity for us it's not just a an incremental opportunity. It's a really big opportunity and again, we're really excited to be aligned with exxonmobil.

Chris Dankert: That's phenomenal news and then congrats again there. I guess just as a follow-up, you know, obviously there's no rush or need to move on the preferred shares now. But I'm just curious, is there an active conversation with the preferred shareholders in terms of what options are there? Or is this more kind of a wait and see approach at the moment?

Speaker Change: That's phenomenal there was it and congrats again there.

Robert Saltiel: I guess, as a follow-up, obviously there's no rush or need to move on to preferred shares now. I'm just curious, is there an active conversation with preferred shareholders in terms of what options are there, or is it more kind of a wait-and-see approach at the moment? Well, keep in mind the preferred shareholder occupies a seat on our board, and so we have an active dialogue, and look, what we want to do is we want to do the right thing for our common shareholders. That's been our message throughout any dialogue relating to the preferred. There's obviously going to be a time when, first of all, we can afford to take it out and secondly, we think it will make sense for our common shareholders.

Speaker Change: And I guess it does as a follow up obviously, there is no ross or need to move on the preferred shares now, but I'm. Just curious is there an active conversation with preferred shareholder in terms of what options are there or is it more kind of a wait and see approach at the moment.

Rob Saltiel: Well, keep in mind, the preferred shareholder occupies a seat on our board, and so we have an active dialogue. And look, what we want to do is we want to do the right thing for our common shareholders. That's been our message throughout any dialogue relating to the preferred shareholders.

Speaker Change: Well keep in mind the preferred shareholder occupies a seat on our board and so we have an active dialogue and look what we want to do is we want to do the right thing for our common shareholders thats been our message or throughout.

Speaker Change: Any dialogue relating to the preferred.

Rob Saltiel: There's obviously going to be a time when, first of all, we can afford to take it out, and secondly, we think it will make sense for our common shareholders. We obviously haven't reached that point yet, but look, we recognize that it is a complication to our capital structure, and for those reasons, we want to make sure that we take it out at the right time and in the right way. And ideally, you take it out when it's accretive to our shareholders, and we can do everything we can to minimize any dilution through share count.

Speaker Change: Theres, obviously going to be a time.

Speaker Change: First of all we can afford to take it out and secondly, we think it will make sense for our common shareholders.

Robert Saltiel: We obviously haven't reached that point yet, but look, we have recognized that it is a complication to our capital structure. For those reasons, we want to make sure that we take it out at the right time and in the right way, and ideally you take it out when it's accretive to our shareholders, and we can do everything we can to minimize any delusion through share count. We have some basic principles that we're thinking about, and I would just say stay tuned. Know that there's an active dialogue going on, but that we are thinking first and foremost about the common shareholders when we strike an agreement to do something with the preferred.

Speaker Change: We obviously haven't reached that point yet.

Speaker Change: But look we recognize that it is a complication to our capital structure.

Speaker Change: And for those reasons.

Speaker Change: We want to make sure that we take it out.

Speaker Change: At the right time and in the right way and ideally.

Speaker Change: You take it out when it's accretive to our shareholders.

Speaker Change: And we can do everything we can to.

Speaker Change: To minimize any dilution through share count. So we have some basic principles that we're thinking about and.

Rob Saltiel: So we have some basic principles that we're thinking about, and I would just say, stay tuned. Know that there's an active dialogue going on but that we are thinking first and foremost about the common shareholders when we strike an agreement to do something with the preferred.

Speaker Change: I would just say stay tuned no that there is an active dialogue going on but that we are thinking first and foremost about the common shareholders.

Speaker Change: When we we strike.

Speaker Change: Agreement too.

Speaker Change: To do something with the preferred.

Speaker Change: That's great color. Thanks, so much for that and best of luck in the back half you guys yes.

Chris Danger: Great, Collar.

Chris Dankert: Great color. Thanks so much for that and best of luck in the back half year, guys. Yeah, I appreciate it.

Robert Saltiel: Thanks so much for that, and best luck in the back half year, guys. Yeah, appreciate it.

Chris Dankert: Yeah, I appreciate it. Thank you.

Speaker Change: I appreciate it thank you.

Operator: Thank you.

Operator: We have reached the end of the question and answer session.

Monica Broughton: We have reached the end of the question and answer session. I would now like to turn the call back over to Monica Broughton for closing comments.

Speaker Change: We have reached the end of the question and answer session I would now like to turn the call back over to Monica Broughton for closing comments.

Monica Broughton: I would now like to turn the call back over to Monica Brotton for closing comments. Thank you for joining us today and for your interest in MRC Global. We look forward to having you join us for a third quarter conference call in November. Have a great day.

Thank you for joining us today and for your interest in MRC Global they look forward to having you join us for our third quarter conference call in November have a great day.

Monica Broughton: Thank you for joining us today and for your interest in MRC Global. We look forward to having you join us for our third quarter conference call in November. Have a great day!

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for you.

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.