1Q 2024 Earnings Presentation
May 8, 2024
Rob Saltiel
President & CEO
Kelly Youngblood
Executive Vice President & CFO
Forward Looking Statements
This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Words such as "will," "expect," "look forward," "guidance," "targeted", "goals", and similar expressions are intended to identify forward-looking statements. Statements about the company's business, including its strategy, its industry, the company's future profitability, the company's guidance on its sales, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, Adjusted SG&A, Gross Profit, Gross Profit percentage, Adjusted Gross Profit, Adjusted Gross Profit percentage, Net Debt, Tax Rate, Capital Expenditures and Cash from Operations, Free Cash Flow, Free Cash Flow after Dividends, growth in the company's various markets and the company's expectations, beliefs, plans, strategies, objectives, prospects and assumptions are not guarantees of future performance. These statements are based on management's expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward- looking statements. These statements involve known and unknown risks, uncertainties and other factors, most of which are difficult to predict and many of which are beyond our control, including the factors described in the company's SEC filings that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward- looking statements, including the company's Current Report on Form 8-K dated May 8, 2024.
For a discussion of key risk factors, please see the risk factors disclosed in the company's SEC filings, which are available on the SEC's website at www.sec.gov and on the company's website, www.mrcglobal.com. Our filings and other important information are also available on the Investor Relations page of our website at www.mrcglobal.com.
Undue reliance should not be placed on the company's forward-looking statements. Although forward- looking statements reflect the company's good faith beliefs, reliance should not be placed on forward- looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the company's actual results, performance or achievements or future events to differ materially from anticipated future results, performance or achievements or future events expressed or implied by such forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except to the extent required by law.
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Non-GAAP Disclaimer
In this presentation, the company is providing certain non-GAAP financial measures. These are not measures of financial performance calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and should not be considered as alternatives. The following GAAP measures have the following non-GAAP measures presented and derived from the respective GAAP measures:
- Net Income (adjusted EBITDA)
- Net Income margin (adjusted EBITDA margin)
- Gross profit (Adjusted Gross Profit)
- Gross profit percentage (Adjusted Gross Profit percentage)
- Net Income (adjusted Net Income)
- Diluted Earnings per Share (adjusted diluted EPS)
- Selling, general and administrative expense (adjusted SG&A)
- Net cash provided by operations (free cash flow and free cash flow after dividends)
- Long-termdebt, net (Net Debt)
- Return on Invested Capital (ROIC), Adjusted for LIFO
They should be viewed in addition to, and not as a substitute for, analysis of our results reported in accordance with GAAP. Management believes that these non-GAAP financial measures provide investors a view to measures similar to those used in evaluating our compliance with certain financial covenants under our credit facilities and provide meaningful comparisons between current and prior year period results. They are also used as a metric to determine certain components of performance-based compensation. They are not necessarily indicative of future results of operations that may be obtained by the company.
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Executive Summary - Financial Highlights
1Q 2024
Strengthening Balance Sheet
- Cash flow from operations of $38 million in 1Q24
- Net debt leverage of 0.6x, (including the preferred stock 2.1x) the lowest in MRC Global's public company history -a new record.
- Solid liquidity position of $791 million
- Plan to repay Term Loan B in 2Q24
Superb Working Capital Efficiency
- Net working capital to sales ratio of 16.1%
Strong Margins
- Adjusted EBITDA of $57 million - 19% improvement over 4Q23
- Adjusted EBITDA margins of 7.1%
- Adjusted Gross Profit percentage of 21.6% in 1Q24 - eight consecutive quarters above 21%
Higher Revenue
- Revenue of $806 million, up 5% over 4Q23
- All three business sectors increased sequentially
Note: See reconciliations of GAAP to non-GAAP measures in our appendix. Also see our Current Report on Form 8-K dated May 8, 2024, for a reconciliation of non-GAAP measures to their closest GAAP measures and for a discussion of forward-looking statements and the factors that might impact the various items in the 2024 Outlook.
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First Quarter 2024 Results - Key Metrics
RevenueDebt
GenerationManagement
Cost
Control
Working Capital
EfficiencyProfitability
Cash Generation &
Liquidity
Gross Margin
Revenue
$806M
- 5%above 4Q23
- 9%below 1Q23
E-commerce
- Steadily increasing adoption of digital ordering
- 65.7%of U.S. orders digital - 146 bpsincrease over 1Q23
- 54.2%of total orders digital - 194 bpsincrease over 1Q23
Total Debt $295M
Net debt $149M
Leverage ratio 0.6x
SG&A 15.5%of
revenue
Adjusted SG&A
15.1%of revenue
Net working capital to
sales ratio
16.1%
Net income attributable
to common
stockholders $13M
Adjusted EBITDA $57M
or 7.1%of revenue
Cash generated from operations
$38M
Liquidity $791M
Gross profit
percentage 20.2%
Adjusted gross profit
percentage 21.6%
1. See reconciliation of non-GAAP measures to GAAP measures in the appendix
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First Quarter 2024 Results - Sequential Changes
SEGMENT:Revenue Highlights 1Q24 vs.4Q23
U.S.:Increased $34 million, or 5%,driven by the U.S. Gas Utilities sector, which increased $13 million, or 5%, as a result of deliveries for upcoming projects and increased customer spending due to normalizing buying patterns. The DIET sector, increased $11 million, or 6%, due to increased turnarounds and project activity for mining, refining and chemicals customers. The PTI sector increased $10 million, or 5%, primarily due to the timing of customer projects benefiting valve sales and production infrastructure.
Canada:Sales increased by $1 million.
International:Increased $3 million, or 3%, from growth in the PTI and DIET sectors. The increase was driven by the DIET sector for project activity in the Middle East and Europe.
SECTOR:Revenue Highlights 1Q24 vs.4Q23
Gas Utilities:Increased $13 million, or 5%, driven by the U.S. segment.
Downstream, Industrial & Energy Transition:Increased $18 million, or 7%, as all segments experienced growth, driven by the U.S. segment.
Production & Transmission Infrastructure:Increased $7 million, or 3%, driven by the U.S. segment followed by the International segment.
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APPENDIX
Quarterly Financial Performance - GAAP | ($ millions, except per share data) |
SALES | ||
$885 | $806 | |
$768 | ||
1Q23 | 4Q23 | 1Q24 |
NET INCOME & % MARGIN
$34
$21 | $19 | ||
2.2% | 2.4% | 3.8% | |
3.8% | 2.7% | 2.4% | |
1Q23 | 4Q23 | 1Q24 |
GROSS PROFIT & % MARGIN
$179 | ||
$163 | ||
$153 | ||
20.2% | 19.9% | 20.2% |
1Q23 | 4Q23 | 1Q24 |
DILUTED EPS
$0.33 | ||
$0.17 | $0.15 | |
1Q23 | 4Q23 | 1Q24 |
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Quarterly Financial Performance - Adjusted | ($ millions, except per share data) |
ADJUSTED GROSS PROFIT & % MARGIN1 |
$188
21.2%20.5%
$168
21.219%.2%
$174
21.216%.2%
1Q23 | 4Q23 | 1Q24 |
ADJUSTED EBITDA & % MARGIN1
$69 | ||
$57 | ||
$48 | ||
6.5% | 7.6% | 7.8% |
7.8% | 6.3% | 7.1% |
1Q23 | 4Q23 | 1Q24 |
ADJUSTED DILUTED EPS1
$0.32 | ||
$0.23 | ||
$0.20 | ||
1Q23 | 4Q23 | 1Q24 |
1. See reconciliation of non-GAAP measures to GAAP measures in the appendix
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Focused on Returns - Creating More Value for Shareholders
- ROIC is a key metric for capital stewardship and shareholder value creation
- Improvement in ROIC is enabled by increased profitability and enhanced efficiency of inventory and financial working capital
Return on Invested Capital, net of LIFO
11.0%
10.3%
4.9%
2021 | 2022 | 2023 |
1. See reconciliation of non-GAAP measures to GAAP measures in the appendix
APPENDIX
Strong Balance Sheet & Financial Flexibility ($ millions)
TOTAL DEBT
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CAPITAL STRUCTURE
$390 | |||
$301 | $295 | ||
1Q23 | 4Q23 | 1Q24 | |
Net Debt1: | $351 | $170 | $149 |
Net Leverage2: | 1.2x | 0.7x | 0.6x |
March 31, 2024 | |
Cash and Cash Equivalents | $ 146 |
Total Debt (including current portion): | |
Term Loan B due September 2024 | $ 292 |
(net of discount & deferred financing costs) | |
Global ABL Facility due 2026 | 3 |
Total Debt | $ 295 |
Preferred stock | 355 |
Common stockholders' equity | 495 |
Total Capitalization | $ 1,145 |
Liquidity | $ 791 |
CASH FLOW FROM (USED IN) PROVIDED BY OPERATIONS
$89 | ||
$38 | ||
$(30) | ||
1Q23 | 4Q23 | 1Q24 |
WORKING CAPITAL TO SALES RATIO3
17.9% | 15.6% | 16.1% |
1Q23 | 4Q23 | 1Q24 |
- Net debt is calculated as total debt less Cash. See reconciliation in the appendix.
- Net leverage multiples represent net debt / trailing twelve months adjusted EBITDA. Net debt is total debt less cash.
- Working capital to sales ratio is defined as working capital (excluding debt), net of cash divided by trailing twelve months sales. Calculated with GAAP figures.
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Financial Outlook
2024 Targets
Profitability (annual)
- Revenue - flat to down low single digits from 2023
- DIET - modestly higher
- PTI - modestly lower
- Gas Utilities - down for the full year with improvement in the second half of 2024
- Adjusted Gross Profit - average 21% or better
- Adjusted EBITDA - average 7% or better
- SG&A/Sales % - average under 15%
Cash Flow (annual)
- Capital expenditures - $40 - 45 million for 2024 - includes ERP system
- Cash flow from operations 2024 - $200 million or better
Sequential Quarterly Revenue (2Q24 compared to 1Q24)
- Total company & each of the sectors - low single digit increase
Note: See our Current Report on Form 8-K dated March 8, 2024, for a reconciliation of non-GAAP measures to their closest GAAP measures and for a discussion of forward-looking statements and the factors that might impact the various items in the 2024 Outlook.
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MRC Global Inc. published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 May 2024 01:50:04 UTC.