MRC Global Inc., a leading global distributor of pipe, valves, fittings and infrastructure products and services to diversified energy, industrial and gas utilities end-markets, has announced first quarter 2024 results.

Net income attributable to common stockholders for the first quarter of 2024 was $13 million, or $0.15 per diluted share, as compared to the first quarter of 2023 net income attributable to common stockholders of $28 million, or $0.33 per diluted share. Adjusted net income attributable to common stockholders for the first quarter of 2024 was $17 million, or $0.20 per diluted share, as compared to the first quarter of 2023 adjusted net income attributable to common stockholders of $27 million, or $0.32 per diluted share.

MRC Global’s first quarter 2024 gross profit was $163 million, or 20.2% of sales, as compared to the first quarter 2023 gross profit of $179 million, or 20.2% of sales. Gross profit for the first quarter of 2024 and 2023 includes $1 million of expense and $1 million of income, respectively, in cost of sales relating to the use of the last-in, first-out (LIFO) method of inventory cost accounting. Adjusted Gross Profit, which excludes (among other items) the impact of LIFO, was $174 million, or 21.6% of sales, for the first quarter of 2024 and was $188 million, or 21.2% of sales, for the first quarter of 2023. 

First Quarter 2024 Financial Highlights

• Cash flow provided by operations of $38 million   
• Sales of $806 million, a 5% improvement compared to the fourth quarter of 2023
• Adjusted Gross Profit, as a percentage of sales, of 21.6%, and eight consecutive quarters above 21%
• Adjusted EBITDA of $57 million, or 7.1% of sales  
• Net Debt leverage ratio of 0.6 times, the lowest in MRC Global history

Rob Saltiel, MRC Global’s president and CEO stated, “Our commitment to improving capital returns, maintaining cost discipline and generating cash across the market cycle is reflected in our excellent results this quarter. We exceeded our expectations with sequential revenue growth of 5% and adjusted EBITDA margins of 7.1%. We believe that our business has turned the corner after the lower activity levels of the fourth quarter of 2023.

“In addition, we generated $38 million of operating cash flow in the first quarter and are on-track to meet or exceed our cash flow guidance of $200 million this year. Our strengthening balance sheet and strong cash flow generation will allow us to repay our Term Loan B in the second quarter and exit 2024 with minimal net debt. We expect to generate significant cash over the next few years, which would provide us flexibility to consider various capital allocation alternatives,” Saltiel added.

Selling, general and administrative (SG&A) expenses were $125 million, or 15.5% of sales, for the first quarter of 2024 compared to $122 million, or 13.8% of sales, for the same period in 2023. Adjusted SG&A for the first quarter of 2024 was $122 million, or 15.1% of sales, excluding $3 million of activism response expenses.

Adjusted EBITDA was $57 million in the first quarter of 2024 compared to $69 million for the same period in 2023.

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Gross Profit, Adjusted Net Income, Adjusted SG&A, Net Debt and Leverage Ratio are all non-GAAP measures. Please refer to the reconciliation of each of these measures to the nearest GAAP measure in this release.

An income tax expense of $8 million was incurred in the first quarter of 2024, with an effective tax rate of 30%, as compared to an income tax expense of $13 million, with an effective tax rate of 28%, for the first quarter of 2023. Our rates differ from the U.S. federal statutory rate of 21% as a result of state income taxes, non-deductible expenses, and differing foreign income tax rates. In addition, the effective tax rate for the three months ended March 31, 2024, was higher than the U.S. federal statutory rate due to foreign losses with no tax benefit.

Sales
The company’s sales were $806 million for the first quarter of 2024, which was 5% higher than the fourth quarter of 2023 and 9% lower than the first quarter of 2023. Sequentially, all sectors were up, led by the Downstream, Industrial and Energy Transition (DIET) and Gas Utilities sectors. As compared to the first quarter of 2023, all sectors declined, led by the Gas Utilities and Production and Transmission Infrastructure (PTI) sectors.

Sales by Segment
U.S. sales in the first quarter of 2024 were $667 million, down $73 million, or 10%, from the same quarter in 2023. The Gas Utilities sector revenue decreased $41 million, or 13%, as customers reduce their product inventory levels. PTI sector sales decreased by $24 million, or 11%, primarily due to lower line pipe sales. DIET sector sales declined $8 million primarily due to non-recurring projects.

Sequentially, as compared to the fourth quarter of 2023, U.S. sales 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 in the first quarter of 2024 were $29 million, down $13 million, or 31%, from the same quarter in 2023, as decreases in the PTI sector offset an increase in the DIET sector. 

Sequentially, Canada sales were up $1 million from the prior quarter.

International sales in the first quarter of 2024 were $110 million, up $7 million, or 7%, from the same period in 2023. The increase was driven by the PTI sector primarily in Europe and Middle East, followed by the DIET sector in Europe and the Middle East for renewable and LNG projects. 

Sequentially, as compared to the previous quarter, International sales were up $3 million, or 3%. The increase was driven by the DIET sector for project activity in the Middle East and Europe.

Sales by Sector
Gas Utilities sector sales, which are primarily U.S. based, were $266 million in the first quarter of 2024, or 33% of total sales, a decrease of $41 million, or 13%, from the first quarter of 2023.

Sequentially, as compared to the fourth quarter of 2023, the Gas Utilities sector sales increased $13 million, or 5%.

DIET sector sales in the first quarter of 2024 were $276 million, or 34% of total sales, a decrease of $2 million, or 1%, from the first quarter of 2023. The decrease in DIET sector sales was driven by the U.S. segment.

Sequentially, as compared to the previous quarter, sales in the DIET sector were up $18 million, or 7%, led by the U.S. segment followed by the International segment.

PTI sector sales in the first quarter of 2024 were $264 million, or 33% of total sales, a decline of $36 million, or 12%, from the first quarter of 2023. The decrease in PTI sales was due to declines in the U.S. and Canada segments.

Sequentially, as compared to the prior quarter, PTI sector sales increased $7 million, or 3%, driven by the U.S. segment followed by the International segment.

Backlog
As of March 31, 2024, the company's backlog was $704 million, a 1% increase compared to the previous quarter.

Balance Sheet and Cash Flow
As of March 31, 2024, the cash balance was $146 million, long-term debt (including current portion) was $295 million, and Net Debt was $149 million. Cash provided by operations was $38 million in the first quarter of 2024. Availability under the company’s asset-based lending facility was $645 million, and available liquidity was $791 million as of March 31, 2024. The company intends to repay its Term Loan B in its entirety during the second quarter using a combination of its asset-based lending facility and cash. Please refer to the reconciliation of non-GAAP measures (Net Debt) to GAAP measures (Long-term Debt) in this release.

Conference Call
The company will hold a conference call to discuss its first quarter 2024 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on May 9, 2024. To participate in the call, please dial 201-689-8261 and ask for the MRC Global conference call at least 10 minutes prior to the start time. To access the conference call, live over the Internet, please log onto the web at www.mrcglobal.com and go to the “Investors” page of the company’s website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live call, a replay will be available through May 23, 2024, and can be accessed by dialing 201-612-7415 and using pass code 13745025#. Also, an archive of the webcast will be available shortly after the call at www.mrcglobal.com for 90 days.