MRC Global Inc. has announced third quarter 2024 results.

Net income attributable to common stockholders for the third quarter of 2024 was $23 million, or $0.27 per diluted share, and was $29 million, or $0.33 per diluted share for the third quarter of 2023. Adjusted net income attributable to common stockholders for the third quarter of 2024 was $19 million, or $0.22 per diluted share, as compared to the third quarter of 2023 result of $28 million, or $0.32 per diluted share.

MRC Global’s third quarter 2024 gross profit was $160 million, or 20.1% of sales, as compared to the third quarter 2023 gross profit of $183 million, or 20.6% of sales. Gross profit for the third quarter includes $5 million and $4 million of income for 2024 and 2023, 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 $166 million, or 20.8% of sales, for the third quarter of 2024 and was $189 million, or 21.3% of sales, for the third quarter of 2023. 

Third Quarter 2024 Financial Highlights:

• Cash flow provided by operations of $96 million for the third quarter and $197 million in the first nine months of 2024
• Sales of $797 million, a 4% decrease compared to the second quarter of 2024
• Adjusted Gross Profit, as a percentage of sales, of 20.8%
• Adjusted EBITDA of $48 million, or 6.0% of sales
• Net Working Capital, as a percentage of sales, of 14.3% - a new company record low
• Net Debt leverage ratio of 0.1 times

Rob Saltiel, MRC Global’s President and CEO, stated, “As we guided on our last earnings call, revenue and Adjusted EBITDA declined in the third quarter due to slowing activity in the U.S. oilfield and project delays in our DIET sector. Despite these headwinds, we generated operating cash flow of $96 million, bringing our 2024 total to $197 million, essentially achieving our full year cash flow target of $200 million a quarter early. Given our robust cash flow generation, we are raising our guidance for the full year operating cash flow to $220 million or more.

"As recently announced, we repurchased all of our convertible preferred shares through a successful new Term Loan B, and we are in the process of extending the maturity of our asset-based lending facility to 2029. We expect that these transactions will be accretive to earnings and cash flow in 2025 and beyond, and they simplify our capital structure while maintaining a solid balance sheet," Mr. Saltiel added.

Selling, general and administrative (SG&A) expenses were $123 million, or 15.4% of sales, for the third quarter of 2024 compared to $126 million, or 14.2% of sales, for the same period in 2023. There were no adjustments to SG&A for the third quarter of 2024. Adjusted SG&A for the third quarter of 2023 was $123 million, or 13.9% of sales, which excluded $3 million for a customer settlement.

Adjusted EBITDA was $48 million, or 6.0% of sales, in the third quarter of 2024 compared to $70 million, or 7.9% of sales, 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 $3 million was incurred in the third quarter of 2024, with an effective tax rate of 9%, as compared to an income tax expense of $14 million, with an effective tax rate of 29%, for the third quarter of 2023. These 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 September 30, 2024, was favorably impacted by a net reduction in valuation allowance provision offset by foreign losses with no tax benefit.

Sales

The company’s sales were $797 million for the third quarter of 2024, which was 10% lower than the third quarter of 2023 and 4% lower than the second quarter of 2024. As compared to the same quarter a year ago, the Production and Transmission Infrastructure (PTI) sector declined the most followed by the Downstream, Industrial and Energy Transition (DIET) and Gas Utilities sectors. Sequentially, the company’s sales decline was due to the PTI and DIET sectors, partially offset by an increase in the Gas Utilities sector.

Sales by Segment

U.S. sales in the third quarter of 2024 were $644 million, down $101 million, or 14%, from the same quarter in 2023. PTI sector sales decreased $43 million, or 19%, primarily due to slowing oilfield activity. DIET sector sales decreased $40 million, or 19%, due to less project work and less turnaround activity. Gas Utilities sector revenue decreased $18 million, or 6%, as customers reduced their own product inventory levels and executed fewer capital projects.

Sequentially, as compared to the second quarter of 2024, U.S. sales decreased $33 million, or 5%, as the PTI and DIET sectors declined, partially offset by an increase in the Gas Utilities sector.  PTI sector sales decreased $21 million, or 10%, primarily due to the completion of projects in the second quarter and slowing oilfield activity, partially offset by an increase in sales related to a new customer contract. DIET sector sales decreased $18 million, or 10%, primarily as a result of non-repeating projects. The U.S. Gas Utilities sector sales, which increased $6 million, or 2%, was driven by increased customer spending due to seasonal increases and normalizing buying patterns.

Canada sales in the third quarter of 2024 were $26 million, down $12 million, or 32%, from the same quarter in 2023, due to a decline in the PTI sector.

Sequentially, Canada sales were down $7 million, or 21%, from the prior quarter primarily due to the PTI sector.

International sales in the third quarter of 2024 were $127 million, up $22 million, or 21%, from the same period in 2023. The increase was driven by both the PTI and DIET sectors. The PTI sector growth is due primarily to various projects in Europe. The DIET sector improvement was driven by projects, including an offshore wind project, as well as refining and chemical turnaround activity. 

Sequentially, as compared to the previous quarter, International sales were up $5 million, or 4%, as the PTI and DIET sectors grew. The PTI sector increased as a result of projects in Europe, Asia and Australia, while the DIET sector increased due to project work in Europe and the Middle East as well as turnaround activity in Europe and Asia. 

Sales by Sector

Gas Utilities sector sales, which are primarily U.S. based, were $295 million in the third quarter of 2024, or 37% of total sales, a sales decrease of $19 million, or 6%, from the third quarter of 2023.

Sequentially, as compared to the second quarter of 2024, the Gas Utilities sector sales increased $8 million, or 3%.

DIET sector sales in the third quarter of 2024 were $248 million, or 31% of total sales, a decrease of $31 million, or 11%, from the third quarter of 2023. The decrease in DIET sector sales was driven by declines in the U.S., partially offset by increases in International and Canada.

Sequentially, as compared to the previous quarter, DIET sector sales were down $20 million, or 7%, due to declines in the U.S. and Canada segments partially offset by the International segment.

PTI sector sales in the third quarter of 2024 were $254 million, or 32% of total sales, a decline of $41 million, or 14%, from the third quarter of 2023. The decrease in PTI sector sales was due to declines in the U.S. and Canada segments partially offset by the International segment.

Sequentially, as compared to the prior quarter, PTI sector sales decreased $23 million, or 8%, due to declines in the U.S. and Canada segments partially offset by the International segment.

Backlog

As of September 30, 2024, the company's backlog was $580 million, a 9% decline from the previous quarter due to reduced order activity during the quarter.

Balance Sheet and Cash Flow

As of September 30, 2024, the cash balance was $62 million, long-term debt (including current portion) was $85 million, and Net Debt was $23 million. Cash provided by operations was $96 million in the third quarter of 2024. Availability under the company’s asset-based lending facility was $485 million, and available liquidity was $547 million as of September 30, 2024.

Subsequent Event

The company issued a new 7-year $350 million Term Loan B in October and is in the process of extending its $750 million asset-based lending facility to 2029, which is expected to be complete by mid-November. The company also repurchased its 6.5% Series A Convertible Perpetual Preferred stock in its entirety for $361 million plus accrued dividends of $4 million. The Net Debt leverage ratio on a pro forma basis as of September 30, 2024, for these transactions is 1.7 times.

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 third quarter 2024 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on November 6, 2024. To participate in the call, please dial 201-689-8261 and ask for the MRC Global conference call 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. For those who cannot listen to the live call, a replay will be available through November 20, 2024, and can be accessed by dialing 201-612-7415 and using pass code 13746017#. Also, an archive of the webcast will be available shortly after the call at www.mrcglobal.com for 90 days.