Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission file number: 001-35479 MRC GLOBAL INC. (Exact name of registrant as specified in its charter) Delaware 20-5956993 (State or Other J ...

Financial Data and Key Metrics Changes - In Q4 2023, the company generated $768 million in total sales, representing a 14% sequential decline and a 12% year-over-year decrease [64] - Adjusted gross margins were 21.9%, marking a 60 basis point improvement over Q3 2023, and adjusted EBITDA was $48 million, or 6.3% of sales, a decline of 160 basis points from the previous quarter [67][68] - The company achieved a record low leverage ratio of 0.7 times, with total liquidity of $741 million [69][58] - For the full year 2023, operating cash flow was $181 million, exceeding previous guidance by 65% [4][17] Business Line Data and Key Metrics Changes - The PTI sector revenue for Q4 was $257 million, a decrease of $38 million or 13% sequentially, primarily due to seasonality and lower year-end customer activity in the US [34] - The DIET sector revenue was $258 million, down $21 million or 8%, attributed to the conclusion of various projects and lower year-end turnaround activity [65] - The gas utility sector saw sales of $253 million in Q4, a decline of $61 million or 19% [64] Market Data and Key Metrics Changes - International revenue was $107 million in Q4, up $2 million or 2%, driven by improvements in both the PTI and DIET sectors [35] - The international segment backlog increased by 55% since the beginning of 2023, indicating strong growth potential [10][27] Company Strategy and Development Direction - The company is focused on improving its cost structure and maintaining healthy adjusted EBITDA margins, with initiatives to lower SG&A costs [9] - A new cloud-based ERP system is being implemented, expected to enhance operational efficiency and reduce IT maintenance costs by approximately $2 million annually [40][71] - The company anticipates a transitional year in 2024, with revenue expected to be flat to modestly lower, but remains optimistic about long-term growth opportunities in all sectors [72][62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the international segment and the potential for growth in the gas utilities sector as destocking efforts are expected to stabilize [20][59] - The company expects to generate approximately $200 million in operating cash flow in 2024, supported by improved working capital efficiencies [31][74] - Management acknowledged potential risks from declining oil prices but noted that larger public E&P companies are expected to drive activity in the U.S. oil field [29] Other Important Information - The effective tax rate for 2024 is projected to be between 26% and 28% [42] - The company is targeting average adjusted gross margins of 21% or better and average adjusted EBITDA margins of 7% for 2024 [73][44] Q&A Session Summary Question: Can you discuss cash flow and working capital expectations for 2024? - Management indicated that they expect to generate $100 million to $150 million in cash generation per year in a single-digit growth market, emphasizing their working capital efficiency [48][49] Question: What are the plans for capital allocation and potential M&A? - Management stated that they are open to considering M&A opportunities that are accretive to the company, but no specific plans were disclosed at this time [97][110] Question: How is the company addressing the impacts of LNG permitting halts? - Management noted that it is too early to assess the impacts but remains bullish on LNG as a growth opportunity for the company [91][112] Question: What are the expectations for SG&A costs in 2024? - Management expects a low single-digit reduction in SG&A costs, aiming to maintain a healthy EBITDA margin while preparing for growth in 2025 [93][120]

2 Forward Looking Statements Non-GAAP Disclaimer 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, Adjust ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) The unaudited condensed consolidated financial statements for the period ended September 30, 2023, show an increase in total assets to $1.96 billion, with sales growing 6% to $2.64 billion and net income increasing by 72% to $93 million, while operating cash flow significantly improved to $92 million from a $30 million use of cash in the prior-year period, driven by better working capital management and profitability [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Balance Sheet Summary (in millions) | Balance Sheet Items | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $1,225 | $1,142 | | Inventories, net | $620 | $578 | | **Total Assets** | **$1,958** | **$1,895** | | **Total Current Liabilities** | $590 | $564 | | Long-term debt, net | $300 | $337 | | **Total Liabilities** | $1,181 | $1,161 | | **Total Stockholders' Equity** | $463 | $386 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Statement of Operations Summary (in millions, except per share data) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Sales | $888 | $904 | $2,644 | $2,494 | | Gross Profit | $183 | $165 | $537 | $452 | | Operating Income | $57 | $45 | $159 | $105 | | Net Income | $35 | $24 | $93 | $54 | | Diluted EPS | $0.33 | $0.21 | $0.88 | $0.42 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Cash Flow Summary - Nine Months Ended Sep 30 (in millions) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operations | $92 | $(30) | | Net cash used in investing activities | $(12) | $(10) | | Net cash (used in) provided by financing activities | $(58) | $24 | | **Increase (decrease) in cash** | **$22** | **$(16)** | - The significant improvement in operating cash flow was primarily due to a **$45 million increase in inventory in 2023** versus a **$197 million increase in 2022**, and a **$20 million increase in accounts receivable** versus a **$159 million increase in 2022**, reflecting more efficient working capital management[14](index=14&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=NOTES%20TO%20THE%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) - The company operates as a global distributor of pipe, valves, and fittings (PVF) and infrastructure products to the gas utilities, downstream/industrial/energy transition, and production/transmission infrastructure sectors[15](index=15&type=chunk)[19](index=19&type=chunk) Disaggregated Revenue by Sector - Nine Months Ended Sep 30 (in millions) | Sector | 2023 | 2022 | | :--- | :--- | :--- | | Gas Utilities | $944 | $944 | | Downstream, Industrial & Energy Transition | $802 | $761 | | Production & Transmission Infrastructure | $898 | $789 | | **Total** | **$2,644** | **$2,494** | - The company uses the last-in, first-out (LIFO) method for its U.S. inventories. The LIFO reserve was **$276 million as of September 30, 2023**, compared to **$279 million at year-end 2022**[29](index=29&type=chunk) - As of September 30, 2023, the company had **$303 million in total long-term debt**, consisting of a Senior Secured Term Loan B (**$293 million net**) and borrowings under its Global ABL Facility (**$10 million**)[36](index=36&type=chunk) - The company is a defendant in approximately **548 lawsuits involving asbestos claims**. Management believes that applicable third-party insurance will substantially cover these claims and the ultimate disposition is unlikely to have a material adverse effect[58](index=58&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management reports a 2% decrease in Q3 2023 revenue year-over-year, primarily due to reduced activity in the U.S. Gas Utilities sector as customers reduce inventory, however, for the first nine months of 2023, revenue grew 6% to $2.64 billion, driven by the Production & Transmission Infrastructure (PTI) and Downstream, Industrial and Energy Transition (DIET) sectors, with Q3 Adjusted EBITDA at $70 million, down from $82 million in Q3 2022, while YTD Adjusted EBITDA rose slightly to $202 million, and the company maintains strong liquidity of $748 million and plans to refinance its Term Loan maturing in 2024 [Recent Trends and Outlook](index=26&type=section&id=Recent%20Trends%20and%20Outlook) - **Gas Utilities:** Sales were flat YTD. Near-term weakness is expected as key customers reduce their inventory levels due to improved supply chain certainty. Long-term drivers remain positive due to infrastructure integrity programs[74](index=74&type=chunk)[76](index=76&type=chunk) - **DIET:** Grew **5% YTD**. Expected to deliver strong growth driven by energy transition projects (e.g., biofuels), LNG projects, and MRO activities. The Inflation Reduction Act is a positive catalyst[78](index=78&type=chunk)[79](index=79&type=chunk) - **PTI:** Grew **14% YTD**. This sector is the most cyclical and benefits from oil prices that support drilling and completion activity[80](index=80&type=chunk) - **Supply Chain:** Lead times and transportation costs have largely returned to pre-pandemic levels. Product inflation has eased. The company has been able to reduce its own inventory levels from the peak in Q2 2023[84](index=84&type=chunk)[86](index=86&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Q3 2023 vs Q3 2022 Performance (in millions) | Metric | Q3 2023 | Q3 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales | $888 | $904 | $(16) | (2)% | | Gross Profit | $183 | $165 | $18 | 11% | | Operating Income | $57 | $45 | $12 | 27% | | Net Income | $35 | $24 | $11 | 46% | | Adjusted EBITDA | $70 | $82 | $(12) | (15)% | - The **2% decrease in Q3 sales** was driven by a **$44 million decline in the U.S. Gas Utilities sector**, partially offset by a **$20 million increase in U.S. PTI sales**[93](index=93&type=chunk)[94](index=94&type=chunk) - Gross profit margin improved from **18.3% to 20.6% in Q3**, largely due to a **$4 million LIFO benefit in 2023** versus a **$24 million LIFO expense in 2022**[97](index=97&type=chunk) YTD 2023 vs YTD 2022 Performance (in millions) | Metric | YTD 2023 | YTD 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales | $2,644 | $2,494 | $150 | 6% | | Gross Profit | $537 | $452 | $85 | 19% | | Operating Income | $159 | $105 | $54 | 51% | | Net Income | $93 | $54 | $39 | 72% | | Adjusted EBITDA | $202 | $195 | $7 | 4% | - The **6% increase in YTD sales** was driven by a **$109 million (5%) increase in the U.S. segment**, led by PTI and DIET sectors, and a **$43 million (16%) increase in the International segment**[113](index=113&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2023, the company had **total liquidity of $748 million**, consisting of **$52 million in cash** and **$696 million of excess availability** under its Global ABL Facility[133](index=133&type=chunk)[136](index=136&type=chunk) - The company postponed a refinancing of its Term Loan in April 2023 after the holder of its Preferred Stock filed a lawsuit to prevent it, claiming a right to consent. The lawsuit was dismissed without prejudice[134](index=134&type=chunk) - The company anticipates repaying or refinancing its Term Loan before its maturity in September 2024. It expects financing terms to be less favorable than the current agreement, resulting in a higher cost of capital[135](index=135&type=chunk) - On September 21, 2023, S&P Global Ratings downgraded the company's issuer credit rating from **B to B-** with a developing outlook[137](index=137&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is primarily exposed to market risks from interest rates, foreign currencies, and steel price volatility, with no material changes to market risk policies or instruments since the 2022 Annual Report on Form 10-K - The company's primary market risks are associated with unfavorable movements in interest rates, foreign currencies, and steel price volatility[146](index=146&type=chunk) - No material changes to market risk policies or sensitive instruments were reported compared to the fiscal year ended December 31, 2022[146](index=146&type=chunk) [Controls and Procedures](index=42&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) As of September 30, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective, with no material changes to the internal control over financial reporting during the third quarter of 2023 - The Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[147](index=147&type=chunk) - No changes occurred in the third quarter of 2023 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[148](index=148&type=chunk) [PART II – OTHER INFORMATION](index=43&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=43&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is subject to various claims incidental to its business, including product claims and asbestos litigation, none of which are expected to have a material effect on its financial condition, and a legal proceeding initiated by the holder of the company's Preferred Stock to prevent a debt refinancing was dismissed without prejudice - The company faces various legal claims, including product liability and asbestos cases, but management believes none are likely to have a material adverse effect on the business[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - In April 2023, the holder of the Company's Preferred Stock brought a proceeding to obtain a temporary restraining order to prevent the Company from refinancing its Term Loan; this proceeding was dismissed without prejudice[154](index=154&type=chunk) [Risk Factors](index=43&type=section&id=ITEM%201A.%20RISK%20FACTORS) A new risk factor has been added concerning shareholder activism, noting that responding to activist campaigns, such as the one publicly reported by Engine Capital LP in October 2023, can be costly, time-consuming, and disruptive to business operations and strategy execution - A new risk factor was added regarding the potential negative effects of shareholder activism on the company's business, operations, and share price[156](index=156&type=chunk) - In October 2023, it was reported that Engine Capital LP had published a letter with its opinions on actions the company should take. Responding to such activism could be costly, divert management's attention, and impair strategic execution[157](index=157&type=chunk)[158](index=158&type=chunk) [Other Information](index=45&type=section&id=ITEM%205.%20OTHER%20INFORMATION) On November 3, 2023, the Board of Directors adopted amended and restated bylaws, with amendments addressing the SEC's universal proxy rules, reserving the white proxy card for the Board's exclusive use, and enhancing disclosure requirements for stockholder nominations and proposals - On November 3, 2023, the Board adopted amended and restated bylaws[162](index=162&type=chunk) - Key amendments include addressing universal proxy rules, reserving the white proxy card for the Board, and enhancing disclosure requirements for stockholder nominations and proposals[164](index=164&type=chunk) [Exhibits](index=46&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Bylaws, an Executive Compensation Clawback Policy, and required CEO/CFO certifications - Filed exhibits include the Amended and Restated Bylaws (Exhibit 3.2), the Executive Compensation Clawback Policy (Exhibit 10.1), and CEO/CFO certifications (Exhibits 31.1, 31.2, 32)[165](index=165&type=chunk)

Financial Data and Key Metrics Changes - Total company sales for Q3 2023 were $888 million, a 2% sequential improvement from Q2 2023 [42] - Adjusted gross profit for Q3 was $189 million or 21.3%, a 20 basis point decline from Q2 [5] - Adjusted EBITDA for Q3 was $70 million or 7.9% of sales, marking the sixth consecutive quarter with adjusted EBITDA margins exceeding 7% [46] - Cash flow from operations in Q3 was $102 million, bringing year-to-date cash flow to $92 million, exceeding the full-year guidance of $90 million [46][54] Business Line Data and Key Metrics Changes - Gas Utilities sales were $314 million in Q3, a $9 million or 3% decrease sequentially [22] - DIET sector revenue was $279 million, an increase of $34 million or 14% due to increased turnaround project activity [22] - PTI revenue declined by 3% sequentially to $295 million, primarily due to timing of shipments and project activity [62] Market Data and Key Metrics Changes - U.S. revenue was $745 million in Q3, a 2% increase from the previous quarter, driven by the DIET sector [62] - International revenue was $105 million, down $1 million or 1%, but backlog increased by 35% since the beginning of the year [62] Company Strategy and Development Direction - The company aims to maintain adjusted gross margins in the 21% range and adjusted EBITDA margins in excess of 7% for the full year 2023 [6][54] - The company is optimistic about the underlying fundamentals of all three sectors and their longer-term outlook, with expectations for growth in PTI and DIET sectors in 2024 [61] - The company is looking to return to M&A to grow the business, emphasizing a disciplined approach to acquisitions [73] Management's Comments on Operating Environment and Future Outlook - Management noted that destocking by customers is expected to continue for 1 to 2 quarters, impacting revenue in the Gas Utilities sector [20][66] - The company expects a seasonal sequential revenue decline of 5% to 10% in Q4, with the International segment expected to approach mid-teens percentage growth for the full year [6] - Management expressed confidence that line pipe prices have likely bottomed and expects a return to normal purchasing levels as the destocking phase concludes [60] Other Important Information - The company has a current availability on the ABL of $696 million, with total liquidity of $748 million [23] - The leverage ratio based on net debt of $251 million was 0.9x, dropping below the 1x hurdle a quarter earlier than expected [23] Q&A Session Summary Question: What visibility is there on the timing of the destocking cycle? - Management indicated that destocking is a significant factor affecting revenue and is expected to be a shorter-term phenomenon, likely lasting for about two quarters [66] Question: How are interest rates and inflation impacting customer spending? - Management noted that higher interest rates and inflation are challenges for customer spending, but they believe these factors are nearing a bottom [67] Question: Is there visibility on the rig count and potential increases in customer spending? - Management believes the rig count has bottomed and expects a pickup in activity as customers finalize their budgets for 2024 [68] Question: Would the gas utility business have grown in 2023 without destocking? - Management stated that without destocking, they believe the gas utility business would have seen growth, as it has historically grown more than 20% in previous years [70]

Financial Data and Key Metrics Changes - Overall revenue grew by 10% in the first half of 2023 compared to the same period in 2022, with EBITDA increasing by 17% and EBITDA margins improving by 40 basis points [10][11] - For Q2 2023, revenue was $871 million, a 2% sequential decline but a 3% year-over-year increase [11][30] - Adjusted gross margins were strong at 21.5%, reflecting a 30 basis point improvement over Q1 2023 [12][41] - EBITDA for Q2 was $63 million, representing 7.2% of sales, which was a 60 basis point decline from the previous quarter [15][42] Business Line Data and Key Metrics Changes - The Production and Transmission Infrastructure (PTI) sector saw a 10% revenue increase year-over-year, with Q2 revenue at $303 million, a 1% sequential increase [17][39] - The Downstream, Industrial and Energy Transition (DIET) sector experienced a 12% decline in Q2 revenue to $245 million due to project timing, but is expected to rebound with strong double-digit growth in Q3 [20][31] - Gas Utilities revenue was $323 million in Q2, a 5% increase sequentially and a 3% increase year-over-year, but is expected to moderate in the second half of the year due to customer inventory adjustments [22][38] Market Data and Key Metrics Changes - U.S. revenue was $727 million in Q2, a 2% decline from the previous quarter, while international revenue was $106 million, a 3% increase driven by the PTI sector [32][33] - The international segment backlog increased by 30% since the beginning of the year, indicating strong future growth potential [25] Company Strategy and Development Direction - The company expects upper single-digit revenue growth for 2023, with double-digit growth anticipated in the PTI sector and high single-digit growth in the DIET sector [27][46] - The focus on diversification is paying off, with approximately two-thirds of revenue generated outside traditional oil fields, positioning the company for long-term growth [52] Management's Comments on Operating Environment and Future Outlook - Management noted that the current destocking in the Gas Utilities sector is expected to be a temporary issue, with strong CapEx budgets remaining intact for the long term [58][74] - The company remains optimistic about the International segment, which is expected to lead growth in energy transition projects [26][52] Other Important Information - The company generated $20 million in cash from operations in Q2 and expects to generate approximately $90 million in net cash flow from operations for the full year [44][46] - SG&A expenses for Q2 were reported at $130 million, representing 14.9% of sales, with expectations to average around 14% for the second half of the year [34] Q&A Session Summary Question: Insights on revised revenue outlook for Gas Utilities and changes in PTI and DIET - Management explained that the destocking in Gas Utilities was due to customers reducing inventory levels after previous high demand, and they expect this to be a temporary situation [56][58] - For PTI, the focus on major operators in the Permian Basin is driving growth, while DIET is expected to see a strong rebound in Q3 due to project activity [59][60] Question: Preferred outcome regarding capital structure and term loan - Management aims for an amicable resolution with preferred shareholders, emphasizing the importance of maintaining a strong balance sheet and avoiding dilution [64][66] Question: Cash flow from operations guidance and inventory management - The reduction in cash flow guidance was attributed to lower revenue and slower growth in Gas Utilities, leading to higher inventory levels than anticipated [69][70] Question: Confidence in Gas Utilities destocking and future revenue growth - Management expressed confidence that the destocking is a short-term issue and that the fundamentals of the business remain strong, with expectations for a return to normal growth rates in 2024 [74][78]

20.5% 21.2% 21.2% $333 $375 21.3% 21.2% 21.5% 20.9% 21.4% 2Q22 1Q23 2Q23 YTD 2022 YTD 2023 $181 $188 $187 ADJUSTED EBITDA & % MARGIN1 ADJUSTED DILUTED EPS1 $0.27 $0.32 $0.25 $0.45 $0.57 2Q22 1Q23 2Q23 YTD 2022 YTD 2023 ... $65 $69 $63 6.5% 7.6% 7.8% $113 $132 7.7% 7.8% 7.2% 7.1% 7.5% 2Q22 1Q23 2Q23 YTD 2022 YTD 2023 1. See reconciliation of non-GAAP measures to GAAP measures in the appendix Kelly Youngblood Executive Vice President & CFO 1 2 Forward Looking Statements Non-GAAP Disclaimer This presentation c ...

Revenue Performance - Revenue for the three months ended June 30, 2023, decreased by 2% sequentially from the previous quarter but increased by 3% compared to the same period in 2022[73]. - Sales for the three months ended June 30, 2023, were $871 million, an increase of $23 million, or 3%, compared to $848 million for the same period in 2022[93]. - U.S. sales increased to $727 million for the three months ended June 30, 2023, from $717 million for the same period in 2022, reflecting a $10 million, or 1%, increase[94]. - International sales increased to $106 million for the three months ended June 30, 2023, from $91 million for the same period in 2022, a $15 million increase, or 16%[96]. - Consolidated sales reached $1,756 million for the six months ended June 30, 2023, a 10% increase from $1,590 million in the same period of 2022[113]. - U.S. sales increased by $132 million, or 10%, to $1,467 million for the six months ended June 30, 2023, driven by improvements in the Production and Transmission Infrastructure sector[114]. Sector Performance - The gas utility sector accounted for 36% of total company revenue, with an 8% increase in sales compared to the first half of 2022[74]. - The Downstream, Industrial and Energy Transition (DIET) sector generated 30% of total revenue, growing by 8% from the first six months of 2022[77]. - The Production and Transmission Infrastructure (PTI) sector represented 34% of company revenues, with a 16% increase from the same period in 2022[79]. Profitability Metrics - Gross profit was $175 million (20.1% of sales) for the three months ended June 30, 2023, compared to $151 million (17.8% of sales) for the same period in 2022, an increase of $24 million[97]. - Operating income was $45 million for the three months ended June 30, 2023, compared to $31 million for the same period in 2022, an increase of $14 million[100]. - Net income was $24 million for the three months ended June 30, 2023, compared to $14 million for the same period in 2022, an increase of $10 million, or 71%[106]. - Adjusted Gross Profit increased to $187 million (21.5% of sales) for the three months ended June 30, 2023, from $181 million (21.3% of sales) for the same period in 2022[98]. - Gross profit rose to $354 million (20.2% of sales) for the six months ended June 30, 2023, up from $287 million (18.1% of sales) in the same period of 2022, marking a 23% increase[117]. - Adjusted Gross Profit increased to $375 million (21.4% of sales) for the six months ended June 30, 2023, compared to $333 million (20.9% of sales) for the same period in 2022, a 13% rise[118]. - Operating income for the six months ended June 30, 2023, was $102 million, an increase of 70% from $60 million in the same period of 2022[120]. - Net income increased to $58 million for the six months ended June 30, 2023, compared to $30 million for the same period in 2022, reflecting a 93% growth[126]. Expenses and Financial Position - SG&A expenses were $130 million (14.9% of sales) for the three months ended June 30, 2023, compared to $120 million (14.2% of sales) for the same period in 2022, an increase of $10 million[99]. - Interest expense increased to $10 million for the three months ended June 30, 2023, from $5 million for the same period in 2022, primarily due to higher benchmark interest rates[103]. - Interest expense increased to $17 million for the six months ended June 30, 2023, compared to $11 million for the same period in 2022, primarily due to higher benchmark interest rates[123]. - Income tax expense was $23 million for the six months ended June 30, 2023, compared to $13 million for the same period in 2022, reflecting increased profitability[125]. Cash Flow and Liquidity - Net cash used in operating activities was $10 million for the six months ended June 30, 2023, a significant improvement from $63 million used in the same period in 2022[140]. - Total liquidity, including cash on hand and amounts available under the Global ABL Facility, was $630 million as of June 30, 2023[136]. - The company has $77 million in borrowings outstanding under the Global ABL Facility as of June 30, 2023[133]. - The company’s ability to generate cash flows is primarily dependent on product sales and margins sufficient to cover expenses[136]. Market Outlook and Risks - The company anticipates lower growth in the U.S. segment for the second half of 2023 due to a slower ramp-up in gas utilities sector sales[73]. - The company is well-positioned to benefit from new LNG infrastructure projects as Europe seeks alternatives to Russian gas supplies[82]. - The company is exposed to market risks associated with interest rates, foreign currencies, and steel price volatility[145]. - The company anticipates higher interest expenses due to recent debt market volatility and plans to refinance the Term Loan before its maturity in September 2024[135]. Backlog and Inventory - The backlog as of June 30, 2023, was $764 million, compared to $742 million as of December 31, 2022, indicating a positive trend in customer orders[88]. - The company has maintained a strong inventory position, allowing it to navigate supply chain disruptions effectively[83]. Credit Rating - The company’s credit rating from S&P was upgraded from B- to B on April 24, 2023, with a stable outlook[137].

Financial Data and Key Metrics Changes - The company reported revenue of $885 million for Q1 2023, representing a 2% sequential increase and a 19% year-over-year improvement [37][10] - EBITDA for the first quarter was $69 million, or 7.8% of sales, showing a 20 basis point improvement over Q4 2022 and a 130 basis point improvement year-over-year [23][10] - Net income attributable to common stockholders was $28 million, or $0.33 per diluted share, with adjusted net income of $27 million, or $0.32 per diluted share [24] Business Line Data and Key Metrics Changes - The DIET sector revenue was $278 million, a sequential increase of 12%, driven by LNG projects and increased turnaround spending [45] - The PTI sector revenue was $300 million, a slight decrease of 1% sequentially, but the backlog increased by 10% since year-end [46] - Gas utility sales were $307 million, a 4% decrease sequentially but a 13% increase year-over-year due to strong activity levels [18] Market Data and Key Metrics Changes - U.S. revenue was $740 million in Q1, a $20 million increase from the previous quarter, primarily driven by the DIET sector [20] - Canada revenue was $42 million, down 9% sequentially due to timing of pipe orders, while international revenue remained unchanged at $103 million [47] Company Strategy and Development Direction - The company is focusing on LNG projects and energy transition initiatives, which are expected to drive growth in the coming years [39][108] - A new sector called production and transmission infrastructure (PTI) has been created for reporting purposes, combining upstream and midstream businesses [9][36] - The company aims for double-digit sales growth and EBITDA margins exceeding 8% for 2023, supported by a solid backlog and customer spending alignment [13][75] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2023 outlook, citing strong first-quarter performance and a growing backlog [13][75] - The company anticipates continued cash generation, targeting $120 million or more in operating cash flow for the year [41][73] - Management noted that the gas utilities sector is resilient and largely independent of commodity prices, contributing to long-term growth prospects [40][57] Other Important Information - The company postponed its term loan refinancing due to complications arising from a disagreement with a preferred stockholder [42][61] - Total debt outstanding at the end of the quarter was $390 million, with a leverage ratio of 1.2 times, an improvement from 1.6 times in the prior year [26] Q&A Session Summary Question: Insights on revenue outlook for the PTI segment - Management confirmed confidence in the PTI sector, expecting mid-teens percentage increases despite some volatility in crude pricing [77][78] Question: Update on refinancing efforts - Management indicated ongoing discussions with preferred stockholders and emphasized the importance of reaching an amicable resolution [81][82] Question: Adjusted gross margin outlook - Management noted inflation in non-line-pipe categories but expects improvements in other product categories to offset this [90] Question: Strength in the DIET sector - Management confirmed strong performance in the DIET sector, with expectations for continued growth driven by LNG and energy transition projects [92][94] Question: Timing of gas utility spending normalization - Management reassured that gas utility spending is expected to return to normal levels in Q2, supported by a strong backlog [116]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______ Commission file number: 001-35479 MRC GLOBAL INC. (Exact name of registrant as ...