MRC (MRC) - 2025 Q2 - Quarterly Results

Executive Summary Second Quarter 2025 Financial Highlights The company delivered strong Q2 2025 results with revenue rising 12% sequentially to $798 million and Adjusted EBITDA surging 50% Second Quarter 2025 Key Financial Highlights: | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sales | $798 million | $799 million | | Net income from continuing operations | $13 million | $30 million | | Adjusted net income from continuing operations | $22 million | $33 million | | Net income attributable to common stockholders | $13 million | $24 million | | Diluted EPS | $0.15 | $0.28 | | Adjusted Diluted EPS | $0.25 | $0.31 | | Adjusted EBITDA | $54 million | $65 million | | Adjusted EBITDA % of Sales | 6.8% | 8.1% | - Revenue increased 12% from Q1 2025, reaching the top of the previous guidance range, with all sectors contributing to sequential growth[3] - Adjusted EBITDA surged 50% sequentially, with margins expanding 170 basis points, reflecting strong operating leverage[3] - Returned $15 million to shareholders through strategic share repurchases at an average price of $12.35 per share[3][9] Strategic Developments and Outlook The company announced a definitive all-stock merger agreement with DNOW Inc, expected to close in Q4 2025 - Announced a definitive merger agreement with DNOW Inc on June 26, 2025, in an all-stock transaction, unanimously approved by both boards[4][27] - The merger is anticipated to close in the fourth quarter of 2025, subject to shareholder and regulatory approvals[27] - Reaffirmed full-year guidance provided last quarter but will not provide future financial guidance due to the pending merger[5][28] Financial Performance Overview Consolidated Financial Results Q2 2025 consolidated sales were $798 million, with year-over-year declines in gross profit and net income Sales Performance Total sales were $798 million in Q2 2025, flat year-over-year but up 12% sequentially across all sectors Sales Performance (Q2 2025): | Metric | Amount | | :--- | :--- | | Sales | $798 million | | YoY Change | Similar to Q2 2024 | | QoQ Change | +12% from Q1 2025 | - Sequential sales increase was across all sectors, led by the PTI sector, followed by the Gas Utilities and DIET sectors[15] Gross Profit Gross profit decreased to $151 million, impacted by a significantly higher LIFO expense compared to the prior year Gross Profit Performance: | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Gross Profit | $151 million | $169 million | -$18 million | | Gross Profit % of Sales | 18.9% | 21.2% | -2.3 ppts | | LIFO Expense | $10 million | $1 million | +$9 million | | Adjusted Gross Profit | $172 million | $180 million | -$8 million | | Adjusted Gross Profit % of Sales | 21.6% | 22.5% | -0.9 ppts | Selling, General and Administrative (SG&A) Expenses SG&A expenses rose to $130 million, with adjusted SG&A at $124 million after excluding merger-related costs SG&A Expenses Performance: | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | SG&A Expenses | $130 million | $122 million | +$8 million | | SG&A % of Sales | 16.3% | 15.3% | +1.0 ppts | | Adjusted SG&A | $124 million | $120 million | +$4 million | | Adjusted SG&A % of Sales | 15.5% | 15.0% | +0.5 ppts | - Adjusted SG&A for Q2 2025 excluded $6 million of other non-recurring legal and consulting costs related to the pending DNOW–MRC Global merger[11] Net Income and Earnings Per Share Net income from continuing operations declined to $13 million, with diluted EPS at $0.15 Net Income and EPS Performance: | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net income from continuing operations | $13 million | $30 million | -$17 million | | Diluted EPS from continuing operations | $0.15 | $0.28 | -$0.13 | | Adjusted net income from continuing operations | $22 million | $33 million | -$11 million | | Adjusted diluted EPS from continuing operations | $0.25 | $0.31 | -$0.06 | Adjusted EBITDA Adjusted EBITDA decreased year-over-year to $54 million but showed a strong 50% sequential increase Adjusted EBITDA Performance: | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $54 million | $65 million | -$11 million | | Adjusted EBITDA % of Sales | 6.8% | 8.1% | -1.3 ppts | - Adjusted EBITDA surged 50% sequentially from Q1 2025, with margins expanding 170 basis points[3] Income Tax Expense The income tax expense was $5 million, resulting in an effective tax rate of 28% for Q2 2025 Income Tax Expense: | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Income Tax Expense | $5 million | $12 million | | Effective Tax Rate | 28% | 29% | Sales by Segment and Sector A 3% decrease in U.S. sales was offset by a 15% increase in International sales, driven by the PTI sector U.S. Sales U.S. sales decreased 3% year-over-year to $658 million but grew 11% sequentially, led by the PTI sector U.S. Sales Performance: | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | U.S. Sales | $658 million | $677 million | -$19 million (-3%) | | DIET Sector (YoY) | | | -$26 million (-14%) | | PTI Sector (YoY) | | | -$5 million (-2%) | | Gas Utilities Sector (YoY) | | | +$12 million (+4%) | - Sequentially, U.S. sales increased $67 million (11%) from Q1 2025, with PTI leading (+26%) and Gas Utilities contributing (+10%)[17] International Sales International sales grew 15% year-over-year to $140 million, primarily driven by the PTI sector International Sales Performance: | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | International Sales | $140 million | $122 million | +$18 million (+15%) | | YoY Growth Driver | PTI sector (North Sea projects) | | | | QoQ Change | +$19 million (+16%) from Q1 2025 | | | | QoQ Growth Drivers | PTI (Middle East, Norway), DIET (wind energy, mining) | | | Gas Utilities Sector Sales Gas Utilities sector sales increased 4% year-over-year to $299 million, representing 37% of total sales Gas Utilities Sector Sales: | Metric | Q2 2025 | Q2 2024 | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | :--- | | Gas Utilities Sales | $299 million | $287 million | +$12 million (+4%) | +$26 million (+10%) | | % of Total Sales | 37% | | | | DIET Sector Sales DIET sector sales decreased 13% year-over-year to $223 million, accounting for 28% of total sales DIET Sector Sales: | Metric | Q2 2025 | Q2 2024 | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | :--- | | DIET Sales | $223 million | $256 million | -$33 million (-13%) | +$3 million (+1%) | | % of Total Sales | 28% | | | | - Year-over-year decline in DIET sales was observed in both U.S. and International segments[21] PTI Sector Sales PTI sector sales grew 8% year-over-year to $276 million, driven by strong international performance PTI Sector Sales: | Metric | Q2 2025 | Q2 2024 | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | :--- | | PTI Sales | $276 million | $256 million | +$20 million (+8%) | +$57 million (+26%) | | % of Total Sales | 35% | | | | - Year-over-year increase in PTI sales was driven by the International segment, partially offset by the U.S. segment[22] Backlog The company's backlog stood at $589 million as of June 30, 2025, a 2% decrease from the previous quarter Backlog as of June 30, 2025: | Metric | Amount | | :--- | :--- | | Backlog | $589 million | | QoQ Change | -2% | | Primary Driver of Decline | PTI sector backlog | | Offsetting Increases | DIET and Gas Utilities sectors | Financial Position and Cash Flow Balance Sheet Highlights The company's cash balance increased to $75 million, with Net Debt standing at $374 million as of June 30, 2025 Balance Sheet Highlights (June 30, 2025): | Metric | Amount | | :--- | :--- | | Cash Balance | $75 million | | Long-term Debt (incl. current portion) | $449 million | | Net Debt | $374 million | Cash Flow from Operations Cash used in continuing operations for the second quarter of 2025 was $46 million Cash Flow from Continuing Operations (Q2 2025): | Metric | Amount | | :--- | :--- | | Cash used in continuing operations | $46 million | Debt and Liquidity Total liquidity remained strong at $574 million, with a Net Debt Leverage Ratio of 2.2 as of June 30, 2025 Debt and Liquidity (June 30, 2025): | Metric | Amount | | :--- | :--- | | Net Debt | $374 million | | Net Debt Leverage Ratio | 2.2 | | ABL Facility Availability | $499 million | | Total Liquidity | $574 million | Capital Allocation Share Repurchase Program The company repurchased $15 million of its common stock in Q2 2025 before suspending the program due to the pending merger Share Repurchase Program (Q2 2025): | Metric | Amount | | :--- | :--- | | Repurchase Amount | $15 million | | Average Price Per Share | $12.35 | | Common Shares Outstanding (June 30, 2025) | 85.0 million | | Program Status | Suspended due to pending merger | Strategic Corporate Actions Agreement to Combine with DNOW A definitive all-stock merger agreement with DNOW Inc was announced, expected to close in the fourth quarter of 2025 - DNOW Inc will acquire MRC Global in an all-stock transaction, unanimously approved by both boards of directors[27] - The transaction is subject to shareholder and regulatory approvals and is currently anticipated to close in the fourth quarter of 2025[27] - The combination is expected to create a premier energy and industrial solutions provider with expanded capabilities and scale[4] Future Guidance and Reporting Due to the pending merger, the company reaffirmed full-year guidance but will not provide future guidance or host a conference call - Reaffirming full-year guidance provided last quarter[5][28] - Will not be providing future financial guidance due to the pending combination with DNOW[5][28] - Will not host a conference call or webcast to discuss Q2 2025 results[28] Company Information About MRC Global Inc. MRC Global is a leading global distributor of pipe, valves, fittings, and other infrastructure products and services - Headquartered in Houston, Texas, MRC Global is a leading global distributor of pipe, valves, fittings (PVF) and other infrastructure products and services[29] - Serves diversified end-markets including gas utilities, downstream, industrial and energy transition, and production and transmission infrastructure sectors[29] - Operates from a worldwide network of approximately 200 locations, offering approximately 200,000 SKUs from over 7,100 suppliers to over 8,300 customers[29] Forward-Looking Statements and Risk Factors Forward-Looking Statements This release contains forward-looking statements regarding the merger and future performance, which involve inherent risks and uncertainties - Statements about the DNOW-MRC Global merger, future events, plans, anticipated results of operations, business strategies, and expected synergies are considered forward-looking[30][31] - These statements are based on management's expectations and involve a number of business risks and uncertainties[31] - Undue reliance should not be placed on forward-looking statements as actual results may differ materially due to known and unknown risks and uncertainties[34] Risks and Uncertainties Key risks include merger-related approvals and timing, economic conditions, commodity prices, and supply chain issues - Risks associated with the merger include obtaining stockholder and regulatory approvals, timing of closing, and the achievement of expected benefits and synergies[32] - External risks include decreases in capital and other expenditure levels, U.S. and international general economic conditions, geopolitical events, and decreases in oil and natural gas prices[32] - Operational and financial risks include unexpected supply shortages, cost increases by suppliers, lack of long-term contracts with suppliers and customers, inability to attract and retain employees, and significant indebtedness[32] Additional Information Regarding the Merger No Offer or Solicitation This document is not an offer to buy or sell securities or a solicitation of votes for the proposed merger - The document is not an offer to buy or sell securities or a solicitation of any vote or approval[36] - No sale, issuance, or transfer of securities will occur in any jurisdiction where it would be unlawful prior to registration or qualification[36] SEC Filings and Investor Resources Investors are urged to read the Form S-4 registration statement and other relevant SEC filings for important merger information - DNOW filed a registration statement on Form S-4 with the SEC, including a definitive joint proxy statement/prospectus for the merger[37] - Investors and security holders are urged to read the registration statement, definitive joint proxy statement/prospectus, and other relevant documents for important information[38] - Free copies of these documents are available on www.sec.gov, MRC Global's investor website (https://investor.mrcglobal.com/), and DNOW's investor website (https://ir.dnow.com/)[39](index=39&type=chunk) Participants in the Solicitation Information regarding directors and executive officers of both companies, deemed participants in the proxy solicitation, is available in SEC filings - MRC Global, DNOW, and certain of their respective directors and executive officers may be deemed participants in the solicitation of proxies for the merger[40] - Information about the directors and executive officers is available in their respective 2025 annual meeting proxy statements[40] - Additional information regarding participants and their interests will be set forth in the registration statement, definitive joint proxy statement/prospectus, and other merger-related SEC filings[41] Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets Total assets increased to $1,774 million as of June 30, 2025, driven by higher accounts receivable and inventories Condensed Consolidated Balance Sheets (in millions): | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $75 | $63 | | Accounts receivable, net | $469 | $378 | | Inventories, net | $490 | $415 | | Total current assets | $1,078 | $921 | | Total assets | $1,774 | $1,624 | | Trade accounts payable | $438 | $329 | | Long-term debt | $445 | $384 | | Total current liabilities | $587 | $508 | | Total liabilities and stockholders' equity | $1,774 | $1,624 | Condensed Consolidated Statements of Operations Q2 2025 sales were $798 million, with net income from continuing operations declining to $13 million from $30 million year-over-year Condensed Consolidated Statements of Operations (in millions, except per share amounts): | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales | $798 | $799 | $1,510 | $1,576 | | Gross profit | $151 | $169 | $293 | $328 | | Selling, general and administrative expenses | $130 | $122 | $254 | $242 | | Operating income | $21 | $47 | $39 | $86 | | Net income from continuing operations | $13 | $30 | $21 | $50 | | Net income (loss) attributable to common stockholders | $13 | $24 | -$9 | $37 | | Diluted earnings (loss) per common share | $0.15 | $0.28 | -$0.11 | $0.43 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $30 million for the first six months of 2025, a reversal from cash provided in the prior year Condensed Consolidated Statements of Cash Flows (in millions): | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | -$30 | $101 | | Net cash used in investing activities | -$2 | -$13 | | Net cash provided by (used in) financing activities | $39 | -$169 | | Increase (decrease) in cash | $7 | -$81 | | Cash -- end of period | $75 | $49 | Supplemental Sales Information (Unaudited) Disaggregated Sales by Segment and Sector In Q2 2025, U.S. sales were $658 million and International sales were $140 million, with Gas Utilities as the largest sector Disaggregated Sales by Segment and Sector (in millions): | Segment/Sector | Q2 2025 Sales | Q2 2024 Sales | 6 Months 2025 Sales | 6 Months 2024 Sales | | :--- | :--- | :--- | :--- | :--- | | U.S. | $658 | $677 | $1,249 | $1,344 | | International | $140 | $122 | $261 | $232 | | Total Sales | $798 | $799 | $1,510 | $1,576 | | Gas Utilities | $299 | $287 | $572 | $552 | | DIET | $223 | $256 | $443 | $523 | | PTI | $276 | $256 | $495 | $501 | Sales by Product Line Valves, Automation, Measurement and Instrumentation was the largest product line with $294 million in Q2 2025 sales Sales by Product Line (in millions): | Product Line | Q2 2025 Sales | Q2 2024 Sales | 6 Months 2025 Sales | 6 Months 2024 Sales | | :--- | :--- | :--- | :--- | :--- | | Line Pipe | $94 | $125 | $166 | $238 | | Carbon Fittings and Flanges | $106 | $102 | $196 | $198 | | Total Carbon Pipe, Fittings and Flanges | $200 | $227 | $362 | $436 | | Valves, Automation, Measurement and Instrumentation | $294 | $284 | $571 | $563 | | Gas Products | $209 | $193 | $396 | $380 | | Stainless Steel and Alloy Pipe and Fittings | $34 | $35 | $74 | $73 | | General Products | $61 | $60 | $107 | $124 | | Total Sales | $798 | $799 | $1,510 | $1,576 | Supplemental Non-GAAP Financial Information (Unaudited) Reconciliation of Gross Profit to Adjusted Gross Profit Adjusted Gross Profit for Q2 2025 was $172 million after excluding a $10 million increase in the LIFO reserve Reconciliation of Gross Profit to Adjusted Gross Profit (in millions): | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Gross profit, as reported | $151 | $169 | $293 | $328 | | % of Revenue | 18.9% | 21.2% | 19.4% | 20.8% | | Increase in LIFO reserve | $10 | $1 | $11 | $2 | | Adjusted Gross Profit | $172 | $180 | $325 | $350 | | Adjusted % of Revenue | 21.6% | 22.5% | 21.5% | 22.2% | Reconciliation of SG&A to Adjusted SG&A Adjusted SG&A was $124 million in Q2 2025, excluding $6 million in non-recurring merger-related costs Reconciliation of SG&A to Adjusted SG&A (in millions): | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Selling, general and administrative expenses | $130 | $122 | $254 | $242 | | Non-recurring other legal and consulting costs (merger) | -$6 | — | -$7 | — | | Activism response legal and consulting costs | — | -$1 | — | -$4 | | Adjusted Selling, general and administrative expenses | $124 | $120 | $245 | $237 | Reconciliation of Net Income (Loss) to Adjusted EBITDA Adjusted EBITDA for Q2 2025 was $54 million, reconciled from a net income of $13 million Reconciliation of Net Income (Loss) to Adjusted EBITDA (in millions): | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $13 | $30 | -$9 | $49 | | Net income from continuing operations | $13 | $30 | $21 | $50 | | Income tax expense | $5 | $12 | $6 | $20 | | Interest expense | $10 | $7 | $19 | $15 | | Depreciation and amortization | $7 | $5 | $12 | $10 | | Amortization of intangibles | $4 | $5 | $9 | $10 | | Increase in LIFO reserve | $10 | $1 | $11 | $2 | | Non-recurring other legal and consulting costs (merger) | $6 | — | $7 | — | | Adjusted EBITDA | $54 | $65 | $90 | $122 | Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) from Continuing Operations Adjusted Net Income from Continuing Operations was $22 million for Q2 2025, down from $33 million in Q2 2024 Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) from Continuing Operations (in millions): | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income from continuing operations | $13 | $30 | $21 | $50 | | Non-recurring other legal and consulting costs, net of tax | $4 | — | $5 | — | | Increase in LIFO reserve, net of tax | $7 | $1 | $8 | $2 | | Adjusted Net Income from Continuing Operations | $22 | $33 | $34 | $57 | Reconciliation of Net Income Attributable to Common Stockholders to Adjusted Net Income (Loss) Attributable to Common Stockholders Adjusted Net Income Attributable to Common Stockholders was $22 million, or $0.25 per diluted share, for Q2 2025 Reconciliation of Net Income Attributable to Common Stockholders to Adjusted Net Income (Loss) Attributable to Common Stockholders (in millions, except per share amounts): | Metric | Q2 2025 Amount | Q2 2025 Per Share | Q2 2024 Amount | Q2 2024 Per Share | 6 Months 2025 Amount | 6 Months 2025 Per Share | 6 Months 2024 Amount | 6 Months 2024 Per Share | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net income (loss) attributable to common stockholders | $13 | $0.15 | $24 | $0.28 | -$9 | -$0.11 | $37 | $0.43 | | Non-recurring other legal and consulting costs, net of tax | $4 | $0.05 | — | — | $5 | $0.06 | — | — | | Increase in LIFO reserve, net of tax | $7 | $0.08 | $1 | $0.01 | $8 | $0.09 | $2 | $0.02 | | Adjusted Net Income Attributable to Common Stockholders | $22 | $0.25 | $27 | $0.31 | $34 | $0.40 | $45 | $0.52 | Reconciliation of Long-term Debt to Net Debt and Net Debt Leverage Ratio As of June 30, 2025, Net Debt was $374 million, resulting in a Net Debt Leverage Ratio of 2.2 Net Debt and Net Debt Leverage Ratio Calculation (in millions): | Metric | June 30, 2025 | | :--- | :--- | | Long-term debt | $445 | | Plus: current portion of debt obligations | $4 | | Total debt | $449 | | Less: cash | $75 | | Net Debt | $374 | | Trailing twelve months Adjusted EBITDA | $170 | | Net Debt Leverage Ratio | 2.2 |