MRC (US:MRC)2022-02-16 19:51Financial Data and Key Metrics Changes - The company achieved full-year EBITDA of $146 million, a 51% increase from 2020, with an EBITDA margin of 5.5%, reflecting a 170 basis point increase [4][16] - Fourth-quarter EBITDA was $47 million, up 21% from the third quarter and more than double the amount reported in the fourth quarter of 2020 [7][16] - Adjusted gross margin for the fourth quarter was $148 million, representing 21.6% of revenue, and the annual adjusted gross profit percentage was 20.1%, both new records since going public [14][16] Business Line Data and Key Metrics Changes - Gas utilities revenue grew 21% in 2021, accounting for 38% of total revenue, exceeding the $1 billion target two years early [5][11] - The Downstream Industrial and Energy Transition (DIET) sector revenue for the fourth quarter was $201 million, a 2% increase sequentially, driven by project deliveries [12][10] - Upstream production sector revenue for the fourth quarter was $140 million, a 6% increase, while midstream pipeline sales were $87 million, reflecting a 2% growth [13][12] Market Data and Key Metrics Changes - U.S. revenue was $566 million in the fourth quarter, a 1% decline, while Canadian revenue was $40 million, up 33% [13][12] - International revenue was $80 million, a 6% decline, but backlog increased by 20% during the quarter, indicating strong future demand [14][19] - The company expects double-digit growth in U.S. and Canadian markets, with mid-single-digit growth internationally in 2022 [20][19] Company Strategy and Development Direction - The company aims for a minimum of $3 billion in revenue and $190 million in EBITDA for 2022, reflecting a 12.5% revenue improvement and a 30% EBITDA improvement over 2021 [11][20] - Focus on energy transition opportunities is expected to drive significant growth, with projections for energy transition revenue to grow from tens of millions to hundreds of millions over the next few years [10][63] - The gas utilities business is anticipated to remain a strong growth engine due to long-term drivers such as infrastructure build-outs and safety regulations [9][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market recovery and the company's ability to maintain cost control while driving profitability [4][6] - The company expects inflation to continue in the near term but anticipates stabilization later in the year, which may impact gross margins [14][29] - The management highlighted a strong backlog position, which is expected to translate into revenue and profitability improvements in 2022 [19][20] Other Important Information - The company reduced its debt by $86 million in 2021, ending the year with a net debt to EBITDA leverage ratio of 1.7 times, a record low since going public [7][19] - Cash generated from operations was $56 million for the year, with expectations for higher cash flows in 2022 despite increased inventory levels [6][21] - The company ended 2021 with a backlog of $520 million, up 18% from the third quarter and over 50% compared to the fourth quarter of 2020 [19][20] Q&A Session Summary Question: On gross margins and inflation expectations - Management acknowledged strong gross margins in 2021 but expects slight moderation in 2022 due to inflation and inventory pricing adjustments [28][29] Question: Top-line guidance and growth outlook - Management confirmed a target of at least $3 billion in revenue for 2022, supported by a growing backlog and strong market response [40][41] Question: G&A costs and adjustments - Management indicated that G&A costs would increase in absolute terms but are expected to trend lower as a percentage of revenue [42][44] Question: Cash flow and working capital considerations - Management projected improved cash generation in 2022, despite anticipated increases in inventory levels [45][49] Question: M&A opportunities and capital structure - Management expressed a focus on maintaining a solid balance sheet to pursue inorganic growth opportunities while continuing organic growth strategies [52][66] Question: Energy transition project visibility and growth - Management highlighted numerous projects in the energy transition space, with expectations for significant growth in this area over the coming years [61][63]