MRC (US:MRC)2021-11-09 20:37Financial Data and Key Metrics Changes - The company achieved its highest EBITDA profitability in the last two years, with an absolute dollar amount of $31 million and an EBITDA margin of 5.7% [11][12] - Year-to-date, EBITDA margins improved by 120 basis points from 3.8% to 5%, with an absolute EBITDA increase of $24 million compared to the previous year [12][16] - The company experienced a net loss attributable to common shareholders of $17 million or $0.21 loss per share, but adjusted net income was $8 million or $0.09 per share when normalizing for LIFO expense [49] Business Line Data and Key Metrics Changes - Gas utilities revenue was $271 million in Q3 2021, a 1% increase from the previous quarter and a 30% increase year-over-year [36] - The DIET sector sales were $197 million, up 3%, driven by refinery turnaround activity and biodiesel projects [37] - Upstream production sales declined by 8% to $132 million due to lower MRO and project activity in Europe and Asia-Pacific [38] Market Data and Key Metrics Changes - U.S. revenue was $570 million, up 2%, with increases in all sectors driven by the DIET sector [39] - International revenue declined by 13% to $85 million due to delayed MRO and project activity [41] - The backlog at the end of October was $472 million, up 20% from the end of Q2, indicating strong demand across all segments [54][100] Company Strategy and Development Direction - The company plans to target higher EBITDA margins and anticipates double-digit revenue increases in 2022 compared to 2021 [15][57] - The energy transition sector is a key strategic growth area, with dedicated sales resources added to pursue new opportunities [26][122] - The company is focused on maintaining a strong balance sheet and financial flexibility, with long-term debt at $325 million and net debt at $278 million [16][51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for growth driven by a growing backlog, expected increases in customer spending, and improving macroeconomic conditions [18][57] - The company expects fourth-quarter revenue to be consistent with the third quarter, which is better than the typical seasonal decline [55] - Management acknowledged ongoing inflation and supply chain challenges but believes they are well-positioned to navigate these issues [27][31] Other Important Information - The company is investing in its e-commerce platform, MRCGO, which has seen increased usage and digital revenue growth [32][33] - Adjusted gross profit for Q3 was $137 million, or 20% of revenue, the highest margin seen in two years [42][44] - The company has been building inventory to support growing business needs, despite a cash burn of $31 million in Q3 [17][50] Q&A Session Summary Question: Comments on EBITDA margins and future expectations - Management was pleased with the EBITDA margins at 5.7% and expects inflationary pressures to support healthy gross margins in the near term [66][68] Question: Cash flow from operations guidance - The company expects to generate at least $30 million in Q4, resulting in a neutral cash flow for the second half of the year [72][73] Question: Revenue shift between Q3 and Q4 - Management noted that the backlog in Canada and international markets has increased significantly, providing confidence for Q4 revenue [80][81] Question: Inventory levels and pricing - The company has been growing gross inventory purchases, despite a slight decrease in net inventory due to LIFO reserves [85][86] Question: SG&A costs and revenue growth - Historical data suggests that for each dollar of revenue growth, SG&A costs typically increase by about $0.035 [89]