MRC (US:MRC)2024-02-15 00:30Financial 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]