NOW(DNOW) - 2025 Q1 - Quarterly Report

Part I Financial Statements This section presents DNOW Inc.'s unaudited consolidated financial statements for Q1 2025 and 2024, accompanied by detailed notes on accounting policies and financial items Consolidated Balance Sheets Total assets increased to $1,651 million as of March 31, 2025, from $1,621 million at December 31, 2024, primarily driven by increases in receivables and inventories Consolidated Balance Sheets (in millions) | | March 31, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $1,067 | $1,028 | | Total assets | $1,651 | $1,621 | | Total current liabilities | $460 | $442 | | Total liabilities | $507 | $493 | | Total stockholders' equity | $1,144 | $1,128 | | Total liabilities and stockholders' equity | $1,651 | $1,621 | Consolidated Statements of Operations For the first quarter of 2025, revenue increased to $599 million from $563 million year-over-year, with net income attributable to DNOW Inc. at $22 million and diluted EPS at $0.20 Consolidated Statements of Operations (Unaudited, in millions, except per share data) | | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $599 | $563 | | Operating profit | $30 | $28 | | Net income attributable to DNOW Inc. | $22 | $21 | | Diluted EPS | $0.20 | $0.19 | Consolidated Statements of Cash Flows Net cash used in operating activities was $16 million in Q1 2025, a significant shift from $81 million provided by operations in Q1 2024, mainly due to increased working capital Consolidated Statements of Cash Flows (Unaudited, in millions) | | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(16) | $81 | | Net cash provided by (used in) investing activities | $(5) | $(188) | | Net cash provided by (used in) financing activities | $(17) | $(4) | | Net change in cash and cash equivalents | $(37) | $(111) | | Cash and cash equivalents, end of period | $219 | $188 | Notes to Unaudited Consolidated Financial Statements These notes detail DNOW's operations, accounting policies, and significant financial events, including a new share repurchase program, credit facility, and a post-quarter acquisition - DNOW operates as a distributor of energy and industrial products through 165 locations in the U.S., Canada, and internationally, serving upstream, midstream, and downstream energy sectors as well as other industrial markets[20][21] - The company has a $500 million global revolving credit facility maturing in December 2026, with no borrowings and approximately $434 million in availability as of March 31, 2025[38][40] - In January 2025, the Board authorized a new share repurchase program for up to $160 million of common stock, with 443,806 shares repurchased for approximately $8 million in Q1 2025[42][43] - Subsequent to the quarter's end, the company completed a non-material acquisition in Singapore to expand its electrical supply capabilities in the Asia Pacific region[58] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses DNOW's Q1 2025 financial performance, highlighting revenue growth, segment contributions, and a strong liquidity position, while addressing market volatility and future growth opportunities Q1 2025 vs Q1 2024 Key Financials (in millions) | Metric | Q1 2025 | Q1 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $599 | $563 | +$36 | +6.4% | | Operating Profit | $30 | $28 | +$2 | +7.1% | | Net Income (DNOW Inc.) | $22 | $21 | +$1 | +4.8% | - The company's outlook is linked to volatile oil and gas prices and geopolitical uncertainty, but DNOW aims to capitalize on energy transition investments and expand into non-oil and gas markets[89][90] Non-GAAP EBITDA Reconciliation (in millions) | | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | GAAP net income attributable to DNOW Inc. | $22 | $21 | | EBITDA excluding other costs | $46 | $39 | | as a % of revenue | 7.7% | 6.9% | Operating Environment Overview The operating environment in Q1 2025 showed mixed signals compared to Q1 2024, with a decrease in worldwide active drilling rigs but a surge in natural gas prices Key Industry Indicators Change (Q1 2025 vs. Q1 2024) | Indicator | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Worldwide Active Drilling Rigs | 1,707 | 1,797 | (5.0%) | | WTI Crude Prices ($/barrel) | $71.84 | $77.56 | (7.4%) | | Natural Gas Prices ($/MMBtu) | $4.15 | $2.13 | 94.8% | | Hot-Rolled Coil Prices ($/short ton) | $753.21 | $961.95 | (21.7%) | Results of Operations Total revenue for Q1 2025 increased by 6.4% to $599 million, driven by a 9.0% rise in the U.S. segment due to acquisitions, partially offset by a decline in Canada Revenue by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | United States | $474 | $435 | +9.0% | | Canada | $62 | $66 | (6.1%) | | International | $63 | $62 | +1.6% | | Total | $599 | $563 | +6.4% | Operating Profit by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | United States | $22 | $23 | | Canada | $4 | $3 | | International | $4 | $2 | | Total | $30 | $28 | - The increase in Warehousing, selling and administrative expenses to $109 million from $101 million was primarily driven by expenses related to acquisitions completed in 2024[99] Liquidity and Capital Resources The company ended Q1 2025 with a strong liquidity position, holding $219 million in cash and no debt, with full availability on its $500 million credit facility - As of March 31, 2025, the company had $219 million in cash and cash equivalents, with $112 million held by foreign subsidiaries[108] - The company has a $500 million revolving credit facility maturing in Dec 2026, with no borrowings and $434 million in availability as of March 31, 2025[109] - Net cash used in operating activities was $16 million, primarily due to a $32 million investment in inventory and a $52 million increase in accounts receivable[112] - Under the new $160 million share repurchase program, the company repurchased $8 million worth of shares in Q1 2025, with $152 million remaining authorized[117] Quantitative and Qualitative Disclosures About Market Risk DNOW's primary market risks stem from foreign currency fluctuations and commodity steel prices, with a significant portion of sales exposed to currency changes, particularly the Canadian dollar - The company's primary market risks are foreign currency fluctuations and changes in commodity steel prices[119][127] - Approximately one-fifth of net sales for Q1 2025 were outside the U.S., with the most significant foreign currency exposure to the Canadian dollar, followed by the British pound[121] - A sensitivity analysis showed that a hypothetical 10% adverse change in foreign currency rates would have resulted in an approximate $1 million change in net income for Q1 2025[126] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[128] - No changes occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[129] Part II Unregistered Sales of Equity Securities and Use of Proceeds This section details DNOW's Q1 2025 share repurchase activities, including the authorization of a new $160 million program and the shares repurchased during the period Share Repurchases for Q1 2025 | Period | Total Shares Purchased | Average Price Paid | Shares Purchased as Part of Program | Value Remaining in Program (millions) | | :--- | :--- | :--- | :--- | :--- | | Jan 2025 | — | $— | — | $160 | | Feb 2025 | 393,483 | $17.41 | — | $160 | | Mar 2025 | 443,806 | $17.14 | 443,806 | $152 | - On January 24, 2025, the Board of Directors authorized a new share repurchase program for up to $160 million of its outstanding common stock[131] Other Information The company reports that during the first quarter of 2025, no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2025[131] Exhibits This section provides a list of all exhibits filed with the Form 10-Q, including corporate governance documents, incentive plans, credit agreements, and officer certifications - This section lists the exhibits filed with the report, including the Amended and Restated Certificate of Incorporation, various incentive plan documents, credit agreements, and required officer certifications[132]