The industrial company whiffed on both the top and bottom lines in its fourth quarter of 2025.Energy products manufacturer DNOW (DNOW 19.16%) had quite the forgettable Friday on the stock exchange. The specialized industrial company's shares fell by more than 19% in value, due largely to quarterly earnings that missed on both the top and bottom lines. Integration challengesThat morning, DNOW took the wraps off its fourth quarter and full-year 2025 results. These showed that revenue nearly doubled year-over- ...

Legacy DNOW achieved record full-year 2025 EBITDA of $199,000,000 and an 8.2% margin, significantly outperforming a contracting U.S. upstream market through differentiated service models. The MRC Global merger completed in November 2025 has transformed the company's scale, diversifying sector reach into gas utilities and downstream industrial markets while expanding the addressable market. Management identified that U.S. MRC Global ERP challenges are a much heavier lift than previously disclosed, with ...

Core Insights - The company reported a fourth-quarter 2025 revenue of $959 million, a 51% increase sequentially, and a full-year revenue of $2.8 billion, up 19% from 2024 [1] - The legacy DNOW business achieved a record full-year EBITDA of $199 million in 2025, with an EBITDA margin of 8.2%, surpassing the company's target [2] - The merger with MRC Global is expected to enhance scale, sector reach, and operational efficiencies, with management targeting $70 million in cost savings within three years [3][4] Financial Performance - Adjusted EBITDA for Q4 was $61 million, representing 6.4% of revenue, while full-year EBITDA totaled $209 million, or 7.4% of revenue [6] - The company reported a net loss of $147 million in Q4, impacted by transaction-related costs and a non-cash charge related to foreign currency translation losses [9] - U.S. revenue for Q4 was $765 million, with $298 million from MRC Global, while legacy DNOW U.S. revenue was $467 million, down about 10% sequentially [10] Merger and Integration - The merger with MRC Global was completed on November 6, and the company is now operating as one entity, emphasizing cultural alignment and technical expertise [5] - Management acknowledged challenges with the U.S. ERP implementation at legacy MRC Global, which has created inefficiencies and impacted revenue [11][12] - The company plans to mitigate ERP issues by enhancing customer service and integrating legacy systems [13] Market Outlook - The company has delayed guidance for 2026 due to ongoing ERP challenges but provided commentary on market conditions, expecting flat to down activity in upstream sectors and growth in midstream and gas utilities [15][16] - Consolidated organic growth is anticipated to be "flattish," with potential upside from cost synergies and integration initiatives [17] - Capital allocation priorities include investing in growth areas, deleveraging debt, pursuing strategic M&A, and share repurchases [18] Liquidity and Cash Flow - DNOW ended the year with $588 million in liquidity, including $164 million in cash, and total debt of $411 million [19] - The company generated $83 million in operating cash flow in Q4 and $155 million for the full year, with capital expenditures of $25 million for 2025 [19] - Management expects to generate cash in the range of $100 million to $200 million in 2026, highlighting opportunities from pent-up inventory and uncollected receivables [20]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $959 million, up 51% or $325 million from Q3 2025, driven by MRC Global's contribution of $388 million during the stub period [28] - Full year 2025 revenue was $2.8 billion, an increase of $447 million or 19% from 2024, marking DNOW's fifth consecutive year of growth [28] - Adjusted EBITDA for Q4 was $61 million or 6.4% of revenue, while full year EBITDA was $209 million or 7.4% of revenue [28][29] - Legacy DNOW achieved a record full-year EBITDA of $199 million in 2025, with EBITDA as a percentage of revenue reaching 8.2% [10][11] Business Line Data and Key Metrics Changes - U.S. revenue for Q4 2025 totaled $765 million, with legacy DNOW's revenue at $467 million, down approximately 10% sequentially [29] - Canadian revenue for Q4 was $51 million, down 4% sequentially, while full year Canadian revenue was $214 million [29] - International revenue for Q4 was $143 million, with legacy DNOW International revenue at $53 million, down 7.5% year-over-year [30][31] Market Data and Key Metrics Changes - Upstream market activity is expected to remain flat to down, focusing on maintenance and efficiency rather than growth [19] - Midstream sector is benefiting from structural growth drivers, including natural gas infrastructure expansion and LNG development [19] - Gas utility market is expected to grow in 2026, with initiatives like the M-Tech gas meter solution aimed at increasing customer wallet share [20] Company Strategy and Development Direction - The merger with MRC Global is expected to significantly increase scale, diversify sector reach, and enhance competitive positioning across various markets [12] - The company aims to achieve $70 million in cost synergies within three years of the merger, with $23 million expected by the end of the first year [13] - Focus on operational improvements, including branch footprint optimization and investments in inventory systems, to enhance service levels [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ERP challenges impacting U.S. MRC Global operations but is optimistic about resolving these issues [16][19] - The company plans to delay guidance until operational stability is achieved, emphasizing the importance of integration and customer service [49] - Long-term growth is anticipated through improved competitiveness, better supplier relationships, and leveraging combined inventories [80] Other Important Information - The company changed its inventory valuation method to LIFO, which is expected to better reflect current costs [32] - Adjusted net income for Q4 was $23 million or $0.15 per share, down from $28 million or $0.26 per share in Q3 [39] - The balance sheet remains healthy with liquidity of $588 million and a leverage ratio of 1.2x [40] Q&A Session Summary Question: Impact of MRC's ERP transition on Q4 and resolution timeline - ERP issues are limited to U.S. MRC only, with notable revenue loss attributed to the implementation in Q3 and Q4 [55][56] - Management is focused on resolving core infrastructure issues and has mobilized resources to mitigate customer service impacts [58][59] Question: Growth expectations for 2026 - Upstream is expected to be flat to down, while midstream and gas utilities are anticipated to grow [61][63] - Management is confident in recovering lost revenue momentum as ERP issues are resolved [64] Question: Cost synergy targets and drivers - Improved cost synergy targets are driven by urgency to resolve ERP issues and fast-tracking migration to SAP [66] - Long-term opportunities for cost savings may exceed initial projections, but management is cautious about making definitive statements [68] Question: Long-term vision for revenue growth and profit margins - Overall business is expected to have flattish revenue, with opportunities for growth through synergies and acquisitions [77] - Long-term benefits from the merger include better competitiveness and improved margins in the 8% EBITDA range [80]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $959 million, up 51% or $325 million from Q3 2025, driven by $388 million from MRC Global contributions during the stub period [22] - Full year 2025 revenue totaled $2.8 billion, an increase of $447 million or 19% from 2024, marking the fifth consecutive year of growth for DNOW [22] - Adjusted EBITDA for Q4 was $61 million, or 6.4% of revenue, while full year EBITDA was $209 million, or 7.4% of revenue [22][23] - Legacy DNOW achieved a record full-year EBITDA of $199 million in 2025, with EBITDA as a percentage of revenue reaching 8.2% [8][9] Business Line Data and Key Metrics Changes - U.S. revenue for Q4 2025 was $765 million, with MRC Global contributing $298 million; legacy DNOW's revenue was $467 million, down approximately 10% sequentially [23] - Canadian revenue for Q4 was $51 million, down 4% sequentially, while full year Canadian revenue was $214 million [23] - International revenue for Q4 was $143 million, with legacy DNOW International revenue at $53 million, down 7.5% year-over-year [24] Market Data and Key Metrics Changes - Upstream market activity is expected to remain flat to down, focusing on maintenance and efficiency rather than growth [16] - Midstream sector benefits from structural growth drivers, including natural gas infrastructure expansion and LNG development [16] - Gas utility market is expected to grow in 2026, supported by modernization efforts [16] Company Strategy and Development Direction - The merger with MRC Global enhances scale, diversifies sector reach, and expands the addressable market, solidifying DNOW's competitive position [10] - The company aims to achieve $70 million in cost synergies within three years, with $23 million expected by the end of the first year [11] - Focus on integrating operations, optimizing supply chains, and capturing identified cost synergies while maintaining customer service [38] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ERP challenges impacting U.S. MRC Global operations but is optimistic about resolving these issues [12][14] - The company plans to reinstate guidance once operational stability is achieved, emphasizing the importance of integration and customer service [40][41] - Long-term growth is expected through improved competitiveness, better product availability, and enhanced relationships with suppliers [70] Other Important Information - The company changed its inventory valuation method to LIFO, which better reflects current costs due to commodity price fluctuations [26] - Transaction-related costs and foreign currency translation adjustments negatively impacted net loss in Q4, totaling $147 million [31] - The balance sheet remains healthy with $588 million in liquidity and a leverage ratio of 1.2x [32][33] Q&A Session Summary Question: Impact of MRC's ERP transition on Q4 and resolution timeline - Management indicated that ERP issues are limited to U.S. MRC only and have caused notable revenue declines in Q3 and Q4; efforts are underway to resolve these issues [47][48] Question: Growth expectations for 2026 - Management expects upstream markets to remain flat to down, while midstream and gas utilities are anticipated to grow; overall revenue is expected to be flattish [52][54] Question: Cost synergy targets and drivers - Improved cost synergy targets are driven by urgency to resolve ERP issues, with potential for exceeding initial savings projections [55][59] Question: Long-term vision for revenue growth and profit margins - Management envisions long-term growth through better competitiveness and improved supplier relationships, aiming for EBITDA margins in the 8% range [66][70] Question: Retaining key employees during ERP challenges - The company is focused on rewarding top talent and ensuring they are involved in decision-making to retain key employees during the transition [71][73]

DNOW (NYSE:DNOW) Q4 2025 Earnings call February 20, 2026 09:00 AM ET Speaker6Good morning. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the DNOW fourth quarter and full year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number ...

Fourth Quarter and Full-Year 2025 Earnings Presentation February 20, 2026 Disclosure Statement Statements made in the course of this presentation that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward -looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward -looking statements. Additional information concerning factors that could cause actual results to diffe ...

Core Viewpoint - Tejara Capital Ltd has established a new position in DNOW, acquiring 685,617 shares valued at approximately $9.08 million, indicating confidence in the company's growth potential and market position [2][3]. Company Overview - DNOW Inc. is a leading distributor of energy and industrial products, focusing on comprehensive supply chain solutions and value-added services for critical infrastructure sectors [5]. - The company operates a distribution-based business model, generating revenue through the sale of consumable products and equipment, complemented by supply chain and materials management solutions [8]. Financial Performance - As of February 4, DNOW shares were priced at $16.05, with a market capitalization of $3 billion and a revenue of $2.43 billion over the trailing twelve months (TTM) [4]. - The company reported a net income of $95 million TTM and generated $634 million in revenue in the third quarter, with an EBITDA of $51 million, representing 8% of sales [10]. - DNOW has zero long-term debt and a liquidity position of approximately $629 million, providing financial flexibility [10]. Strategic Positioning - The new stake by Tejara Capital adds a steady, cash-generative industrial layer to its portfolio, benefiting from energy activity without direct commodity risk [9]. - DNOW serves various sectors, including upstream, midstream, and downstream energy companies, positioning itself as a key partner for operations seeking efficiency and reliability [8]. Future Outlook - The company is working towards closing an all-stock acquisition of MRC Global, a deal valued at around $1.5 billion, which is expected to enhance its scale and product reach [10]. - The essential components sold by DNOW are critical for maintaining energy and industrial systems, suggesting that the business will benefit from rising activity levels while its cash position offers downside protection during market downturns [11].

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Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $634 million, up 1% or $6 million from Q2 2025, marking the highest revenue quarter in almost six years [17][19] - EBITDA for Q3 was $51 million, or 8% of revenue, marking the 14th consecutive quarter of approximately 7% EBITDA or better [17][19] - Net income attributable to DNOW for Q3 was $25 million or $0.23 per fully diluted share, with a Non-GAAP net income of $28 million or $0.26 per fully diluted share [20][19] - Free cash flow for Q3 was $39 million, elevating year-to-date free cash flow to $58 million, with expectations to approach $150 million for the full year 2025 [8][19] Business Line Data and Key Metrics Changes - U.S. revenue totaled $527 million, effectively flat sequentially but up $45 million or 9% year-over-year, with U.S. Energy Centers contributing approximately 73% of total U.S. revenue [18][19] - Canada revenue was $53 million, up $5 million or 10% sequentially, while international revenue was $54 million, up $2 million or 4% sequentially [18][19] - The midstream sector accounted for 24% of overall DNOW revenue, with strong demand for pipe, valves, and fittings supporting several capital projects [10][19] Market Data and Key Metrics Changes - In the U.S., rig count decreased by 5% sequentially, and completions declined by 6% in Q3, indicating a cautious market environment [8][9] - Demand for products improved in the Haynesville region, primarily tied to new construction linked to increased demand for power generation and LNG exports [9][10] - Internationally, growth was observed in the Middle East and Singapore, driven by high demand for FPSO conversions and LNG module fabrication [15] Company Strategy and Development Direction - The company aims to invest in organic growth and pursue acquisitions, particularly in process solutions, to enhance service and product offerings [16][23] - The announced merger with MRC Global is expected to generate $70 million in annual cost synergies within three years, enhancing DNOW's earnings durability and cash flow [24][25] - The focus remains on retaining top talent and leveraging combined resources to grow business with existing and prospective customers [34][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the fifth consecutive year of revenue growth, despite macro challenges such as customer consolidations and geopolitical uncertainties [27][29] - The outlook for Q4 anticipates typical seasonal decreases in revenue, with expectations for mid-single-digit percentage growth compared to Q4 2024 [26][27] - Full year 2025 EBITDA is projected to approach 8% of revenues, with free cash flow expected to reach approximately $150 million [27] Other Important Information - The company ended Q3 with zero debt and a cash position of $266 million, an increase of $34 million sequentially [20][21] - Accounts receivable was $429 million with days sales outstanding improving to 62 days, while inventory was $377 million, down $6 million from Q2 2025 [21][22] - The company has completed acquisitions totaling $122 million over the last 12 months and returned $32 million to shareholders through share repurchases [23] Q&A Session Summary Question: Insights on MRC Global merger and cost synergies - Management confirmed focus on achieving the $70 million synergy target and emphasized the importance of retaining top talent to maximize performance [34][35] Question: Challenges in integration and risk management - The biggest challenge is to engage employees and promote the future of the combined company to avoid revenue leakage during integration [38][39] Question: Growth opportunities in U.S. revenue and market share - Management believes the merger will enhance growth opportunities and market share in upstream sectors [44] Question: Visibility on FlexFlow and EcoVapor growth opportunities - Management indicated plans to continue evaluating and investing in these areas for growth, particularly in midstream and adjacent markets [49][70] Question: Update on gross margins and pricing environment - Management highlighted a focus on maximizing gross margins and navigating inflationary pressures while remaining competitive [63][64] Question: Opportunities in data centers and industrial markets - Management discussed growth prospects in midstream and data center markets, emphasizing the importance of providing necessary infrastructure [71][75]