Core Viewpoint - DNOW Inc. has successfully completed its acquisition of MRC Global Inc., creating a leading solutions provider in the energy and industrial markets [1][11]. Company Overview - DNOW is a premier energy and industrial solutions provider with over 160 years of experience, specializing in the distribution of pipe, valves, fittings, pumps, and fabricated equipment [5]. - The company is headquartered in Houston, Texas, employing approximately 5,000 individuals and operating a global network of distribution and engineering locations [5]. Merger Details - Under the merger agreement, each share of MRC Global's common stock was converted into the right to receive 0.9489 shares of DNOW's common stock [2]. - The total value of the all-stock transaction is approximately $1.5 billion, which includes MRC Global's net debt [13]. Strategic Benefits - The merger is expected to enhance DNOW's earnings durability, cash flow, and financial position, allowing the company to capitalize on growth opportunities across various sectors [3]. - DNOW anticipates generating $70 million in annual cost synergies within three years post-merger through operational efficiencies and streamlined corporate structures [6]. Market Position and Growth Opportunities - The combined entity will serve a broader mix of customers in essential energy infrastructure, including sectors such as chemical processing, municipal water, utilities, mining, and power generation [6]. - The merger expands DNOW's geographic footprint and distribution presence across the U.S., Canada, and other international markets, with over 350 service and distribution locations in more than 20 countries [6].

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]

Core Insights - NOW reported strong financial performance in Q2 2025, with non-GAAP EPS of $0.27, exceeding analyst expectations by 28.2% and GAAP revenue of $628 million, also above estimates [1][5] - The company achieved record EBITDA of $51 million, marking a 2% increase year-over-year, despite a slight decline in GAAP revenue compared to Q2 2024 [2][5] - Free cash flow reached $41 million, a significant increase of 115.8% year-over-year, indicating robust cash generation capabilities [2][6] Financial Performance - Non-GAAP EPS for Q2 2025 was $0.27, compared to estimates of $0.21 and $0.25 in Q2 2024, reflecting an 8% year-over-year increase [2][5] - GAAP revenue was reported at $628 million, down 0.8% from $633 million in Q2 2024, but above the estimate of $612.7 million [2][5] - EBITDA (Non-GAAP) was $51 million, representing 8.1% of revenue, a record high for the company [5] - Cash and cash equivalents stood at $232 million, down 9.4% from $256 million year-over-year, with no long-term debt [2][6] Business Overview - NOW operates as an industrial distributor, focusing on supplying pipe, valves, fittings, pumps, and automation control equipment to energy and industrial markets across approximately 165 locations globally [3] - The company is strategically positioned to leverage its distribution network for timely product delivery and is adopting digital solutions like the DigitalNOW platform to enhance procurement and workflow [4] Strategic Focus - The company is emphasizing growth in sustainable and adjacent industrial segments, with a focus on deep customer relationships and effective inventory management [4] - A pending merger with MRC Global is expected to enhance operational capabilities and market reach [4] Regional Performance - U.S. revenue for Q2 2025 was $528 million, an increase from $512 million in Q2 2024, driven by midstream project demand [7] - Canadian and international segments experienced declines due to the absence of one-time project revenue and strategic exits from less profitable regions [7][12] Product and Digital Initiatives - NOW's diversified product portfolio includes traditional offerings and solutions for automation and environmental sustainability, with digital revenue accounting for 53% of SAP-based sales [8][13] - The DigitalNOW platform is a key initiative aimed at improving procurement efficiency and integrating AI for document processing [11] Outlook - Management anticipates flat to high-single-digit percent revenue growth for 2025 compared to 2024, with EBITDA margins expected to approach 8% of revenue [14] - The company is targeting $150 million in free cash flow for 2025, maintaining its forward guidance [14]