NOW(US:DNOW)2020-11-04 18:42Financial Data and Key Metrics Changes - Revenue for Q3 2020 was $326 million, a sequential decline of $44 million or 12% [20] - Gross margins improved by 60 basis points sequentially to 19.0% due to resilient product margins despite elevated inventory charges [21] - Free cash flow for Q3 was $57 million, with a record cash position of $325 million, remaining debt-free [24][49] - Net loss for Q3 was $22 million or a loss of $0.20 per share, with non-GAAP EBITDA loss of $15 million [49] Business Line Data and Key Metrics Changes - U.S. segment revenue was $228 million, down $32 million or 12% from Q2 2020 [39] - U.S. Process Solutions revenue decreased by 28% sequentially due to lower customer activity [41] - Canadian segment revenue was $42 million, up $1 million from Q2, with a 17% increase when excluding a large project order from the previous quarter [43] - International segment revenue was $56 million, down $13 million from Q2 due to pandemic-related restrictions [44] Market Data and Key Metrics Changes - The market cycle bottom was reached in Q3, providing a basis for planning and capital allocation [12] - Customers have reduced CapEx budgets and adhered to austerity measures, impacting exploration and production landscapes [15] - The company expects to expand market share as customer acquisitions and mergers are completed, particularly in North America [19] Company Strategy and Development Direction - The company focuses on end market expansion, digital disruption, and transforming operations towards a more efficient model [14] - Emphasis on strong customer relationships and value propositions to reduce total cost of ownership for customers [16] - The company is actively pursuing M&A opportunities while remaining selective and patient [58] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing challenges due to COVID-19 but remains committed to improving circumstances [8] - The outlook for Q4 anticipates seasonal revenue declines, with potential offsets from increased completions [55] - Management expects to achieve break-even in the first half of 2021, with a target of 5% EBITDA margin as a minimum [66] Other Important Information - The company published its first sustainability report, reflecting its commitment to ESG practices [11] - Significant reductions in workforce and operational costs have been achieved, with a forecasted WSA reduction of over $140 million year-over-year [48] Q&A Session Summary Question: What is the outlook for gross margins and inventory charges? - Management expects elevated inventory charges through the end of the year but anticipates normalized gross margins to be above 20% in the future [62][64] Question: What is the expected revenue decline for Q4? - Management guides for a high single-digit percentage decline in revenue, with some offsets from completion activities [71][74] Question: What percentage of revenue comes from municipal water and mining sectors? - These sectors currently represent less than 3% of total revenue, but there is potential for growth [75] Question: What is the normalized level of WSA expected? - Historically, normalized WSA should be closer to 15% of revenues, with ongoing efforts to achieve this [93]