Financial Data and Key Metrics Changes - Revenue for Q1 2020 was $604 million, a sequential decline of $35 million or 5%, and down $181 million or 23% compared to Q1 2019 [17][41] - Gross margins were 19.4%, a decline of 20 basis points sequentially and 70 basis points year-over-year, primarily due to $9 million in inventory charges [45] - Net loss for Q1 was $331 million or $3.03 per diluted share, with other costs totaling $325 million pretax [50][52] - Cash totaled $202 million at the end of Q1, the highest cash position since Q2 2014, with no outstanding borrowings [53][55] Business Segment Data and Key Metrics Changes - U.S. revenue was $441 million, a sequential decline of $27 million or 6%, with rig count down 4% and average completions down 12% [17][43] - Canadian revenue was $78 million, a sequential increase of $2 million or 3%, while International revenue was $85 million, a sequential decline of $10 million or 11% [17][44] - U.S. Supply Chain Services revenue declined 15% sequentially, primarily due to lower activity with major partners [20] - U.S. Process Solutions revenue was down 3%, partially offset by midstream and downstream activity [21] Market Data and Key Metrics Changes - Market conditions deteriorated significantly in March, with revenues down 33% in April compared to the Q1 monthly average [42] - U.S. rig counts averaged 791 in the first 11 weeks of Q1 but dropped by 384 rigs in the last seven weeks [42] - International revenue declines were attributed to closures in the U.K. and reduced activity in the Middle East and Asia [24] Company Strategy and Development Direction - The company is focused on a structural transformation to reduce costs and improve efficiency, including significant personnel reductions and technology investments [30][63] - The DigitalNOW initiative aims to enhance customer engagement and operational efficiency through digital tools [35][96] - The company plans to maintain a strong balance sheet with zero debt and ample liquidity to navigate the downturn and position for future growth [16][73] Management's Comments on Operating Environment and Future Outlook - Management noted that the oil and gas industry is facing unprecedented challenges due to COVID-19 and falling oil prices, but emphasized the company's resilience and commitment to ESG goals [13][11] - The outlook for Q2 and the full year remains uncertain, with no specific revenue guidance provided due to market volatility [40][67] - Management expressed confidence in the company's ability to capture market share during the downturn and emphasized the importance of cash preservation [68][72] Other Important Information - The company has implemented a series of cost reduction initiatives and expects to achieve $100 million in savings for 2020 compared to 2019 [64] - The CEO search process has been temporarily slowed due to COVID-19, with expectations to select a new CEO by Q3 2020 [75][76] Q&A Session Summary Question: Outlook for Q2 revenues and activity declines - Management acknowledged the significant declines in activity and indicated that a 10% to 15% decline in International revenues seems reasonable, while U.S. upstream revenues may also see substantial declines [80][81] Question: Expectations for free cash flow and working capital - Management projected free cash flow for the year could range from $75 million to $125 million, depending on revenue declines and asset liquidity [88][90] Question: Differentiation of DigitalNOW offering - Management highlighted that DigitalNOW is aimed at improving internal efficiencies and enhancing customer engagement, positioning the company ahead of smaller competitors [93][96] Question: G&A reductions and target exit rate for WSA - Management expects WSA to be in the low $110 million range for Q2, with a long-term goal of reducing WSA to 15% or better of revenue [102][104]
NOW(DNOW) - 2020 Q1 - Earnings Call Transcript