NOW(DNOW) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2024, the company reported total revenue of $606 million, a year-over-year increase of 3% or$ 18 million [29] - EBITDA for the quarter was $42 million, representing 6.9% of revenue, with year-to-date EBITDA at$ 131 million or 7.3% of revenue [29] - Free cash flow for the quarter was $72 million, totaling$ 273 million over the trailing four quarters [8][39] - The company raised its full-year 2024 free cash flow forecast to approximately $215 million [8] Business Line Data and Key Metrics Changes - U.S. revenue for Q3 2024 was$ 482 million, an increase of $34 million or 8% year-over-year [30] - U.S. Process Solutions had its best financial performance ever, contributing significantly to overall results [14] - Canadian revenue for Q3 2024 was$ 65 million, down $3 million or 4% year-over-year but up 16% sequentially [30][21] - International revenue decreased to$ 59 million, down $6 million or 9% sequentially, impacted by location closures and lower project activity [22][30] Market Data and Key Metrics Changes - The number of active rigs and completions in the U.S. declined more than 12% year-over-year, affecting revenue opportunities [10] - The company noted a 60% increase in CCUS projects, with 628 facilities now in development [23] - The company experienced project delays due to customer consolidations, impacting revenue timing [15][56] Company Strategy and Development Direction - The company is focusing on expanding its midstream business, which currently accounts for approximately 20% of revenues [44][64] - There is a strategic emphasis on energy evolution and adjacent industrial markets, including mining and chemical processing [44][24] - The company plans to continue pursuing acquisitions as a key growth strategy, leveraging its strong cash position and lack of debt [27][37] Management's Comments on Operating Environment and Future Outlook - Management expects lower sequential oil and gas activity in Q4 2024 due to customer budget exhaustion and normal seasonality [42] - The company anticipates modest full-year revenue growth for 2024 compared to 2023 [42] - Management highlighted the resilience of revenue despite project delays, attributing this to strong operational execution and market positioning [45] Other Important Information - The company reported a cash position of$ 261 million and total liquidity of $622 million at the end of Q3 2024 [37] - The company continues to execute its share repurchase program, with cumulative repurchases totaling$ 74 million under an $80 million authorization [40] Q&A Session Summary Question: Impact of the election on M&A environment - Management believes a more business-friendly climate from a Republican administration could facilitate acquisitions and benefit the company [48][49] Question: Pipeline maturity and actionable deals - Management indicated ongoing negotiations for several potential acquisitions, focusing on growing process solutions [50][51] Question: Project deferrals and their timing - Approximately$ 10 million in projects were deferred in Q3, primarily due to product availability, with expectations for these to ship in Q4 [52][53] Question: Customer consolidation effects - Management noted that customer consolidations can disrupt operations but may ultimately benefit the company in the long term due to its unique capabilities [58][60] Question: Working capital and inventory turns - Management stated that while current inventory turns are strong at 5.2, further improvement may be limited without risking product availability [61][62] Question: Midstream revenue expectations - Management expects midstream revenue to potentially increase in 2025, benefiting from favorable market conditions and acquisitions [64] Question: Share repurchase versus dividends - Management favors share repurchases over dividends, prioritizing organic growth and M&A as primary uses of cash [71][72]