NOW(US:DNOW)2025-05-07 14:02Financial Data and Key Metrics Changes - The first quarter of 2025 saw EBITDA of $46 million, up 2% sequentially and 18% year over year, marking the second-best first quarter EBITDA results in the company's history [9][10] - Revenue for Q1 2025 was $599 million, an increase of 4.9% from Q4 2024 and 6.4% year over year [10][26] - Gross margins remained resilient at 23.2%, better than expected [11][28] - Net income attributable to DNOW Inc. for Q1 was $22 million or $0.20 per fully diluted share [30] Business Line Data and Key Metrics Changes - U.S. revenue totaled $474 million, up $23 million or 5% sequentially, with U.S. energy centers contributing approximately 69% of total U.S. revenue [26][27] - U.S. Process Solutions achieved a new quarterly revenue record, contributing approximately 31% to total U.S. revenue [27] - Canadian revenue was $62 million, down $4 million sequentially, while international revenue was $63 million, up $9 million or 17% sequentially [22][27] Market Data and Key Metrics Changes - In the U.S., revenue growth was driven by increased midstream demand, particularly from the Witco business [18] - Internationally, revenue growth was attributed to increased project activity, with a notable $15 million project not expected to repeat in Q2 [23][27] - The company reported that approximately 70% of products sold in U.S. operations are sourced domestically, reducing dependence on international sources [13] Company Strategy and Development Direction - The company is focused on diversifying its market mix and investing in core markets while capturing additional revenues from energy evolution opportunities [11] - A small international acquisition was completed in April to enhance the McLean International brand, expanding its market presence in Singapore and the Asia Pacific region [12] - The company aims to balance growth with capital returns, having repurchased $16 million in shares year-to-date under a new $160 million share repurchase program [34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of tariffs and macroeconomic uncertainties but noted that customer spending has not significantly declined [35][36] - For Q2, the company expects flat to mid-single-digit percentage growth in revenues, driven by increased midstream activity [37] - Full-year guidance for 2025 remains flat to up in the high single-digit percentage range from 2024 levels, with EBITDA potentially approaching 8% of revenue [38] Other Important Information - The company has zero debt and a cash position of $219 million, with total liquidity of $567 million [30][31] - The effective tax rate for 2025 is estimated to be approximately 26% to 29%, with no material U.S. Federal cash income taxes expected due to available NOL carryforwards [29] Q&A Session Summary Question: How is inflation tracking in the business? - Management noted that inventory costs are currently low, but normal inflationary pressures are resuming, with some products seeing price increases of 3% to 35% due to tariffs [43][44][46] Question: Are smaller competitors staying rational in the market? - Management indicated that competitors are being careful with inventory, but there is still intense bidding on projects, maintaining a competitive environment [47][48] Question: What are the opportunities for market share gains? - The company has significant global buying power, allowing it to leverage volume for better product availability and cost advantages against smaller competitors [50][51] Question: What is the outlook for geographic growth? - Management expects flat growth internationally, with stronger performance anticipated in the U.S. driven by midstream activity and the Trojan acquisition [66][67] Question: How does the company plan to navigate potential drilling and completion activity curtailments? - The focus is on growing with E&C customers and expanding the energy transition business, which is expected to offset upstream declines [80] Question: What is the current state of the M&A landscape? - Management reported active conversations regarding potential acquisitions, with some caution expected due to oil price volatility [101][102]