NOW(US:DNOW)2026-02-20 15:02Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $959 million, up 51% or $325 million from Q3 2025, driven by MRC Global's contribution of $388 million during the stub period [28] - Full year 2025 revenue was $2.8 billion, an increase of $447 million or 19% from 2024, marking DNOW's fifth consecutive year of growth [28] - Adjusted EBITDA for Q4 was $61 million or 6.4% of revenue, while full year EBITDA was $209 million or 7.4% of revenue [28][29] - Legacy DNOW achieved a record full-year EBITDA of $199 million in 2025, with EBITDA as a percentage of revenue reaching 8.2% [10][11] Business Line Data and Key Metrics Changes - U.S. revenue for Q4 2025 totaled $765 million, with legacy DNOW's revenue at $467 million, down approximately 10% sequentially [29] - Canadian revenue for Q4 was $51 million, down 4% sequentially, while full year Canadian revenue was $214 million [29] - International revenue for Q4 was $143 million, with legacy DNOW International revenue at $53 million, down 7.5% year-over-year [30][31] Market Data and Key Metrics Changes - Upstream market activity is expected to remain flat to down, focusing on maintenance and efficiency rather than growth [19] - Midstream sector is benefiting from structural growth drivers, including natural gas infrastructure expansion and LNG development [19] - Gas utility market is expected to grow in 2026, with initiatives like the M-Tech gas meter solution aimed at increasing customer wallet share [20] Company Strategy and Development Direction - The merger with MRC Global is expected to significantly increase scale, diversify sector reach, and enhance competitive positioning across various markets [12] - The company aims to achieve $70 million in cost synergies within three years of the merger, with $23 million expected by the end of the first year [13] - Focus on operational improvements, including branch footprint optimization and investments in inventory systems, to enhance service levels [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ERP challenges impacting U.S. MRC Global operations but is optimistic about resolving these issues [16][19] - The company plans to delay guidance until operational stability is achieved, emphasizing the importance of integration and customer service [49] - Long-term growth is anticipated through improved competitiveness, better supplier relationships, and leveraging combined inventories [80] Other Important Information - The company changed its inventory valuation method to LIFO, which is expected to better reflect current costs [32] - Adjusted net income for Q4 was $23 million or $0.15 per share, down from $28 million or $0.26 per share in Q3 [39] - The balance sheet remains healthy with liquidity of $588 million and a leverage ratio of 1.2x [40] Q&A Session Summary Question: Impact of MRC's ERP transition on Q4 and resolution timeline - ERP issues are limited to U.S. MRC only, with notable revenue loss attributed to the implementation in Q3 and Q4 [55][56] - Management is focused on resolving core infrastructure issues and has mobilized resources to mitigate customer service impacts [58][59] Question: Growth expectations for 2026 - Upstream is expected to be flat to down, while midstream and gas utilities are anticipated to grow [61][63] - Management is confident in recovering lost revenue momentum as ERP issues are resolved [64] Question: Cost synergy targets and drivers - Improved cost synergy targets are driven by urgency to resolve ERP issues and fast-tracking migration to SAP [66] - Long-term opportunities for cost savings may exceed initial projections, but management is cautious about making definitive statements [68] Question: Long-term vision for revenue growth and profit margins - Overall business is expected to have flattish revenue, with opportunities for growth through synergies and acquisitions [77] - Long-term benefits from the merger include better competitiveness and improved margins in the 8% EBITDA range [80]