NOW(US:DNOW)2023-05-06 19:23Financial Data and Key Metrics Changes - First quarter revenue was $584 million, up 7% sequentially and up 23% year-over-year, driven by strong international growth of 28% [24][29] - Gross margins for Q1 2023 were 23.5%, down from recent highs but above the combined gross margin of 22.9% for 2021 and 2022 [3][24] - EBITDA for the first quarter was $47 million, representing 8% of revenue, and up 68% year-over-year [24][30] - Free cash flow consumption was $11 million in Q1 as the company invested in working capital and capital expenditures [24][30] Business Line Data and Key Metrics Changes - U.S. revenue totaled $427 million, a 3% increase sequentially and a 28% increase year-over-year [29][30] - Canada revenue was $83 million, up 11% sequentially but relatively flat year-over-year [29][30] - International revenue reached $74 million, a sequential increase of 28% [27][29] Market Data and Key Metrics Changes - The U.S. energy centers contributed approximately 74% of total U.S. revenue, while U.S. process solutions contributed 26% [29] - The company noted a 2% decline in U.S. rig counts and completions, impacting overall market conditions [49][58] - Increased demand for renewable natural gas (RNG) and biodiesel projects was highlighted as a growth opportunity [51][87] Company Strategy and Development Direction - The company is focused on revenue synergies from recent acquisitions, aiming to grow its business rather than seeking cost savings [5][48] - Strategic investments are being made in upgrading facilities and expanding the rental fleet for Flex Flow and EcoVapor businesses [31][48] - The company aims to generate $100 million in cash from operations in 2023 while maintaining a disciplined approach to capital allocation [31][57] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the international segment's strong growth and the potential for market share gains despite a challenging U.S. market [10][58] - The company anticipates a low single-digit percentage increase in sequential revenues for Q2 2023, with year-over-year growth expected to be around 10% [12][58] - Management acknowledged headwinds from weather-related activity declines and lower oil and gas prices but remains focused on executing their strategy [10][58] Other Important Information - The company remains debt-free with a cash position of $168 million and total liquidity of $555 million [30][56] - The share repurchase program is ongoing, with $36 million spent in Q1, totaling $43 million repurchased to date [57][58] - The company is actively pursuing additional acquisitions to enhance its market position and expand its geographic reach [48][74] Q&A Session Summary Question: Can you elaborate on the second quarter outlook and expected gross margin changes? - Management confirmed expectations of slight gross margin erosion due to seasonal impacts and geographic mix, particularly from Canada [34][35] Question: What are the prospects for organic growth in the current market? - Management indicated that organic growth is expected primarily in the U.S., driven by new customer acquisitions and market share gains [63][77] Question: How is the company diversifying its international business? - The company has diversified its international operations to focus more on land-based projects and capital projects associated with national and international oil companies [78] Question: What is the outlook for the Process Solutions segment? - Management aims for the Process Solutions segment to grow to one-third of U.S. revenue, emphasizing its higher margins and revenue synergies from acquisitions [84][85]