NOW(US:DNOW)2024-02-15 19:45Financial Data and Key Metrics Changes - For Q4 2023, net income attributable to DNOW Inc. was $147 million or $1.35 per fully diluted share, while on a non-GAAP basis, it was $24 million or $0.22 per fully diluted share [2] - Full year 2023 revenues increased by $185 million or 9%, totaling $2.32 billion, with EBITDA of $184 million or 7.9% of revenue [8][61] - The effective tax rate for Q4 2023 was impacted by a noncash benefit of $126 million from the release of valuation allowances on deferred tax assets, with a non-GAAP effective tax rate of approximately 27.5% for Q4 2023 [1][63] Business Line Data and Key Metrics Changes - U.S. Process Solutions revenue grew 46% year-over-year, contributing significantly to the overall revenue increase [74] - Solutions represented one-third of U.S. revenue, marking a new high since the division's creation, with steady demand for various products [57] - In Canada, revenue for Q4 was $65 million, a decrease of 4% sequentially, while international revenue was $72 million, flat sequentially but up 24% year-over-year [58][61] Market Data and Key Metrics Changes - U.S. rig count decreased by 4% and completions decreased by 8% sequentially, impacting revenue dynamics [56] - International revenue grew 26% year-over-year, driven by customer investments in energy security and alternative energy technologies [58] - The company expects U.S. business to grow sequentially and year-over-year in Q1 2024, while international activity is expected to decline [6][7] Company Strategy and Development Direction - The company is focused on organic growth and acquisitions, with a commitment to maintaining a debt-free status and generating attractive shareholder returns [4][5] - The acquisition of Whitco Supply is expected to enhance earnings and free cash flow, expanding the company's reach into the midstream space [32][45] - The company aims to capture revenue from carbon capture and renewable fuels markets, with significant capital investment expected in these areas [70][71] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strong finish in Q4 2023 and the overall performance in 2023, despite market headwinds [8][39] - For 2024, the company expects revenue growth of 0% to 5% and anticipates generating up to $150 million in free cash flow [31][30] - Management noted that customer spending is expected to focus on maintaining current production levels, with potential growth in rig counts anticipated in the second half of 2024 [30][31] Other Important Information - The company generated $171 million in free cash flow in 2023, exceeding initial guidance [28][72] - Cash position at the end of Q4 2023 was $299 million, with total liquidity of $626 million [27] - The company plans to continue its share repurchase program, having repurchased $57 million of the authorized $80 million by year-end 2023 [28][26] Q&A Session All Questions and Answers Question: Does the guidance include a contribution from Whitco? - Management confirmed that the guidance does not include contributions from Whitco until the acquisition is finalized [10] Question: How much of the current business is attributed to energy evolution projects? - Management indicated that approximately $30 million in revenues were attributed to energy evolution projects in 2023, with expectations to double that in 2024 [12] Question: What are the assumptions behind the guidance for flat to up 5% growth? - Management noted that the U.S. rig count is stable in the low 600s, with expectations for an uptick in the second half of 2024 [18] Question: What is the outlook for cash flow and working capital in 2024? - Management expects strong free cash flow generation in 2024, primarily from the P&L, with minimal excess inventory in the system [24][22] Question: What are the plans for share repurchase and acquisitions? - Management stated that share repurchase activity slowed in the second half of 2023 due to preparing for a significant acquisition, with plans to resume the program [26]