NOW(US:DNOW)2024-05-10 17:39Financial Data and Key Metrics Changes - Total revenue for Q1 2024 was $563 million, an increase of 1% or $8 million from Q4 2023 [38] - EBITDA excluding other costs for Q1 was $39 million, representing 6.9% of revenue [38] - Free cash flow generated in Q1 was $80 million, contributing to a total of $262 million over the last four quarters, the best trailing four-quarter period since 2016 [27][41] - Gross margins for Q1 were 22.9%, down 20 basis points from the 2023 average, primarily due to inventory step-up amortization charges related to the acquisition [15] Business Line Data and Key Metrics Changes - U.S. revenue for Q1 2024 totaled $435 million, up $17 million or 4% sequentially, driven by the acquisition of Whitco Supply [7][38] - Canadian revenue was $66 million, an increase of $1 million or 2% from Q4 2023 [15] - International revenue was $62 million, down $10 million or 14% sequentially, primarily due to non-repeating projects [9][15] Market Data and Key Metrics Changes - U.S. rig count was flat quarter-over-quarter, while U.S. completions declined 11% sequentially and 15% year-over-year [7] - Demand for FlexFlow horizontal pump products remained steady, with increased demand for EcoVapor products as operators sought solutions for emissions reduction [8][10] Company Strategy and Development Direction - The company aims to leverage its solid position in upstream and midstream markets, achieve leadership in energy evolution, and expand its presence in adjacent industrial markets [20][28] - The acquisition of Whitco Supply is seen as a strategic move to enhance service levels and capabilities, particularly in the midstream energy sector [5][28] - The company is focused on driving revenue synergies from the Whitco acquisition, targeting new customer bases and expanding product offerings [68] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the prospects for the remainder of 2024, expecting sequential growth in U.S. and international markets [42] - The full-year revenue outlook has been upgraded, with expectations for mid-to-high single-digit growth compared to 2023 [43] - Management highlighted the importance of adapting to changing market conditions and maintaining a disciplined approach to balance sheet management [29] Other Important Information - The company ended the quarter with a cash position of $188 million and zero debt, with total liquidity of $564 million [40] - The effective tax rate for Q1 was 27.6%, with expectations for the full year to be approximately 27% to 28% [16] Q&A Session Summary Question: What are the revenue synergy potentials from the Whitco acquisition? - Management indicated that the focus will be on revenue synergies, particularly leveraging Whitco's midstream customer base which overlaps minimally with DNOW's existing customers [68] Question: What contributed to the strong free cash flow in Q1? - Approximately half of the cash flow was attributed to earnings, while the other half came from improved organic accounts receivable, with a notable decrease in days sales outstanding [45] Question: How does the addition of Whitco affect future acquisitions? - Management stated that while Whitco is a unique acquisition, future investments will likely focus on process solutions, maintaining a strategy of targeted acquisitions [82]