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Yahoo
11-06-2025
- Business
- Yahoo
DNOW Q1 Earnings Call: Margin Resilience and Market Diversification Amid Tariff Uncertainty
Energy and industrial distributor DistributionNOW (NYSE:DNOW) reported revenue ahead of Wall Street's expectations in Q1 CY2025, with sales up 6.4% year on year to $599 million. Its non-GAAP profit of $0.22 per share was 26.9% above analysts' consensus estimates. Is now the time to buy DNOW? Find out in our full research report (it's free). Revenue: $599 million vs analyst estimates of $587.8 million (6.4% year-on-year growth, 1.9% beat) Adjusted EPS: $0.22 vs analyst estimates of $0.17 (26.9% beat) Adjusted EBITDA: $46 million vs analyst estimates of $40.4 million (7.7% margin, 13.9% beat) Operating Margin: 5%, in line with the same quarter last year Market Capitalization: $1.57 billion DistributionNOW's first quarter results were shaped by steady demand in U.S. midstream infrastructure and continued momentum in the company's Process Solutions segment, despite a largely unchanged U.S. rig count and lower completions activity. Management pointed to resilient gross margins and a diversified market mix as core reasons for outperforming expectations. CEO David Cherechinsky highlighted that the quarter delivered the second-best first quarter EBITDA in company history, noting, 'This is notable given the misunderstood perception that the upstream sector alone drives opportunities for DNOW.' The company's recent acquisition in Singapore further contributed to expansion in the Asia Pacific region and strengthened its MacLean International brand, underscoring the importance of international diversification. Cherechinsky also emphasized the effectiveness of DNOW's supply chain repositioning in response to previous tariff rounds and supply disruptions, which allowed the company to maintain operational flexibility. Looking ahead, DistributionNOW's outlook hinges on its ability to manage tariff-driven cost pressures, capitalize on U.S. midstream opportunities, and further penetrate adjacent industrial markets. Management reaffirmed full-year revenue guidance with expectations of flat to high-single-digit growth, supported by continued investment in digital initiatives and targeted M&A. Cherechinsky acknowledged ongoing macro uncertainty, driven by evolving tariffs and fluctuating oil prices, stating, 'The dynamics of this environment remain volatile, leading to fluctuations in market sentiment.' The company's strategy includes passing on supplier cost increases, optimizing pricing structures, and leveraging its purchasing power to buffer against inflation and supply chain volatility. While risks remain from potential declines in U.S. rig activity, DNOW anticipates that midstream demand and its inventory planning will help offset upstream headwinds and support earnings stability. Management attributed first quarter performance to execution in U.S. midstream and Process Solutions, strategic inventory planning, and swift adaptation to tariff and supply chain changes. Midstream and Process Solutions momentum: Increased activity in U.S. midstream infrastructure and a full-quarter contribution from the Trojan acquisition boosted growth, with Process Solutions delivering its highest-ever quarterly revenue contribution. Strategic inventory build: The company intentionally increased inventory in anticipation of tariff-related supply disruptions, positioning itself to maintain product availability and optimize procurement costs as tariff impacts unfold. International expansion with acquisition: The acquisition of a Singapore-based distributor expanded DistributionNOW's MacLean International offering in Asia Pacific, targeting diversified end markets such as marine, petrochemical, and data centers. Digital transformation progress: DigitalNOW initiatives drove efficiencies, with digital revenue reaching a record 53% of SAP-related sales. Management highlighted the rollout of AI-powered process automation, including certificate indexing and system integration. Tariff and inflation management: The company's supply chain adjustments reduced dependence on China, with most products sourced domestically or from alternative international suppliers. Management expects to pass on cost increases and adjust pricing to protect margins as new tariffs take effect. DistributionNOW's forward guidance is shaped by tariff-driven pricing, midstream growth, and ongoing diversification into adjacent markets. Tariffs and pricing strategy: Management expects recently announced tariffs and supplier cost inflation to drive higher input costs, but plans to pass these through to customers via pricing adjustments. The company anticipates that its inventory position and sourcing flexibility will help maintain gross margin levels. U.S. midstream and Process Solutions growth: Demand in U.S. midstream, including infrastructure expansions and gathering asset investments, is projected to remain strong. Process Solutions, strengthened by recent acquisitions, is expected to capture additional revenue from industrial and energy transition markets, such as water, wastewater, and data centers. M&A and market adjacencies: DistributionNOW intends to pursue further acquisitions, particularly in U.S. Process Solutions, and seeks to grow in adjacent sectors like mining, chemicals, and renewable energy. Management noted that diversification efforts are designed to reduce reliance on upstream drilling and completion activity, mitigating downside risk from potential rig count declines. Looking forward, the StockStory team will monitor (1) how effectively DistributionNOW passes on tariff-related cost increases to customers and preserves gross margins, (2) continued expansion and integration of recent acquisitions in international and Process Solutions markets, and (3) the pace of digital adoption and AI-driven process improvements. Progress in adjacent market penetration and the impact of rig count trends will also be watched closely. DistributionNOW currently trades at a forward EV-to-EBITDA ratio of 10.3×. In the wake of earnings, is it a buy or sell? See for yourself in our full research report (it's free). The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025. While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. 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Business Wire
07-05-2025
- Business
- Business Wire
DNOW Reports First Quarter 2025 Results
- Earnings Conference Call 8:00 a.m. CT 1 (888) 660-6431 (within North America) 1 (929) 203-2118 (outside North America) Access Code: 7372055 Webcast: HOUSTON--(BUSINESS WIRE)--DNOW Inc. (NYSE: DNOW) announced results for the first quarter ended March 31, 2025. Recent Capital Allocation Actions Repurchased $8 million of common stock in the first quarter of 2025, and $16 million year-to-date, under the $160 million share repurchase program authorized this year Completed acquisition of Natron International Pte. Ltd in April, headquartered in Singapore, which expands our electrical supply capabilities under the MacLean International brand in the Asia Pacific region, serving traditional and renewable energy, infrastructure and other commercial and industrial end-markets Financial Highlights Revenue was $599 million for the first quarter of 2025 Net income attributable to DNOW Inc. was $22 million, or $0.20 per diluted share, for the first quarter of 2025 Non-GAAP net income attributable to DNOW Inc. excluding other costs was $24 million, or $0.22 per diluted share, for the first quarter of 2025 EBITDA excluding other costs was $46 million or 7.7% of revenue for the first quarter of 2025 Invested $33 million in additional inventory, with cash used in operating activities of $16 million for the first quarter of 2025 Cash and cash equivalents was $219 million and long-term debt was zero at March 31, 2025, with total liquidity of approximately $567 million David Cherechinsky, President and CEO of DNOW, added, 'Following our second-best fourth quarter in history, we beat first-quarter expectations with revenue growth of 5% sequentially to $599 million, and delivered our second-best first-quarter EBITDA of $46 million, in a market with fewer operating rigs and completions. We executed adroitly on our capital allocation initiatives, closing on a small important acquisition in Singapore to expand our MacLean International offering. We repurchased $16 million of common stock on a year-to-date basis, under our new $160 million share repurchase program, while strategically adding $33 million in inventory for organic growth, which should set us up favorably in this environment. We are uniquely well-capitalized, with a significant cash balance and no debt or interest payments and can be selective and patient at the acquisition bargaining table while benefiting from our fortuitous inventory planning. While future market conditions are difficult to predict, given uncertainties stemming from the decline in oil prices and tariff-induced trade disruptions, we believe we are well positioned to seize organic, adjacent and inorganic growth opportunities, pursuing more efficient and cost-effective ways to execute operationally. I want to extend my sincerest gratitude to the women and men of DNOW who distinguish us in the market with how we promote our key manufacturers and work tirelessly to delight our customers, as we build upon a great start to the year.' Prior to the earnings conference call a presentation titled 'DNOW First Quarter 2025 Key Takeaways' will be available on the Company's Investor Relations website. About DNOW DNOW is a supplier of energy and industrial products and packaged, engineered process and production equipment with a legacy of over 160 years. Headquartered in Houston, Texas, with approximately 2,600 employees and a network of locations, we offer a broad set of supply chain solutions combined with a suite of digital offerings branded as DigitalNOW® that provide customers access to highly complementary digital commerce, data and information management channels. Our locations provide products and solutions to exploration and production, midstream transmission and storage companies, refineries, chemical companies, utilities, mining, municipal water, manufacturers, engineering and construction as well as companies operating in the decarbonization, energy evolution and renewables end markets. Statements made in this press release that are forward-looking in nature are intended to be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by DNOW Inc. with the U.S. Securities and Exchange Commission, which identify significant risk factors which could cause actual results to differ from those contained in the forward-looking statements. DNOW INC. (In millions, except per share data) Three Months Ended March 31, December 31, 2025 2024 2024 Revenue $ 599 $ 563 $ 571 Operating expenses: Cost of products 460 434 438 Warehousing, selling and administrative 109 101 103 Impairment and other charges − − 1 Operating profit 30 28 29 Other income (expense) − 1 1 Income before income taxes 30 29 30 Income tax provision 7 8 7 Net income 23 21 23 Net income attributable to noncontrolling interest 1 − − Net income attributable to DNOW Inc. $ 22 $ 21 $ 23 Earnings per share attributable to DNOW Inc. stockholders: Basic $ 0.20 $ 0.20 $ 0.22 Diluted $ 0.20 $ 0.19 $ 0.21 Weighted-average common shares outstanding, basic 106 106 106 Weighted-average common shares outstanding, diluted 107 107 107 Expand DNOW INC. SUPPLEMENTAL INFORMATION (CONTINUED) U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP RECONCILIATIONS In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in our quarterly earnings press releases and other public disclosures. The non-GAAP financial measures include: (i) earnings before interest, taxes, depreciation and amortization (EBITDA) excluding other costs, (ii) EBITDA excluding other costs as a percentage of revenue, (iii) net income attributable to DNOW Inc. excluding other costs, (iv) diluted earnings per share attributable to DNOW Inc. stockholders excluding other costs, and (v) free cash flow. We use these non-GAAP financial measures to evaluate and manage the Company's operations because we believe they provide useful supplemental information regarding the financial performance of our business. These non-GAAP financial measures are not intended to replace the GAAP financial measures. Free cash flow is net cash provided by (used in) operating activities adjusted for purchases of property, plant and equipment, and the remaining non-GAAP financial measures exclude the impact of certain other items. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included in the schedules herein. Totals in the schedules herein may not foot due to rounding. NET INCOME ATTRIBUTABLE TO DNOW INC. TO NON-GAAP NET INCOME ATTRIBUTABLE TO DNOW INC. (In millions) Three Months Ended March 31, December 31, 2025 2024 2024 GAAP net income attributable to DNOW Inc. $ 22 $ 21 $ 23 Other (2) 3 3 3 Other tax expense (benefit) (3) (1 ) (1 ) − Other, net of tax (4)* 2 2 4 Net income attributable to DNOW Inc. excluding other costs $ 24 $ 23 $ 27 Expand * Totals may not foot due to rounding. Expand DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO DNOW INC. STOCKHOLDERS TO NON-GAAP DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO DNOW INC. STOCKHOLDERS EXCLUDING OTHER COSTS Three Months Ended March 31, December 31, 2025 2024 2024 GAAP diluted earnings per share attributable to DNOW Inc. stockholders $ 0.20 $ 0.19 $ 0.21 Other, net of tax (4) 0.02 0.02 0.04 Diluted earnings per share attributable to DNOW Inc. stockholders excluding other costs $ 0.22 $ 0.21 $ 0.25 Expand NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES TO FREE CASH FLOW RECONCILIATION (UNAUDITED) March 31, December 31, September 30, June 30, March 31, 2025 2024 2024 2024 2024 Net cash provided by (used in) operating activities $ (16 ) $ 122 $ 74 $ 21 $ 81 Less: Purchases of property, plant and equipment (6 ) (3 ) (2 ) (3 ) (1 ) Free cash flow $ (22 ) $ 119 $ 72 $ 18 $ 80 Expand (1) Stock-based compensation excludes less than $1 million for the three months ended March 31, 2025 as such amounts were reported in Other. (2) For the three months ended March 31, 2025, Other primarily included approximately $2 million of transaction-related charges and $1 million of International restructuring charges, both of which were included in warehousing, selling, and administrative. For the three months ended March 31, 2024, Other was related to transaction-related charges, including approximately $2 million in warehousing, selling and administrative, and approximately $1 million in cost of products for cost of inventory that was stepped up to fair value during purchase accounting related to an acquisition. For the three months ended December 31, 2024, Other included transaction-related charges of approximately $2 million included in warehousing, selling and administrative, and International restructuring charges of approximately $1 million related to foreign currency translation losses included in impairment and other charges. Transaction-related charges include transaction costs, inventory fair value step-up, retention bonus accruals and integration expenses associated with acquisitions. (3) For the three months ended March 31, 2025, Other tax expense (benefit) represents tax benefit of approximately $1 million related to Other. The tax effect of Other is calculated based on the nature of the item and/or the tax jurisdiction in which the item has been incurred and applying the specific tax rate or tax treatment to each item included in Other. For the three months ended March 31, 2024, Other tax expense (benefit) represents tax benefit of approximately $1 million related to Other. The tax effect of Other is calculated based on the nature of the item and/or the tax jurisdiction in which the item has been incurred and applying the specific tax rate or tax treatment to each item included in Other. For the three months ended December 31, 2024, Other tax expense (benefit) represents tax benefit of less than $1 million related to Other. The tax effect of Other is calculated based on the nature of the item and/or the tax jurisdiction in which the item has been incurred and applying the specific tax rate or tax treatment to each item included in Other. (4) Other, net of tax comprises Other and Other tax expense (benefit). See footnotes (2) and (3) for details. Expand Contacts Senior Vice President and Chief Financial Officer (281) 823-4754 Industry: Oil/Gas Alternative Energy Energy Other Energy Utilities DNOW Inc. NYSE:DNOW Release Summary DNOW Reports First Quarter 2025 Results Release Versions English Contacts Mark Johnson Senior Vice President and Chief Financial Officer (281) 823-4754 More News From DNOW Inc. Get RSS Feed DNOW Announces Fourth Quarter and Full-Year 2024 Earnings Conference Call DNOW Inc. NYSE:DNOW Release Summary DNOW Reports First Quarter 2025 Results Release Versions English Contacts Mark Johnson Senior Vice President and Chief Financial Officer (281) 823-4754
