Revenue: $633 million, up 12% or $70 million from Q1 2024.
EBITDA: $50 million, or 7.9% of revenue.
US Revenue: $512 million, an 18% increase from Q1 2024.
Canada Revenue: $56 million, a 15% decrease from Q1 2024.
International Revenue: $65 million, up 5% sequentially.
Gross Margin: 21.8%, a decline of 110 basis points from Q1 2024.
Free Cash Flow: $18 million for the quarter, $98 million year-to-date.
Net Income: $24 million, or $0.21 per fully diluted share.
Cash Position: $197 million with zero debt.
Total Liquidity: $579 million.
Inventory Turn Rate: 5.0 times annualized.
Operating Profit: $33 million total; US: $28 million, Canada: $2 million, International: $3 million.
Income Tax Expense: $8 million for the quarter.
Share Repurchases: $10 million in Q2 2024, $67 million cumulatively under the $80 million program.
Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Dnow Inc (NYSE:DNOW) achieved strong earnings with a 12% sequential revenue growth in the second quarter of 2024, driven by the Whitco acquisition and growth in International and legacy US businesses.
The company generated $50 million in EBITDA for the quarter, showcasing strong bottom-line performance.
Dnow Inc (NYSE:DNOW) produced $18 million of free cash flow during the quarter, bringing the year-to-date amount to $98 million.
The company remains debt-free with $197 million in cash and $579 million in total liquidity, providing flexibility for organic and inorganic growth.
Dnow Inc (NYSE:DNOW) is making progress in expanding its industrial adjacent markets, including mining, municipal water, and chemicals, aligning well with its service areas and product lines.
The US onshore oil and gas activity is challenging due to E&P consolidation, low natural gas prices, and infrastructure constraints, impacting growth.
Gross margins declined by 110 basis points from the first quarter of 2024, affected by declining steel pipe prices and acquisition purchase accounting impacts.
The company expects third-quarter sequential revenues to be flat to down 5% from Q2 2024 due to muted US activity and project timing internationally.
Dnow Inc (NYSE:DNOW) faces headwinds from lower gas prices, lower US rigs and completions, and the seasonal breakup in Canada.
Customer consolidations have impacted project timing, resulting in funding and approval delays or project timeline shifts.
Q: What has changed for DNOW over the last six months, and how has this affected your order rates and market view? A: David Cherechinsky, President and CEO, explained that rig counts have been declining, impacting revenue opportunities. Completions have also been down, and expectations for a bottom in these metrics have not materialized. This has led to a cautious approach in investment and resource management. However, they see potential growth opportunities in the future, indicating that current challenges are temporary.
Q: Why do you believe the current challenges are temporary, and what are the green shoots you see? A: David Cherechinsky highlighted several factors: growing oil demand, increasing LNG export opportunities, potential easing of tentativeness post-US elections, expected gas futures improvements, and interest rate cuts. Additionally, DNOW’s energy evolution strategy is gaining traction, with expectations to double sales in this area.
Q: Can you provide more details on the energy evolution revenue expectations for 2024 and beyond? A: David Cherechinsky confirmed a potential $60 million in revenue for 2024 from energy evolution projects. While there is a significant increase in quotes and orders, translating this into 2025 projections is still uncertain.
Q: Are you seeing market share gains in the US, and how does customer consolidation affect your business? A: David Cherechinsky noted that DNOW is gaining market share as smaller competitors face challenges. Customer consolidations can delay projects initially, but DNOW is well-positioned to benefit from these consolidations in the long term.
Q: How is the Whitco acquisition impacting your midstream footprint, and what are the expectations for future activity? A: Brad Wise, Vice President of Digital Strategy and Investor Relations, stated that the acquisition enhances DNOW’s ability to address midstream challenges, such as gas takeaway capacity. While short-term congestion exists, long-term demand for gas export positions DNOW well in the midstream sector.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.