DNOW DNOW Inc

Earnings Conference Call May 10, 2024 8:00 a.m. CT 1 (888) 660-6431 (within North America) 1 (929) 203-2118 (outside of North America) Access Code: 7372055 Webcast: ir.dnow.com

DNOW Inc. (NYSE: DNOW) announced results for the first quarter ended March 31, 2024.

First Quarter 2024 Highlights

• Cash provided by operating activities was $81 million for the first quarter of 2024 and $275 million for the trailing four quarters ending March 31, 2024
• Revenue was $563 million for the first quarter of 2024
• Net income attributable to DNOW Inc. was $21 million, or $0.19 per diluted share, for the first quarter of 2024
• Non-GAAP net income attributable to DNOW Inc. excluding other costs was $23 million, or $0.21 per diluted share, for the first quarter of 2024

• EBITDA excluding other costs was $39 million or 6.9% of revenue for the first quarter of 2024
• Completed acquisition of Whitco Supply LLC for $185 million in cash, enhancing capabilities and position primarily in the U.S. midstream market
• Cash and cash equivalents was $188 million and long-term debt was zero at March 31, 2024 with total liquidity of approximately $564 million

David Cherechinsky, President and CEO of DNOW, added, “I am incredibly pleased with the progress we made this quarter, generating strong free cash flow of $80 million towards our $150 million full-year target, which we expect could now approach $200 million in 2024.

We welcomed Whitco Supply to the DNOW family, one of our largest acquisitions, and still ended the quarter debt-free with $188 million in cash. The addition of Whitco's talented team, rich culture and technical expertise will enhance our service levels and capabilities, enabling us to better support our customers’ midstream and energy evolution investments.

Despite the slow start to the first quarter, evidenced by lower U.S. well completions and historically low natural gas prices, we are encouraged by our prospects for the remainder of the year and are upgrading our 2024 full-year outlook to now grow revenue in the mid-to-high single digit percentage range, and sequentially we expect second quarter revenue to increase ten to fifteen percent, assuming increased market activity.

With a solid balance sheet, an expanding diversified customer base, the best people in the business and a proactive approach to seizing value-enhancing acquisition opportunities, I am excited about our future.”

Prior to the earnings conference call a presentation titled “DNOW First Quarter 2024 Key Takeaways” will be available on the Company’s Investor Relations website.

About DNOW

DNOW is a worldwide 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 2,650 employees and a network of locations worldwide, we offer a broad set of supply chain solutions combined with a suite of digital offerings branded as DigitalNOW® that provide customers world-class technology for digital commerce, data and information management. 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 transition 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.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 

March 31, December 31,

2024

2023

  ASSETS Current assets: Cash and cash equivalents

$

188

 

$

299

 

Receivables, net

 

410

 

 

384

 

Inventories, net

 

428

 

 

366

 

Prepaid and other current assets

 

19

 

 

19

 

Total current assets

 

1,045

 

 

1,068

 

Property, plant and equipment, net

 

137

 

 

131

 

Deferred income taxes

 

112

 

 

118

 

Goodwill

 

192

 

 

139

 

Intangibles, net

 

59

 

 

28

 

Other assets

 

49

 

 

45

 

Total assets

$

1,594

 

$

1,529

 

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable

$

339

 

$

288

 

Accrued liabilities

 

112

 

 

120

 

Other current liabilities

 

11

 

 

10

 

Total current liabilities

 

462

 

 

418

 

Long-term operating lease liabilities

 

33

 

 

30

 

Other long-term liabilities

 

20

 

 

18

 

Total liabilities

 

515

 

 

466

 

Commitments and contingencies Stockholders' equity: Preferred stock - par value $0.01; 20 million shares authorized; no shares issued andoutstanding

 

−

 

 

−

 

Common stock - par value $0.01; 330 million shares authorized; 106,783,725 and 106,257,565shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

1

 

 

1

 

Additional paid-in capital

 

2,031

 

 

2,032

 

Accumulated deficit

 

(807

)

 

(828

)

Accumulated other comprehensive loss

 

(149

)

 

(145

)

DNOW Inc. stockholders' equity

 

1,076

 

 

1,060

 

Noncontrolling interest

 

3

 

 

3

 

Total stockholders' equity

 

1,079

 

 

1,063

 

Total liabilities and stockholders' equity

$

1,594

 

$

1,529

 

 

DNOW INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In millions, except per share data)

 

Three Months Ended March 31, December 31,

2024

2023

2023

  Revenue

$

563

$

584

$

555

 

Operating expenses: Cost of products

 

434

 

447

 

425

 

Warehousing, selling and administrative

 

101

 

102

 

98

 

Operating profit

 

28

 

35

 

32

 

Other income (expense)

 

1

 

−

 

(1

)

Income before income taxes

 

29

 

35

 

31

 

Income tax provision (benefit)

 

8

 

3

 

(116

)

Net income

 

21

 

32

 

147

 

Net income attributable to noncontrolling interest

 

−

 

1

 

−

 

Net income attributable to DNOW Inc.

$

21

$

31

$

147

 

Earnings per share attributable to DNOW Inc. stockholders: Basic

$

0.20

$

0.28

$

1.36

 

Diluted

$

0.19

$

0.28

$

1.35

 

Weighted-average common shares outstanding, basic

 

106

 

110

 

106

 

Weighted-average common shares outstanding, diluted

 

107

 

111

 

107

 

 

DNOW INC.

SUPPLEMENTAL INFORMATION

 

BUSINESS SEGMENTS (UNAUDITED)

(In millions)

 

Three Months Ended March 31, December 31,

2024

 

2023

 

2023

Revenue: United States

$

435

$

427

$

418

Canada

 

66

 

83

 

65

International

 

62

 

74

 

72

Total revenue

$

563

$

584

$

555

 

DNOW INC.

SUPPLEMENTAL INFORMATION (CONTINUED)

U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP RECONCILIATIONS

NET INCOME ATTRIBUTABLE TO DNOW INC. TO NON-GAAP EBITDA EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

(In millions)

 

Three Months Ended March 31, December 31,

2024

 

2023

 

2023

  GAAP net income attributable to DNOW Inc. (1)

$

21

 

$

31

 

$

147

 

Net income attributable to noncontrolling interest (2)

 

−

 

 

1

 

 

−

 

Interest expense (income), net

 

(2

)

 

(1

)

 

(1

)

Income tax provision (benefit)

 

8

 

 

3

 

 

(116

)

Depreciation and amortization

 

7

 

 

6

 

 

7

 

Other costs: Stock-based compensation

 

2

 

 

3

 

 

4

 

Other (3)

 

3

 

 

4

 

 

3

 

EBITDA excluding other costs

$

39

 

$

47

 

$

44

 

EBITDA % excluding other costs (4)

 

6.9

%

 

8.0

%

 

7.9

%

 

NET INCOME ATTRIBUTABLE TO DNOW INC. TO NON-GAAP NET INCOME ATTRIBUTABLE TO DNOW INC. EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

(In millions)

 

Three Months Ended March 31, December 31,

2024

2023

2023

  GAAP net income attributable to DNOW Inc. (1)

$

21

$

31

 

$

147

 

Other, net of tax (5) (6)

 

2

 

(3

)

 

(123

)

Net income attributable to DNOW Inc. excluding other costs (6)

$

23

$

28

 

$

24

 

 

DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO DNOW INC. STOCKHOLDERS TO NON-GAAP DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO DNOW INC. STOCKHOLDERS EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

 

Three Months Ended March 31, December 31,

2024

2023

2023

  GAAP diluted earnings per share attributable to DNOW Inc. stockholders (1)

$

0.19

$

0.28

 

$

1.35

 

Other, net of tax (5) (6)

 

0.02

 

(0.03

)

 

(1.13

)

Diluted earnings per share attributable to DNOW Inc. stockholders excluding other costs (6)

$

0.21

$

0.25

 

$

0.22

 

 

(1)

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) net income attributable to DNOW Inc. excluding other costs and (iii) diluted earnings per share attributable to DNOW Inc. stockholders excluding other costs. Each of these financial measures excludes the impact of certain other costs and therefore has not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included in the schedules herein.

 

 

(2)

Net income attributable to noncontrolling interest represents the income retained by the noncontrolling party of a joint venture in our international segment which we consolidate into our financials as we are the primary beneficiary and controlling member.

 

 

(3)

Other includes certain income and expenses and does not include stock-based compensation expense.

 

For the three months ended March 31, 2024, Other of approximately $3 million was related to transaction-related charges which are included in operating profit, and include approximately $1 million, included in cost of products, for cost of inventory that was stepped up to fair value during purchase accounting related to the acquisition.

 

 

(4)

EBITDA % excluding other costs is defined as EBITDA excluding other costs divided by Revenue.

 

 

(5)

Other, net of tax includes certain income and expenses and does not include stock-based compensation expense.

 

For the three months ended March 31, 2024, Other, net of tax, of approximately $2 million was related to transaction-related charges.

 

 

(6)

Totals may not foot due to rounding.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240510156146/en/

Mark Johnson Senior Vice President and Chief Financial Officer (281) 823-4754