DNOW Reports Second Quarter 2024 Results

Rhea-AI Summary

DNOW Inc. (NYSE: DNOW) reported its second quarter 2024 results, highlighting revenue of $633 million and net income of $24 million ($0.21 per diluted share). Non-GAAP net income excluding other costs was $28 million ($0.25 per diluted share). The company achieved EBITDA excluding other costs of $50 million, representing 7.9% of revenue. DNOW generated $21 million in cash from operating activities for the quarter and $211 million for the trailing four quarters. The company repurchased $10 million of common stock and maintained a strong financial position with $197 million in cash, zero long-term debt, and total liquidity of approximately $579 million. CEO David Cherechinsky expressed satisfaction with the company's growth and execution of its strategy in a challenging market.

Positive

• Revenue of $633 million for Q2 2024
• Net income of $24 million ($0.21 per diluted share)
• Non-GAAP net income of $28 million ($0.25 per diluted share)
• EBITDA excluding other costs of $50 million (7.9% of revenue)
• $21 million cash provided by operating activities in Q2
• $211 million cash from operations for trailing four quarters
• $197 million cash and zero long-term debt
• Total liquidity of approximately $579 million
• $10 million in share repurchases during Q2

Negative

• None.

Insights

Financial Analyst

DNOW's Q2 2024 results demonstrate resilience in a challenging market. Revenue of $633 million and net income of $24 million ($0.21 per diluted share) show solid performance. The non-GAAP net income of $28 million ($0.25 per diluted share) indicates underlying strength when excluding one-time costs.

The EBITDA margin of 7.9% is commendable, suggesting efficient operations. Strong cash flow generation, with $211 million over the trailing four quarters, demonstrates robust financial health. The company's debt-free status and $197 million cash position provide significant financial flexibility for future growth and acquisitions.

The ongoing share repurchase program signals confidence in the company's valuation and commitment to shareholder returns. Overall, DNOW's financial position appears strong, with potential for strategic expansion in midstream and industrial markets.

Market Research Analyst

DNOW's Q2 performance is impressive given the "challenging market" conditions mentioned. The company's strategy to expand beyond its core market into midstream, energy evolution and adjacent industrial sectors is a smart move for diversification and growth.

The $10 million share repurchase in Q2 and plans to complete the $80 million program this year indicate management's confidence in the company's prospects and potential undervaluation. This could positively impact stock price in the short term.

Long-term growth potential lies in DNOW's focus on solving customers' complex operational and supply chain challenges, which could lead to increased customer loyalty and market share. The company's strong liquidity position of $579 million provides ample resources for strategic acquisitions, potentially accelerating growth and market penetration.

Earnings Conference Call

August 7, 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

HOUSTON--(BUSINESS WIRE)-- DNOW Inc. (NYSE: DNOW) announced results for the second quarter ended June 30, 2024.

Second Quarter 2024 Highlights

• Revenue was $633 million for the second quarter of 2024
• Net income attributable to DNOW Inc. was $24 million, or $0.21 per diluted share, for the second quarter of 2024
• Non-GAAP net income attributable to DNOW Inc. excluding other costs was $28 million, or $0.25 per diluted share, for the second quarter of 2024

• EBITDA excluding other costs was $50 million or 7.9% of revenue for the second quarter of 2024
• Cash provided by operating activities was $21 million for the second quarter of 2024 and $211 million for the trailing four quarters ending June 30, 2024
• Repurchased $10 million of common stock in the second quarter of 2024
• Cash and cash equivalents was $197 million and long-term debt was zero at June 30, 2024 with total liquidity of approximately $579 million

David Cherechinsky, President and CEO of DNOW, added, “We are delighted with the growth we achieved during the second quarter, in a challenging market, where we delivered $50 million in EBITDA and produced $18 million in free cash flow, bringing our free cash flow haul to $201 million over the past four quarters. We opportunistically repurchased $10 million in shares in the quarter and are on a path to complete the $80 million share repurchase program this year.

We continue to execute on our strategy to bolster DNOW’s capabilities and expand our core market, while further penetrating into midstream, energy evolution and adjacent industrial markets, providing additional opportunities for growth. The future remains bright thanks to our dedicated, skilled and passionate employees who work tirelessly and successfully to help solve our customers’ complex operational and supply chain challenges.

With $197 million in cash, no debt and $579 million of total liquidity, we continue to pursue complementary, margin accretive acquisitions where the combination would maximize shareholder value and fuel future DNOW success.”

Prior to the earnings conference call a presentation titled “DNOW Second 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 2,600 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)
	June 30,				December 31,
	2024				2023
ASSETS
Current assets:
Cash and cash equivalents	$	197			$	299
Receivables, net		403				384
Inventories, net		399				366
Prepaid and other current assets		24				19
Total current assets		1,023				1,068
Property, plant and equipment, net		139				131
Deferred income taxes		105				118
Goodwill		192				139
Intangibles, net		57				28
Other assets		47				45
Total assets	$	1,563			$	1,529
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	278			$	288
Accrued liabilities		123				120
Other current liabilities		11				10
Total current liabilities		412				418
Long-term operating lease liabilities		32				30
Other long-term liabilities		20				18
Total liabilities		464				466
Commitments and contingencies
Stockholders' equity:
Preferred stock - par value $0.01; 20 million shares authorized; no shares issued and outstanding		−				−
Common stock - par value $0.01; 330 million shares authorized; 106,549,496 and 106,257,565 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		1				1
Additional paid-in capital		2,028				2,032
Accumulated deficit		(783	)			(828	)
Accumulated other comprehensive loss		(151	)			(145	)
DNOW Inc. stockholders' equity		1,095				1,060
Noncontrolling interest		4				3
Total stockholders' equity		1,099				1,063
Total liabilities and stockholders' equity	$	1,563			$	1,529

DNOW INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In millions, except per share data)
	Three Months Ended										Six Months Ended
	June 30,							March 31,			June 30,
	2024			2023				2024			2024			2023
Revenue	$	633		$	594			$	563		$	1,196		$	1,178
Operating expenses:
Cost of products		495			460				434			929			907
Warehousing, selling and administrative		105			98				101			206			200
Operating profit		33			36				28			61			71
Other income (expense)		−			(1	)			1			1			(1	)
Income before income taxes		33			35				29			62			70
Income tax provision		8			1				8			16			4
Net income		25			34				21			46			66
Net income attributable to noncontrolling interest		1			−				−			1			1
Net income attributable to DNOW Inc.	$	24		$	34			$	21		$	45		$	65
Earnings per share attributable to DNOW Inc. stockholders:
Basic	$	0.21		$	0.31			$	0.20		$	0.41		$	0.59
Diluted	$	0.21		$	0.31			$	0.19		$	0.41		$	0.59
Weighted-average common shares outstanding, basic		107			107				106			107			108
Weighted-average common shares outstanding, diluted		108			108				107			107			109

DNOW INC. SUPPLEMENTAL INFORMATION
BUSINESS SEGMENTS (UNAUDITED) (In millions)
	Three Months Ended									Six Months Ended
	June 30,						March 31,			June 30,
	2024			2023			2024			2024			2023
Revenue:
United States	$	512		$	456		$	435		$	947		$	883
Canada		56			66			66			122			149
International		65			72			62			127			146
Total revenue	$	633		$	594		$	563		$	1,196		$	1,178

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												Six Months Ended
	June 30,								March 31,				June 30,
	2024				2023				2024				2024				2023
GAAP net income attributable to DNOW Inc. (1)	$	24			$	34			$	21			$	45			$	65
Net income attributable to noncontrolling interest (2)		1				−				−				1				1
Interest expense (income), net		(1	)			−				(2	)			(3	)			(1	)
Income tax provision		8				1				8				16				4
Depreciation and amortization		9				6				7				16				12
Other costs:
Stock-based compensation		4				4				2				6				7
Other (3)		5				2				3				8				6
EBITDA excluding other costs	$	50			$	47			$	39			$	89			$	94
EBITDA % excluding other costs (4)		7.9	%			7.9	%			6.9	%			7.4	%			8.0	%

NET INCOME ATTRIBUTABLE TO DNOW INC. TO NON-GAAP NET INCOME ATTRIBUTABLE TO DNOW INC. EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)
	Three Months Ended										Six Months Ended
	June 30,							March 31,			June 30,
	2024			2023				2024			2024			2023
GAAP net income attributable to DNOW Inc. (1)	$	24		$	34			$	21		$	45		$	65
Other, net of tax (5) (6)		4			(7	)			2			6			(10	)
Net income attributable to DNOW Inc. excluding other costs (6)	$	28		$	27			$	23		$	51		$	55

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										Six Months Ended
	June 30,							March 31,			June 30,
	2024			2023				2024			2024			2023
GAAP diluted earnings per share attributable to DNOW Inc. stockholders (1)	$	0.21		$	0.31			$	0.19		$	0.41		$	0.59
Other, net of tax (5) (6)		0.04			(0.06	)			0.02			0.05			(0.09	)
Diluted earnings per share attributable to DNOW Inc. stockholders excluding other costs (6)	$	0.25		$	0.25			$	0.21		$	0.46		$	0.50

(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 and six months ended June 30, 2024, Other was primarily related to transaction-related charges, of which approximately $1 million and $3 million, respectively, were included in warehousing, selling and administrative, and approximately $4 million and $5 million, respectively, were included in cost of products. Transaction-related charges include transaction costs, inventory fair value step-up, retention bonus accruals and integration expenses associated with acquisitions.
(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 and six months ended June 30, 2024, Other, net of tax, included approximately $4 million and $6 million, respectively, 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/20240807073786/en/

Mark Johnson

Senior Vice President and Chief Financial Officer

(281) 823-4754

Source: DNOW Inc.

FAQ

What was DNOW's revenue for Q2 2024?

DNOW reported revenue of $633 million for the second quarter of 2024.

How much net income did DNOW generate in Q2 2024?

DNOW generated net income attributable to DNOW Inc. of $24 million, or $0.21 per diluted share, for the second quarter of 2024.

What was DNOW's EBITDA excluding other costs for Q2 2024?

DNOW's EBITDA excluding other costs was $50 million or 7.9% of revenue for the second quarter of 2024.

How much cash did DNOW generate from operating activities in Q2 2024?

DNOW generated $21 million in cash from operating activities for the second quarter of 2024.

What is DNOW's current cash position and debt level?

As of June 30, 2024, DNOW had $197 million in cash and cash equivalents and zero long-term debt.