DNOW Inc. Q3 FY2024 earnings call

• Financial Performance: Third quarter 2024 generated $72 million in free cash flow, with trailing 4 quarters free cash flow at $273 million. EBITDA was $42 million (6.9% of revenue). Year-to-date EBITDA was $131 million (7.3% of revenue). • U.S. Market Resilience: Despite decline in rigs, completions, etc., DNOW's solutions muted impact. Examples include Williston, North Dakota mega center and U.S. Process Solutions' strong performance. • Digital Initiatives: Digital revenue as a percent of total SAP revenue improved to 52% in the quarter, passing 50% for the first time. • Acquisitions: Inorganic growth is a key lever, prioritizing margin-accretive businesses to diversify capabilities.

Third quarter 2024 revenue was $606 million. U.S. revenue totaled $482 million, up 8% year-over-year, with U.S. energy centers contributing approximately 3/4 of total U.S. revenue and U.S. Process Solutions contributing the remainder. Canada revenue was $65 million, down 4% year-over-year but up 16% sequentially from the second quarter. International revenue was $59 million, down 9% sequentially due to location closures and lower project activity in the Middle East and U.K.

• Fourth Quarter and Full Year 2024: Sequential revenue expected to be down seasonally in high single digits from Q3 2024. Modest full-year revenue growth compared to 2023. Full-year 2024 EBITDA as percent of revenue could approach 7%, cash from operations could approach $225 million, CapEx approaching $10 million.

• Market Volatility: Impact of lower commodity prices, customer consolidations, and potential delays in projects due to integration processes. • Supply Chain: Product availability issues leading to project deferrals. • International Operations: Restructuring of international operations with suboptimal financial returns in some locations.

Q: Nathan Jones from Stifel asked about M&A environment and election impact.

A: David Cherechinsky responded that the election result provides a more business-friendly climate, and DNOW's focus is on pumping solutions acquisitions.

Q: Jeff Robertson asked about midstream revenue and election impact.

A: David Cherechinsky and Brad Wise discussed midstream growth potential and benefits from administration changes, including possible expedited permitting and growth in LNG export capacity.