DNOW (DNOW) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $633 million, up 12% sequentially and 6.6% year-over-year, driven by the Whitco acquisition and organic growth, despite lower U.S. well completions and weak natural gas prices.

• Net income attributable to the company was $24 million ($0.21 per share); adjusted net income was $28 million ($0.25 per share).

• EBITDA for the quarter was $50 million, or 7.9% of revenue, with $2 million in non-recurring favorable items.

• Free cash flow totaled $18 million for the quarter and $98 million year-to-date, with a trailing four quarters total of $201 million.

• Share repurchases of $10 million were executed in Q2, with $67 million repurchased cumulatively under the $80 million program.

Financial highlights

• U.S. revenue was $512 million, up 18% sequentially and 12% year-over-year, mainly from Whitco and growth in energy centers and process solutions.

• Canada revenue was $56 million, down 15% sequentially and 15.2% year-over-year due to seasonal breakup and weaker project activity.

• International revenue was $65 million, up 5% sequentially but down 9.7% year-over-year, primarily from Middle East projects.

• Gross margin for Q2 2024 was 21.8%, impacted by steel pipe prices, mix, competition, and acquisition accounting.

• Cash and cash equivalents were $197 million at quarter-end, with total liquidity of $579 million.

Outlook and guidance

• Q3 2024 revenue expected to be flat to down 5% sequentially, with EBITDA margin around 7%.

• Full year 2024 revenue projected to grow low- to mid-single digits over 2023, with EBITDA margin of 7%-7.5%.

• Free cash flow for 2024 could approach $200 million.

• Management aims to complete the $80 million share repurchase program in 2024 and is evaluating accretive M&A opportunities.

• U.S. activity expected to be lower in Q3 due to weak gas prices and election uncertainty; Canada to see growth; international to be lower due to project timing.