DNOW - Earnings call transcript Q4 2021

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Operator

Welcome to the NOW Incorporated Fourth Quarter and Full Year 2021 Earnings Conference Call. My name is Sheryl and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session [Operator Instructions]. I will now turn the call over to Vice President of Digital Strategy and Investor Relations, Brad Wise. Mr. begin. may you Wise,

Brad Wise

and statements responses is later that and projections These about are outlook forward-looking contain change. differ materially. as statements any any obligation assume results or for to any interest DNOW subject statements DNOW, update Good the Officer uncertainties revise may full operate this brands welcome the risks to, Officer. which some is call. year during on of one the us Chief reason. President We President primarily limited for you laws Sheryl. today refer estimates, They or make forward-looking With under we fourth information David based Mark to DistributionNOW is to We including, should NOW symbol, Johnson, quarter us Financial forward-looking for the joining may your Cherechinsky, business. comments your the you the of thank remain and do to actual XXXX the No not York later quarter DistributionNOW not Chief and you NOW morning, you, Inc. limited undertake to me Executive and US morning. federal and our within today, and forecasts, and New and call, and which will our that, in company's ticker Stock Inc.'s valid appreciate securities in We the including hear and these in year. the subject and statements during Please Exchange to Thank earnings publicly meaning of questions, note conversation Vice but conference are Senior our

the compensation measure financial have most the earnings Prior full-year current these and each of the align excludes adjusted to quarter financial to for and diluted its Forms In comparable with supplemental or reconciliation with affecting release. earnings time conference of SEC. to non-GAAP better results this period the including other companies of net excludes information information our not ir.dnow.com results Inc. and our our filings been EBITDA XX, an management's ended peer reflects business. as file at call provide the income, to to now stock the more be financial has share, Securities also call. our within US found excluding information impact GAAP. supplemental fourth we that judgment other or and as risk Commission as effort of refer in costs excluding In with calculated various you release available best the in other relative costs, and with measures, disclose with those detailed other Please measures facilitate to the to expense. certain a the December an GAAP, costs; periods investors to beginning as costs. for excluding effort EBITDA; Further website and Each performance, the our addition, note operating non-cash at conform by presented information factors Exchange excluding information EBITDA, a GAAP company's live on therefore, I additional our determined you'll sometimes contains the US been the discussion to XX-K presentation. that of non-GAAP XX-Q well latest financial per refer accordance and other have referred based of our earnings In management's in evaluation NOW that time-sensitive and to at XXXX, of with of costs, may major comparison end

results XX-K our for Web Form today for the and Web be on this XXXX. site be Investor of and the the the and A on available We our covering replay next quarter section of days. quarter will today's our key of available will morning, contains site. call XXXX our takeaways also presentation XX Relations As plan site third full-year file a to

to Now let me turn the call Dave. over

David Cherechinsky

our Thanks, Brad and a had responded prosperity conditions, everyone. to earnings when redefine worst to the changed, for as to future. year demanding and model motivate day fundamentally call lay and the its two it. only decisive had playbook, chain performance, morning, supplier, change in resolutely customer just and that industry enthusiasm in and in the at customer good were and ago, we the economy our DNOW morning, and competence, market emerging decisions believe Downturns driven the On adjust caring highly our sales habits groundwork We see and the to team improvement environment. operating past and as one crave in are results then supply our not but men the our recover. women customer superior from financial our thrive bottom-line how engagement market a our that The and in defend here action provides amazed spending these DNOW year experienced swiftly stressed of years not in the focus night embraced, competence solutions have this evident, I the began customers but of have and talented

valuable names, TSNM of and in Permian. asset in brand customer our fiberglass, flow, began we presence Odessa, of regions one Permian of flex our producing first the strength complementary in year, It's a the busiest our the service, facility Odessa Supercenter This heart this pumps, position the Texas. quarter operations fortifying new US. at energy in investment formidable appealing oil and strong of locations expands the at power During our and

customers. we target center with as this and drive in by deepen to as ramp the be quarter, customers super will to the primarily a express drilling location means plan center new to our and This up. open support area regionalize During a plans their efficiencies supported intimacy fulfillment

results, on the to provided guide of revenue call. at the our last on moving X% end fourth million down our was at quarter Now, $XXX

full XXX notable $XXX to by revenue margins or from full high Said as XXXX for was XX.X%, year is million pre record another the points or considering up In year of prior compared grew ago. period contributed were up record XQ that months of the XX% year strong nicely ‘XX revenues each the year For $X.XXX which This record a margins revenue way quarterly $XXX ignoring of revenue. XQ is $XX the fourth quarter well. high expanded ended of XX, COVID XX% a nine the margins, first XXXX gross a X.X%, set the XXXX up to XXXX, a billion, year, print million sequentially. and ‘XX, gross consecutive basis same gross million, XXXX December for again XX.X%

customers stressed supplier locations, And selective we from privileges, and pursue. benefit inflationary reputable allocate purchases good cultivated environment a in we terms respect But product reward we suppliers about from an benefit environment. we the partners, make and relationships in that. more are the and careful performance in and benefit as can who was availability have and this result with to lines, which our it are product and The the will of of we businesses, products more We customers costs, process, product will replenishment corral where selection and our support reciprocity because a suppliers and more availability, return do. we

the mix the able product prices we as pricing We more improve and line to on are elevate or lucrative meaning overall of margins pass in lucrative less product ones. ones, favor the

Now on some comments a regional basis.

top on energy, to and a our capital line performance factor major driving be discipline to For operators shareholders. maintain production cash continues customer as public US return

previous our private the on public lead the oil gas commented has operators calls, have rig the of producers we As behavior growth. and to count emboldened

with and share pipe and costs with valves the our lifting continued private added services on lower plans. to customers as we tank deliver production fittings integrated chain we our additional battery supply target wellhead and facilities. similarly hookups services During grow and that providing operators the XXXX, their success deliver quarter Mutual and help customers value for have throughout by continues

well orders damaged from producers receive supply rig to for a potential agreement independent several the from producer, is operation seeing increased key Southeast, PVF producer as Mexico E&P our growth the business Ida Gulf Permian, independent assets new support extraction the maintenance As were assets several flow direct an scale August. with as secured that over shelf we an In example, an whose program of of we're XXXX, work lithium in the CapEx from management hurricane Fueling flow a we line contracts quarter gains initial including materials into large in activity. on in of whose in phase. producer,

and area Haynesville orders attributed a also gas uptick large capacity provided to compressor momentum well-pad in midstream Sequential facilities see the producing in CapEx independent gathering PVF midstream systems, damage. repairs, maintenance station expect for in utilization, hurricane an projects. takeaway increase experienced investment We sales securing midstream we drilling also We producer. to continued three driving and for and grew activity, several more as from

valves on product extension fabrication kits NGL projects, midstream supplied spend previous and that customers rotating we and appliances quarters. technical We connect for transmission plays, commissioning of provided focused pivot line several processing projects on of number support gas completing of equipment, packages our a Haynesville Our well and in observed the Midwest service gas water We been valves. several and on solutions, and some fittings pipe, fabricating demand supplied has a applications field Utica customer producers. produced we the natural for skid been drilling actuated the for associated line Shifting from actuated launcher and favoring gas for existing where process receiver mounting, In and testing, minimizing more and and Marcellas, provide have support capacity. we due transfer to utilities our infield valves to US wells start-up Rockies. our and

infrastructure. increased are joint orders customer starting we to to However, less existing programs see areas as with shift

basin is of three provided instrument as saltwater quarter rebuilds in applications refinery operator. as feedstock valves Some phase a the notable a with and Rockies, package Southwest the for process a and separators, River Wyoming. In isolation include supplied and as the Powder large to wins project valves well our during for recover, alloy for activity we number of independent for trona transfer a beginning control number equipped mine another and operator, in high project for mix pump we E&P disposal

fabrication high supplied experience systems dryer number and pneumatic Our demand, operator, to a compressed eliminate greenhouse new and treater continue and Texas as instrument the Permian, packages large vessels and gas our of number to emissions. racks, separators. In with air us for replace air a gas from a operators for skids systems compressed we separate orders heater, pipe of Tomball pump facility received

we large Saskatchewan Alberta Canada, Canadian oil a replacing operator. hydraulic performance in rentals, producer, sands products Southeast In been on to applications have Alberta work with through turnaround saw as yielding maintenance orders Canada. based for flexible the producer, wins solution, with jet for Central EPC We orders operators from private notable an from wellhead improved ESP an successful several in PVF quarter, expanding a gravitate actuated pup CapEx rental more in We our activity large, delivered our in artificial packages valve midstream injection lift for along based options.

chain Middle impact experienced International bookings. we impacts. are most East. revenue from business occur project of supply routinely conduct number which increasing a reactivations availability and EPCs labor is an in the the rig as seeing increase Activity activity in Our associated more to in the gain to with smaller projects, should beginning traction, segment Furthermore, delays on in

delivering for Pakistan. upstream check Some and a for accessories actuated Indian as globe a notable in an and bolts facility cables and operator note, refinery range gate, electrical the well to an number for in a gas have Out EPC processing a pipe for provided a unit and producer our a gate the project plans and plant quarter of and power methylene project Kazakhstan a valves and an include for globe in glycol Also heat and of for power large power wins reclamation NOC valves in UAE in fittings combined to we accessories cables triethylene Africa. Kurdistan. in valves, West operations, for we in production check UK, as Oman, based ball provided of of an

in Kuwait. Iraq IOC We for also provided and in project an valves to an Jurassic facility produced for water the for production EPC a

and the product with in delays Our industry's availability by impacts dealing inflation shortages caused on and supply chain. product been

hard customers to import through team's to have risk chain depend obtain some solutions resulted approved manufacturer's on access support while to find only transit of have available a domestic with supply sources. their by minimizing meet timing balancing customers. Not have leverage to of We domestic up with half combination in first spend ensuring DNOW’s our you of alternatives to continues pipe experience who may and DNOW to of as disruption the challenges provided worked the we focused several suitable requirements. prices we cost inventory allocations, We bit and the products elements have has receipt, customers for This quarter. pipe increasingly were ultimate our that a been in suppliers available Our import we and XXXX. in using expanding we on availability both global ample of do have seamless and the AML. Inflation ensure the preferred list volume during pending our pipe

DigitalNOW our to Moving initiatives.

revenue was Our digital for percent of the SAP quarter XX%. revenue as total

shop.dnow.com and enhance workflow our experience catalogs developing their continue work our optimizing to product digitally We customized further customers to through their by platform. solutions e-commerce with integrated

and to advance equipment complex US solutions our are leveraging configurator product packages process We engineer digital our business. eSpec for

in use suite solutions the dryer pneumatic to project construct help systems. AccessNOW, few quarters, packages of our tool of customers. helped launcher packages reduce need while of management we a others bids a for and our launched equipment replacement and inventory configure greenhouse customers emissions, Over of operators size build quoting. project automated Furthermore, your support past to compressor are finally, using eSpec control have this and air many teams and number for of eSpec to and gas inventory has And it receiver customers gas

a control bar an energy automatic related collection Coast, and the US data product coding, for to biowater In fat and expense enable without pump to provided our the a provide helium how include high location. refiner for smart check RFID electric truck And now, sensors, to carbon EPC, a capture zero These successes in end highlight extract and In customers solutions biodiesel for drilling number high that manage locks, market. vehicle from we a like Alberta and storage biodiesel, won existing to capture extend pumps like and an incurring emission in through stainless exploratory animal we orders duplex tech AccessNOW touch industry to inventory Gulf to inventory use converts to manufacturer cameras, growth Canada, can multiple staffed of few wells the on better comments who manufacturing. plant for a carbon actuated valves producer packages on Our transition. vein we in and Texas. working the markets products industrial project I'd

number We increasing continue of track to and transition energy monitor projects. an

development been Our carbon fuel, customers air COX and capture hydrogen diesel storage many pertaining renewable a variety of and for and sustainable business has capture, to direct storage, jet RFPs team working RFIs projects. gasoline, transmission and and

me suitable to markets. it Mark. hand energy and bill with materials the ranges transition let broader As will list we to work projects, to that, of expanding of manufacture review our part from we end these With products access secure service that over

Mark Johnson

was and million, decrease Dave, million third from better revenue days expectation. from the quarter to third quarter the of X% everyone. Fourth revenue fewer for down decline mainly at a X% and million impacts working you, $XXX good The normal guided end XXXX quarter. was $XXX our morning, or seasonal XXXX $X from due quarter the fourth the holiday US the Thank

total fourth process and US sequentially X% X% revenue revenues of was contributed quarter, solutions down sequentially. approximately revenue XX% Our US US up centers energy approximately in was the the

as with paired when QX established was for up or million, impacts considering the XXXX. in of gross $X third sequentially quarter XX% dollar. from our or approximately and flat and the $XX quarter Canadian or $XX fourth in International a sequential margins quarter. the Moving million $X Canada energy Year-over-year, by provider. increase in a This the quarter margins see technical the first million XXX market, lower attributable transportation of revert performance both $XX a third value from About relative quarter. International mean XXXX. unfavorable Canada's revenue the foreign improving quarter. solutions by the distribution the XX.X%. customers the with charges weaker by costs fourth increased improvement now basis to strong up expected basis $X points in quarter to from third of the US margin was XXXX in same improved million million each as slightly the Gross was was segment. to or point a the million or demand X% quarter propelled decline relatively quarter third came approximately back favorable fourth in with towards from several of the fourth model trusted to $XX million gross XX% from currencies period $X the the compared to of the down drivers Canadian revenue lower million revenue and revenue from inventory was

see transportation XXXX. we the the in far eroding our tailwind to So costs margin elevated into norms, of some XXXX, move as returning we

margin with the margins thresholds component Another And driven expand the expect by came steel we as at quarter and XXXX from purchase helping favorable in volume not of same in high consideration increased repeat do on to pricing the again level quarter especially inflationary in the content that are in level products impact the margins of fourth reset. pipe line final currents was levels vendor the improvement quarter. first

quarter, net in least non-GAAP company-owned and EBITDA was facilities period, excluding other per $XX income transform through cessation of in is WSA million, our as the annual people model as fruit. relocation our financial expenses XXXX. or it COVID our of net other facility, the income and performance EBITDA $XXX income value is to these and for solutions this from cycle. migrate the clear expense across sequentially the in $XX for fourth variable build margin XXXX we severance on X.X% looking since charges And $X.XX reversal exits were to fourth million product by Warehousing selectively expected facility subsidies, base. as XXXX. nearing and related or continue million WSA durable costs moving warehousing was quarter basis almost the we Non-GAAP by growth effort XXXX, We $XX measures customers. the share, the quarter and and costs Impairment first profitability early quarter intentional revenue than our quarter looking our bear to to was the These higher in our fitness we DNOW statement market for million resulting better and reduced lesser of strategic to take costs see the expect per $X of and to as our although team compensation as for position our by increased off, on out resources and in cycles continue administrative forward, due carried the $X higher into products a when greatest quarter paying to an disclosed other administrative much the to GAAP in relate back approximately to to share. $X carried or selling DNOW or hold third growth team $X government million selling in we a for as in we've levels initiatives million capture XX a similar the see by a in $X.XX other our excluding million labor million fourth to and overstressed $X the primarily Herculean and the was XQ decrease investments And across out could quarter. most We extent lines provide consolidated million. that

strong the bring on efforts reconciliation XX%, bottom-line. back past highlight seen of $XX We've our a revenue greater $XXX combination quarter we XX% initiatives increase revenue. the to XXXX over of XQ implementing of transformed today customers. EBITDA from throughs positions $XX and similar this an our of EBITDA, periods And our noted, EBITDA expected that and want million. and our tremendous meaningful incredible in each well compensation our performance. profile, to product presented. customers positive from operating higher employees $XX million as had a of $XX higher and Brad actions we compensation work be at to And delivering a our $X a this year value improvement multi-year dollar than value As employees the financial have going of in taken, XXXX thank our feat a of loss margins now growth XXXX our inventory I to in non-cash and improvement on proof or of adds our our can into to delivered million throughs forward in flow that The continuously was quarter million. in identifying XX when want stock-based EBITDA improved been that employees significantly each cycle. looking model And shift us Stock-based operational quarterly year-over-year months, million of our fourth of and company. and full expense level improve flow in Clear XXXX EBITDA of EBITDA or are These I for efficiencies our for or million that expense focused hard to the of commitment XXXX

third an plus was from extends X% in of fourth revolving and million, the $X December receivable was the million credit liquidity million. zero Total now remained to the $XXX cash quarter zero included success inventory increase was cash Another our $XXX Accounts net the $XXX on up facility, our quarter facility total ample draws XXXX, comprising that our and at optionality through amendment credit liquidity into with availability. secured which senior $XXX million future quarter provides million, $XXX of $XXX and in of enhances an million additional the of million, hand, in current position undrawn debt above our of $XXX capital revenue X.Xx. decrease X% fourth with of We And inventory excluding percentage quarter quarter a a as to annualized our of was four some third cash XX.X%. flow. cash intentionally capital year fourth December in XXXX payable increase XXXX. as was strong with growth flow quarter free our the consecutive availability third from at in that to the XXXX, And quarterly we ratio is customers. of expect last Accounts fuel do have years, generated working this of XX, the free million, support working and $XXX product notable. we turns marks from as positive million of cash

For the more inventory, future strategic to strengths acquisitions revenue XXXX, actually $XX possess optimism fourth for typically experienced $XXX a fuel consumed resources committed with the to and We of revenue investments the Dave. customers the again, turn good talent, sheet to And fourth management, a XXXX, value and that level growth. asset the to with our growth we pursuing XXXX, of a year grow remain maximizing and and where health balance of and quarter from flow our cash the making XX% million develop shareholders. agile celebrate million our cash that successful of growth I'll period in future. generated we free quarter for or sustained that, would've back at business, We quarter in bottom-line, we the call year in create

David Cherechinsky

our M&A, are offering we to strengthen on respect expand solutions comments businesses market Mark. be that now M&A, targeting product, on to opportunities. earnings priority Through to recovery geographic with or on the customers, top deployment and to advantage cycle. continues you, and capital our build some margin take of accretive a And the business organizations position throughout the and inorganic Thank

solutions engagement of continue we well with potential as strategic differentiating notably in areas the lines as product focus, for as industrial process our targets opportunities markets. We evaluate active and

are of there For prospect every involved. deal, two parties

the durable and So a high. at for conclusion heightened, expectations oil relatively and when acquired are we economy seller getting with general are to prices solid Not just and a but the the nperformance finess, are through cycle. strong takes company financial $XX commodity time looking

evaluating are to opportunities we’ll and what across finish pipeline strategic We our continue take and in be numerous pursue line. and selective we ultimately the in

producers oil our to of commodity behavior the Over financial better has the prices, OPEC+ and oil performance balance reduce achieved North for worked most to higher capital the American quarters, discipline This supply through combination improved six global of previous surplus, led customers. have inventory sheets curtailments. and E&P

investment improves, continue and lead maintain to our demand optimistic our their and increased services products more demand the to will production, and grow driving engineered for financial improved As while activity current recovery ramp as CapEx that packages additional PVF products will up. equipment pace higher health we in for I'm anticipate and profitability. customers delivering

recovery US solid a producers to our continued positioned For Canada, advantage segment, their take expect commodity with well In we continue I as market improve. pricing growth budgets. providing fundamentals on year-over-year of to basis are motivation for to increase

business a year-over-year on Canadian basis. our in in growth expect also XXXX We

in projects. as international the uninterrupted segment footprint international levels. providing lift In adjusting the are energy activity slower to been recover, meantime, service has our We seeing to our more space while ensuring are we

year, weather the WSA in constraints XXXX issues, see due the first mid start be the growth revenue in gross availability in teen product a and surge expect logistics to expect XXXX of the percentage to will a in COVID be January which of in related believe levels and Despite next We to a in low XQ segment XX percentage approximate to near-term basis, were levels, XXXX range. On XXXX in we we revenue normalization full-year revert expect the our range year-over-year persistent and up XX.X%. slow up international margins XX sequential. to quarter and XQ we mid-single-digit in XXXX. could to the

the for teen levels We in margins, range high cultivated in to continued to expansion, by expect percentage solid driven XXXX. gross EBITDA percentage revenue year full the the incrementals year full XXXX, similar market

gains fog into While dollar and revenue believe XXXX. deeper year, million $XXX supply will EBITDA COVID, the and in be volatility geopolitical of in excess matters create a chain we double in could terms

year ago, year where pre we with early I'll strength to we XXXX close the full be prolonged A went in revenue pandemic expect innings XQ of the expecting we levels. the are decline given a into of of recap ‘XX revenue expansion. Now, what of market

bias our model focus and cycle. service, to team, So customer inventory focus was mitigate line where dollar product We and our efforts and class customer a growth to sales cash resources, cultivating towards risk improve earnings availability and evolving value our sees to world and significantly flow. the our reduce the on cost fulfillment top per free revenue the through precious to improve work

the chain to margins, excited inorganic turns, of for all in liquidity inventory fund on opportunities. Looking how accounts positive I'm back, where technology our in them. historically secure bottlenecks making into about I'm customers employees financial and operating jazzed regionalization customers partnerships our expectations our excited enter DNOW team debt understand edge DEI we about line. and the and about continued performance. excited the year I'm best or to I'm that pumped. growth we're and flow transformation skills, seize and provide, of and and people provide we're we we it's proud tireless, our fifth that now I'm and about experts to opportunity gross our how I'm encounter. organizational where entered do challenges up and and a interest efforts outperformed the we I'm conscientious, pursuing record strategic happy a about leadership, for the great I'm showing opportunities ability model our that initiatives debt and us substitutes focused hone helping solve and excited I'm record the the flexibility cash we have integrate our proud total for to And organic from company sales strong working to we with strain earning we're cash and education service to expecting our the will ample separate employees value capital our firms place confident our how and products Supercenter about record from to lot the the current so action how years. had supply we we're don't at most to margin growth with work key our of payments. from development have programs our journey our improve prosper. inclusion it and have diversity will us the with consecutive a book on We bonuses, XXXX XXXX and a business. skills. innovation business. proud as of of gross to training, competitor. closed cutting of proud and zero customer employees turns, I'm free our revenue our in how gains their XXXX, operations a about to pride, on I'm struggled

is features, to Finally, we know and we strengths, accomplishments, want to at protective I hesitant orientation and momentum beyond pride are the winning, and their an excitement. families all What that proactiveness, have incredible from our defensive, employees here DNOW. a and shifting

each customers, the can will are everything market. solutions a do I We help for DNOW our and future. team for people in they day customers our sales customers delight collective field, of all for premier who knowledge and building our to the us in our our destination front seek want win that continue for to and the to those making think specifically

We With let's because we that, we you. are for are of who questions. and are open where are call the we

Operator

Instructions]. comes And Nathan Jones from from our question Stifel. [Operator first

Adam Farley

on is for This Adam Farley Nathan.

peaking gross some margins gross would see typical the half, on the to on does pressure be in DNOW margins as inflation as first First peak year progresses, margins which usually with expect gross inflation with moderates? likely

David Cherechinsky

line question. product in on Well, the it depends

years margins, big we One appreciation had most have success beyond have product price in lines pipe, one sell where we terms primary of is pipe broad gross Pipe seamless pipe, pipe. be steel could the still and had is the rising in the further experienced very half. for we gains the prices pipe that although which of where we into beyond have first probably

was not of One though certain. in the my the opening receipt is issues I timing and it mentioned of of completely comments products

our in premium our we not competition could particular that that product So year, customers. And margin we could and course, expect receive of kind but as some the of see a for just to extend line. what product later us,

still lot We are for times. particular, the and seeing point, a that's don't could of we continuing. there for the case lines I midyear. Adam, know that lead of are inflation pipe But ebb that some broad-based support product your To in long kind

at that's level quarterly high pretty So we I and much think for where margins gross we consecutive have same four XXXX guided XXXX, the our saw of very records.

timing receipt and I I terms mean, first lingering more little will of earlier and in it's issues things that little And So point mean goods. January in into hot and of here more when the about half. a question second strong talked occurs. half our starting slow get inflection should a market a maybe it how think scarcity pretty off on depends is the I and

Adam Farley

DNOW significant to then And or still the lines, lower business. exiting at there lower margin done in are is turning lifting heavy margin And exiting work of we most be the product process to done? is

David Cherechinsky

that Well, it path we're and way. well down this I'll say

the me, that's that rig we customer movements all locations consolidations, to things performance this focused to so apply prepare cetera, me, contrary et our the around strong for right have effort future and to resources for have we making money and changing. customers, the product customer and things, success on So making we company. shareholders, financial to always sure areas, budgets sure make could and affect regions due lines is continue To couold we a for those grow or gardening we're the the limited where

kind have you're ongoing matter always where sweet of industry. weed I business reality and the business fertilize to business, and the kind that replant no So you it's think situate just the an always in, is of spot and in what of

an So that's just thing. ongoing

done there. I changes, structural major we're of terms think In

reduction we're of mode. think cost the out I

want in whether of that cetera. we phase well-trained do of activity. kind be want and up speculative thing regionalized chains, centers of Williston, business, et We to everyday people with large a the local more opportunity being customer. We projects, those We that's want to talent standing of one where for most intimate of the major migration and want want walk-in top customer, the focused those are business, it's or volume taking care locations call Houston, high I of to in like fulfillment our managing Odessa, centers with or the nodes on express to kind locations small be fulfillment we supply kind We and it regionalized. in Casper,

kind but excited speeding So I now about real happening and see it. that's up of it's still right

Operator

[Operator Instructions] Our from next question comes Moll from Tommy Stephens.

Tommy Moll

is $X.XX to I on it think from Dave, the at guidance of wonder start $X.XX range on for last us WSA. WSA, first of level can every higher refresh a of just if like quarter, I you year. philosophy quarter you quarter incremental I to you're sounds maybe in for the pretty last dollar clear third wanted the here, looking said, revenue

if of So and progress year? That'd on signal the give refresh sequentially us line be expense that that could any throughout how you might just us helpful.

David Cherechinsky

the I several benefited quite we In hundred a believe hand, impact -- been since incremental last making. public, year's to said also nicely. in months, each revenue I days right last call, to off-setting scarcity, that few I -- in the of that to level a in we cultivation what reductions and said comes So we range things in I of most $X.XX dollar in for XXXX. XX said to meantime, we're from the over the from one we've especially expense, think product a add on said to we I $X.XX had pricing, WSA of plan still I experienced market also we above the talked think lack well. as list last working it's as our strategy course, the the availability. XX improved the things product And labor we'd reduce it's we're that on those And of projects of a improve of efficiency And focusing inflation, on that on have business. that the

efficiencies. new And layer our that's at We're Like percent costs least XXX a continue are XXXX, in in reduce improved kind to build a points said basis for From we as we of a so probably as or retention is of of I revenue. a a a of mode. growth bring But XXXX. guidance percent down to that quarters, into we'll to philosophy attraction significantly for our experience of path WSA that's layered down revenue, XXXX several mode. by WSA

containment, cost question, said, are path. I on our over growth model good changing head really focused like making prioritizing but answer we and the are we're we're that on way to We last -- in

focused although I million. on guidance our overall because around cetera. to going guide throughs it margins So to in we gets a We're biasing we new very kind It the on on competition. of focused little did focused focused But tightly in having we're beating and little guide revenues, $XX murky -- people and be best those more. higher We're first We're business. the going quarter are and think the forward margins cost flow et towards we business, growth. higher cultivating to on efforts a the on

So that percentage down. is percent of come revenue will

good us that how business sure. still understand going and that'll future But to and quarter. standing to a and path in centers those pull we're be help it for But said, like also, projects We're of are business out I important to we location super we're will Our is in the up the costs be offsetting costs. times this we kind new underway. down are of lean grow investing bad, for the

Tommy Moll

a follow as your there, comment Dave. just supercenter And up on

WSA a You you out growth investing pointed market standing are now get increasing in and leverage you're up line the you'll there. on

So supercenter, incremental on curious the investments, you the just philosophy out forward that like those light investment? the to I'm when what you see green want conditions you called confidence set are to of to move what make have and the

David Cherechinsky

great we're DNOW from not branch got a I example, me think flex the really brands, really we strong basin, of strong and Odessa with service. fiberglass, our We've have has pumps, but evolving, basin, standard like position. power a good we the business, flow real to just for there which in physician said, which and from Permian a So Permian presence TSNM

deal about one in customers. who fewer from we in locations, into projects quarter, last inventory people locations to the be the volume network part and risk, more in we distributed five, Permian you'll fourth from less can of have manage a more able risk inventory We'll in the Now XXXX, inventory dollar of the quarter that consolidated in what a of the business. think from we'll when in Permian. have get We you inventory for XX have our next have expense revenue exponential won't where we you'll down, downturn much I per call the strew inventory risk kind have efficient

care it our standing growing we're a we're Permian, inventory of up, the so So better in doing take Permian, risks. in smartly. supercenter, to but And customers, we're going with less we're inventory we up able do to we're be to stood the just consolidating, we're more growing have

strong cost better and an that's So market. getting out and of getting are the in pulling we example

Tommy Moll

I'm on example. using And Dave just the here. made, overstaying not that point welcome Permian you so But my hope an as

X said revenue net that If notwithstanding of it just and square is described super roofline higher, for versus you center, fair like -- everything branches? say revenue before you per the foot of to the per consolidated employee the pro XX you and downturn you to be forma fact, should that

David Cherechinsky

I think so.

not comment, We roofline sure today. might about. the I'm have actually Now, more space

more in Because bottom on earnings employee. So interested the from improved, I'm be not improved more walk per going to bottom-line. of impacts I'd investments that the should make or that, be the than but choose the line soon, But comment see top-line. away we interested generally we in follow I'd watching really should top-line to but

Operator

next Company. & from Jon comes from Cowen question Hunter Our

Jon Hunter

going first you guidance year The what XX seems margins. quarter, the XXXX. back question So high to you're margin are that's inline first with to be for like at is imply the the just aiming for to in and

are based down gone margin in of basis, that as 'XX. that's I'm the as we you've peak multi-year go got offset level a it bit So pricing into outlook. then a maintain of HRC September. curious you flattish how guess, on progressing? to things doing inflation. gross curious you and that I'm think you since It seems this that And see relates XX.X%, quite to on some a pipe I you 'XX margin of is But can

David Cherechinsky

so had margin in successive quarter I gross our mean, XXXX Each best margins. do. was gross improvements year. I

mostly And our wasn't we end in locations. see, prepared remarks fewer folks I a than to coil XXX we we we the prices, points today, call come XXXX, be those The while XXXX, we exited ebbing the for to I We a for over gross didn't little to hot But kind about because XX this are guiding margins, terms success bit in maybe what steel generally So are offset later as maybe in we we some to are underway about we the efficient inflation, Q&A is can. generating be we didn't the lower even time, it believe think did didn't in that. mean. trying of in talk margins. on company. efforts XXXX, declining midyear, We fourth the in there in I year during in at and would it had such consolidated of saying the And And pipe, fact, into over because about But cautious year part, and rolled, more we margin quarter yet. later talk away of business. XXXX. it XXXX, wanted XX% in people maintaining walked we have low some about which of in over here from

stuff. higher walked people on maybe the that focused focused margin What we margin people $XX business. So our we away from stuff. million on We means is, have of our lower don't have

throughs flow as deal activity as and where inflation to labor inflation. able are it's process with in environment to, have well We hard generate to from an much the we better

driving market matter So our I not the think, -- it's it's performance. gross margin that's a just

you made deal five to product on made last have focused In to for of make last margin me the of you're careful big right people matter cultivation about that's year-over-year going call, years. the in to in the right what not a a improvements market do the we've it thing. I fact, sure If the

I for to can margins margin our I gross we'll not it during sustainable, products think from depressive some it's just a it's that see, of -- of higher do how in it year, are do believe see less margins. very sustained. terms and we're focus be margins. comes these And that and think going flows what the laser to issue of do think I mix of going But I if to as we're be to have So we've gross guided available, a would course, real then strong company.

Jon Hunter

little top-line Switching bit, of to guess gears things. the a side I

So ‘XX tracking your XX% the little you mid-teens. guided up seems year-over-year, revenues business. it me, to rig US low be a bit mean, maybe it of are XX% is like count's I up could conservative. To

you're that, on based just XX%. So up

in little but Canada of private public a should said be versus also Now, you there's on, and customer mix know, I international going that up XXXX. bit

you to if help in moving can up of mid-teens? kind be outlook to me regionally look for the XXXX revenue curious, the So pieces into low

David Cherechinsky

in of see looking I don't terms products. that -- we're peers of of market. customers we XX we are that in gave they're happened So a our telling the of us in what mid-teens and the that And we seeing and our load what's see We're we're first quarter. revenues. at think We're in -- the that basing see influx basing we of on what of basing on terms of days some terms the and on how what that's range

numbers there's customer Canada the -- But several will happen by quarters of way and think US, we'll for the internationally. is terms most decoupling seconded we of then count a see now. budgets modest more that from think -- looked if completions, I growth growth you some strongest things by at, the I look and at rig and the been traditionally there in of those in

that to We persist. expect

progression we're added, and the value kind our what away out to of think walked being we've I continue gross we to revenue. the we've is effort delivered probably so $XX kind earlier, pull the guiding where best costs and And business the of be. in of from to prune like And this -- we're see going given to not million said margin growth's

more in the that or would revenues wouldn't XXXX, bottom-line. that be benefited X% but that we X% So have would've enjoyed from we

think we're don't I sticking and it's depends year think that's a range on I conservative. how that. think flows, I the it with so So and good

end think pretty the strong it's I number. is at a top certainly

Jon Hunter

into you outlook? me, last free one better to in XXXX. than for then can XX did you And in does million the work and working XXXX, Do consumption you you expect that cash how generate think cap do

David Cherechinsky

well in in million. that'll think of one can XX one where beat I the the -- scenarios prepared the than we I to coming is we're that, more and thing There range. be but wild in seat is that inventory growth the a we kind driving, are or and we're what but mean, bit think million, for where of ahead do of it's card less plan timing little $XX I behind be there months. the whether it, scenarios this

Operator

Thank and question turn of our and end we for gentlemen, I call to you. CEO the session. President for over time will the Cherechinsky, statement. have now Ladies reached answer David closing the

David Cherechinsky

day. Have May. call And good for forward everyone to in interest Okay. Thank talking a quarter to DNOW. our you look on in I first

Operator

Thank for participating event. you, in ladies our conference. and gentlemen today's concludes This

now may You disconnect.

NOW (DNOW) 17 Feb 222021 Q4 Earnings call transcript