DNOW - Earnings call 1 2023

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Operator

Good morning, afternoon, evening. My name is Bhavesh, and I'll be your conference operator today. At this time, I would like to welcome everyone to the NOW Incorporated First Quarter 2023 Earnings Conference Call. [Operator Instructions] Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference.

Brad Wise

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

has and the In more that release additional results supplemental contains each excludes note Commission of provide filings that the Inc., earnings to major detailed costs website attributable to that or of judgment therefore, best our as with and net comparable have not management's measures, income refer of to time-sensitive the Each our information release. operating information to financial disclose our information calculated as forms a the been impact call. the may call measures U.S. U.S. Inc., time risk relative of our by business. information found latest in Securities investors XX-K non-GAAP with well our effort addition, earnings other in refer excluding in financial GAAP and other factors our on affecting reflects non-GAAP at NOW at the other to supplemental Inc. as most the attributable the SEC. An be per you within certain we excluding financial with with and Further financial costs our information NOW of of also live this on for conference file and, I XX-Q Exchange to discussion to costs, end EBITDA; determined these GAAP. Please NOW referred at available diluted earnings accordance excluding sometimes share as reconciliation other measure GAAP, costs. a to including its EBITDA, various ir.dnow.com you'll

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

turn let over call Now the me to Dave.

David Cherechinsky

the its growth best sequentially year-over-year to international constructive strong continues quarter more earnings, percentage first and segments, growth quarterly XXXX. marking our last earnings talented delivered year, good spinning U.S. Brad, discipline since completions weather-related counts results and and that provided we've the propelled had decade. We growth The oil of in I'm across as sequential on off outperforming strategy best reduced to be all than execute call proud our everyone. declines, lower as off our despite quarter first prices. the revenue in maintained EBITDA Thanks, our rig kick we see results a produced with recently in by team we segment of again the the and to gas this guide activity X revenue good most May quarter morning, and

It's communication, the for a planning, deliver Our I'm of result success. our employees. hard efforts and of their and a work focus discipline grateful are testament across the smart to the to globe our by achievements dedication and team,

make bolster shareholders. areas. strategic These sustainable provide widening or our balancing to other key this our X existing are continue opportunities even drive revenue adjacent both, to customers long-term business, In acquired reach expand in we enhanced and By products better we our pursuing fuel growth to the an geographic U.S. for value effort downstream, and growth for to our approaches repurchasing DNOW's excited Process U.S. exclusivities allocation, our existing million, which welcome capital inorganic aim new refining markets. businesses Regarding through further for the investments $XX to we cultivate to opportunistically week, we and products DNOW X and industrial the territorial agreements, with the territories Solutions acquisitions look those earlier and joining these while shares. family together. can offerings employees I'm DNOW solution into to deepening manufacturer forward

We also repurchase our continue to shareholders program. share value return to $XX through million

the active $XX repurchase to we purchased amounting end have authorized in were X.X million. million the million shares the quarter, Through the $XX first XX% of we as the During of market program. we quarter, consumed

some financial Now the of highlights. I'll hit

to by On was XX%, growth international was quarter December the U.S. of the year-over-year on First revenue to Canada X%, $XXX million, a attributable X% sequentially up acquisitions. XX%, primarily grew higher better-than-expected and lower count. year-over-year XX%, primarily XX sequentially in margins were XX% basis, XQ project expected, revenue or increase was XX.X%, up outpacing rig global due dilutive as margins. $XXX the million gross

margins given vendor following XQ a mix XQ consideration project 'XX, in 'XX better XQ first quarter the strong the in and 'XX example, were than reduced product in lower close. was For

million XXXX. out in in $XX produce That million cash to first capital from asset yielding to revenue in the consumption and support was up revenue, is million For XX% rental investments we excellent EBITDA EBITDA or to growth enhancements. quarter, XX% said, to round we invested free flow $XX year-over-year EBITDA the in as results. a quarter $X flow-throughs. working infrastructure Free a first and deployed positive On expect or of robust flow resulting was capital cash performance, million $XX X% basis, year-over-year solid

for demand the spool-mounted drove hovered an solutions comments. growth sequentially, dry In $XXX ERW was X% as prices million, sought U.S. process the regional and Across businesses newly for by were for line gas for our record gas process, U.S. our winter. oily completion drilling by Henry Btus. was some $X.XX of revenue in steel job quarter equipment. operators demand U.S., snowfalls and flat coil and million were Many to balance impacted around pipe. as sequentially due softened increase as poor inaccessible acquired relatively the spot U.S. negatively and first Northwest. X% packaged $XX weather and or sites production Now energy from million rig offerings with by pump count as driven in and Rig counts natural the Hub in well activity our demand as areas seamless per supply the receded basins, pipe to gas revenues

fully about IOCs revenue center the and PVF growth operational, MRO center mega the now to customers and and quarter and maintenance and opportunities Williston refinery gas their the products is we're enables. Key new renewals synergies spend. in agreement utility for provide successes excited Our include CapEx for

sequentially integrated contribute During the services our an the frames. to ordered PBF the we in products work expenses and a the share customers as processing expect meet improved to to spending new the and to projects for strong lower project inventory turnarounds. revenue time downstream and their availability for remain by demand they of chemical managing construction In for lease improving by operating refining future market, product and in Permian, supply Activity implemented market we as quarter, customers chain with increase growth. share we IOC we commitment market with as grew

diesel We products. are providing projects PBF refineries increased products for of customers as throughput biodiesel conversion renewable at their

process and to as to our up midstream pump companies, Our booster packages acquired solutions revenue the us the from activity XX% of U.S. units was business while our U.S. the segment grew additions for in lapped December quarter. increased for demand due

for seek Our vessel remains as newly operators strong their fabrication increase completed also to capacity wells. business separation

pump compressors beverage We targeting and aftermarket growth food and gas producers. and packages, are service air in non-oil we are markets capabilities manufacturing and in where industrial seeing

air pumps and Last beverage acquisition announced and vertical a Pump the providing we mining market. serial are in quarter, food of We dryer projects Supply. package for to manufacturer turbine and industrial Stealth compressor our

of municipal a DNOW contract we service Looking positions the and gas, maintenance large a the with in service water, This and over pump the an preventative service won has further for led for pump in largest and the wastewater plays. combined a districts, collectively revenue package a IOC unlocking organizations XXX contract the water the oil oil organizations Permian, of gas of Odessa program service one strength installed offering pumps markets. to units. And Pumps for win service and to securing in as preventative at Stealth maintenance opportunities additional outside successfully

of as to disposal as water for demand water in increases to saw business to Flow expand use water operators offsite applications sought Flex their opposed disposal transfer sites. permitted Our recycling

we testing for our quarter, Increased of gas and see provides several improving footprint. greater many for pressure regulation Furthermore, mute systems and deployed environmental industry pumping DNOW to EcoVapor their units a pipeline We emissions demand batteries. the LNG reduction our gas horizontal oil we drive customers. applied for natural find under construction. as overall mitigate pipeline products new to onshore During increase saw to demand that operators production solutions mobile to support the our recently and for standards to flaring demand around emissions of removal oxygen tank acquired emission Canada products

gas a their ability ZerOX challenged as the contracted sinks. routine per gas by removing lease million environment. our growth collected the tank Btu of grew quarter, oil water expanded During The battery sub-$X venting reduce oxygen period produced the value during units storage despite the ZerOX's EcoVapor and from gas in the proposition installations fleet speaks to the customers' at to flaring business

will in success a traditionally project must stringent products seeing to oxygen midstream industry. renewable demand oil the ensure achieved to The units gas our the gas renewable and natural was since gas supplied separation to project address oxygen ZerOX who equipment an and to large increase and winning We operators in quarter operators gas, swine operators, RNG This process the from a $XX within XX% specifications the gas industry, biogas water market we EcoVapor has oil the sell gas we to market. March And the sell revenue are EcoVapor Similar meets we for the farm gas the EcoVapor/RNG for notable to streams. In gas removal for collect RNG EcoVapor contamination sequentially. opens were large see in the customers' Canada, XX, successful the challenge sources up units and securing the order units with waste pipeline to gas for million market. customer. increased equipment RNG largest increasing. biowaste solved in ZerOX their and and from our a midstream growing using order order demand as landfills is collected landfill and While

capital well pipe as midstream and number fittings flanges projects a diverse from strong MRO plant perform to and for companies, of customers gas, through oil continues actuation projects of number oil we well supply gas a for demand team an operators, as with agribusiness valve Highlights for as drilling include EPC solutions and demand. and Canadian land-based Our our service mix a we demand contractors. customer a Outside of saw improve processing project. revenue and and for daily of

million, sequential $XX million was or of revenue a international, XX%. $XX increase For

For were has our being increased as projects the budgeted. quarters, few past long segment volume International in cycle

McLean valve seeing We orders industrial in distribution products activity and MRO revenue and to the win our higher converting safety equipment first are the inquiries, Electrical those driving quarter. In to products, competitive DNOW with now increased U.K., business. those and

products are in in expanded seeing provided existing West IOC the and and Middle as increased as North fields Pacific. East, in we tied Africa a investment Sea U.K., We customer greenfields the new the for reinvestment FPSOs Revenue investment and with major of activity in growing Asia them variety expand. to

previously and we cable supply for EPC pumps major additional we renewed East exports imported a base with gas a Europe and major assets. Middle natural IOC the with Russian with of for customers their out gas. customer agreement seek a replace In to frame portion electrical an PPE of for expand products petrochemical space instrumentation MRO project as refining agreement the During quarter, Norway, the to activity an projects, several downstream the to an a offshore to FPSO the products we X-year and an electrical activity support with cable platform. a capture In tieback carbon low-voltage Australia, as both project for secured orders are to for production for inquiries a In On in and IOC. secured development improving electrical and sizable greenfield subsea for increased

DigitalNOW to Moving our initiatives.

mix Our a on customer sequentially the line revenue digital revenue billing of was SAP as quarter for growth. top percent XX%, total due project the and to lower

Canada, trip efficiencies This punchout and revenue incremental for we both driving delivers procurement our nondigital in organization, quarter, service order app ordering. all-digital service preferred and field to efficiently, document began receiving mechanics enabling new round During purchase an the a method parties. our with linked Within began orders U.S. through perform simplicity Solutions digitally customer, Process out costs we allows new rolling to interface. our pump that alleviating work

We to as and our and and will asset. the talked pump of we real-time training horizontal Flex continue Flow a working digital expand quarter, improve use OptiWatch customer technology the monitoring used tool the about to efficiencies measure the drive solution help this asset performance to health of service. Last

With for with pump replacement. we service, monitor to are Mark. gaining happy units let is We that XXX provides hand revenue over and the our This opportunities see maintenance customers as popularity in field. that, asset OptiWatch it to software horizontal customer-owned me solution field actively over additional

Mark Johnson

good was other the quarter and excluding totaled was $XXX Thank or up million XXXX you, of for increase The XXXX. since from quarter fourth revenue. XXXX or XXXX XXXX. XX% X% revenue quarter or year-over-year Dave, fourth quarter first of $XXX up $XX EBITDA $XX X% XX%. $XXX than U.S. of first revenue revenue revenue EBITDA from the highest higher Total first a Year-over-year, U.S. million the the quarter first or was million X% quarter $XX increased for the or million, quarter reaching the $XX and of a million the quarter morning, million basis, revenue first pandemic. million, On or costs everyone.

revenue $XX Our of increasing $XX U.S. of X% million million X% million Canada flat, revenue U.S. foreign a foreign contributed XX% increase sequentially. $XX $X and XXXX currency And million quarter In XX% first or contributed first of approximately our or an energy year-over-year, relatively U.S. the revenue or the by revenue revenue million, X%, million. from quarter process first quarter, revenue up the $X for of quarter XX%. XX% approximately quarter negative revenue total $XX of $X negative XXXX. in was XX% And of million, $X limited fourth solutions first the million. International centers Canada, first impact quarter impact was was approximately a or for international currency despite year-over-year up totaled

the and highs million, of XX.X%. and and $X expenses to first our XX.X%, XXXX their gross new a from resetting gross margins our up for anticipated, sequentially, million but As from remain quarter $XXX quarter in above quarter expense WSA full tax combined year. the were or was the down limit-based margin recent selling administrative, primarily XXXX of from operating fourth the acquisitions payroll quarter Warehousing, of

first when reducing as quarter, the revenue make the a expect level. our approximate to XXXX. of WSA of as continue percent compared to percent progress to improving WSA first with a second We on the first sequentially and quarter quarter quarter revenue In of WSA we

$XX in or reported and X.X% million X.X% or the in or revenue. profit the $X delivered to delivered million quarter XXXX. U.S. Canada Moving operating the profit of operating revenue, of our profit revenue in segment of segments. In first the million by International of quarter, geographic first operating operating $X in X.X% profit

typically of Moving is to basis, the the face XXXX, March X the you, taxes. at rate for and On calculated income effective earnings the effective rate statement the X.X%. months expected is a tax rate levels. below I tax this was from these ended is remind GAAP the XX, income tax

tax our provision includes As in valuation the tax our deferred allowance favorable benefit a income changes the income tax expense on on tax from statement the assets.

exclude why benefits. such rate, is imputing tax income tax we this our such, As when non-GAAP

And a year for $X.XX the quarter XQ XX% diluted $XX tax a per XXXX. for per tax to modeling the is the effective or go-forward basis, net effective income estimate income, And $XX in rate For estimating was changes other income and modeling million QX NOW non-GAAP tax $X.XX to an from share. favorable XX% Inc. to a impact rate and XXXX fully was share. or net for NOW approximately non-GAAP for XX% the excludes quarter purposes, excluding allowance. Net was first million good the other costs, excluding valuation costs, Inc., for fully on attributable diluted attributable rate

acquisitions. quarter, At end debt a cash position $XX and balance million to of following amortization fourth and the had decreased be return and in the in depreciation in depreciation million. common XXXX We with In $X invested inventory expect Moving amortization expectations $XXX line our sheet. with X quarter first quarter, purchases the In quarterly value position our and the we additional $XXX as the we expense with availability. million of between to first ended we capital growth facility of comprises strategic the the of reported million our we total quarter $X quarter second the expense the business XXXX, credit shareholders. and to by investments, liquidity $X to repurchased cash which million. Cash million, net of and million $XXX in quarter stock we in quarter of our to

customers. In existing we access for inventory XXXX, with the the several end rates inventory million extends cash portion million $XX end capital, an increase $XXX was of from quarter. an at project DNOW was excluding of providing X% first facility as expenditures in process was remained was than we consumption customers million of And a $XX growth. percentage million for of cash annualized million net of of And $XX of in support forecasted capital $XXX fourth to XX.X%. invested approximately as quarter for payable procured In quarter capital of first invested million sequentially our million we first free In with Accounts operating the to quarter. flow of at our years. with in specifically the enhance fleet businesses. operating activities working flat actively this from $XX investment quarter the quarter, churn cash with growth. to and the A at the more the first levels the revenue full And as and increase was X.Xx. in of facilities million while the $X rental Flow capital commitments, billion solutions our $XXX to quarter to support capital credit Our used for was $XX additional the the quarter, into fourth XXXX, service the increase $X.X XXXX, first million December receivable first or our we more in Flex $X working next to first upgrading are million expanding million, expenditures X.X inventory, and ample quarter utility XXXX the our we Accounts year be investing as equipment key $XX for than these facilities, and invested EcoVapor range. revolving efficiencies was estimate

$XXX growth plans. well managing capital XQ for the in operations flow to fundamentals million business looking on $XX are having cycles, ended annual growth flow discipline at when through looking XX our and million the This corresponding the in positioned period cash XQ free revenue from XXXX are in cash trailing We which XQ bodes in XXXX, was future through million operations million business. comparing months months generate on from shows And and generation back XXXX. $XX positive, cash the to ended $XXX generate we XXXX. the and the how approximately cash the This to has in cash DNOW invested trailing allocation XX generated when focus free achieved

stock. additional X.X We of XXXX, that repurchases shares is quarter through the our in or repurchase continue common authorized December million to of XX, $XX with million execute program share on

our As repurchase repurchased $XX under XX, of we XXXX, million share $XX program. March have authorized million

approach key attractive having in tools opportunistically returns broadened management. remains the generate organic without to through ability shares and sheet capital also repurchase to use to acquisitions company commitment growing allocation to we balance as growth Our from deviating the priority, while a our the our disciplined framework shareholder

Dave. cash have we the be back to keep of me to debt-free, debt generation flow on continue call let that, with interest We no payments priority. And while turn

David Cherechinsky

Mark. you, Thank

$X growth U.S., Internationally, decline will areas our switching quarter the we production the revenue sequential outlook Now seasonality those quarter market mid-single-digit sequential in beginning quarter declined In quarter synergies not for lower. of in that Canada, Canada's acquisitions the the to from the revenue of from is from the to access drive the breakup second segment. quarter, second restricted. recur the second expect derived second driving we approximately U.S. heavy quarter historically expect the gains, in million in equipment and XX% first expected share to approximately projects in in revenue thaw, And quarter XXXX. a acquisitions drive and muddy revenue sequentially second where period the due to freeze sequential to to

increase growth spite XX% second approximating single-digit in Taken all DNOW's seasonal revenues the Canadian for year-over-year in low the 'XX from together, we to expect expected second sequential quarter percentage of XQ to quarter decline, range DNOW.

XXXX XX% targeted $XXX X% We for of expect second expect X% the revenue. We the to quarter full progresses, free gather XX full cash our flow cash is EBITDA approximate that year full for increase EBITDA XXXX, EBITDA year our full XXXX. as revenue level. our the to year will million XXXX of operations revenue deliver flow we dollar the to XQ approximately momentum And we year and from and anticipate year to at will view compared reaffirm

it I'm going up Before we about comments to the questions, with close business. open some for

solid lower these in results. related better-than-expected gas rig U.S. first bottom results and weather, counts despite as quarter. is quarter, off We achieved headwinds quarter weaker X% the X% completions and with prices inclement oil year to Again, first top to and nice revenue. of driving EBITDA start, a a revenue Our the performance sequentially, including line in and growing strong first percent

seen XX. first with Process And acquisitions about XXXX. our through shares to of We earlier growth strong Solutions million $XX completed of levels business. by further quarter, X cumulative U.S. additional million the this we sequential since repurchasing purchase XX% March returned strengthening In $XX segment the not operating we levels week, profit exceeding revenue our International posting shareholders excited are and cash

a talent, ample on remain advantageous that, on We as We call a place tools in advance the an focused in great market. With are possess let's open customers. footing solid questions. to the financial further DNOW's and for with of singularly our liquidity company variety incredible debt-free position with

Operator

Moll Instructions] Stephens [Operator Tommy from question of Inc. first from Your comes the line

Thomas Moll

to second I quarter correctly, the and WS&A on I you dollars start up EBITDA Dave, if on outlook basis, provided, wanted heard revenue read flattish sequential dollars, flattish. a

rate. that I back that, on means could So presume I'm gross margin the giving bit If you're on us little point to correct helpful. a any drivers there you be would

David Cherechinsky

Yes. acquisitions Good erosion, read. We're quarter. modeling that's quarters, the X Tommy. the recent X quarter. a been speaking good see of I've the in quarter some Yes, months. the see We're That's a the finally margin kind hit in second to which to gross starting last how of in several now we're question, about of last going full first

was the enjoyed our we're a quarters competition premium on it's we So we of I've et layer products, to number that on begun working premium and high-grading of margins, been a dissipating, able didn't. to as higher But been to margins. our margins for so. because really were do where which there layer of availability and We had product guiding because pricing and talking We've priority command focusing about always businesses gross a higher-margin cetera. margins pipe

that a basis gross see in, into And a a full we this we So of from segment. Canada basis slippage tends year quarter, compression decline. still quarter, we'll second is 'XX as our first We year primarily to we talked year. a highest a XX move be breakup kind little margin to expect to points of saw margin the full Canada quarter last due From little very period. XX in to XXXX strong second in do margins quarter the decline geographic kick mix see XXXX, the there. We about going points Canada. expect to about XXXX.

little expect like everything the more do about. taming we're can we grade, of talk we to overall high a we doing but margins, So

eroding get Canada. bit that's impacted how the seasonally of we gross inputs, expected terms being said, and you the as quarter, So big there. in little flat from really margins WSA second and X largely Like a

Thomas Moll

helpful. That's

May. to ask you I sounds As seal in like pump the and a follow-up, closed space. wanted It X acquisitions they're distribution the in about

just those could space, for any lines sizable generally along that Are about would the be you're looks pipeline additional like? in chasing you appetite What your you deals deals talk why helpful. like If it? anything there

David Cherechinsky

off, Yes. start it to Brad. going hand then to I'm and I'll it

the deals think Tuesday, solution acquisition the was Tuesday consecutive made. XXth X process I I closed So week, we this represents it think we've

growing So from acquisitions. came we're pump really on business seal and these business, growing primarily as that the business well focused X our that

big So part that's a focus. of our

do this will We deals like that year.

the the deals In market. of terms better affect to these get rates to multiples larger talking of try the could we we of kind that larger happens a in are to some on deals, uncertainty And companies ones. think little interest as and rise

looking part to opening And like our said my that's a in big we're comments, pull in I of we levers. really all the position and -- So are focus. a

rate organically. itself last The primarily market isn't We the growing focused year. as are on it at was growing

And Secondarily, we're the color? all give our to balance repurchase thirdly, acquisitions, details on X. deals months. on share sheet and some we X we've terms balance focused focused M&A, and Brad, on you done we -- our But way way want in sheet, the X manage can do we in do the of

Brad Wise

Dave. Yes,

Wyoming sell top-tier additional company some lot a a we with DNOW that good manufacturer of of as of color. in Wyoming. of PSI our really high same acquisition build was manufacturer, business, addition and kind in really pump They're called broadens broadening that, gross really securing, pump our out acquisitions and Back that other really significantly provided. geographic to The pumps XXXX, our but EBITDA in and in leader margins. manufacturer Just upon acquisition kind market we relationship kind aftermarket And in really capability earlier expands Montana, seal seal in it XXXX margins, in on a pump acquired with packages, the that week that some expanded the service service pump strategy our as footprint line, very repair large the this into capability new that closed mechanical of with X service the area far Colorado of very took mechanical the capability. us a benefits that high

part to business, our core strategy and forward. of that's kind accretive our going been acquisition So current of base

we're really our as in businesses. And Dave that these excited year of out his excited are footprint And extract the in mentioned expanding progresses. about So to prepared really there as that synergies about we're bolt-ons, They X remarks. area. going

David Cherechinsky

on And to to just one grow revenue want comment synergies. We on the that synergies focus we're business. going

not some looking cost at We from sales Solutions a synergy the at services for really and want the business of thanks. savings customers. We're the grow of to perspective. leveraging of are Anyway, competencies revenue those deals. to Process provide DNOW rest the from they We talent, looking that

Operator

Becker Capital The comes Doug the next from line question of from One.

Doug Becker

So you Dave, questioning, in is of the market gains, XQ, acquisitions, some growth to share count following revenue be highlighted synergies America going along the rig same that as drive should down. lines even North

the very on get year, full Just the of just nature fluid what's thoughts in the organic growth your quarter the and wanted U.S. for to given happening

David Cherechinsky

Yes.

in in going the we're the second the of organic U.S. is quarter most to think see to I happen going growth

really in second like I said, $X number strong of going seasonal see, not the about do a Of course, Canada, in in million, a had We to quarter. decline totaling international, we to quarter. we're projects repeat expect

different customers U.S., the of new growth moderate to really there. kind with most So organic in North the of In customers having wherever of of is American penetrated we're that footprint. going will or regions see our level activity the

leverage really in to Texas, there enterprise, just up businesses So to et we're from multiple Bakken, see and in DNOW business we South to continued growth Flow Flex our Permian mega-center where our EcoVapor our going the to fiberglass in stood the cetera.

as can with down service have and slowed we a the bit. a we team of mousetrap our main fundamentals simply those kind the same see with of drive. we and So rig market market seen of areas the turns that it's little then out, it kind seen mostly We've thing And completions. growth, We've X customers. as a share count some of decline, how sales customers value with base our better

we quarter. are to market gains us believe fuel share the the be going in for second So primary

Doug Becker

markets I DNOW's recent that's market given encouraging. acquisitions international broadened same the some and commentary, And you time, sounds the and offshore How the and guess, activity North your exposure initiatives. really just just at be it characterize outside end really to Now to current America has exposure as well. upstream, would like of end increasing seems

really just North outside upstream. America So exposure

Brad Wise

is really to kind having the take since in upstream distributor Since for this good a I'll NOV the going segment XXXX, that diversifying done core drilling top. or on might was spun levered OEM layer Dave off international in job But our business. Mark a downturn back, be Doug, offshore, our highly NOV international of to and from a equipment. we've Brad. maybe international we shot at business Yes,

areas. key East, in land-based IOCs in also more EPCs, capital in the in areas more we're projects and but So Middle Australia. We're projects in NOCs large through Asia and associated project-centric, the different U.K., executing with

a previous only a U.K. West Australia, relationship, not good the is IOC our our in capabilities, and McLean but also top relationships to the group, distribution Electrical electrical we we as very Africa. is which have team acquisition did Of we in business exporting course, expand management that driving as global

export the side seeing that we're So business up. pick of

part day time, diversification, would a revenue offshore small business. We're now. So to X% from was starting it's -- where it a say I much business our lot higher increase of of healthier international probably than see a the rates our at that's one that. business

like market business. geographically segment end about this diverse, healthier, quarter, We've So waiting And for we been grow. more growth. excited really this to it's diverse out the a pointed

The think activity picking we're that. backlog is The seeing up. picking up. is I

all and hitting future. excited So about finally cylinders on the it's

open in areas and seeing investment a expand, They to think East, Middle As we're We're security. activity and investment in the CapEx energy in we have driving Dhabi around and Arabia M&A kind Saudi as certainly certainly as with that internationally to of Kuwait all well. good well really more as Norway, be would we Abu looking foothold. obviously pretty UAE those

kind So it up. that sums of

Doug Becker

new hit not well, the maybe energy any other. on of downstream just exposure or commentary kind international And on, exposure the say, of very some really but

Mark Johnson

Sure. Yes.

if I So question downstream was specifically, think that internationally, the Brad...

Doug Becker

broadly. just internationally, just Not

Mark Johnson

Sure. Yes.

predominantly in across overreliance been Brad expansion the kind we're which of in prior has think really sector, seeing downstream the of of And the years where percentages ago, now part sector great. X to market geographies, was our International offshore downstream look I probably. if alluded we're larger single-digit seeing that for play back before segment, you kind of all cycles the business. it

Dave do this optimism And talked a lot some to plus are XX% arena. bright a spot so for provide And about and call that products on projects give think our that international be being to the is us energy able large of in into to those space double-digit, needing evolution for of the able grow that I for of us. customers

Operator

from the from Nathan Stifel. Jones question next line comes Our of

Adam Farley

are This categories? Nathan. that gross on other Are given of line follow some still in I pipe you steel is line the any Adam prices seeing understand in up questioning. coming you for down, to pipe prices? inflation but wanted I in product line have your recent moves margin on Farley the seen of moderation of

David Cherechinsky

about think seeing seeing part return of general -- first a certain not on seeing see of the of to increases normal stick. kind on we're inflation, types So push for through, seeing norm but times starting Manufacturers we're lead the the I of we're some valves them manufacturers. some to kind long trying We're and inflation. we're with product price otherwise, normalization our a of certain pricing lines are to kind

kind a normal chain. is of supply them for which a don't, of less Some stretched tenor

sales, type product for et see to So products, especially most and products I flanges starting terms of availability think valve more biddings in cetera. balance we're MRO routine of and and

to a the there. So kind of norm reversion

for inflation back say behavior kind would normal most product is I a And normalized that So now. of to lines. it's

We're internationally, is in some some that availability less and seeing down. are We of projects product issues seeing slowing that North America.

In seeing compression stabilized. pricing pipe terms of as margin of primarily in is pipe what pricing, kind has we're pipe

And down, suppliers could that Today, improved for products liquid Some product chain supply a pipe come ago. might little only the there. simply prices biggest it's more bit. to squeezing much that but that's ability due margin have acquire a year

range, we're some basis. long on kind to times, that's despite normal that So cost but having inventory, I something creating would inflation in of a kind squeeze. -- say, lead normal more lines product is regional the But we of margin seeing experience a higher back

Adam Farley

called Okay. in of And And the to quantify weather the from to press in out any to in meaningful make it expect up did in you near out -- do weather? term? if I that the fact, was, you want revenue release, the call quarter. it enough impact Was

David Cherechinsky

$X drags along But million some the I would. the which how into revenues or one think number to lost that gets much of of amount that don't I we deferred, probably about lines, the in quarter. those or so. estimate of second a Probably it quarter. deferred first it's would was X.X% know. in But

into of of the that the slip completions, wasn't could of Some to into cetera. the kind already. quarter That April was and second or gas reason primary, addition in headwind kind third but or third sort the that et prices, oil

Operator

Our from from Water Robertson comes last Jeffrey question Tower Research.

Jeffrey Robertson

several see next revenue generally it you revenue I believe correct, a Solutions mix margin Process U.S. talk And I XX%, was you higher -- quarters? represented mentioned in segment business first where think the quarter. of Dave, that be to I'm tends over you going Can that's of You mentioned you. for about the

David Cherechinsky

Yes.

that from it to So together kind XX% I first Solutions, put question It's a think to target when time. of accounted we for U.S. our time hard me get about but revenues. pinpoint for of I number, Process

doing. business doing margins. better like has net was has and Now -- reporting margins. But purchased I that that deal businesses the said we're we're have -- gross several unit, earlier, that in to it's are overall, up think that deal last And line each years there better operating space. XX back. for But been Every we We I so and guess, synergies revenue XX%. or

So where we But that's for X/X to percentage because here to want get the focus both like we're their It's our who strong business into big want an that really we area grow business those U.S. and in beyond to can business leaders moving a high-margin rental a pretty to But that big business. well. of joke get But grow more that us. which about I business X target around lines, for to like. energy be see What grow us. also kind businesses have as we I'd assets really that's of that.

line, for but line becomes more top really to the really So the that we attractive want bottom than to grow me business sure.

Jeffrey Robertson

centers? a businesses, so are stickier rental you So than but or maybe see the longer-duration stream -- businesses in might stickier, than those revenue what energy terms the on of not

David Cherechinsky

service sales for. just It's of it's businesses. lines complementary pull-through that Well, our for gross and already product other better those margins primarily the we allows customers to

it bigger of simply better margins well. more it us as customer wallet important us So makes just to gives a share the and the provides

suite better for So and a rental growing customer. complementary business on the I focus simply motivation think that's the solutions and primary of repair as to provides there's business, well margins that that that we

Jeffrey Robertson

even and material gas in comments, a that I could about the renewable talk project gas landfill is mentioned gas you something and become think biodiesel just landfill for some your DNOW? natural and and and farm. you opportunity projects In that project on biodiesel some increasingly a Can swine

David Cherechinsky

hands has Brad going -- his up. I'm to Brad let

wants one. to he Brad. So this grab

Brad Wise

at and some obviously, Where of but to and the refineries able certain agreements we're relationships, convert fairly But a oil -- refining bows number of fittings we're we -- in refineries. for have to and the market. the looking we're opportunities reasons. sold really products the RNG gas, biodiesel also diesel. we're as process yes, capacity states we We've of into provide take to to some for RNG biodiesel like those advantage into historically to projects and these Jeff, by and upstream with diversify levered market pipe

certainly a really of see rate as On a lot RNG horizon and the market of fourth the demand we than the we immediate the the RNG really than solution see quarter, did good kind cements side, end oil we fits gas and that EcoVapor in at the a higher growing acquisition future. the on that product

unlocked fiberglass pipe that as that that use open kind stringent have again, we farms PVF So meet we oil we're swine free landfill as capturing in leading opportunity takeaway they're of gas. Traditionally, same gas having to we the to project, of dairy our pump for might excited pieces up EcoVapor our done operators well regular as requirements as equipment, can from lot solutions well and with but a EcoVapor with RNG midstream bring the applications, gas packages haven't of products what put think the and as across for DNOW it's what business. to, that, gas into landfill section process can fabricated about as provide whole additional oxygen just and well other see, a to whether as farms,

bullish that, we're DNOW name growth and We're on So yet about the that market. number a but on we're ready excited the in potential pretty to not RNG. has end that growth

Operator

at time. Brad no call you. Mr. further turn this are back to Wise. questions I over There the

Brad Wise

conference on you, Bhavesh, back Have today call. We thank forward joining Thank second your look operator your talking August. to and quarter the call and questions a nice everyone for XXXX the in conclude Inc. day, our and everyone, for to earnings NOW I'll Okay. interest with you, to it turn in

Operator

This call. you. conference today's concludes Thank

may You now disconnect.

NOW (DNOW) 4 May 232023 Q1 Earnings call transcript