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01/11 11:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Despite a slight sequential revenue decline, DNOW demonstrates strong financial health with increased EPS, robust free cash flow, and a significant share repurchase program. The optimistic guidance, especially in the energy evolution market and midstream interest, suggests positive future prospects. The Q&A reveals constructive tariff impacts and expansion opportunities, which further bolster sentiment. With a market cap of $1.44 billion, the stock is likely to react positively, anticipating a 2% to 8% increase over the next two weeks.
EPS $0.25, up from $0.14 year-over-year.
Fourth Quarter Revenue $571 million, down 6% sequentially.
Full Year Revenue $2.4 billion, up 2% year-over-year.
Fourth Quarter Gross Margin 23.3%, up 100 basis points sequentially.
Full Year Gross Margin 22.5%, lower than 2023 due to pricing deflation in steel products.
Fourth Quarter EBITDA $45 million, or 7.9% of revenue, well above expectations.
Full Year EBITDA $176 million, or 7.4% of revenue.
Fourth Quarter Free Cash Flow $119 million.
Full Year Free Cash Flow $289 million, a 165% free cash flow conversion.
US Revenue (Q4) $451 million, down 6% from Q3.
Full Year US Revenue $1.88 billion, up 7% year-over-year.
Canada Revenue (Q4) $66 million, up 2% from Q3.
Full Year Canada Revenue $253 million, down 10% year-over-year.
International Revenue (Q4) $54 million, down 8% sequentially.
Full Year International Revenue $240 million, down 17% year-over-year.
Net Income (Q4) $23 million, or $0.21 per fully diluted share.
Net Income (Q4, non-GAAP) $27 million, or $0.25 per fully diluted share.
Full Year Net Income (non-GAAP) $100 million, or $0.91 per fully diluted share.
Cash Position (end of Q4) $256 million.
Total Liquidity (end of Q4) $556 million.
Accounts Receivable (end of Q4) $388 million, down $17 million from Q3.
Inventory (end of Q4) $352 million, down $12 million from Q3.
Accounts Payable (end of Q4) $300 million, up $22 million from Q3.
Working Capital (Q4) 14.4% of annualized fourth quarter revenue.
Cash from Operating Activities (Q4) $122 million.
Cash from Operating Activities (Full Year) $298 million.
New Product Offerings: NOW Inc. expanded its EcoVapor product offerings in the US, targeting increased demand for natural gas and reducing scope one emissions.
Acquisition of Trojan: NOW Inc. acquired Trojan, enhancing its water management solutions and expanding its capabilities in water treatment, sourcing, and transfer markets.
Market Expansion: NOW Inc. is focused on intensifying growth in process solutions, with the Trojan acquisition expected to contribute to this strategy.
Revenue Growth in Energy Evolution: Revenues in the energy evolution space grew by over 60% year-over-year, indicating a strong market positioning.
Operational Efficiencies: NOW Inc. achieved a working capital velocity of approximately seven times a year, improving product availability and reducing logistics costs.
Cost Control Initiatives: The company implemented self-help strategies, including rationalizing IT costs and aligning workforce, resulting in improved earnings.
Strategic Focus on M&A: NOW Inc. completed 23 acquisitions since going public, with a focus on margin-accretive businesses to strengthen capabilities.
Share Repurchase Program: NOW Inc. announced a new $160 million share repurchase program, doubling the previous program, reflecting confidence in cash generation.
Market Activity Decline: NOW Inc. anticipates a decline in market activities that drive revenues for the third consecutive year, which poses a risk to growth opportunities.
Competitive Pressures: The company is facing competitive pressures, particularly in the upstream sector, which may limit growth opportunities.
Regulatory Issues: Operators are closely assessing new policy decisions from the administration, which could impact larger scale CCUS and RNG projects related to government subsidies.
Supply Chain Challenges: The company experienced project delays in the international segment, which shifted revenue recognition into the first half of 2025.
Economic Factors: The outlook for 2025 includes expectations of lower upstream customer spending due to efficiency gains in drilling and completions, which could affect revenue.
Revenue Reduction: NOW Inc. expects a $40 million decline in fabrication sales in 2025 and a $30 million reduction in revenues from low-margin business activities.
Inventory Growth: The company anticipates inventory growth in 2025, which may consume cash based on their forecasted model.
Growth Strategy: NOW Inc. is forecasting growth in 2025 despite expected declines in market activities for the third consecutive year. The company aims to achieve its fifth consecutive year of growth.
M&A Activity: NOW Inc. has completed 23 acquisitions since going public in 2014, with a focus on margin-accretive businesses. The recent acquisition of Trojan is expected to enhance their process solutions business.
Self-Help Initiatives: The company is actively rationalizing IT costs, third-party expenses, and has aligned its workforce down by 12% to improve earnings and cash generation.
Digital Integration: NOW Inc. is leveraging digital technologies to automate processes and improve efficiencies, which is expected to reduce costs and enhance data accuracy.
2025 Revenue Outlook: For 2025, NOW Inc. expects revenues to be flat to up in the high single-digit percent range from 2024 levels.
2025 EBITDA Guidance: Full year 2025 EBITDA is projected to approach 8% of revenue.
Free Cash Flow Target: NOW Inc. is targeting free cash flow of $150 million in 2025.
Q1 2025 Revenue Guidance: For Q1 2025, sequential revenue is expected to increase in the low to mid-single-digit percent range compared to Q4 2024.
Share Repurchase Program: NOW Inc. completed an $80 million share buyback program in the fourth quarter, repurchasing approximately 7 million shares at an average price of $11.39 per share. Additionally, a new $160 million share repurchase program was authorized, which is double the size of the previous program.
The earnings call reflects a positive outlook with strong financial performance, including improved EBITDA and free cash flow. The MRC Global merger presents synergy opportunities, and there's optimism in market expansion, especially in energy evolution markets. While there are challenges in integration and uncertain midstream growth projections, management maintains confidence in achieving cost synergies. The positive aspects outweigh the uncertainties, leading to a positive sentiment, likely resulting in a stock price increase of 2% to 8% over the next two weeks.
The earnings call reveals strong financial performance with record EBITDA, solid free cash flow, and a debt-free balance sheet. Despite some regional revenue declines, overall growth is evident. The Q&A session highlights strategic growth areas like electrification and AI, and the company remains focused on integration and diversification. While management's guidance remains cautious, the strong current metrics and shareholder returns suggest a positive stock price movement, especially for a small-cap company.
The earnings call summary highlights a strong cash position, zero debt, and a positive free cash flow conversion, which are solid indicators of financial health. International revenue growth and a strategic inventory build-up support customer growth. Despite inflationary pressures, management expects favorable gross margin increases. The Q&A section reveals steady growth in adjacent markets and an advantageous position over competitors. The acquisition of Natron International and share repurchase program further boost sentiment. Given the company's small market cap, these factors suggest a positive stock price movement of 2% to 8% over the next two weeks.
Despite a slight sequential revenue decline, DNOW demonstrates strong financial health with increased EPS, robust free cash flow, and a significant share repurchase program. The optimistic guidance, especially in the energy evolution market and midstream interest, suggests positive future prospects. The Q&A reveals constructive tariff impacts and expansion opportunities, which further bolster sentiment. With a market cap of $1.44 billion, the stock is likely to react positively, anticipating a 2% to 8% increase over the next two weeks.
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