GuruFocus -
- Revenue: $606 million for Q3 2024, a sequential decrease of $27 million or 4%.
- EBITDA: $42 million or 6.9% of revenue for Q3 2024.
- Free Cash Flow: $72 million for the quarter, $273 million over the trailing four quarters.
- Cash from Operations: $281 million over the trailing four quarters.
- US Revenue: $482 million, down $30 million or 6% sequentially.
- Canada Revenue: $65 million, an increase of 16% sequentially.
- International Revenue: $59 million, a decrease of $6 million or 9% sequentially.
- Gross Margin: Increased 50 basis points to 22.3% from the second quarter of 2024.
- Net Income: $13 million or $0.12 per fully diluted share for Q3 2024.
- Non-GAAP Net Income: $22 million or $0.21 per fully diluted share for Q3 2024.
- Cash Position: $261 million at the end of the quarter.
- Inventory: $364 million at the end of the third quarter, a decrease of $35 million from the second quarter.
- Operating Profit: $23 million total, with $25 million from the US and $3 million from Canada.
- Interest Income: $1 million for the period.
- Effective Tax Rate: Estimated at approximately 28% to 30% for the full year 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dnow Inc (NYSE:DNOW) generated significant free cash flow of $72 million in the quarter, contributing to $273 million over the trailing four quarters.
- The company upgraded its 2024 free cash flow forecast to approach $215 million, indicating strong financial performance.
- Dnow Inc (NYSE:DNOW) achieved a solid EBITDA of $42 million, or 6.9% of revenue, despite a challenging market environment.
- The company has no debt and a strong cash position, providing flexibility for strategic growth initiatives.
- Dnow Inc (NYSE:DNOW) is expanding its midstream business, which now accounts for approximately 20% of its revenue, indicating diversification beyond upstream markets.
- Dnow Inc (NYSE:DNOW) experienced a sequential revenue decrease of $27 million, or 4%, in the third quarter of 2024.
- The US market saw a decline in active rigs, completions, and new wells drilled, impacting revenue opportunities.
- International revenue decreased by $6 million, or 9%, due to location closures and lower project activity in the Middle East and UK.
- The company faced project delays, with approximately $10 million in orders not processed in the third quarter.
- Customer consolidations led to project timing shifts and funding delays, affecting revenue realization.
A: David Cherechinsky, President and CEO, stated that a more business-friendly climate from the election results could benefit DNOW. The company is actively pursuing acquisitions and believes a favorable administration could facilitate more deals, especially in the $100 million to $200 million range.
Q: Can you provide details on the project deferrals from Q3 and their expected timeline?
A: David Cherechinsky explained that about $10 million in projects were deferred in North America due to product availability issues. These projects are expected to ship in Q4, with some potentially pushing into Q1 2025.
Q: How does DNOW view the current oil and gas cycle, and what impact does customer consolidation have?
A: David Cherechinsky noted that DNOW benefits from the capital discipline shown by oil and gas companies, which has muted the downturn. Customer consolidation can cause short-term disruptions, but DNOW expects to benefit long-term due to its capabilities and market position.
Q: What is DNOW's outlook for midstream revenue, and how might it be affected by potential policy changes?
A: David Cherechinsky indicated that midstream currently accounts for about 20% of revenue and is expected to grow. Brad Wise (LON:WISEa), VP of Investor Relations, added that policy changes could expedite permitting processes, benefiting midstream and potentially increasing revenue beyond 20%.
Q: How does DNOW plan to use its strong cash flow, and what is the priority between share repurchases and dividends?
A: David Cherechinsky emphasized that DNOW prioritizes organic growth and M&A. Share repurchases are favored over dividends as a means of returning value to shareholders, supported by strong cash flow and balance sheet management.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.