Dnow Q2 2026 Earnings Call Transcript

Dnow (NYSE: DNOW ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This content is powered APIs. 3 billion, a 10% sequential increase, and a 54% rise in EBITDA to $60 million.

The company is focused on executing its US ERP conversion and optimization plans, having transitioned 17 MRC Global locations to SAP, enhancing operational efficiency and synergy realization. 5%. S. revenue growth in midstream, gas utilities, and upstream sectors, with the midstream sector reaching its highest revenue level.

Management emphasized successful integration and synergy realization from the MRC Global acquisition, with expectations to achieve $70 million in annual synergies by the end of year three. Full Transcript Greg, Operator Good day. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to the Dnow second quarter 2026 earnings conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad, and if you'd like to withdraw your question, simply press star one again. Thank you.

Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference. Brad Wise, VP Marketing & Investor Relations Thank you, Greg. Good morning and welcome to Dnow second quarter 2026 earnings conference call.

We appreciate you joining us, and thank you for your interest in Dnow. With me today is David Cherachinski, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer. We operate under the Dnow and MRC brands, and DNOW is our New York Stock Exchange ticker symbol. Please note that some of the statements we make during this call, including the responses to your questions, may contain forecasts, projections, and estimates, including, but not limited to, comments about our outlook for the Company's business.

S. federal securities laws based on limited information as of today, August 6, 2026, which is subject to change. They are subject to risks and uncertainties, and actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or later in the year.

We do not undertake any obligation to publicly update or revise any forward-looking statements for any reason. In addition, this conference call contains time-sensitive information that reflects management's best judgment at the time of the live call. S. Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business.

com or in our filings with the SEC. To supplement the information provided to investors under GAAP, we present certain non-GAAP financial measures in our quarterly earnings releases and other public communications. We encourage you to review our earnings release and securities filings for further details on our use of these non-GAAP metrics and for reconciliations to the most comparable GAAP measures, and these documents are also available on our website. Unless we specifically state otherwise, references in this call to EBITDA refer to adjusted EBITDA.

Our second quarter 2026 earnings presentation is available on the Investor Relations section of our website. We expect to file our Form 10-Q later today, after which it will also be available on our website. A replay of today's call will be available for the next 30 days. Now let me turn the call over to Dave.

David Cherachinski, President & CEO Thank you, Brad, and good morning, everyone. I want to start by recognizing and thanking our 5,000 Dnow employees who delivered strong second quarter results, which reflect a meaningful improvement from the first quarter of 2026, our first full quarter as a combined organization. The revenue, earnings, and significant cash gains generated in the quarter were the direct result of teamwork and collaboration across the company. Our employees came together with a shared purpose, adding value to our customers and working towards realizing the full potential of Dnow.

Our customer-first mindset remains our greatest differentiator and continues to drive growth as we move into the second half of the year. I'm deeply grateful for the commitment, resilience, and hard work of every team member. Thank you for all you do to support our customers and to make Dnow run stronger. 3 billion, a sequential improvement of 124 million or 10%, with 13% growth in the United States exceeding our expectations.

Our teams continue to work tirelessly towards executing our US ERP conversion and optimization plans. Our strong top-line performance helped lift EBITDA to 60 million in the second quarter, a 21 million or 54% sequential improvement, beating our expectations and a key step towards our targeted profitability improvement. 6%, a 130 basis points improvement over the first quarter. We delivered 133 million of cash flow from operations in the second quarter, resulting in a positive 38 million year-to-date cash inflow.

This cash haul was driven by continued progress on the system optimization and working capital management fronts. The quarter benefited from higher revenue, improved execution, and accelerated synergy actions, while acknowledging that we continue to incur temporary elevated costs related to the MRC Global US ERP implementation and integration activities. These costs are expected to remain a near-term headwind but should decline as integration milestones are completed and systems are deployed.

During the second quarter, we made progress on the most important objective we laid out earlier this year: retrieving the revenue we want while improving profitability and cash generation. In July, we successfully transitioned our 17th MRC Global location to SAP, marking another important milestone in our US ERP conversion and optimization journey. With 17 locations now converted, we continue to standardize upstream and midstream operations across the network while enhancing operational efficiency, inventory visibility, and synergy realization.

Each conversion advances our ability to grow revenues, standardize processes, optimize the footprint, improve service levels, and capture the merger synergies identified as part of our three-year integration plan. This achievement reflects outstanding cross-functional execution, with teams delivering high-quality results across data preparation, testing, training, system readiness, and cutover activities with accelerated timelines. S.

1 billion in revenue, up 13% from the first quarter, representing strong sequential revenue improvement in areas where the combined Dnow and MRC Global platform gives us the best opportunity to recapture customer activity, gain share, and improve operating leverage. Revenue growth was driven by midstream strength, gas utility gains, with notable sequential upstream market share improvement supported by strong execution and deeper customer engagement. The combined product range and geographic coverage helped expand our commercial reach and operational capabilities for our customers.

In the Permian, for example, where we now operate on optimized ERP platforms, we are supporting larger project activity while strengthening local branch execution, inventory deployment, and customer service. As a result, we are seeing increased project activity, stronger bid conversion, and growing momentum with both existing and new customers. We are seeing clear evidence that the combined organization is winning in the market by bringing together customer relationships, broader product availability, best practices, and stronger execution discipline.

This was especially evident where inventory depth, local coverage, and targeted customer recovery actions enabled us to respond more effectively. S. performance improved across our operating regions, supported by healthy demand in maintenance, production infrastructure, and project-related activity. In upstream, we made definitive progress recovering customer activity and recapturing share.

This is a sector where our combined organization benefits from strong field relationships, deeper product availability, and a broader footprint. , our highest midstream revenue level ever. Investment in natural gas infrastructure, LNG-related activity, power generation, and feed gas infrastructure buildouts for data centers continue to support demand for the infrastructure-type products and services we provide. We are seeing strong activity across midstream infrastructure, pipeline-related work, compressor station packages, fabricated solutions, valve automation, and other project-driven demand lanes.

Our second quarter performance is a solid example of the type of momentum we want to see across the combined Dnow platform. The business continues to benefit from strong customer engagement, recurring project activity, and forward-looking planning and quoting activity with customers. Our midstream momentum reflects customer trust earned through consistent execution and the ability to convert relationships and project visibility into repeat opportunities. Gas utilities delivered another point of validation.

Our gas utilities business grew 15% sequentially, nearly twice the three-year second quarter sequential growth average. This represents an 11-quarter revenue high in what we see as a sector with a strong macro outlook. Gas utilities is a durable, infrastructure-led market supported by modernization, infrastructure integrity and meter replacement programs, and utility investment. Sequential revenue growth was driven by improved operational execution, seasonal construction demand, increasing capex from top customers, and market share growth from new customers.

To meet the growing needs of one of our top gas utility customers, we invested in a new distribution center designed to support 15 customer locations, resulting in improved proximity and enhanced customer service. As activity levels expand, activity across downstream industrial sectors was mixed. The downstream business saw a 12 million sequential revenue decline in 2Q, although activity and revenue was flat sequentially when removing the impact of a first quarter large non-repeating project, paired with market share take-back initiatives.

Despite continued weakness in the chemical processing industry, our targeted downstream customer relationships are improving and we are encouraged by the future revenue opportunities associated with upcoming turnaround activity. We typically begin to see pre-buy activity for seasonal turnarounds toward the end of the third quarter in advance of the first quarter execution, which is traditionally the strongest quarter for downstream turnaround activity. As a result, we expect downstream performance to improve as we move into the coming quarters. S.

LNG expansion, mining, and selected industrial markets. Near seasonal high refinery utilization and declining crude inventories point to a constructive future demand environment, supporting ongoing energy and industrial activity and improving demand for maintenance-related products and services. Simultaneously, across all sectors, we are focused on a number of operational and financial improvement initiatives, including inventory optimization, pricing actions, facility rationalization, and technology upgrades that will deliver stronger working capital performance and process efficiency. Data centers continue to represent an attractive opportunity for us.

We are encouraged by the momentum we are building across both our infrastructure products business and our automation and controls capabilities. Our strategy is focused on developing relationships with the EPC firms, mechanical and general contractors supporting major data center developments, allowing us to establish a meaningful presence in this rapidly expanding market. Through responsive service, supply chain expertise, material management capabilities, and consistent execution, we have earned repeat business and expanded our participation across multiple projects and geographies.

I also want to shine a spotlight on our Process Solutions business delivering its highest ever quarterly revenue, with growth led by our Water Solutions team, with solid contributions from Trojan, Flexflow, and Edge Controls. What is particularly encouraging is that this performance was not concentrated on a single product line or end market, highlighting the strength of the business’s growing portfolio. This breadth is important because Process Solutions provides Dnow with premium earnings growth while providing our customers a more diversified set of advanced fluid, gas, and automation solutions across a diverse set of industrial applications.

Strategically, Process Solutions strengthens Dnow's diversification and infrastructure-led growth profile. Canada's revenue for the second quarter was 47 million, or 8% lower than the first quarter, better than expected as a result of the seasonal pressure that accompanies the spring breakup period. We saw more resilient customer and project activity in Canada despite second quarter seasonality, with activity less susceptible to breakup-period-related declines across midstream and LNG opportunities. International revenue was 151 million, up 4 million or 3% sequentially, with increased profitability due to project mix.

We observed positive activity in certain markets and softer or timing-driven performance in others. We are seeing improving market conditions across several key regions, particularly in UK brownfield activity and in Australia, where both MRO and project demand strengthened, while customers remain cautious amid geopolitical uncertainty, legislative developments, and ongoing cost and supply chain pressures. These market dynamics also continue to create opportunities for new project awards and market share gains. In our Middle East operations, geopolitical instability continues to impact customer activity and project timing.

We are seeing some customers slow workforce deployment and defer project execution, resulting in delays in bidding activity and capital spending decisions across the region. While several larger opportunities remain in the pipeline, customer engagement and project progression have been slower than anticipated as uncertainty persists. We remain well positioned with key customers internationally and are encouraged by the long-term opportunity set. Turning to capital allocation, we remain disciplined and focused on creating long-term shareholder value through balanced investments, maintaining a strong balance sheet, and returning capital to shareholders.

During the second quarter we demonstrated the strength of our cash generation capabilities, delivering 133 million of cash flows from operations, a second quarter Dnow record. We deployed that cash across multiple capital allocation priorities, repurchasing 25 million of shares while reducing net debt by 95 million during the quarter, to be more in line with our net debt to four-quarter trailing EBITDA level target of less than 2. We view share repurchases as an attractive means of returning capital to shareholders and continued significant share repurchase levels in the quarter.

We are strengthening the balance sheet, which enhances our financial flexibility and our ability to execute our strategic priorities while creating long-term shareholder value. The combination with MRC Global has created a larger, more diversified business with greater participation in markets supported by long-term infrastructure and industrial investment. These characteristics strengthen the durability of earnings and give us confidence in our ability to continue generating meaningful cash flow.

Looking ahead, we will continue to focus on long-term value creation through our capital allocation, with prioritization of share repurchases, debt reduction, organic investments, and strategic acquisitions, while maintaining the financial flexibility to capitalize on attractive opportunities as they arise. With that, let me turn it over. Mark Johnson, CPA, CGMA — Chief Financial Officer and Senior Vice President Thank you, Dave, and good morning, everyone. 3 billion, up approximately 10% or $124 million from the first quarter and above the guidance we provided on our last call.

The sequential increase was driven by growth across the midstream, gas utilities, and upstream sectors on a geographic segment basis. S.