DNOW Inc. (NYSE:DNOW) is a global distributor of energy and industrial products, providing a comprehensive suite of supply chain solutions to a diverse customer base. With a legacy spanning over 160 years, the company has established itself as a trusted partner in the energy and industrial sectors, leveraging its extensive product portfolio, digital capabilities, and strategic acquisitions to drive sustainable growth.

Financials

In the fiscal year 2023, DNOW reported impressive financial results, showcasing its resilience and adaptability in a dynamic market environment. The company generated annual revenue of $2,321 million, a testament to its ability to capitalize on opportunities across its diversified customer base. Net income for the year reached $247 million, demonstrating the company's strong profitability. DNOW's annual operating cash flow of $188 million and free cash flow of $171 million further highlight its financial strength and ability to generate substantial cash flows to fund growth initiatives and return capital to shareholders.

The first quarter of 2024 was a strong start to the year for DNOW, with the company reporting revenue of $563 million, a slight decrease of 3.6% compared to the same period in the prior year. Despite the year-over-year decline, the company's performance was bolstered by the strategic acquisition of Whitco Supply, LLC, which contributed $17 million in revenue during the partial quarter of ownership. Net income attributable to DNOW Inc. for the first quarter of 2024 was $21 million, or $0.19 per diluted share.

Business Overview

DNOW's geographic diversification is a key strength, with operations in the United States, Canada, and internationally. In the first quarter of 2024, the U.S. segment generated revenue of $435 million, up 1.9% year-over-year, driven by the Whitco Supply acquisition. The Canadian segment reported revenue of $66 million, a decline of 20.5% compared to the same period in the prior year, primarily due to a decrease in Canadian rig count and weaker project activity. The International segment generated revenue of $62 million, a decrease of 16.2% year-over-year, reflecting weaker project activity in the region.

The company's product and service offerings span the energy industry, from upstream drilling and completion to midstream transportation and downstream refining, as well as industrial applications such as chemical processing, mining, and water/wastewater management. DNOW's U.S. segment is divided into two main business lines: Energy Centers, which contributed approximately 70% of total U.S. revenue in the first quarter of 2024, and Process Solutions, which accounted for the remaining 30%.

Strategic Focus

DNOW's strategic focus on the energy transition and adjacent industrial markets has positioned the company for continued growth. The company is actively involved in projects related to carbon capture, utilization, and storage (CCUS), hydrogen, and renewable natural gas (RNG), leveraging its expertise and product portfolio to support its customers' evolving needs. In the first quarter of 2024, DNOW saw an increase in quote activity for energy transition projects, with the value of quotes surpassing the total quote value for the full year 2023.

The company's digital initiatives have also been a key driver of its performance, with digital revenue as a percentage of total revenue increasing to 49% in the first quarter of 2024. DNOW's DigitalNOW platform provides customers with world-class technology for e-commerce, data management, and supply chain optimization, enhancing efficiency and strengthening customer relationships.

Liquidity

DNOW's strong balance sheet and liquidity position provide the company with the flexibility to pursue strategic acquisitions and return capital to shareholders. As of the end of the first quarter of 2024, the company had $188 million in cash and no debt, with $465 million in available credit facility capacity. During the quarter, DNOW generated $80 million in free cash flow, reflecting its ability to convert earnings into cash.

Outlook

Looking ahead, DNOW has provided an optimistic outlook for the remainder of 2024. The company expects sequential revenue growth in the second quarter, with a 10% to 15% increase compared to the first quarter. For the full year 2024, DNOW anticipates revenue growth in the mid-to-high single-digit range compared to 2023, with EBITDA margins similar to the previous year.

Conclusion

DNOW's diversified business model, strategic acquisitions, digital transformation, and focus on the energy transition and adjacent markets position the company for continued success. The company's strong financial performance, liquidity, and disciplined capital allocation strategy underscore its ability to navigate market dynamics and deliver value to its shareholders.