Q2 2024 DNOW Inc Earnings Call
Preventing our noise.
Operator: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.
Speaker Change: After the speaker's remarks, there will be a question and answer session.
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Operator: If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations. You may begin your conference.
Brad Wise: Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference. Well, thank you, Rob. Good morning and welcome to Denow's second quarter. 2024 earnings conference call. We appreciate you joining us and thank you for your interest in Denow. With me today is David Cherechinsky, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer. We operate primarily under the Denow brand, which is also our New York Stock Exchange ticker symbol. Please note that some of the statements we make during this call, including responses to your questions, may contain forecasts, projections, and estimates, including not limited to comments about our outlook for the company's business.
Brad Wise: Well, thank you, Rob. Good morning, and welcome to DNow's second quarter 2024 earnings conference call. We appreciate you joining us, and thank you for your interest in D-Now. With me today are David Cherechinsky, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer.
Speaker Change: Well, thank you, Rob. Good morning and welcome to DNow's second quarter 2024 earnings conference call.
Brad Wise: We operate primarily under the D-NOW brand, which is also our New York Stock Exchange ticker symbol. Please note that some of the statements we make during this call, including responses to your questions, may contain forecasts, projections, and estimates, including but not limited to comments about our outlook for the company's business. These are forward-looking statements within the meaning of the U.S. federal securities laws based on limited information as of today, August 7, 2024, which is subject to change.
Brad Wise: 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. I refer you to the latest Forms 10-K and 10-Q that D-NOW has on file with the U.S. Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business.
Speaker Change: Please note that some of the statements we make during this call, including responses to your questions, may contain forecasts, projections, and estimates, including but not limited to comments about our outlook for the company's business.
Brad Wise: These are four looking statements within the meaning of the U.S. federal securities laws based on limited information as of today, August 7, 2024, which is subject to change. They are subject to risks and uncertainties, and actual results may differ materially. Now, it should assume these four 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. I refer you to the latest tip forms 10-K and 10-Q that Denow has on file with the U.S.
Speaker Change: These are forward-looking statements within the meaning of the U.S. federal securities laws based on limited information as of today, August 7, 2024, which is subject to change.
Speaker Change: We do not undertake any obligation to publicly update or revise any forward-looking statements for any reason.
Speaker Change: In addition, this conference call contains time-sensitive information that reflects management's best judgment at the time of the live call.
Speaker Change: I refer you to the latest Forms 10-K and 10-Q that D-NOW has on file with the U.S. Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business.
Brad Wise: Securities and Exchange Commission for more detailed discussion of the major risk factors affecting our business. Further information, as well as supplemental financial and operating information, may be found within our earnings release on our website at ir.denow.com or in our filings with the SEC. In an effort to provide investors with additional information relative to our results as determined by U.S. gap, you'll note that we also disclose various non-GAAP financial measures, including EBITDA, excluding other costs, sometimes referred to as EBITDA. That income, attributable to Denow Ink, excluding other costs, and diluted earnings per chair, attributable to Denow Ink, excluding other costs.
Brad Wise: Further information as well as supplemental financial and operating information may be found in our earnings release on our website at ir.dnow.com or in our filings with the SEC, in an effort to provide investors with additional information relative to our results as determined by U.S. GAAP. You'll note that we also disclosed various non-GAAP financial measures.
Speaker Change: Further information as well as supplemental financial and operating information may be found within our earnings release on our website at ir.dnow.com or in our filings with the SEC.
Speaker Change: that income attributable to D-NOW, Inc., excluding other costs, and diluted earnings per chair.
Brad Wise: Each excludes the impact of certain other costs and therefore have not been calculated in accordance with GAAP. Please refer to the reconciliation of these non-GAAP financial measures to its most comparable GAAP financial measure and the supplemental information available at the end of our earnings release. As of this morning, the Investor Relations section of our website contains a presentation covering our results and key takeaways from the second quarter of 2024. A replay of today's call will also be available on our website in the next 30 days.
Speaker Change: attributable to Denow Inc. excluding other costs. Each excludes the impact of certain other costs and therefore have not been calculated in accordance with GAAP.
Speaker Change: A replay of today's call will also be available on our website in the next 30 days. We plan to file our 2024 Form 10-Q for the second quarter later today and it will also be available on the website.
Brad Wise: We plan to file our 2024 Form 10-Q for the second quarter later today and will also be available on the website.
Brad Wise: Now let me turn the call over today.
David Cherechinsky: Thank you, Brad, and good morning, everyone. Before I talk about the business, I'd like to recognize the perseverance of our employees through the disruption caused by two recent storms: the derecho, thunderstorms in May, and the more recent hurricane barrel in July. Both storms directly impacted many of our employees, causing widespread loss of power and destruction of personal problems. With Outhazitation, our DNO employees selflessly stepped up, extended a helping hand, and supported one another and our communities. I'm impressed with the way we came together to help one another in a type of need. This collective response is emblematic of DNO's culture and brings me a great deal of pride.
Speaker Change: Now, let me turn the call over to Dave.
Dave: Thank you, Brad, and good morning, everyone.
Dave: Both storms directly impacted many of our employees, causing widespread loss of power and destruction of personal property.
Dave: This collective response is emblematic of Dean Howe's culture and brings me a great deal of pride.
David Cherechinsky: In that same spirit of teamwork and community, in the first quarter we joined forces with Whitco Supply, tapping into a talented team with strong leaders and technical expertise who earn deep affection from their customers. Their supply chain design, strength and midstream, world-class sales team and team focus on customers peaked our interest when we pursued that combination. Whitco people and culture were a natural fit with how we've transformed DNO to live and breathe those same cultural attributes. During this last six months, it's remarkable to see the deep, a spirit of core and cultural alignment our team share, elevating DNO to expand our value and reach in the market to help fuel greater success together.
Speaker Change: In that same spirit of teamwork and community, in the first quarter, we joined forces with WITCO Supply, tapping into a talented team with strong leaders and technical expertise who earn deep affection from their customers.
David Cherechinsky: Their supply chain design, strength in midstream, world-class sales team, and keen focus on customers piqued our interest when we pursued that combination. The Witko people and culture were a natural fit with how we've transformed Guineau to live and breathe those same cultural attributes. Now, our results.
Speaker Change: Their supply chain design, strength in midstream, world-class sales team, and keen focus on customers piqued our interest when we pursued that combination.
Speaker Change: During this last six months, it's remarkable to see the deep esprit de corps and cultural alignment our teams share, elevating Dino to expand our value and reach in the market to help fuel greater success together.
David Cherechinsky: In terms of highlights for the quarter, there were many. We produced strong earnings, having grown revenues organically in the second quarter despite Edwin's. We grew our legacy midstream business, coupled with the onboarding of Whitco, where we have more than doubled our midstream coverage. We are seeing success along our trek to double our energy evolution sales in 2024, a key element of our long-term strategy. We generated inventory velocity of five turns in the quarter, a high mark, which is even harder to do in a slowing market. We drove the best DSOs we've seen since 2020, and we produce cash among the expected to consume it given a substantial cash generating first quarter.
Speaker Change: We are seeing success along our trek to double our energy evolution sales in 2024, a key element of our long-term strategy.
Speaker Change: We drove the best DSOs we've seen since 2020, and we produced cash when we expected to consume it, given a substantial cash-generating first quarter.
David Cherechinsky: And with our quarter execution, we more than funded the share repurchases we made in the quarter. This is great execution by our teams. And now moving to our results, the strength that our second quarter performance was evident against the combination of headwinds from lower gas prices, lower US rigs and completions, and the unfavorable impact from the seasonal breakup in Canada. Second quarter, 2024 revenue grew sequentially $70 million or 12% from Whitco's full quarter contribution combined with growth in international and in our legacy, Dina US Energy Centers and Process Solutions businesses. We generated 50 million in EBITDA for the quarter, strong bottom line performance, which was aided by two million in favorable items not expected to recur in the third quarter.
Speaker Change: And now, moving to our results. The strength in our second quarter performance was evident against a combination of headwinds from lower gas prices, lower U.S. rigs and completions, and the unfavorable impact from the seasonal breakup in Canada.
Speaker Change: Second quarter 2024 revenue grew sequentially $70 million or 12% from WITCO's full quarter contribution combined with growth in international and in our legacy Dino U.S. Energy Centers and Process Solutions businesses.
David Cherechinsky: We generated 18 million of pre-cash flow during the quarter, bringing the year to date a month to 98 million and our trailing four quarters free cash flow total of 201 million. In North America, onshore oil and gas activity in the US is more challenging than in recent times due to EMP consolidation, low natural gas prices, hampered further by a lack of natural gas take away infrastructure, LNG export capacity, and political posh. yet we are focused on opportunities where we see growth, and one area we've been focused on is mid-street. Our Whitco acquisition further expanded our business in the mid-street market, a sprawling, geographically diverse network of lack units, pumping stations, metering kids, and pipes, valves, fittings, infrastructure, one that is aging and undersized for current and future demands.
Speaker Change: We generated $18 million of free cash flow during the quarter, bringing the year-to-date amount to $98 million, and our trailing four quarters free cash flow totaled $201 million.
Speaker Change: In North America, onshore oil and gas activity in the U.S. is more challenging than in recent times due to E&P consolidation, low natural gas prices, hampered further by a lack of natural gas takeaway infrastructure, LNG export capacity, and political posturing.
David Cherechinsky: Yet we are focused on opportunities where we see growth, and one area we've been focused on is mid-season. Direct air capture technology remains promising, currently contributing to our revenue profile as we expect more units to be constructed to reduce the atmospheric concentration of CO2, and the Renewable Gas. During the quarter, additional customer consolidations were; during the quarter, activity with our supply chain services customers improved sequentially, driven by a blend of projects, well maintenance activity, and infrastructure upgrades.
Speaker Change: Yet we are focused on opportunities where we see growth and one area we've been focused on is Midstreet.
David Cherechinsky: The mid-street market vertically compliments our upstream offerings and strengthens our partnership with, and the importance to the key manufacturers we support. This market provides a steady diet of day-to-day MRO business combined with a buffet of capital projects aimed at debottlenecking upstream capacity constraints through the expansion of mid-stream infrastructure, with demand pulled through expanded export opportunities for crude oil, refined products, and LNG. We remain excited about growing opportunities in the energy evolution space where we are seeing more use cases of CO2 and expanded enhanced oil recovery combined with an increasing backlog of CO2 storage permit submissions to coincide with capital investments in CCUS.
Speaker Change: This market provides a steady diet of day-to-day MRO business combined with a buffet of capital projects aimed at de-bottlenecking upstream capacity constraints through the expansion of midstream infrastructure.
Speaker Change: with demand pulled through, expanded export opportunities for crude oil, refined products, and LNG.
David Cherechinsky: Direct air capture technology remains promising, currently contributing to our revenue profile as we expect more units to be constructed to reduce the atmospheric concentration CO2. And in the renewable gas, natural gas sector, our patented process technology from our eco-vapor business offers biogas and landfill gas operators the ability to treat their waste gas by removing oxygen, sulfur, and excess water to meet pipeline transfer specifications. We are making progress in expanding our industrial adjacent markets with increased participation in the mining sector, municipal water, and chemicals markets. These target markets align well with our service areas. Our current product lines and present new demand for our process solutions, pump packages, mechanical seals, and field service capabilities.
Speaker Change: Direct air capture technology remains promising, currently contributing to our revenue profile as we expect more units to be constructed to reduce the atmospheric concentration of CO2.
Speaker Change: We are making progress in expanding our industrial adjacent markets with increased participation in the mining sector, in municipal water and chemicals markets.
Speaker Change: These target markets align well with our service areas, our current product lines, and present new demand for our process solutions pump packages, mechanical seals, and field service capabilities.
David Cherechinsky: On the international front, with industry experts forecasting continued capital investment and growth and activity in regions like the UK, Norway, Netherlands, Australia, and the Middle East, we believe there is opportunity to improve the profitability of our international business as we strategically increase our focus on specific locations, products, and solutions to provide the greatest value to our customers.
Speaker Change: On the international front, with industry experts forecasting continued capital investment and growth and activity in regions like the UK, Norway, Netherlands, Australia, and the Middle East.
Mark Johnson: Now some details on the business. In the U.S., revenue was 512 million, up 77 million or 18 percent sequentially, from the full quarter impact of our WITCO supply acquisition, plus mid-single digit revenue percentage increases from our U.S. process solutions and our legacy U.S. energy centers businesses. U.S. rate counts contracted 3 percent sequentially, down 17 percent year-over-year, as U.S. completions declined 4 percent, or down 13 percent year-over-year, both contributing to the temporary slowdown that we're navigating. During the quarter, additional customer consolidations were announced, and for some of our customers, those pending deals have impacted project timing, resulting in funding and approval delays or project time-line shifts.
Speaker Change: And I'll have some details on the business.
Speaker Change: businesses.
Speaker Change: U.S. rate counts contracted 3% sequentially, down 17% year-over-year, as U.S. completions declined 4% or down 13% year-over-year, both contributing to the temporary slowdown that we're navigating.
Speaker Change: During the quarter, additional customer consolidations were announced, and for some of our customers, those pending deals have impacted project timing, resulting in funding and approval delays or project timeline shifts.
Mark Johnson: During the quarter, the activity with our supply chain services customers improves sequentially, driven by a blend of projects, well maintenance activity, and infrastructure upgrades. We expect some of these larger customers, by design, to curtail their level of spending in the second half, like we experienced last year. At our Williston, North Dakota mega-center, we can solidate a number of third-party operating yards to a single centralized yard and expect a consolidation to improve customer service and enhance efficiencies. In the Bakken, we provided PVF to an operator currently one-third of the way through their Refack program, an example of an operator analyzing older shale wells to improve their production to enhance refracting techniques.
Speaker Change: During the quarter, activity with our supply chain services customers improved sequentially, driven by a blend of projects, well maintenance activity, and infrastructure upgrades.
Speaker Change: We expect some of these larger customers, by design, to curtail their level of spending in the second half like we experienced last year.
Speaker Change: At our Willison North Dakota Mega Center, we consolidated a number of third-party operating yards to a single centralized yard and expect the consolidation to improve customer service and enhance efficiencies.
Mark Johnson: In the Northeast, we secured a new materials management and integrated supply contract with a regional utility company, who market natural gas, LPG, electricity, and renewable energy solutions. In U.S. process solutions, demand for our products grew sequentially despite lower locations during the quarter. Our flexible H-Pomp rental utilization rates remain stronger in the quarter, reflecting steady demand for our mobile horizontal trailer solutions used to dispose of produce water, assault water disposal, and enhanced oil recovery applications. We are further investing in this business to capture market share and service other areas. Our mechanical seal industrial air packages and pump service and repair offerings have been a key focus area for growth, and we saw notable progress in the quarter.
David Cherechinsky: In the Northeast, we secured a new materials management and integrated supply contract with a regional utility company that markets natural gas, LPG, electricity, and renewable energy solutions. We are further investing in this business to capture market share and service other areas. In the quarter, we noted several wins in industries that helped diversify outside our core market and executed a three-year PVF-MRO contract with an oil and gas company. And now, a few comments related to energy evolution.
Speaker Change: who market natural gas, LPG, electricity, and renewable energy solutions.
Speaker Change: Our mechanical seal, industrial air packages, and pump service and repair offerings have been a key focus area for growth and we saw notable progress in the quarter.
Mark Johnson: Executing on our diversification strategy, we added a new pump manufacturer distribution agreement to expand our product offering in the municipal water market. We provided mechanical seals and pumps to several power generation operators. In the mining industry, we secured a supplier agreement from a uranium mine operator, and in the chemical processing market, we are gaining traction by increasing our presence to a large installed pump market by offering aftermarket services tied to asset maintenance. Our pump packages, mechanical seals, and field service is a fungible offering enabling opportunities for diversified growth and revenues across various industrial adjacent markets.
Speaker Change: Executing on our diversification strategy, we added a new pump manufacturer distribution agreement to expand our product offering in the municipal water market. We provided mechanical seals and pumps to several power generation operators.
Speaker Change: Our pump packages, mechanical seals, and field service is a fungible offering enabling opportunities for diversified growth and revenues across various industrial adjacent markets.
Mark Johnson: In Canada, revenue is 56 million for the quarter, lower 15 percent sequentially as expected, primarily due to the impact break up has during the quarter. In the quarter, we noted several wins and industries that helped diversify outside our core market. We secured a three-year agreement to provide vendor-managed inventory for a steel manufacturer and won a notable project with an independent power producer on top of the current day-to-day MRO business. We added a new Alberta-based operator who plans to ramp up activity in the oil sands area and executed a three-year PVF MRO contract with an oil and gas producer.
Speaker Change: In the quarter, we noted several wins in industries that helped diversify outside our core market.
Speaker Change: We added a new Alberta-based operator who plans to ramp up activity in the oil sands area.
Speaker Change: and executed a three-year PVF MRO contract with an oil and gas producer.
Mark Johnson: For international revenue was 65 million, up 3 million or 5 percent. The increase in revenue during the quarter was primarily attributed to Middle East projects. Revenue with major oil and gas operators improves sequentially, with the majority of revenue coming from brownfield projects as opposed to new infrastructure bills. Electrical products continue to be the majority of products sold by our international segment, followed by pumps, valves, and industrial and safety products. A couple of notable projects include NFPSO project in Australia and LNG project in Southeast Asia where we supply valves and fittings. And finally, in Norway, we secured a supply agreement contract from an OEM to provide electrical cable for facilities and new builds.
Speaker Change: For international, revenue was $65 million, up $3 million or 5%. The increase in revenue during the quarter was primarily attributed to Middle East projects.
Speaker Change: Revenue with major oil and gas operators improved sequentially with a majority of revenue coming from brownfield projects as opposed to new infrastructure builds.
Speaker Change: Electrical products continue to be the majority of products sold by our international segment, followed by pumps, valves, and industrial and safety products.
Speaker Change: A couple of notable projects include an FPSO project in Australia, an LNG project in Southeast Asia where we supplied valves and fittings.
Speaker Change: And finally, in Norway, we secured a supply agreement contract from an OEM to provide electrical cable for facilities and new builds.
Mark Johnson: And now a few comments related to energy evolution. Over the last few quarters, we've been delivering PVF products tied to a large scale gas gathering project that will transport natural gas and re-deliver it to the Gold Coast markets, including for LNG export. The scope of the project includes a carbon capture portion that will permanently sequester up to 2 million tons of CO2 annually. Across the US, we provided PVF products; customers used to upgrade existing infrastructure to eliminate methane, atmospheric leaks. Many of these initiatives are tied to customer manage, greenhouse gas reduction programs. We are making inroads into the mining sector by providing pumps and pipe valves and fittings products into the soda ash mines and the extraction of lithium to support growth in battery production.
David Cherechinsky: Over the last few quarters, we've been delivering PBF products tied to a large-scale gas gathering project that will transport natural gas and re-deliver it to the Gulf Coast markets, including for LNG export. The scope of the project includes a carbon capture portion that will permanently sequester up to 2 million tons of CO2 annually across the U.S. will be provided PBF products, customers used to upgrade existing infrastructure to eliminate methane atmospheric Many of these initiatives are tied to customer-managed greenhouse gas reduction programs, pipe valves and fittings products into the soda ash mines, and the extraction of lithium to support growth in battery production.
Speaker Change: And now a few comments related to energy evolution.
Speaker Change: Over the last few quarters, we've been delivering PBF products tied to a large-scale gas gathering project that will transport natural gas and re-deliver it to the Gulf Coast markets, including for LNG export.
Speaker Change: The scope of the project includes a carbon capture portion that will permanently sequester up to 2 million tons of CO2 annually.
Speaker Change: You're making inroads into the mining sector by providing pumps and pipe valves and fittings products into the soda ash mines and the extraction of lithium to support growth in battery production.
Mark Johnson: Through McLean International in the UK, we provide an assortment of PPE, tools, and electric electrical cable for a variety of offshore wind projects. We also expanded our sales efforts and secured orders for tools, harnesses, and electrical cable for a new offshore wind customer base in the Netherlands.
David Cherechinsky: Through McLean International in the UK, we provide an assortment of PPE, tools, and electrical cable for a variety of offshore wind projects. We have also expanded our sales efforts and secured orders for tools, harnesses, and electrical cable for a new offshore wind customer base in the Netherlands, and procurement for the products we offer to support their operations. With that, let me hand it over to Mark. Thank you, Dave, and good morning, everyone.
Mark Johnson: Moving to our digital now initiatives, our digital revenue as a percent of total SAP revenue was 48 percent, flat sequentially. With a major midstream customer, we completed systems integration, data visualization, and a punch out e-commerce catalog project. The enhanced integration will drive a more user-friendly and efficient method of sourcing and procurement for the products we offer to support their operations. With our access now automated and unattended inventory control system, we were able to reduce costs and overall operating expenses for a customer at a JohnStream chemical facility.
Speaker Change: Moving to our digital now initiatives. Our digital revenue as a percent of total SAP revenue is 48 percent flat sequentially.
Speaker Change: With a major midstream customer, we completed systems integration, data visualization, and a punch-out e-commerce catalog project.
Speaker Change: With our AccessNow automated and unattended inventory control system, we were able to reduce costs and overall operating expenses for a customer at a downstream chemical facility.
Mark Johnson: And switching to M&A, a key part of our growth strategy, Dino is in a great position. We remain debt-free with 197 million in cash on our balance sheet and 579 million in total liquidity that affords a multitude of options to organically and organically grow the company and increase value to shareholders. We are in various stages of engagement with multiple targets in our pipeline and are focused on accretive deals where we are the natural operator and where we can add value and increase the contribution of the acquired firm.
Speaker Change: And switching to M&A, a key part of our growth strategy, Dino is in a great position.
Dino: We are in various stages of engagement with multiple targets in our pipeline and are focused on accretive deals where we're the natural operator and where we can add value and increase the contribution of the acquired firm.
Mark Johnson: With that, let me hand it over to Mark. Thank you, Dave. Good morning, everyone.
Mark Johnson: Total second quarter 2024 revenue was $633 million, up 12%, or $70 million from the first quarter of 2024. U.S. revenue for the second quarter 2024 totaled $512 million. Year over year, U.S. revenue increased $56 million, or 12% from the second quarter of 2023. In Canada, for the second quarter, revenue totaled $56 million, a decrease of $10 million, or 15% from the first quarter of 2024, as expected due to seasonal breakups. Warehousing, Selling, and Administrative, or WSA, for the quarter was $105 million, up $4 million sequentially.
Mark Johnson: Thank you, Dave. Good morning, everyone.
Mark Johnson: Total second quarter of 2024 revenue was $633 million, up 12 percent, or $70 million, from the first quarter of 2024. EBITDA excluding other costs or EBITDA for the second quarter was $50 million or 7.9 percent of revenue.
Dino: EBITDA excluding other costs, or EBITDA for the second quarter, was $50 million, or 7.9% of revenue.
Mark Johnson: New. US revenue for the second quarter, 2024 totaled $512 million. A $77 million increase or 18% higher than the first quarter of 2024. Year over year, US revenue increased $56 million or 12% from the second quarter of 2023. The US sequential revenue increase was driven by the full-quarter contribution of Whitco, paired with US growth in both energy centers and process solutions in the quarter. US energy centers contributed approximately 74% of total US revenue in the second quarter, and US process solutions contributed approximately 26%. In Canada, for the second quarter, revenue totaled $56 million. A decrease of $10 million or 15% from the first quarter of 2024, as expected due to seasonal breakup.
Mark Johnson: Now moving to income taxes, in the second quarter of 2024, DNOW's income tax expense was $8 million, and $16 million year-to-date. From a cash income tax perspective, we're not expecting to pay U.S. federal cash income taxes in 2024 due to available net operating loss carried forward.
Dino: U.S. revenue for the second quarter of 2024 totaled $512 million.
Dino: Year over year, U.S. revenue increased $56 million, or 12% from the second quarter of 2023.
Dino: In Canada, for the second quarter, revenue totaled $56 million, a decrease of $10 million or 15% from the first quarter of 2024, as expected due to seasonal break-ups.
Mark Johnson: International revenue for the second quarter of 2024 was $65 million. Up, $3 million or 5% sequentially.
Mark Johnson: Primarily from projects in the Middle East, not expected to repeat in the third quarter. Gross margins declined 110 basis points from the first quarter of 2024 to 21.8%. With about half the change attributable to declining steel pipe prices, product and project mix, and competition intensity, and the other half, primarily resulting from the impact of acquisition purchase accounting, flushing out in the second quarter for inventory step-up to fair market value. Warehousing selling in an administrative or WSA for the quarter was $105 million, up $4 million sequentially. Primarily related to the WICO full quarter contribution, partially offset by approximately 2 million in favorable WSA quarterly impacts, not expected in the third quarter.
Dino: Gross margins declined 110 basis points from the first quarter of 2024 to 21.8 percent.
Dino: with about half the change attributable to declining steel pipe prices, product and project mix, and competition intensity, and the other half primarily resulting from the impact of acquisition purchase accounting flushing out in the second quarter for inventory step-up to fair market value.
Mark Johnson: We forecast the third quarter WSA level should approximate $107 million, and could lower towards $103 million in the fourth quarter. In the second quarter, we reported $9 million of depreciation and amortization expense, and for the third quarter 2024, we forecast depreciation and amortization to be approximately $8 million. Now moving to operating profit in the second quarter, total company operating profit was $33 million. Respectively, the US generated $28 million, Canada delivered $2 million, and international contributed the remaining $3 million in operating profit in the second quarter of 2024. Interest income in the period was $1 million.
Mark Johnson: Now moving to income taxes in the second quarter of 2024, DNOW's income tax expense was $8 million, and $16 million year-to-date. Our effective tax rate, as computed on the face of the income statement, was 25.8% year-to-date 2024. We estimate our 2024 full-year effective tax rate will be approximately 27 to 28%. From a cash income tax perspective, we're not expecting to pay US federal cash income taxes in 2024 due to available net operating loss carried forward. Net income attributable to DNOW for the second quarter was $24 million, or 21 cents per fully diluted share. and on a non-GAAP basis, Q2 2024 net income, attributable to denailing, excluding other costs, was $28 million, or $0.25 per fully delineated share.
Mark Johnson: Net income attributable to DNOW, Inc. for the second quarter was $24 million, or $0.21 per fully diluted share. And on a non-GAAP basis, Q2 2024 net income attributable to D-NOW, Inc., excluding other costs, was $28 million, or $0.25 per fully diluted share. Moving to the balance sheet, at the end of the quarter, we had a cash position of $197 million, and zero debt. We ended the second quarter with total liquidity of $579 million, comprising our net cash position of $197 million and $382 million in additional credit facility availability.
Dino: Net income attributable to DNOW, Inc. for the second quarter was $24 million, or $0.21 per fully diluted share.
Dino: And on a non-GAAP basis, Q2 2024 net income attributable to D-NOW Inc., excluding other costs, was $28 million, or 25 cents, per fully diluted share.
Mark Johnson: Moving to the balance sheet, at the end of the quarter, we had a cash position of $197 million in zero debt. Cash increased by 9 million in the second quarter, driven by our cash generation from operating activities, partially offset by stock repurchases in the quarter. We ended the second quarter with total liquidity of $579 million, comprising our net cash position of $197 million and $382 million in additional credit facility availability. Our existing $500 million revolving credit facility extends into December 2026, providing and denial with immediate access to capital under the facility. Ending accounts receivable was $403 million, a decrease of $7 million from the first quarter.
Dino: Cash increased by $9 million in the second quarter, driven by our cash generation from operating activities, partially offset by stock repurchases in the quarter.
Mark Johnson: Our existing $500 million revolving credit facility extends into December 2026, providing D-NOW with immediate access to capital under the facility. Ending accounts receivable were $403 million, a decrease of $7 million from the first quarter. At June 30th, our cumulative repurchases under our $80 million authorized share repurchase program totaled $67 million. Our commitment to growing the company through creative, organic, and inorganic growth remains a key priority. And with that, let me turn the call back to Dave.
Dino: providing D-NOW with immediate access to capital under the facility.
Mark Johnson: Days sales outstanding, or DSO, was 58 days at the end of the second quarter, the lowest level since the fourth quarter of 2020. In inventory, was $399 million at the end of the quarter, a decrease of $29 million from the first quarter. With a quarter-annualized turn rate of 5.0 times. Accounts payable was $278 million at the end of the second quarter, a decrease of $61 million from the first quarter, primarily based on timing and volume of inventory purchased in the period. And for the second quarter of 2024, working capital, excluding cash, as a percentage of annualized second quarter revenue was 16.4%.
Dino: And inventory was $399 million at the end of the quarter, a decrease of $29 million from the first quarter, with a quarter annualized turn rate of 5.0 times.
Dino: And for the second quarter of 2024, working capital, including cash, as a percentage of annualized second quarter revenue was 16.4 percent.
Mark Johnson: The second quarter cash provided by operating activities was $211 million, and $211 million for the trailing four quarters ending June 30, 2024. We invested $3 million in capital expenditures in the second quarter of 2024, bringing our second quarter free cash flow to $18 million. We continue to execute on our share repurchase program that has been authorized through December 31, 2024, and repurchased $10 million under the program in the second quarter. As of June 30, our cumulative repurchases under our $80 million authorized share repurchase program totaled $67 million. Our commitment to growing the company through a creative organic and inorganic growth remains a key priority, while also having the ability to repurchase shares opportunistically.
Dino: The second quarter cash provided by Operating Activities was $21 million and $211 million for the trailing four quarters ending June 30, 2024.
Dino: We invested $3 million in capital expenditures in the second quarter of 2024, bringing our second quarter free cash flow to $18 million.
Dino: We continue to execute on our share repurchase program that is authorized through December 31, 2024 and repurchase $10 million under the program in the second quarter.
Mark Johnson: As we use the tools in our capital allocation framework to generate attractive shareholder returns without deviating from our disciplined approach to balancing management. We continue to be debt-free and keep cash flow generation the top priority.
Dino: while also having the ability to repurchase shares opportunistically as we use the tools in our capital allocation framework to generate attractive shareholder returns without deviating from our disciplined approach to balance sheet management.
Mark Johnson: And with that, let me turn the call back today.
David Cherechinsky: Thank you, Mark. Now switching to our outlook for the third quarter and full year 2024.
David Cherechinsky: Thank you, Mark. Now switching to our outlook for the third quarter and full year 2024. Internationally, we expect activities to be lower sequentially due to project time. Taken together, we expect Genov's third quarter sequential revenues to be flat.
David Cherechinsky: In the US, we expect activity to be lower sequentially as US operating rigs and completions are expected to be muted due to weak gas prices, in addition to customer budget throttling and tentativeness around upcoming US elections. In Canada, we expect growth from the second quarter as more favorable weather patterns afford increased activity. Internationally, we expect activities to be lower sequentially due to project timing. Taken together, we expect Dinoff's third quarter sequential revenues to be flat, to down 5% from 2Q24, with EBITDA to approximate 7% of third quarter revenues. And for the full year 2024, revenue could increase in the low to mid single digit percentage range compared to full year 2023, and our 2024 full year EBITDA could approximate 7 to 7.5% of revenue.
Dino: In the U.S., we expect activity to be lower sequentially, as U.S. operating rigs and completions are expected to be muted due to weak gas prices, in addition to customer budget throttling and tentativeness around upcoming U.S. elections.
Dino: In Canada, we expect growth from the second quarter as more favorable weather patterns afford increased activity.
Dino: Internationally, we expect activities to be lower sequentially due to project timing.
Dino: Taken together, we expect Dinov's third quarter sequential revenues
David Cherechinsky: And for the full year 2024, revenue could increase in the low to mid single-digit percentage range compared to the full year 2023. And our 2024 full year EBITDA percent could approximate 7% to 7.5% of revenue; free cash flow for 2024 could approach $200 million. We have a legacy of supporting our customers for the past 160 years, and the long-term outlook remains strong as we are positioned to capitalize on market opportunities, despite slowing activity, advantaged by the solutions we offer today, underwritten by our strong balance.
Dino: And for the full year 2024, revenue could increase in the low to mid single digit percentage range compared to full year 2023, and our 2024 full year EBITDA percent could approximate seven to seven and a half percent of revenue.
David Cherechinsky: Free cash flow for 2024 could approach $200 million.
David Cherechinsky: We have a legacy of supporting our customers for the past 160 years, and the long term outlook remains strong as we are positioned to capitalize on market opportunities despite slowing activity, advantage to by the solutions we offer today underwritten by our strong balance sheet. Our priorities are first to finance and seize organic growth, second to execute on strategic and tuck-in margin-accretive acquisitions, and third to opportunistically repurchase shares in a program which we intend to complete by year end. We will invest and grow our core market, capture additional revenues from the growth in investments tied to energy evolution, and diversify our customer base by targeting revenue from additional industrial markets while driving efficiencies across our business.
David Cherechinsky: Our priorities are first to finance and seize organic growth. Second, to execute on strategic and tuck-in-margin creative acquisitions. And third, to opportunistically repurchase shares, a program which we intend to complete by year end, across our I'd like to close with where we began with our employees. I was fortunate to spend a couple of days in Wyoming at one of our brightest growth locations.
Dino: We will invest and grow our core market, capture additional revenues from the growth in investments tied to energy evolution, and diversify our customer base by targeting revenue from additional industrial markets while driving efficiencies across our business.
David Cherechinsky: And finally, I'd like to close with where we began with our employees. I was fortunate to spend a couple of days in Wyoming at one of our brightest growth locations. We opened a new facility situated in the heart of the town, designed with the customer focus set up for educating our customers on the products and services we provide. At the grand opening, we had over 130 customers, suppliers, employees, the mayor, and the town council, a true community event. One of the council members and obvious fan of our team shared some of his thoughts about who we are.
Dino: I'd like to close with where we began with our employees. I was fortunate to spend a couple of days in Wyoming at one of our brightest growth locations.
David Cherechinsky: We opened a new facility situated in the heart of the town designed with a customer focus set up for educating our customers on the products and services we provide. At the grand opening, we had over 130 customers, suppliers, employees, the mayor, and the town council; a true community event. One of the council members, an obvious fan of our team, shared some of his thoughts about who we are. Some of the sentiment shared, which speaks to our culture as a whole, includes: To be leaders requires creating lasting partnerships with our customers, our communities, and our suppliers.
Dino: At the grand opening, we had over 130 customers, suppliers, employees, the mayor, and the town council. A true community event.
Speaker Change: One of the council members, an obvious fan of our team, shared some of his thoughts about who we are.
David Cherechinsky: Some of the sentiments shared, which speaks to our culture as a whole, include. To be leaders requires creating lasting partnerships with our customers, our communities, and our suppliers. The steadfast force keeps the wheels of each of our local industries and communities turning, accusing the lifeblood into our local communities and our company. We cherish, admire and celebrate our employees who are dedicated, skilled and passionate to delight the customer, who work tirelessly to help solve complex challenges. Our employees do more than sell steel products and the components to help our customers extract, gather, transport, process, and market traditional and new energy to the world.
Speaker Change: Some of the sentiments shared, which speak to our culture as a whole, include
Speaker Change: To be leaders requires creating lasting partnerships with our customers, our communities, and our suppliers.
David Cherechinsky: Steadfast force keeps the wheels of each of our local industries and communities turning, infusing lifeblood into our local communities and our companies. We cherish, admire, and celebrate our employees who are dedicated, skilled, and passionate about delighting the customer, who work tirelessly to help solve complex challenges. Our employees do more than sell steel products and components to help our customers extract, gather, transport, process, and market traditional and new energy to the world.
Speaker Change: The steadfast force keeps the wheels of each of our local industries and communities turning, infusing the lifeblood into our local communities and our company.
Speaker Change: We cherish, admire, and celebrate our employees who are dedicated, skilled, and passionate to delight the customer, who work tirelessly to help solve complex challenges.
David Cherechinsky: Our employees build bridges, bridges that span not only between businesses but also between innovation and tradition, and between aspirations and achievements. We are building our bridge to the future, and the solutions we offer today boards the promise of progress, the resilience of our communities, and the spirit of collaboration. We are architects of possibility, engineers of growth, partners for sustainability, and stewards of lasting impact. For all the women and men of Dino, our opportunities are abundant to take Dino to a bright future and to build bridges that connect the reality today to the promise of tomorrow.
David Cherechinsky: Our employees build bridges, bridges that span not only between businesses but also between innovation and tradition and between aspirations and achievements. We are building our bridge to the future, and the solutions we offer today forge the promise of progress, the resilience of our communities, and the spirit of collaboration. We are architects of possibility, engineers of growth, partners for sustainability, stewards of lasting impact. For all the women and men of DENOW, our opportunities are abundant to take DENOW into a bright future and to build bridges that connect the reality today to the promise of tomorrow. With that, let's open the call for questions.
Speaker Change: bridges that span not only between businesses but also between innovation and tradition and between aspirations and achievements.
Speaker Change: We are building our bridge to the future, and the solutions we offer today forge the promise of progress, the resilience of our communities, and the spirit of collaboration.
Speaker Change: We are architects of possibility, engineers of growth, partners for sustainability.
Speaker Change: and stewards of lasting impact.
Speaker Change: For all the women and men of D-NOW, our opportunities are abundant to take D-NOW to a bright future and to build bridges that connect the reality today to the promise of tomorrow.
Operator: With that, let's open the call for questions.
Operator: At this time, I would like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.
Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Nathan Jones from Stiefel. Your line is open.
Speaker Change: With that, let's open the call for questions.
Nathan Jones: Your first question comes from a line of Nathan Jones from Steeple. Your line is open. Good morning, everyone.
Speaker Change: Your first question comes from a line of Nathan Jones from Stiefel. Your line is open.
Nathan Jones: Morning, Nathan. Good morning.
Nathan Jones: I think I'd just like to start off asking a question about, you know, what's changed for you guys over the last six months. We started off the year expecting, you know, some low growth for the business, and now, ex WITCO, we're kind of looking more at minus 10. Yeah, I think I know a number of drivers here in terms of what's going on in the market. But maybe you can talk about, you know, what your view of the market has changed over the last six months and how that has played out in terms of your order rates. Thank you very much, during the year and specifically in the second quarter and into the third quarter.
David Cherechinsky: I think I'd just like to start off asking a question about what's changed for you guys over the last six months. We started off the year expecting some low growth, I guess, for the business. And now, we're kind of looking more at minus 10. I think I know a number of drivers here in terms of what's going on in the market. But maybe you can talk about what's changed in your view of the market over the last six months and how that played out in terms of your own rights during the year and specifically in the second quarter and into the third quarter.
Nathan Jones: Good morning, everyone.
Nathan Jones: Morning, Nathan. Morning.
Nathan Jones: I think I'd just like to start off asking a question about, you know, what's changed for you guys over the last six months. We started off the year expecting, you know, some low growth, I guess, for the business, and
Speaker Change: We're looking more at minus 10. I think I know a number of drivers here in terms of what's going on in the market, but maybe you can talk about what's changed in your view of the market over the last six months and how that played out in terms of your order rates.
David Cherechinsky: Okay, that's a good start-off question, Nathan. In terms of what's changed... So far this year, and indeed, for some time last year, we saw rigs decline for much of the year. I think they dropped about 20% in 2023 compared to the prior year, and they continue to drop this year. As you know, that's one of the key barometers, ultimately, of the revenue opportunity for the company. In parallel to that, activity, or those metrics are completions trends.
Speaker Change: during the year, and specifically in the second quarter and into the third quarter.
David Cherechinsky: Okay, that's a good start-off question, Nathan. In terms of what's changed so far this year, in fact, for some time last year, we saw risks to climb. Much of the year, I think they dropped about 20% in 2023 compared to the prior year, and they continue to drop this year. As you know, that's one of the key barometers, ultimately, of the revenue opportunity for the company. In parallel to that activity or those metrics are completion trends. Complations have been down for several quarters. And if you recall over the last four quarters, perhaps, not just Dino, but industry participants have been calling for a bottom for a breakout, declines and completions, which just simply hasn't occurred yet.
Speaker Change: Okay, that's a good start-off question, Nathan. In terms of what's changed...
Speaker Change: So far this year, in fact, for some time last year, we saw rigs decline.
Speaker Change: much of the year. I think they dropped about 20% in 2023 compared to the prior year and they continue to drop this year. As you know, that's one of the key barometers, ultimately, of the revenue opportunity for the company.
Speaker Change: in parallel to that.
Speaker Change: activity or those metrics are completions trends. Completions have been down for several quarters and if you recall over the last four quarters perhaps not just DNOW but industry participants have been calling for a bottom.
David Cherechinsky: Completions have been down for several quarters, and if you recall, over the last four quarters, perhaps, not just DNOW, but industry participants have been calling for a bottom, for rig count declines and completions, which just simply hasn't occurred yet. So we've seen further erosion, inactivity around completions and rate counts, and the current expectations are that they may bottom in the second half of the year or early in 2025 So that gives us pause as to where we invest, how we resource the business, how we manage expenses, and those things. But our view is that we believe temporarily things will change. We think we've got some green shoots going or some bright spots going into next year, but that's the kind of evolution in our thinking.
Speaker Change: for rig count declines and and completions which just simply hasn't occurred yet. So we've seen further
David Cherechinsky: So we've seen further erosion in activity around completions and rate counts. And the current expectations are that made bottom in the second half of the year or early in 2025. So that gives us pause as to where we invest, how we resource the business, how we manage expenses, and those things. But our view is we believe temporarily change. We think we've got some green shoots going or some bright spots going into next year. But that's been that kind of evolution in our thinking.
Speaker Change: erosion inactivity around completions and rig count.
Speaker Change: And the current expectations are that May bottom in the second half of the year or early in 2025.
Speaker Change: gives us pause.
Speaker Change: as to where we invest, how we resource the business.
Nathan Jones: That was actually going to be my follow-up question. You said in your answer, and you said in your prepared remarks as well, that you think this is temporary. Can you talk about why you think it's temporary and what those green shoots are?
Speaker Change: how we manage expenses and those things. But our view is, we believe temporarily change. We think we've got some green shoots going, or some bright spots going into next year. But that's been the kind of evolution in our thinking.
David Cherechinsky: That was actually going to be my follow-up question. You said that in your answer, and you said in your prepared remarks as well that you think this is temporary. Can you talk about why you think it's temporary and what those green shoots are? Well, I think we'll share some things we believe are true or at least being talked about. Oil demand is growing for one thing. We think that accrues to our benefits. Export LNG opportunities are going to be growing in 2025 and 2026. We're well poised to capitalize. on that. We think there is a tentativeness or a timidity by some about the U.S.
Speaker Change: That was actually going to be my follow-up question. You said that in your answer and you said in your prepared remarks as well that you think this is temporary. Can you talk about why you think it's temporary and what those green shoots are?
David Cherechinsky: Well, I think, sure, some things we believe are true, or at least being talked about. Oil demand is growing, for one thing, and we think that accrues to our benefit because Export LNG opportunities are going to be growing in 2025 and 2026. We're well poised to capitalize. We think there is tentativeness or timidity by some about the U.S. election. And I think they'll, once a decision is made, or the U.S. citizens render a verdict, I think we'll see some tentativeness ease.
Speaker Change: Well I think sure some some things we believe are are true or at least being being talked about. Oil demand is growing.
Speaker Change: for one thing, we think that accrues to our benefits. Export LNG opportunities are going to be growing in 2025 and 2026. We're well-poised to capitalize on that.
Speaker Change: We think there is a tentativeness.
David Cherechinsky: elections. And I think once the decision's made or the U.S. citizens render a verdict; I think we'll see some tentativeness ease. Gas futures are expected to be in the $3-plus range. And interest rate cuts, we think, is, I think most people think is imminent. That should grease the economy. Steel prices, while they've been declining for many quarters, we're starting to see some manufacturers talk about longer lead times and higher utilization rates. We believe that suggests an improved or less lower product availability will be well-choiced to run the supply chain better than the average participant out there.
Speaker Change: and I think they'll, once a decision is made...
Speaker Change: or the U.S. citizens render a verdict, I think we'll see some tentativeness ease.
David Cherechinsky: Gas futures are expected to be in the three plus dollar range, and we'll benefit from that next year. Interest rate cuts, we think, I think most people think are imminent, that should grease the wheels. The Economist.
Speaker Change: Gas futures are expected to be in the three-plus-dollar range, and we'll benefit from that next year. Interest rate cuts we think is, I think most people think, is imminent.
David Cherechinsky: Steel prices. While they've been declining for many quarters, we're starting to see some manufacturers talk about longer lead times and higher utilization rates. We believe that suggests... and improved, or our left. Lower product availability will be well poised to run the supply chain better than the average person, participant out there. Plus, energy evolution, as a key part of our long-term growth strategy, we're gaining traction. We expect that to grow. We had about 30 million energy evolution sales last year. We expect that could double. So those are the things that underpin our confidence going into the next.
Speaker Change: the economy.
Speaker Change: or less.
Speaker Change: used to run the supply chain better than the average.
David Cherechinsky: Plus energy evolution as a key part of our long-term growth strategy, we're gaining traction there. We expect that to grow. We had about 30 million energy evolution sales last year. We expect that to double this year.
Speaker Change: participant out there, plus energy evolution.
Speaker Change: as a key part of our long-term growth strategy, we're gaining traction there.
Speaker Change: We expect that to grow. We had about 30 million energy evolution sales last year. We expect that to double this year.
David Cherechinsky: So those are the things that underpin our confidence going into next year.
Speaker Change: So those are the things that underpin our confidence.
Nathan Jones: Okay, thanks for taking my questions.
Nathan Jones: Okay, thanks for taking my questions.
David Cherechinsky: You're welcome.
Speaker Change: Okay, thanks for taking my questions. You're welcome.
Operator: Again, if you'd like to ask a question, press star one on your telephone keypad.
Operator: Again, if you'd like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Jeff Robertson from Watertower Research. Your line is open.
Jeffrey Robertson: Your next question comes from a line of Jeff Robertson from Water Tower Research. Your line of energy evolution, did you say 60 million of potential revenue in 2024? I did, I did, Jeff.
Jeff Robertson: Thank you. Dave, on the energy evolution, did you say 60 million dollars of potential revenue in 2024?
Speaker Change: Thank you. Dave, on the energy evolution, did you say 60 million of potential revenue in 2024? I did. I did, Jeff.
David Cherechinsky: I did, I did, Jeff.
Jeff Robertson: And do you have a view, based on what you're seeing from projects or customer inquiries, of where that could go in 2025?
David Cherechinsky: And do you have a view on, based on what you're seeing from projects or customer inquiries, of where that could go in 2025? We don't right now. What we think is, what we're seeing is a significant ramp up in quotes, which to me is only suggesting more interest around budgeting and those kinds of things, and we're seeing more orders. And that more orders matriculate into sales in 2024 like we said. How that translates, what the timing is going to 2025. I don't think we have a good field for that. Quite that, Jeff.
David Cherechinsky: We don't right now, I mean... What we're seeing is a significant ramp-up in quotes, which to me is only suggesting more interest around budgeting and those kinds of things, and we're seeing more orders, and then more orders matriculate into sales in 2024, like we said. But how that translates, what the timing is going to be for 2025, I don't think we have a good feel for that quite yet,
Jeff: What we're seeing is...
Speaker Change: a significant ramp-up in quotes, which to me
Speaker Change: you know, suggesting more interest.
Speaker Change: I don't think we have a good feel for that quite yet, Jeff.
Jeffrey Robertson: With respect to revenue per rig, I think your revenue per rig was about 15 or 1.5 in 2Q24. It looks like in the US, it was quite strong. Are you seeing market share gains in the US?
Jeff Robertson: And with respect to revenue per rig, I think you should. Revenue Per Rig was about $15 or 1.5.
Speaker Change: With respect to revenue per rig, I think you
Jeff: Revenue Per Rig was about
Jeff Robertson: It looks like in the U.S., it was quite strong. Are you seeing market share gains in the U.S.? And with respect to consolidation, do you think as companies get together and maybe adjust their supply chain management practices, that creates market share gains or maybe increased wallet share gains with supply chain?
Jeff: 2Q24.
David Cherechinsky: And with respect to consolidation, do you think as companies get together and maybe adjust their supply chain management practices, that creates market share gains or maybe increase wallet share gains with some of your customers? Yeah, I think the phenomenon that we're are slowly beginning to see is as the, our economy in our oil field kind of focus space slows down, we're seeing some of our smaller competitors and they tend to be a competition we fight against day to day, they're being a little more careful, they're making some reductions, they're liquidating inventory, and as that's happening our large customers are consolidating and only a few distributors can adequately come up with the product requirements, pricing arrangements and geographic reps to service those consolidated customers. We think big companies come together where there's a, there's kind of a tip towing around who's going to do what, there tends to be a delay in projects, things get deferred. We believe we're feeling that right now, we think that will abate in the coming quarters, but so we think we're taking market share, we think long-term, those customer consolidations work to our benefit and, you know, we want to be poised to capitalize on it.
Speaker Change: And with respect to consolidation, do you think as companies get together and maybe adjust their supply chain management practices, that creates market share gains or maybe increased wallet share gains with some of your customers?
David Cherechinsky: Yeah, I think the phenomenon that we're slowly beginning to see is as our economy in our oil field kind of focused space slows down. We're seeing some of our smaller competitors, and they tend to be the competition we fight against day-to-day, they're being a little more careful, they're making some reductions, they're liquidating inventory. And as that's happening, our large customers are consolidating, and only a few... distributors can adequately come up with the product requirements, pricing arrangements, and geographic breadth to service those consolidated customers. We think that accrues to our benefit.
Speaker Change: distributors can adequately come up with the product requirements, pricing arrangements, and geographic breadth to service those consolidated customers, we think that accrues to our benefit.
David Cherechinsky: So, but now there's a period of time once these big companies come together where there's kind of a tip-toeing around who's going to do what. There tends to be a delay in projects, and things get deferred. We believe we're feeling that right now, and we think that will abate in the coming quarters. So we think we're taking market share, we think, long-term, those customer consolidations work to our benefit, and, you know, we want to be poised to capitalize.
Jeff Robertson: And lastly, with respect to your midstream footprint, excuse me, with the WITCO acquisition, are you seeing increased activity as midstream companies look to try to de-bottleneck the gas network, and I think Waha Gas in West Texas was way negative yesterday? There's obviously a lot of gas that seems to be stranded from a market standpoint. Is that driving activity that you think you'll see in 2025 and 2026 Yeah, Jeff.
Brad Wise: And lastly, with respect to your midstream footprint, excuse me, with the Whitcom acquisition, are you seeing increased activity as midstream companies look to try to de-bottle neck to gas network? And I think Waha Gas and West Texas was negative, was way negative yesterday, and there's obviously a lot of gas that seems to be stranded from a market standpoint. Is that driving activity that you think we'll see in 2025 and 2026, even? Yeah, Jeff, this is Brad. I'll take that, and maybe Dave or Mark can add additional color, but absolutely we're seeing, you know, certainly with the associated gas produced in the Permian, with Waha prices being, you know, well below a dollar, you know, some challenges to move that gas to the Gulf Coast market.
Speaker Change: Lastly, with respect to your midstream footprint, excuse me, with the WITCO acquisition, are you seeing increased...
Brad Wise: Yeah, Jeff, this is Brad. I'll take that. And maybe Dave or Mark can add additional color. But absolutely, we're seeing, you know, certainly with the associated gas produced in the Permian, with Waugh prices being, you know, well below a dollar, some challenges to moving that gas to the Gulf Coast market. So we've seen a couple of announcements that have come out recently to help alleviate the large amount of associated gas there to help with additional takeaway capacity. That's going to take, you know, probably a year to two years to add additional capacity.
Speaker Change: well below a dollar, you know, some challenges to
Brad Wise: So we've seen a couple of announcements that's come out recently to help alleviate, you know, the large amount of associated gas there to help with additional takeaway capacity. And that's going to take, you know, probably, you know, a year to two years to add additional capacity. And I think the Matterhorn pipeline was delayed a little bit. I think LNG export capacity had some additional delays to be able to grow that, you know, out of the Gulf Coast with delays with the Freeport LNG. So, you know, I think over the next, you know, six to the 12 months, I think we'll start to see some more relief there.
Brad Wise: And I think the Matterhorn pipeline was delayed a little bit. I think LNG export capacity had some additional delays to be able to grow that, you know, out of the Gulf Coast with delays with Freeport LNG.
Speaker Change: probably a year to two years to add additional capacity. And I think the Matterhorn
Speaker Change: pipeline was delayed a little bit. I think LNG export capacity had some
Speaker Change: additional delays to be able to grow that.
Speaker Change: you know, out of the Gulf Coast with delays with Freeport LNG. So.
Brad Wise: You know, I think over the next, you know, six to 12 months, I think we'll start to see some more relief there. The question is, really, will the dry gas basins come back into play and be able to get some of that dry gas from Hainesville to the Gulf Coast markets? And can we get increased takeaway capacity from the Permian and Eagleford fields to the Gulf Coast markets as well?
Brad Wise: You know, really the question is, you know, will the, you know, the dry gas basins come back in the play and be able to get, you know, some of that either dry gas from the Hainesville to the Gulf Coast markets. And can we get an increased takeaway capacity from the Permian and the Eagle for the Gulf Coast markets as well? So, you know, what we think long term, that demand sets up well, you know, for gas for us to be able to export LNG. And so, Dean now sits in a good position to be able to capitalize on the midstream sector with our legacy business and with our Whitco business.
Brad Wise: So, you know, we think long term that demand sets up well for gas for us to be able to export LNG, and so D now sits in a good position to be able to capitalize on the midstream sector with our legacy business and with our WITCO business. We think we've got many of those basins I've mentioned, as well as additional ones covered with a current service model and access to new customers that you mentioned, which I mentioned earlier with WITCO.
Speaker Change: the Permian, and Eagleford to the Gulf Coast markets as well. So, you know, what we think long term, that demand sets up well, you know, for gas for us to be able to
Brad Wise: We think we've got many of those basins I've mentioned as well as additional ones covered with a current service model and access to new customers that you mentioned earlier with Whitco.
Brad Wise: Also think that in Canada, hopefully we'll see some additional relief in LNG out of the West Coast there maybe in the next couple of years. So again, you know, long term, I think it sits up well; short term. You know, I think we're trying to alleviate some congestion and look for additional takeaway capacity to help drive incremental rig count demand tied to natural gas. Mr. Brad.
Brad Wise: I also think that in Canada, hopefully, we'll see some additional relief in LNG from the West Coast there, maybe in the next couple of years. So again, long term, I think it sits up well. Short term, I think we're trying to alleviate some congestion and look for additional takeaway capacity to help drive incremental rig count demand tied to natural gas.
Operator: And there are no further questions at this time.
Operator: And there are no further questions at this time. Mr. Brad Wise, I turn the call back over to you.
Brad Wise: Mr. Brad Wise, I join the call back over to you. Okay. Well, thank you for your questions today and your interest in D Now.
Brad Wise: Okay, well, thank you for your questions today and your interest in D-NOW, and we look forward to talking to everyone on our third quarter call scheduled for November later this year. With that, I'll turn it back to the operator to conclude our call.
Operator: And we look forward to talking to everyone on our third quarter call scheduled for November later this year. With that, I'll turn it back to the operator to conclude our call. This concludes today's conference call. You may now disconnect. Thank you.
Operator: This concludes today's conference call. You may now disconnect.
Speaker Change: This concludes today's conference call. You may now disconnect.