DNOW Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Revenue: $1.3 billion, up 10% ($124 million) sequentially; U.S. revenue increased 13% to $1.1 billion.

Adjusted EBITDA: $60 million, a 54% sequential increase, representing 4.6% of revenue.

Cash Flow: Generated $133 million from operations, marking a year-to-date cash inflow of $38 million.

Net Loss: $21 million or $0.11 per diluted share; adjusted net income was $21 million or $0.12 per diluted share.

Debt: Total debt of $474 million with a net debt leverage ratio of 1.7x.

2Strategic Updates and Business Highlights

ERP Implementation: Successfully transitioned 17 MRC Global locations to SAP, enhancing operational efficiency and customer service.

Market Performance: Strong growth in midstream (first time surpassing $1 billion annualized revenue), gas utilities (15% sequential growth), and upstream sectors.

Operational Improvements: Focus on inventory optimization and working capital management led to a significant reduction in inventory by $131 million.

Share Repurchase: $25 million in shares repurchased during the quarter, totaling $112 million year-to-date.

3Forward Guidance and Outlook

Q3 2026 Expectations: Anticipate low to mid-single-digit sequential revenue growth, with EBITDA targeted at 5% to 5.5% of revenue.

Full Year 2026 Guidance: Revenue expected to approach $5 billion to $5.1 billion, with EBITDA as a percentage of revenue near 4.5%.

Long-term Outlook: Confidence in achieving $350 million EBITDA for 2027, driven by growth in upstream, midstream, and gas utilities.

4Bad News, Challenges, or Points of Concern

Temporary Elevated Costs: Continued elevated costs related to ERP implementation and integration activities are expected to remain a near-term headwind.

Downstream Performance: Mixed results with a $12 million sequential revenue decline; concerns about timing sensitivity in downstream and industrial sectors.

Middle East Operations: Geopolitical instability is impacting customer activity and project timing, leading to delays in bidding and capital spending.

5Notable Q&A Insights

Working Capital Gains: Management indicated potential for further reductions in inventory and accounts receivable, projecting an additional $25 million to $50 million in inventory streamlining.

Turnaround Season Visibility: Management expressed optimism about the upcoming turnaround season, with expectations for pre-buy activity and improved relationships with downstream refining customers.

ERP System Performance: Significant improvements in operational efficiency and customer service have been noted since the ERP upgrades, with a focus on enhancing speed and responsiveness.

Market Dynamics: The upstream market is expected to grow, with private companies driving rig count increases, while larger public companies maintain capital discipline. This summary encapsulates the key financial metrics, strategic initiatives, forward guidance, and notable challenges faced by DNOW in Q2 2026, providing a comprehensive overview of the company's current position and outlook.