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DNOW Inc. (DNOW)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $0.628B (+5% q/q; -0.8% y/y) with GAAP diluted EPS of $0.23 and record Q2 EBITDA of $51M (8.1% margin) driven by U.S. midstream strength; management reaffirmed full-year revenue, EBITDA, and $150M FCF targets .
  • DNOW delivered a clear beat versus S&P Global consensus: revenue $612.7M* vs actual $628.0M and EPS $0.21* vs non-GAAP $0.27, with U.S. revenue up 11% sequentially and midstream rising to ~27% of total .
  • Q3 outlook: sequential revenue growth in the low-single digits and EBITDA approaching ~8% of revenue; company expects typical Q4 budget exhaustion (~5% seasonal impact) and reaffirmed full-year guidance ranges .
  • Balance sheet remains robust: $232M cash, zero debt, ~$582M liquidity; $19M repurchased in Q2 and $27M YTD before pausing buybacks pending MRC Global merger close .
  • Strategic catalyst: all-stock acquisition of MRC Global (targeting ~$70M annual cost synergies in 3 years) to diversify end-market exposure and expand opportunities in AI infrastructure, gas utilities, LNG and industrials .

What Went Well and What Went Wrong

What Went Well

  • Record second-quarter EBITDA: $51M, 8.1% of revenue, reflecting strong midstream fall-through and operating discipline .
    Quote: “best second-quarter EBITDA results in our public-company history… 8.1% of revenue” — CEO David Cherechinsky .
  • U.S. momentum: U.S. revenue $528M (+$54M, +11% q/q), supported by midstream project investments and FlexFlow water management solutions strength .
  • Cash generation and capital allocation: $45M CFO, $41M FCF in Q2; $232M cash, zero debt, liquidity ~$582M; $19M repurchased in Q2 before suspending buybacks due to merger process .

What Went Wrong

  • Canada seasonal break-up and macro softness: Canada revenue fell to $48M (-$14M q/q, -23% q/q) amid road restrictions, tariff uncertainty, political posturing and project non-repeat .
  • International decline: International revenue $52M (-$11M q/q, -17% q/q) due to non-repeating Q1 projects; North Sea approvals uncertainty slowed capital investments .
  • Pricing/margin headwinds from tariffs and competition: gross margin 22.9% was resilient but faced a “governor” from intense competition in a slower market; growth mostly volume-based (≈80%) rather than price .

Financial Results

Core Financials vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$571 $599 $628
GAAP Diluted EPS ($)$0.21 $0.20 $0.23
Non-GAAP Diluted EPS ($)$0.25 $0.22 $0.27
EBITDA ($USD Millions)$45 $46 $51
EBITDA Margin (%)7.9% 7.7% 8.1%

Consensus vs Actual (Q2 2025)

MetricConsensusActualSurprise
Revenue ($USD Millions)$612.7*$628.0 Beat
EPS (Primary / non-GAAP) ($)$0.21*$0.27 Beat
# of Estimates (EPS / Revenue)3* / 3*——

Values retrieved from S&P Global.*

Segment Revenue Breakdown

Region ($USD Millions)Q4 2024Q1 2025Q2 2025
United States$451 $474 $528
Canada$66 $62 $48
International$54 $63 $52
Total$571 $599 $628

KPIs and Balance Sheet

KPIQ4 2024Q1 2025Q2 2025
Cash from Operations ($M)$122 $(16) $45
Free Cash Flow ($M)$119 $(22) $41
Cash & Equivalents ($M)$256 $219 $232
Long-term Debt ($M)$0 $0 $0
Liquidity ($M)~$556 ~$567 ~$582
Share Repurchases ($M)—$16 YTD $19 Q2; $27 YTD

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth vs 2024FY 2025Flat to high-single-digit range (reaffirmed) Flat to high-single-digit range Maintained
EBITDA Margin (%)FY 2025Could approach ~8% (reaffirmed) Could approach ~8% Maintained
Free Cash Flow ($M)FY 2025$150 (reaffirmed) $150 Maintained
Revenue (sequential)Q3 2025N/ALow single-digit % increase q/q New quarter-specific outlook
EBITDA Margin (%)Q3 2025N/A~8% of revenue New quarter-specific outlook

Note: Company stated a “reaffirming” stance vs prior quarter; explicit prior-quarter numeric ranges were not detailed in the Q1 press release.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Midstream expansionSolid gross margin and cost control; strong cash generation in Q4 2024 ; Q1 set up favorably with inventory adds Midstream grew to ~27% of total; pulled-forward ~$5M project; drives EBITDA strength Accelerating; key earnings driver
AI/data centersLimited detail pre-2025; strategic adjacencies discussed Won valves for a new data center; pipeline building incl. power plant feed gas projects Increasing opportunity
Tariffs/macroQ1 noted tariff-induced trade uncertainties Product costs up; competitive pressure limits price; growth mostly volume (~80%) Margin sensitivity persists
Canada seasonalityTypical Q2 breakup; Q1 steady Canada down 23% q/q; macro/tariffs/politics amplify seasonality Seasonal + macro headwinds
International projectsQ4 restructuring and variable projects -17% q/q from non-repeating Q1 work; UK slower approvals; Norway CCUS/hydrogen/wind offsets Mixed; selective growth
Capital allocation$160M buyback auth; strong FCF in 2024 $27M repurchased YTD; pause repurchases pending MRC close; bolt-ons in process solutions Active but M&A-focused
MRC Global mergerAnnounced post-Q2; strategic diversification ~$70M synergies over 3 years; diversification into gas utilities, electrification, LNG Transformational

Management Commentary

  • “$628 million in revenue… at the top-end of our guided range, while producing our best second-quarter EBITDA… $51 million, or 8.1% of revenue.” — CEO David Cherechinsky .
  • “Midstream business… more than doubled our midstream revenue percentage contribution… over the prior six quarters.” — CEO .
  • “We ended the quarter with total liquidity of $582,000,000 comprising our net cash position of $232,000,000 plus $350,000,000 in additional credit facility availability.” — CFO Mark Johnson .
  • “We expect to realize $70,000,000 of annual cost synergies within three years… derived from public company costs, corporate and IT systems, and operational and supply chain efficiencies.” — CEO .
  • “We are reaffirming our full-year 2025 revenue and EBITDA guidance and reaffirming 2025 free cash flow guidance targeted at $150 million.” — CEO .

Q&A Highlights

  • Integration focus and risks: Management emphasized customer-first orientation, external focus on supply chain/manufacturers, and cross-selling to drive growth; high-caliber joint integration teams in place .
  • Guidance cadence and seasonality: Bias towards top-half of FY guide but modeled normal Q4 budget exhaustion (~5% impact); Q3 expected low-single-digit growth with ~8% EBITDA margin .
  • Synergies scope: ~$70M cost synergies targeted; upside contemplated via vendor/customer cross-sell rather than location consolidations .
  • Tariffs/price dynamics: Product costs up on tariffs/inflation; competitive intensity limits pricing power; growth predominantly volume-driven .
  • Margin drivers: Midstream growth boosts EBITDA despite lower gross margins due to better operating fall-through; strongest lever in Q2 .

Estimates Context

  • Q2 2025 delivered clear beats: revenue $628.0M vs consensus $612.7M* and non-GAAP EPS $0.27 vs consensus $0.21*, driven by U.S. midstream strength and project timing (a ~$5M project pulled into Q2) .
  • With Q3 guided to low-single-digit sequential revenue growth and ~8% EBITDA margins, estimate models may need to reflect sustained midstream contribution and a more diversified post-merger mix (less upstream cyclicality) .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Midstream mix shift is a durable earnings driver; watch project cadence and fall-through to EBITDA as the company targets ~8% margins near term .
  • Q2 beat was quality: volume-driven growth, record EBITDA, strong cash conversion; supports near-term estimate upward revisions and multiple resilience .
  • FY 2025 guide reaffirmed; Q3 sequential growth and margin outlook suggest steady trajectory into H2, with typical Q4 budget exhaustion modeled (~5%) .
  • Balance sheet optionality remains high (cash, zero debt, liquidity ~$582M), enabling bolt-ons and facilitating merger integration without leverage risk .
  • MRC Global transaction is a secular diversification catalyst (gas utilities, AI/data centers, LNG); synergy plan (~$70M) plus cross-sell should reduce upstream cyclicality exposure .
  • Tariff and competitive dynamics cap pricing; volume and inventory positioning are key to margin defense — monitor gross margin resilience vs competitive intensity .
  • Near-term trading: positive skew from beats and reaffirmed guide; medium term thesis hinges on successful merger close/integration and realization of synergies across diversified end markets .