DNOW DNOW Inc

Earnings Conference Call February 15, 2024 8:00 a.m. CT 1 (888) 660-6431 (within North America) 1 (929) 203-2118 (outside of North America) Access Code: 7372055 Webcast: ir.dnow.com

DNOW Inc. (NYSE: DNOW) announced results for the fourth quarter and full-year ended December 31, 2023.

Financial Highlights

• Cash provided by operating activities was $105 million for the fourth quarter of 2023 and $188 million for the full-year 2023
• Revenue was $555 million for the fourth quarter of 2023
• Net income attributable to DNOW Inc. was $147 million, or $1.35 per diluted share, for the fourth quarter of 2023, which included a non-cash deferred tax benefit of $126 million from the release of valuation allowances on deferred tax assets
• Non-GAAP net income attributable to DNOW Inc. excluding other costs was $24 million, or $0.22 per diluted share, for the fourth quarter of 2023
• EBITDA excluding other costs was $44 million or 7.9% of revenue for the fourth quarter of 2023
• Cash and cash equivalents was $299 million and long-term debt was zero at December 31, 2023 with total liquidity of approximately $626 million

David Cherechinsky, President and CEO of DNOW, added, “I am excited by our strong fourth quarter finish, capping off another stellar year. In 2023, revenues grew $185 million, or 9%, while generating $184 million in EBITDA excluding other costs, a record performance since becoming a public company, or 7.9% of revenue. U.S. Process Solutions delivered significant full-year double-digit revenue growth in each of our Power Service, Odessa Pumps, Flex Flow and EcoVapor businesses. Adding to our impressive top-line increase, we produced $171 million in free cash flow, more than twice our original guidance provided last February, and we are targeting to generate $150 million in 2024.

I am thrilled about the agreement we reached to acquire Whitco Supply and believe this partnership will delight our customers, enhance earnings, free cash flow and shareholder value.

I want to thank the highly talented women and men of DNOW who have delivered these results and positioned our company to be the critical link in supplying the world’s evolving energy needs.”

Prior to the earnings conference call a presentation titled “DNOW Fourth Quarter and Full-Year 2023 Key Takeaways” will be available on the Company’s Investor Relations website.

About DNOW

DNOW is a worldwide supplier of energy and industrial products and packaged, engineered process and production equipment with a legacy of 160 years. Headquartered in Houston, Texas, with approximately 2,475 employees and a network of locations worldwide, we offer a broad set of supply chain solutions combined with a suite of digital solutions branded as DigitalNOW® that provide customers world-class technology for digital commerce, data and information management. Our locations provide products and solutions to exploration and production companies, midstream transmission and storage companies, refineries, chemical companies, utilities, mining, municipal water, manufacturers, engineering and construction companies as well as companies operating in the decarbonization, energy transition and renewables end markets.

Statements made in this press release that are forward-looking in nature are intended to be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by DNOW Inc. with the U.S. Securities and Exchange Commission, which identify significant risk factors which could cause actual results to differ from those contained in the forward-looking statements.

DNOW INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

  December 31, December 31,

 

2023

 

 

2022

 

  ASSETS Current assets: Cash and cash equivalents

$

299

 

$

212

 

Receivables, net

 

384

 

 

398

 

Inventories, net

 

366

 

 

381

 

Prepaid and other current assets

 

19

 

 

26

 

Total current assets

 

1,068

 

 

1,017

 

Property, plant and equipment, net

 

131

 

 

119

 

Deferred income taxes

 

118

 

 

−

 

Goodwill

 

139

 

 

116

 

Intangibles, net

 

28

 

 

25

 

Other assets

 

45

 

 

43

 

Total assets

$

1,529

 

$

1,320

 

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable

$

288

 

$

304

 

Accrued liabilities

 

120

 

 

126

 

Other current liabilities

 

10

 

 

9

 

Total current liabilities

 

418

 

 

439

 

Long-term operating lease liabilities

 

30

 

 

25

 

Deferred income taxes

 

−

 

 

1

 

Other long-term liabilities

 

18

 

 

11

 

Total liabilities

 

466

 

 

476

 

Commitments and contingencies Stockholders' equity: Preferred stock - par value $0.01; 20 million shares authorized; no shares issued and outstanding

 

−

 

 

−

 

Common stock - par value $0.01; 330 million shares authorized; 106,257,565 and 110,369,266 shares issued and outstanding at December 31, 2023 and 2022, respectively

 

1

 

 

1

 

Additional paid-in capital

 

2,032

 

 

2,066

 

Accumulated deficit

 

(828

)

 

(1,075

)

Accumulated other comprehensive loss

 

(145

)

 

(150

)

DNOW Inc. stockholders' equity

 

1,060

 

 

842

 

Noncontrolling interest

 

3

 

 

2

 

Total stockholders' equity

 

1,063

 

 

844

 

Total liabilities and stockholders' equity

$

1,529

 

$

1,320

 

 

DNOW INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In millions, except per share data)

  Three Months Ended Year Ended December 31, September 30, December 31,

2023

2022

2023

2023

2022

  Revenue

$

555

 

$

547

 

$

588

$

2,321

 

$

2,136

Operating expenses: Cost of products

 

425

 

 

415

 

 

454

 

1,786

 

 

1,630

Warehousing, selling and administrative

 

98

 

 

97

 

 

97

 

395

 

 

365

Impairment and other charges

 

−

 

 

−

 

 

−

 

−

 

 

10

Operating profit

 

32

 

 

35

 

 

37

 

140

 

 

131

Other income (expense)

 

(1

)

 

(1

)

 

−

 

(2

)

 

8

Income before income taxes

 

31

 

 

34

 

 

37

 

138

 

 

139

Income tax provision (benefit)

 

(116

)

 

2

 

 

2

 

(110

)

 

10

Net income

 

147

 

 

32

 

 

35

 

248

 

 

129

Net income attributable to noncontrolling interest

 

−

 

 

−

 

 

−

 

1

 

 

1

Net income attributable to DNOW Inc.

$

147

 

$

32

 

$

35

$

247

 

$

128

Earnings per share attributable to DNOW Inc. stockholders: Basic

$

1.36

 

$

0.28

 

$

0.32

$

2.26

 

$

1.14

Diluted

$

1.35

 

$

0.28

 

$

0.32

$

2.24

 

$

1.13

Weighted-average common shares outstanding, basic

 

106

 

 

110

 

 

107

 

107

 

 

111

Weighted-average common shares outstanding, diluted

 

107

 

 

111

 

 

108

 

108

 

 

111

 

DNOW INC.

SUPPLEMENTAL INFORMATION

BUSINESS SEGMENTS (UNAUDITED)

(In millions)

  Three Months Ended Year Ended December 31, September 30, December 31,

2023

2022

2023

2023

2022

Revenue: United States

$

418

$

414

$

448

$

1,749

$

1,591

Canada

 

65

 

75

 

68

 

282

 

315

International

 

72

 

58

 

72

 

290

 

230

Total revenue

$

555

$

547

$

588

$

2,321

$

2,136

 

DNOW INC.

SUPPLEMENTAL INFORMATION (CONTINUED)

U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP RECONCILIATIONS

NET INCOME ATTRIBUTABLE TO DNOW INC. TO NON-GAAP EBITDA EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

(In millions)

  Three Months Ended Year Ended December 31, September 30, December 31,

 

2023

 

 

2022

 

 

2023

 

 

2023

 

 

2022

 

  GAAP net income attributable to DNOW Inc. (1)

$

147

 

$

32

 

$

35

 

$

247

 

$

128

 

Net income attributable to noncontrolling interest (2)

 

−

 

 

−

 

 

−

 

 

1

 

 

1

 

Interest expense (income), net

 

(1

)

 

−

 

 

(2

)

 

(4

)

 

(1

)

Income tax provision (benefit)

 

(116

)

 

2

 

 

2

 

 

(110

)

 

10

 

Depreciation and amortization

 

7

 

 

5

 

 

7

 

 

26

 

 

19

 

Other costs: Stock-based compensation

 

4

 

 

4

 

 

4

 

 

15

 

 

11

 

Other (3)

 

3

 

 

4

 

 

−

 

 

9

 

 

7

 

EBITDA excluding other costs

$

44

 

$

47

 

$

46

 

$

184

 

$

175

 

EBITDA % excluding other costs (4)

 

7.9

%

 

8.6

%

 

7.8

%

 

7.9

%

 

8.2

%

 

NET INCOME ATTRIBUTABLE TO DNOW INC. TO NON-GAAP NET INCOME ATTRIBUTABLE TO DNOW INC.

EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

(In millions)

  Three Months Ended Year Ended December 31, September 30, December 31,

 

2023

 

 

2022

 

 

2023

 

 

2023

 

 

2022

 

  GAAP net income attributable to DNOW Inc. (1)

$

147

 

$

32

 

$

35

 

$

247

 

$

128

 

Other, net of tax (5) (6)

 

(123

)

 

(3

)

 

(7

)

 

(140

)

 

(21

)

Net income attributable to DNOW Inc. excluding other costs (6)

$

24

 

$

29

 

$

28

 

$

107

 

$

107

 

 

DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO DNOW INC. STOCKHOLDERS TO NON-GAAP DILUTED

EARNINGS PER SHARE ATTRIBUTABLE TO DNOW INC. STOCKHOLDERS EXCLUDING OTHER COSTS

RECONCILIATION (UNAUDITED)

  Three Months Ended Year Ended December 31, September 30, December 31,

 

2023

 

 

2022

 

 

2023

 

 

2023

 

 

2022

 

  GAAP diluted earnings per share attributable to DNOW Inc. stockholders (1)

$

1.35

 

$

0.28

 

$

0.32

 

$

2.24

 

$

1.13

 

Other, net of tax (5) (6)

 

(1.13

)

 

(0.03

)

 

(0.07

)

 

(1.27

)

 

(0.18

)

Diluted earnings per share attributable to DNOW Inc. stockholders excluding other costs (6)

$

0.22

 

$

0.25

 

$

0.25

 

$

0.97

 

$

0.95

 

 

(1)

In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in our quarterly earnings press releases and other public disclosures. The non-GAAP financial measures include: (i) earnings before interest, taxes, depreciation and amortization (EBITDA) excluding other costs, (ii) net income attributable to DNOW Inc. excluding other costs and (iii) diluted earnings per share attributable to DNOW Inc. stockholders excluding other costs. Each of these financial measures excludes the impact of certain other costs and therefore has not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included in the schedules herein.

 

(2)

Net income attributable to noncontrolling interest represents the income retained by the noncontrolling party of a joint venture in our international segment which we consolidate into our financials as we are the primary beneficiary and controlling member.

 

(3)

Other includes certain income and expenses not included in stock-based compensation.

 

For the three months ended December 31, 2023, Other of $3 million included approximately $2 million (included in warehousing, selling and administrative) related to legal fees for litigation matters that were not ordinary or routine to the operations of the business where the Company is seeking damages and transaction-related charges, as well as approximately $1 million (included in other income (expense)) related to settlements of the plan assets and benefit obligations of the Company's defined benefit pension plans.

 

For the year ended December 31, 2023, Other of $9 million included approximately $8 million (included in warehousing, selling and administrative) related to legal fees for litigation matters that were not ordinary or routine to the operations of the business where the Company is seeking damages, and separation and transaction-related charges, as well as approximately $1 million (included in other income (expense)) related to settlements of the plan assets and benefit obligations of the Company's defined benefit pension plans.

 

(4)

EBITDA % excluding other costs is defined as EBITDA excluding other costs divided by Revenue.

 

Other, net of tax includes certain income and expenses and does not include stock-based compensation expense.

 

For the three months ended December 31, 2023, Other, net of tax included a benefit of approximately $126 million from the release of valuation allowances recorded against the Company’s deferred tax assets, partially offset by approximately $2 million (included in warehousing, selling and administrative) related to legal fees for litigation matters that were not ordinary or routine to the operations of the business where the Company is seeking damages and transaction-related charges, as well as approximately $1 million (included in other income (expense)) related to settlements of the plan assets and benefit obligations of the Company's defined benefit pension plans.

 

For the year ended December 31, 2023, Other, net of tax included a benefit of approximately $149 million from the release of valuation allowances recorded against the Company’s deferred tax assets, partially offset by approximately $8 million (included in warehousing, selling and administrative) related to legal fees for litigation matters that were not ordinary or routine to the operations of the business where the Company is seeking damages and separation and transaction-related charges, as well as approximately $1 million (included in other income (expense)) related to settlements of the plan assets and benefit obligations of the Company's defined benefit pension plans.

 

The Company has excluded the impact of these items on its valuation allowance in computing net income excluding other costs.

 

(5)

Totals may not foot due to rounding.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240215195391/en/

Mark Johnson Senior Vice President and Chief Financial Officer (281) 823-4754