DNOW Inc. — Call Transcript 2025

Good morning. My name is [Jeannie], and I will be your conference operator today. At this time, I would like to welcome everyone to the DNOW's Second Quarter 2025 Earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference. Thank you, Jeannie. Good morning and welcome to DNOW's second quarter 2025 earnings conference call. We appreciate you joining us and thank you for your interest in DNOW. With me today is David Cherechinsky, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer. We operate under the DNOW 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 meanings of the U.S. Federal Securities Laws based on limited information as of today, August 6th, 2025, which is subject to change. 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 DNOW has on file with the U.S. Securities and Exchange Commission for a 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.dnow.com or in our filings with the SEC. In an effort to provide investors with additional information regarding our results, as determined by U.S. GAAP, you'll note we disclose various non-GAAP financial measures in our earnings press releases and other public disclosures. These are non-GAAP financial measures: earnings before interest, taxes, depreciation, and amortization, or EBITDA, excluding other costs; EBITDA, excluding other costs as a percentage of revenue; net income attributable to DNOW Inc, excluding other costs; diluted earnings per share attributable to DNOW Inc stockholders, excluding other costs; and free cash flow. Please refer to a reconciliation of each 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 key results and takeaways for the second quarter 2025. A replay of today's call will be available on the site for the next 30 days. Now, let me turn the call over to Dave. Thank you, Brad, and good morning, everyone. We have quite a bit to cover from our second quarter results and achievements to the outlook for our business and some updates on the MRC Global transaction. I'd like to start by acknowledging the continued solid execution by our team, driving an exceptional first half of the year despite macroeconomic headwinds. In recent growth years, such as 2021 and 2022, U.S. rigs and completions grew on a year-over-year basis, which created more opportunities for targeted growth. However, in this current softer market, achieving growth necessitates greater focus and a concerted effort to identify and execute on the prospects that meet our strategic and financial goals. Our relentless commitment to serving our customers and supplying them with the best solutions and fit-for-purpose products from the top manufacturers is instrumental to our success. I am proud of our team's performance, and I'm thankful for their efforts and their desire to win the market. The second quarter of 2025 represents the best second quarter EBITDA results in our public company history at $51 million. This achievement is a result of the steadfast execution by our team, where market activity has actually declined sequentially and year-over-year. As I stated in our first quarter call, this is important to emphasize, given the misunderstood perception that upstream sector activity alone drives opportunities for DNOW. Revenue for the second quarter was $628 million, up 5% from the first quarter, and twice the midpoint of the sequential guidance we gave in May. Gross margins remained resilient at 22.9%, in line with our expectations and better than the full year 2024 average, despite being challenged in a more price-sensitive environment. EBITDA for the quarter was $51 million, again, a second quarter company best, up 11% sequentially. EBITDA as a percentage of revenue was 8.1%, beating our second quarter target and demonstrating continued earnings strength. U.S. activity drove strong sequential revenue gains, up 11%, driven by midstream strength with additional contribution from steady demand for our water management solutions. Our midstream business in the second quarter grew to approximately 27% of total DNOW revenue. Over the prior six quarters, we have more than doubled our midstream revenue percentage contribution from the end of 2023, demonstrating our ability to diversify into and expand within this key strategic and growing sector. On the upstream production side, U.S. operators remain disciplined, focused on balance sheet management and profitability rather than prioritizing production growth targets. This has resulted in customers maintaining a limited project backlog, driven partially by market uncertainties and adopting a cautious approach to additional spending while seeking inventory preservation and asset expansion, primarily through M&A. Most of our large public upstream customers have scheduled activity for this year at or close to maintenance production levels, which provides DNOW with a steady base of revenue and cash flow. During the quarter, our strength in managing the balance sheet and income statement yielded free cash flow of $41 million and afforded us the opportunity to continue repurchasing shares. Through the end of the second quarter and year to date, we have purchased $27 million in shares under our new program authorized earlier this year. Even still, we expanded our cash balance to $232 million and continue to carry no debt, enhancing our already solid financial position. Before I move to our results on a regional basis, I wanted to share a brief update about our recently announced combination with MRC Global. Since the announcement, we've spoken with many employees, suppliers, customers, and shareholders who have expressed excitement for what this opportunity means. We discussed our confidence in becoming even better able to serve a broader mix of customers in the construction and maintenance of essential energy process, production, transmission infrastructure, downstream processing, and gas utilities activities. This combination will allow for enhanced opportunities in alternative energy, AI-driven infrastructure, electrification, RNG, mining, and other industrial markets. These are areas with significant runways and bring additional opportunities to drive value creation. At the same time, integration planning is underway with joint MRC Global DNOW teams meeting with the initial work to set us on the path for what the combined company will ultimately become. As the team embarks on this collective effort, they will focus on several areas that will be critical once the transaction is completed, including bringing together our organizations and retaining key talent, offering products and services to one another's customers, and working to realize the $70 million of annual cost synergies the company is expected to generate within three years following closing. As a reminder, these cost synergies are expected to be derived from public company costs, corporate and IT systems, and operational and supply chain efficiencies. The bedrock to the success of DNOW and MRC Global joining together is our expected substantial cash flow generation capabilities and robust balance sheet, providing a strong foundation for continued investment in organic and inorganic growth and driving shareholder value. Our supplier relationships have always been incredibly important to our success. Through this transaction, we expect to build upon those valued partnerships, serve our customers more holistically, and grow the combined business. This opportunity to bring our two organizations together is thanks to the tremendous efforts of my DNOW colleagues and the MRC Global team. As the customary regulatory and shareholder approval processes proceed, I want to highlight that the final S-4 Definitive Proxy Statement was filed yesterday, and DNOW and MRC Global each filed a Pre-Merger Notification and Report Form under the HSR Act on August 1st. We look forward to welcoming MRC Global and their valued team members in due course and bringing our organizations together to drive growth and value for our customers, partners, and shareholders alike. We cannot wait to see all we will accomplish together. Now I'll turn to some comments on our results by region. In the U.S., revenue was $528 million, up $54 million, or 11% sequentially. Sequential growth was driven by Whitco Supply and Energy Centers locations. We experienced strong sequential growth geared towards customer midstream project investments in the quarter, including a $5 million project pulled forward into Q2 that was previously scheduled for the third quarter. We also saw sequential growth in U.S. upstream as customers continue to pursue efficiencies driven by longer laterals, resulting in fewer drilling days, fewer drilling rigs, and completions crews. However, production volumes are resilient and in some areas growing. We continue to adjust our model to the market environment, investing in areas of growing demand while pruning costs in areas of reduced activity, in combination with increasing efficiencies to maximize profitability. An emerging trend as operators focus on efficiencies is their need for larger centralized tank batteries and more specialized material. This type of shift from smaller tank batteries to larger centralized tank batteries tends to favor DNOW due to our fabrication infrastructure and our inventory and service capabilities to service larger size projects like these centralized tank batteries. As a reminder, DNOW is focused on providing products and supply chain solutions to customers to extract, produce, separate, and move large volumes of fluids through pipe, valves, fittings, and infrastructure as our customers deliver production volumes to the market. In U.S. Process Solutions, revenue was relatively flat sequentially. We continue to see strength in flex flow water management solutions across a number of basins as produced water disposal services demand remains high for our leased water disposal and transfer assets. According to an industry U.S. Water Solutions report, produced water volumes are projected to be up about 2% in 2025, and produced water recycling volumes handled by midstream infrastructure companies are projected to be up 13% for the year, presenting growth opportunities for DNOW water management solutions, which we are capturing. In Canada, revenue was $48 million for the quarter, down $14 million, primarily due to the seasonal breakup period each year where road access to oil and gas assets is restricted, reducing activity in the second quarter. When comparing the second quarter to prior years, this year's breakup impact on revenue was higher than average, impacted by additional macro impacts such as tariff uncertainty, the recent Canadian federal election, consolidating customer activity, and non-repeating project and turnaround work sequentially. We continue to look for organic opportunities for growth in Canada, focused on end-market diversification and energy evolution opportunities. For international, revenue was $52 million, sequentially lower by $11 million, or 17%, in line with our May guided $10 million sequential decline due to non-repeating first quarter project activity. Brownfield activity in the UK remains steady, while capital project investments are slow due to uncertainty regarding the renewal and approval of North Sea oil and gas leases. In Norway, activity was led by increasing oil production and demand for gas, coupled with opportunities for additional sales from customer investments in carbon capture, hydrogen, and offshore wind. The acquisition of Natron International closed in the second quarter and expands DNOW's electrical products opportunities to participate more broadly in Singapore and in the Asia Pacific region. I would like to make a few comments about several additional growth markets we continue to pursue. In the energy evolution arena, which includes activity primarily associated with carbon capture and storage, direct air capture, and RNG-related projects, we experienced sequential growth driven from CCUS project activity and from direct air capture destruction. In the rapidly expanding data center market, we provided valves to a general contractor for a newly constructed data center project where we expect to gain additional revenues in the third quarter. Quoting activity increased in the quarter in the RNG-related markets, indicating increased interest in pipe, valves, and fittings as construction firms work to win and execute projects tied to the continuing build-out of the RNG export market. Looking ahead, we see interest in DNOW's products and services growing with several industrial adjacent markets and activity tied to geothermal, water, wastewater, and mining investments. All are areas of interest for DNOW. To provide our products and solutions while expanding and diversifying our business. Turning to capital allocation, our core long-term priorities remain the same. We will balance accretive organic and inorganic growth with opportunistic share repurchases. Our decision to combine with MRC Global is directly in line with this approach and will enable us to capture compelling and diverse growth opportunities with our expanded and complementary portfolio of services and product offerings. As is typical with transactions of this nature, we have suspended our share repurchase program until the close of the MRC Global transaction. Our near-term focus is on successfully completing the transaction with MRC Global and planning for the seamless integration of our two companies. In the meantime, we are pursuing potential bolt-on acquisitions and Process Solutions to better serve the needs of our customers. With that, let me hand it over to Mark. Thank you, Dave, and good morning, everyone. Total revenue for the second quarter of 2025 was $628 million, up 5%, or $29 million from the first quarter of 2025. At the top end of our guide from our May call, EBITDA excluding other costs or EBITDA for the second quarter was $51 million, or 8.1% of revenue, up $5 million sequentially. The second quarter also marked the 13th consecutive quarter where DNOW has delivered EBITDA at or above the 6.9% level. U.S. revenue for the second quarter of 2025 totaled $528 million, an increase of $54 million, or up 11% from the first quarter of 2025. Year-over-year, U.S. revenue increased $16 million, or up 3%. U.S. Energy Centers contributed approximately 72% of total U.S. revenue in the second quarter, and U.S. Process Solutions contributed approximately 28%. In Canada, for the second quarter, revenue totaled $48 million, a decrease of $14 million, or 23% from the first quarter of 2025, as seasonality drove sequential revenue lower. Canada's revenue historically declined in the second quarter due to the seasonal breakup period where heavy equipment access to production areas is restricted. International revenue for the second quarter of 2025 was $52 million, down $11 million, or 17% sequentially, as expected based on the $15 million first quarter international projects we discussed last quarter, partially offset with increased project activity elsewhere. Overall, DNOW gross margins for the second quarter were 22.9%, down slightly sequentially, and up 110 basis points when compared to the second quarter of 2024. Warehousing, selling, and administrative, or WSA, for the quarter was $112 million, in line with our expectations from last quarter after considering the more than $3 million second quarter costs incurred related to the announced merger with MRC Global. We anticipate various other costs in future quarters as we move towards closing the transaction. In the second quarter, we reported $10 million of depreciation and amortization expense, and total company operating profit was $32 million. The U.S. generated $30 million of operating profit, Canada was breakeven in the quarter, and our international segment delivered $2 million in operating profit in the second quarter of 2025. Moving to income taxes in the second quarter of 2025, DNOW's income tax expense was $7 million, and our effective tax rate, as computed on the face of the income statement, was 21.9%. The effective tax rate for the quarter was favorably impacted by tax benefits associated with vesting of stock awards during the quarter. We estimate our 2025 full-year effective tax rate to be approximately 26%-28%. Net income attributable to DNOW Inc for the second quarter was $25 million, or $0.23 per fully diluted share. On a non-GAAP basis, Q2 2025 net income attributable to DNOW Inc, excluding other costs, was $29 million, or $0.27 per fully diluted share. Moving to the balance sheet, at the end of the second quarter, we had $0 debt and a cash position of $232 million, an increase of $13 million from the first quarter. We ended the quarter with total liquidity of $582 million, comprising our net cash position of $232 million + $350 million in additional credit facility availability. Our existing $500 million revolving credit facility extends into December of 2026, providing DNOW with immediate access to capital under the facility. As previously announced, we have also secured additional commitments to expand our existing credit facility by $250 million at the close of the merger, further enhancing our liquidity and capital allocation flexibility. Accounts receivable was $440 million at the end of the second quarter, similar to the first quarter of 2025 levels. Days sales outstanding, or DSO, was 64 days at the end of the second quarter, a three-day improvement from the first. Inventory was $383 million at the end of the second quarter, down $2 million from the first quarter of 2025, with a strong annualized turn rate of 5.1x, improving from our first quarter turn rate of 4.8x. As we've outlined in the past, we take a strategic approach to intentionally invest in inventory that will support our customers as we proactively navigate the challenges posed by tariffs. Accounts payable was $318 million at the end of the second quarter, a decrease of $11 million from the first quarter. For the second quarter of 2025, working capital excluding cash as a percentage of annualized second quarter revenue improved to 15.6%. In the second quarter of 2025, we generated $45 million of cash from operating activities and invested $4 million for capital expenditures to support growth, primarily in our U.S. Process Solutions business. Under our new share repurchase program that commenced in January, we repurchased $19 million in the second quarter, bringing the cumulative repurchases under our share repurchase program to $27 million year to date through June 30, 2025. Over the last 12 months, we've completed acquisitions totaling $122 million. We've generated $210 million in free cash flow and have converted over 100% of our EBITDA to free cash flow, while returning $39 million to our shareholders through share repurchases and increasing our cash balances by $35 million. Our commitment to growing the company through a combination of organic initiatives and M&A remains a key priority. We continue to be debt-free, have no interest payments, while keeping cash flow generation a top priority. With that, let me turn the call back to Dave. Thank you, Mark. Now switching to our outlook for the third quarter. In the U.S., second quarter revenue was higher than expected due to third quarter forecasted projects pulling forward into the second quarter. As such, we expect U.S. third quarter revenue to be relatively flat compared to the second quarter as we continue to face sector headwinds impacted by midstream project timing and offset by continued progress in our energy evolution and industrial adjacent market penetration. In Canada, we expect to see a seasonal increase in revenue sequentially coming out of the second quarter breakup. However, we anticipate continued softness in the Canada market impacted by U.S. trade negotiations, tariff uncertainty, and political posturing impacting customer investments. Internationally, we expect sequential top-line growth due to increases in project activity. Taken all together, we expect DNOW's third quarter sequential revenues to increase in the low single-digits percentage range from the second quarter. We expect third quarter EBITDA to approach 8% of revenues. We reaffirm our view that full-year 2025 revenues will be flat to up on the high single-digit percentage range from 2024 levels, and full-year 2025 EBITDA could approach 8% of revenue. We are also reaffirming our target of free cash flow in 2025 of $150 million. In closing, I'd like to again recognize and thank our DNOW team for their unyielding focus in serving our customers and the continued execution of our strategy. Their efforts have enabled solid results for the quarter, posting revenues at the top end of our second quarter projections and delivering record-setting second quarter EBITDA. Moving forward, we remain focused on advancing our strategy and planning for the close of our transaction to combine with MRC Global. This is a transformative milestone in the strategic advancement of DNOW, and we are all eager to bring together our teams and pursue growth through an expanded suite of products and services, all to serve a diverse and growing customer base. With that, let's open the call for questions. Thank you. 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 with Stifel. Your line is open. Good morning. This is Adam Farley on for Nathan. Hi, Adam. Morning, Adam. Morning. Maybe starting first with the merger with MRC, thinking about, thinking through the work, what are the most difficult parts of the integration likely to be? How do you manage the risks? How do you keep your employees focused during this period? Our orientation, Adam, is around bringing the notion to our employees that this flat out is going to make DNOW and MRC Global combined a better company. We've done transformational combinations in our history. The first cardinal rule is we're going to focus on the customer post-close like we are today. It's all about the customer. We're going to align our teams early in the process, get everyone focused on external matters, that is, managing the supply chain, working very closely with the manufacturers we support, becoming better distributors to the manufacturers we support, focusing on our customers and being a better supplier to them with a broader array of products and solutions, with more locations closer to them, with a broader array of inventory, and simply just a company much better able to satisfy customer requirements as they evolve, especially in this consolidation experience we're seeing with our top customers. The focus is on how do we grow the business going forward. That's the focus. Having done this before, you really have to, the focus must be an external one. It must be focused on the supply chain and our customers and getting everyone pumped about the future. We've got a high-caliber team that's focused on the integration, and we can talk more about that in a bit. All right, that's a good caller. Dave, you know, maybe thinking about 2025 guidance, is it safe to assume the year is heading towards maybe the top half of the current guidance? Do you have any color on if customers are telling you anything about possible budget exhaustion in the fourth quarter? Just any detail on the back half? In the answer to the first part of your question, I wouldn't bias the guide towards the top end. I think it's safer to be in the middle of that range. We've got an exciting second half of the year planned out, but we'll see some of our customers with budget exhaustion, most notably in the fourth quarter, and that's factored in there. In terms of what was the second part of your question? I'm sorry, Adam. What are your assumptions around fourth quarter seasonality and budget exhaustion? Yeah, I think it's going to be in line with what we normally experience. There's nothing saying it would be more pronounced. I think it'll be pretty much consistent in that 5% range we've experienced over the last several years. I think that's probably a good bet for the fourth quarter. Okay, thanks for taking my questions. I'll hop back in queue. You're welcome. Thanks, Adam. Your next question comes from the line of Jeff Robertson with Water Tower Research. Your line is open. Thank you. Good morning. Dave, in your comments with respect to the MRC combination, you said you've had some discussions with vendors and customers, and I know the $70 million of estimated cost synergies is mostly related to corporate costs. Are you seeing opportunities at this early stage that you can drive some synergies with vendors and with customers that ultimately add to those costs and accretion over time? Yeah, we spend a good deal of time on estimating those synergies, and I'm not going to raise the number. It's going to take a lot of work to get there. We've just kicked off a joint MRC Global DNOW team with high-caliber talent from both organizations, both groups having deep understanding of the respective organizations, and the focus is on people and talent and growth. Tomorrow, once we close the deal, we want to be focused on growing our business and being a better distributor to our customers, like I said. My focus is on growth and the promise of what this combination can mean, really not from combining locations, certainly not considering how that will transpire as we go through this integration process. The focus remains on growth and the promise of the combination, rather than focusing on field consolidations where we're going to realize most of the benefits from the complementary nature of each of the firms. As you look at the combined company, Dave, are you seeing, or do you expect that with less exposure to upstream than DNOW standalone has, do you see that as an increased visibility in the future earnings power of the company as you have less tie to the drilling and completion capital cycles? It certainly will make the combined company less, you know, focused on upstream in particular, but we still see that as an important part of our business. We want to grow our position in upstream, but I think that diversification is the real opportunity here. MRC Global has built very strong end markets where we play such a small role. We can use our complementary locations, sales teams, non-crossover customer access to grow both sides of the businesses. I think the real opportunity there is to, you know, rely on cross-selling to grow the company. Lastly, do you anticipate a lot of that coming from electrification in terms of AI and just other build-out of the grid? I think that's part of the strength of MRC was exposure to the gas utilities and products markets. Yeah, Brad, you want to hit that a little bit? Yeah, good morning, Jeff. I think Dave in his prepared remarks identified a number of growing industrial markets. Electrification, of course, as you know, we've seen many of the OFS sector, as well as other providers, work to move away from fossil fuels on the electrification side. Of course, AI data centers is a very exciting space. I think the combination of our companies going forward would just bring more capabilities around that area. I know we highlighted a successful win selling some valves to a data center project. I think the prior quarter we highlighted winning feed gas, 5,000 fittings on a feed gas line to a power plant that's feeding the data center. We're starting to see more and more opportunities in our quotations and our business development efforts, really focusing on those growing end markets that we identified. Certainly, midstream, we've had tremendous growth there, approximating 27% of DNOW revenue this quarter. As you look further downstream with opportunities with RNG export, we're seeing opportunities there. We're seeing, as I mentioned, opportunities with data center, data center construction, and then the power generation side on that too, and what that means for the future of natural gas demand, as some analysts are projecting natural gas operating rigs to grow potentially here in the second half, certainly into 2026. That certainly helps us on the upstream side as well. We're excited about the future and what the combination of these two companies can bring to many of these diversified industrial markets. Thank you, Brad. If you would like to ask a question, press star, then the number one on your telephone keypad. Your next question comes from the line of Blake McLean with Daniel Energy Partners. Please go ahead. Hey, good morning, you all. Morning. Morning, Blake. Hi, Blake. I appreciate all the color this morning, and I appreciate really that last series of questions and answers around kind of the total end market portfolio and the opportunities and threats there. Maybe just expanding on that a little bit, how do you think about how the mix of [NewCo] evolves over the next one, two, three years as it relates to those total end market, you know, that portfolio of total end markets? Thank you for the question. I think, in our previous merger call announcement, we talked about what combined co-end market would look like, from an upstream, roughly about $5.3 billion in revenue, about 41% of that upstream, about 21% of that midstream, about 17% gas utilities, or 21% gas utilities, in the balance downstream industrials. We're excited about certainly increased diversification there. I think it offsets some of the cyclicality in the upstream market, certainly that we're accustomed to over the many years here at DNOW. I would say, moving forward, many of those industrial markets are projected to grow with various degrees of CAGRs. Certainly the gas utilities sector, I believe, is increasingly going through modernization and replacement as population grows and demand increases there. AI, the demand for more gigawatts tied to AI development and data center construction, that's an exciting area, I think, for NewCo, really with the exposure that both companies have traditionally had and are gaining because it's a new growth area both on the power gen side, on the general contractor side with the construction, with the operators, and some of these hyperscalers like Meta, Microsoft, and others. We're starting to see more activity and build relationships there. Also, continue to build out midstream infrastructure to really satisfy that, call it, five nines of reliability for power demand for those data centers. Really exciting is RNG. We commented on a couple of wins there. We've seen our quote backlog tied to RNG continually increase here quarter-over-quarter. We hope to get some of those across the finish line over the next four to six quarters here. They are long cycle projects as U.S. and Western Canadian companies look to expand their export liquefaction terminals and to be able to capture demand from Europe and Asia to help feed those markets on a global RNG basis. Those are some of the exciting opportunities we have looking forward. I think NewCo and its combination with our combined sales force, our success, prior success with customers, and our supplier relationships can present an exciting opportunity going forward in the market. Okay, appreciate that color. I mean, we would agree that the growth profile in a lot of those places just feels different, right? One more, just kind of maybe quick follow-up. Could you talk a little bit about impact from tariffs in the back half of the year and how you guys are sort of thinking about that and navigating those challenges in this environment? Yeah. I'll take that one. We've seen some positive impact from tariffs from a product cost perspective. We've seen product costs go up a little bit. We've seen that from tariffs. We've also seen it from general inflation, which we began to experience before the tariff impacts. We're seeing most of our sales growth coming through volume, not price. About 80% of our sales growth has come from selling more products versus the increase in price. We haven't really seen much price impact from the tariffs quite yet. There's been a kind of a governor on margin impacts due to tariffs because there's hyper-intensive competition out there, especially as we're in kind of a slower market in some of the end markets. One thing I want to say about that is, despite the tariffs, despite supply chain uncertainty, despite some political events that complicate managing the supply chain, we expect, and our forecasts suggest this will be our fifth consecutive year of growth in an environment where the market has contracted three consecutive years. We're making gains in energy evolution and the adjacent markets where we've been pursuing growth. We're able to fill some of those market activity declines by expanding our focus, often with the same customers that we're doing upstream and midstream business with. We're growing our business organically. We're making smart acquisitions. We're integrating those businesses smartly. We want to grow all the end markets in the standalone DNOW and in NewCo. We want to grow our business, and we've been very successful at doing so. We talked about the second quarter having the highest EBITDA second quarter in our history. That's something to say after three years of market decline. We're excited about where we are. We're excited about how the strengths of the product offerings are so complementary in this merger. We'll have more locations with access to more customers with a better array of products and services. We start off strong. We have two lean organizations who are focused on the customer. Our cultures are similar, and we see coming together as a real opportunity. Both organizations see that. We're very excited about where we're at, how we've been able to weather slower times and produce record earnings and reliably generate free cash flow. I just want to mention one statistic. At the end of 2023, we had $299 million in cash. 18 months later, we have $232 million in cash. In that timeframe, we spent $357 million on M&A and share repurchases. We're an active growing organization, and we're going to be even more so as we combine together with MRC Global. We're excited about where we're at. We want to grow all our end markets. We generate cash and can grow inorganically and organically, and we're excited about that. Tariffs, as they settle, can be a very positive impact to growth going forward. We just haven't seen much of it yet. Gross margins remain strong. My final comment to your question, or I kind of deviate a little bit in the answer, but very excited about where we're at. McLean, thanks. Yeah, thanks very much. Great color. Your next question comes from the line of Jeff Robertson with Water Tower Research. Your line is open. Thanks, Dave. Just as a follow-up in the DNOW second quarter, I think you said that's the highest adjusted EBITDA. I think it's maybe since it's been a public company, but the EBITDA margin was 8.1%, which is the best it's been since the first quarter of 2023. I know that was above expectations. Were there some things in the quarter that drove that outperformance? I think the biggest driver was growth in midstream. We've talked about this with you, Jeff, and on these public calls before. Midstream business tends to have lower gross margins because the order sizes tend to be much larger, but the cost to service that activity is lower as well. In fact, you can see midstream activity with greater fall through at the earnings line. I think the biggest driver in improved earnings and for us able to have our best second quarter EBITDA and above 8% EBITDA performance in the quarter was largely driven by growth in midstream. We're very excited about midstream for this second half of the year or for the third quarter, for sure. We'll see some tailing off in the fourth quarter, like we discussed. Thank you for the color. Thank you. Thank you for your questions. That concludes the question and answer session of today's call. Mr. Brad Wise, I turn the call back over to you for a final remark. Thank you, everyone, for joining us today and your interest in DNOW. We'll look forward to discussing our third quarter 2025 results on our next earnings conference call in November. Hope everyone has a wonderful Wednesday, and with that, we'll turn it back to the operators to conclude the call. Thank you for joining today's conference call. You may now disconnect.

Speaker 6: Good morning. My name is [Jeannie], and I will be your conference operator today. At this time, I would like to welcome everyone to the DNOW's Second Quarter 2025 Earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference. Good morning. good morning My name is [Jeannie], and I will be your conference operator today. my name is [jeannie] and i will be your conference operator today At this time, I would like to welcome everyone to the DNOW's S econd Quarter 2025 Earnings Conference call. at this time i would like to welcome everyone to the dnow's s econd quarter 2025 earnings conference call All lines have been placed on mute to prevent any background noise. all lines have been placed on mute to prevent any background noise After the speaker's remarks, there will be a question and answer session. after the speaker's remarks there will be a question and answer session If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. if you would like to ask a question during this time simply press star followed by the number one on your telephone keypad If you would like to withdraw your question, again, press star one. if you would like to withdraw your question again press star one Thank you. thank you Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference. mr brad wise vice president of digital strategy and investor relations you may begin your conference

Speaker 5: Thank you, Jeannie. Good morning and welcome to DNOW's second quarter 2025 earnings conference call. We appreciate you joining us and thank you for your interest in DNOW. With me today is David Cherechinsky, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer. We operate under the DNOW 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 meanings of the U.S. Federal Securities Laws based on limited information as of today, August 6th, 2025, which is subject to change. They are subject to risks and uncertainties, and actual results may differ materially. Thank you, Jeannie. thank you jeannie Good morning and welcome to DNOW 's second quarter 2025 earnings conference call. good morning and welcome to dnow 's second quarter 2025 earnings conference call We appreciate you joining us and thank you for your interest in DNOW . we appreciate you joining us and thank you for your interest in dnow With me today is David Cherechinsky, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer. with me today is david cherechinsky president and chief executive officer and mark johnson senior vice president and chief financial officer We operate under the DNOW brand, which is also our New York Stock Exchange ticker symbol. we operate under the dnow 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. 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 meanings of the U.S. these are forward-looking statements within the meanings of the u.s Federal Securities Laws based on limited information as of today, August 6th, 2025, which is subject to change. federal securities laws based on limited information as of today august 6th 2025 which is subject to change They are subject to risks and uncertainties, and actual results may differ materially. 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 DNOW has on file with the U.S. Securities and Exchange Commission for a 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.dnow.com or in our filings with the SEC. In an effort to provide investors with additional information regarding our results, as determined by U.S. No one should assume these forward-looking statements remain valid later in the quarter or later in the year. 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. 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. 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 DNOW has on file with the U.S. i refer you to the latest forms 10-k and 10-q that dnow has on file with the u.s Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business. securities and exchange commission for a 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.dnow.com or in our filings with the SEC. 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 In an effort to provide investors with additional information regarding our results, as determined by U.S. in an effort to provide investors with additional information regarding our results as determined by u.s GAAP, you'll note we disclose various non-GAAP financial measures in our earnings press releases and other public disclosures. These are non-GAAP financial measures: earnings before interest, taxes, depreciation, and amortization, or EBITDA, excluding other costs; EBITDA, excluding other costs as a percentage of revenue; net income attributable to DNOW Inc, excluding other costs; diluted earnings per share attributable to DNOW Inc stockholders, excluding other costs; and free cash flow. Please refer to a reconciliation of each 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 key results and takeaways for the second quarter 2025. A replay of today's call will be available on the site for the next 30 days. Now, let me turn the call over to Dave. GAAP, you'll note we disclose various non-GAAP financial measures in our earnings press releases and other public disclosures. gaap you'll note we disclose various non-gaap financial measures in our earnings press releases and other public disclosures These are non-GAAP financial measures: earnings before interest, taxes, depreciation, and amortization, or EBITDA, excluding other costs; EBITDA, excluding other costs as a percentage of revenue; net income attributable to DNOW Inc, excluding other costs; diluted earnings per share attributable to DNOW Inc stockholders, excluding other costs; and free cash flow. these are non-gaap financial measures earnings before interest taxes depreciation and amortization or ebitda excluding other costs ebitda excluding other costs as a percentage of revenue net income attributable to dnow inc excluding other costs diluted earnings per share attributable to dnow inc stockholders excluding other costs and free cash flow Please refer to a reconciliation of each 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. please refer to a reconciliation of each 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 key results and takeaways for the second quarter 2025. as of this morning the investor relations section of our website contains a presentation covering our key results and takeaways for the second quarter 2025 A replay of today's call will be available on the site for the next 30 days. a replay of today's call will be available on the site for the next 30 days Now, let me turn the call over to Dave. now let me turn the call over to dave

Speaker 4: Thank you, Brad, and good morning, everyone. We have quite a bit to cover from our second quarter results and achievements to the outlook for our business and some updates on the MRC Global transaction. I'd like to start by acknowledging the continued solid execution by our team, driving an exceptional first half of the year despite macroeconomic headwinds. In recent growth years, such as 2021 and 2022, U.S. rigs and completions grew on a year-over-year basis, which created more opportunities for targeted growth. However, in this current softer market, achieving growth necessitates greater focus and a concerted effort to identify and execute on the prospects that meet our strategic and financial goals. Our relentless commitment to serving our customers and supplying them with the best solutions and fit-for-purpose products from the top manufacturers is instrumental to our success. Thank you, Brad, and good morning, everyone. thank you brad and good morning everyone We have quite a bit to cover from our second quarter results and achievements to the outlook for our business and some updates on the MRC Global transaction. we have quite a bit to cover from our second quarter results and achievements to the outlook for our business and some updates on the mrc global transaction I'd like to start by acknowledging the continued solid execution by our team, driving an exceptional first half of the year despite macroeconomic headwinds. i'd like to start by acknowledging the continued solid execution by our team driving an exceptional first half of the year despite macroeconomic headwinds In recent growth years, such as 2021 and 2022, U.S. rigs and completions grew on a year-over-year basis, which created more opportunities for targeted growth. in recent growth years such as 2021 and 2022 u.s rigs and completions grew on a year-over-year basis which created more opportunities for targeted growth However, in this current softer market, achieving growth necessitates greater focus and a concerted effort to identify and execute on the prospects that meet our strategic and financial goals. however in this current softer market achieving growth necessitates greater focus and a concerted effort to identify and execute on the prospects that meet our strategic and financial goals Our relentless commitment to serving our customers and supplying them with the best solutions and fit-for-purpose products from the top manufacturers is instrumental to our success. our relentless commitment to serving our customers and supplying them with the best solutions and fit-for-purpose products from the top manufacturers is instrumental to our success I am proud of our team's performance, and I'm thankful for their efforts and their desire to win the market. The second quarter of 2025 represents the best second quarter EBITDA results in our public company history at $51 million. This achievement is a result of the steadfast execution by our team, where market activity has actually declined sequentially and year-over-year. As I stated in our first quarter call, this is important to emphasize, given the misunderstood perception that upstream sector activity alone drives opportunities for DNOW. Revenue for the second quarter was $628 million, up 5% from the first quarter, and twice the midpoint of the sequential guidance we gave in May. Gross margins remained resilient at 22.9%, in line with our expectations and better than the full year 2024 average, despite being challenged in a more price-sensitive environment. I am proud of our team's performance, and I'm thankful for their efforts and their desire to win the market. i am proud of our team's performance and i'm thankful for their efforts and their desire to win the market The second quarter of 2025 represents the best second quarter EBITDA results in our public company history at $51 million. the second quarter of 2025 represents the best second quarter ebitda results in our public company history at $51 million This achievement is a result of the steadfast execution by our team, where market activity has actually declined sequentially and year- over- year. this achievement is a result of the steadfast execution by our team where market activity has actually declined sequentially and year- over- year As I stated in our first quarter call, this is important to emphasize, given the misunderstood perception that upstream sector activity alone drives opportunities for DNOW . as i stated in our first quarter call this is important to emphasize given the misunderstood perception that upstream sector activity alone drives opportunities for dnow Revenue for the second quarter was $628 million, up 5% from the first quarter, and twice the midpoint of the sequential guidance we gave in May. revenue for the second quarter was $628 million up 5% from the first quarter and twice the midpoint of the sequential guidance we gave in may Gross margins remained resilient at 22.9%, in line with our expectations and better than the full year 2024 average, despite being challenged in a more price-sensitive environment. gross margins remained resilient at 22.9% in line with our expectations and better than the full year 2024 average despite being challenged in a more price-sensitive environment EBITDA for the quarter was $51 million, again, a second quarter company best, up 11% sequentially. EBITDA as a percentage of revenue was 8.1%, beating our second quarter target and demonstrating continued earnings strength. U.S. activity drove strong sequential revenue gains, up 11%, driven by midstream strength with additional contribution from steady demand for our water management solutions. Our midstream business in the second quarter grew to approximately 27% of total DNOW revenue. Over the prior six quarters, we have more than doubled our midstream revenue percentage contribution from the end of 2023, demonstrating our ability to diversify into and expand within this key strategic and growing sector. On the upstream production side, U.S. operators remain disciplined, focused on balance sheet management and profitability rather than prioritizing production growth targets. EBITDA for the quarter was $51 million, again, a second quarter company best, up 11% sequentially. ebitda for the quarter was $51 million again a second quarter company best up 11% sequentially EBITDA as a percentage of revenue was 8.1%, beating our second quarter target and demonstrating continued earnings strength. ebitda as a percentage of revenue was 8.1% beating our second quarter target and demonstrating continued earnings strength U.S. activity drove strong sequential revenue gains, up 11%, driven by midstream strength with additional contribution from steady demand for our water management solutions. u.s activity drove strong sequential revenue gains up 11% driven by midstream strength with additional contribution from steady demand for our water management solutions Our midstream business in the second quarter grew to approximately 27% of total DNOW revenue. our midstream business in the second quarter grew to approximately 27% of total dnow revenue Over the prior six quarters, we have more than doubled our midstream revenue percentage contribution from the end of 2023, demonstrating our ability to diversify into and expand within this key strategic and growing sector. over the prior six quarters we have more than doubled our midstream revenue percentage contribution from the end of 2023 demonstrating our ability to diversify into and expand within this key strategic and growing sector On the upstream production side, U.S. operators remain disciplined, focused on balance sheet management and profitability rather than prioritizing production growth targets. on the upstream production side u.s operators remain disciplined focused on balance sheet management and profitability rather than prioritizing production growth targets This has resulted in customers maintaining a limited project backlog, driven partially by market uncertainties and adopting a cautious approach to additional spending while seeking inventory preservation and asset expansion, primarily through M&A. Most of our large public upstream customers have scheduled activity for this year at or close to maintenance production levels, which provides DNOW with a steady base of revenue and cash flow. During the quarter, our strength in managing the balance sheet and income statement yielded free cash flow of $41 million and afforded us the opportunity to continue repurchasing shares. Through the end of the second quarter and year to date, we have purchased $27 million in shares under our new program authorized earlier this year. Even still, we expanded our cash balance to $232 million and continue to carry no debt, enhancing our already solid financial position. This has resulted in customers maintaining a limited project backlog, driven partially by market uncertainties and adopting a cautious approach to additional spending while seeking inventory preservation and asset expansion, primarily through M&A. this has resulted in customers maintaining a limited project backlog driven partially by market uncertainties and adopting a cautious approach to additional spending while seeking inventory preservation and asset expansion primarily through m&a Most of our large public upstream customers have scheduled activity for this year at or close to maintenance production levels, which provides DNOW with a steady base of revenue and cash flow. most of our large public upstream customers have scheduled activity for this year at or close to maintenance production levels which provides dnow with a steady base of revenue and cash flow During the quarter, our strength in managing the balance sheet and income statement yielded free cash flow of $41 million and afforded us the opportunity to continue repurchasing shares. during the quarter our strength in managing the balance sheet and income statement yielded free cash flow of $41 million and afforded us the opportunity to continue repurchasing shares Through the end of the second quarter and year to date, we have purchased $27 million in shares under our new program authorized earlier this year. through the end of the second quarter and year to date we have purchased $27 million in shares under our new program authorized earlier this year Even still, we expanded our cash balance to $232 million and continue to carry no debt, enhancing our already solid financial position. even still we expanded our cash balance to $232 million and continue to carry no debt enhancing our already solid financial position Before I move to our results on a regional basis, I wanted to share a brief update about our recently announced combination with MRC Global. Since the announcement, we've spoken with many employees, suppliers, customers, and shareholders who have expressed excitement for what this opportunity means. We discussed our confidence in becoming even better able to serve a broader mix of customers in the construction and maintenance of essential energy process, production, transmission infrastructure, downstream processing, and gas utilities activities. This combination will allow for enhanced opportunities in alternative energy, AI-driven infrastructure, electrification, RNG, mining, and other industrial markets. These are areas with significant runways and bring additional opportunities to drive value creation. At the same time, integration planning is underway with joint MRC Global DNOW teams meeting with the initial work to set us on the path for what the combined company will ultimately become. Before I move to our results on a regional basis, I wanted to share a brief update about our recently announced combination with MRC Global. before i move to our results on a regional basis i wanted to share a brief update about our recently announced combination with mrc global Since the announcement, we've spoken with many employees, suppliers, customers, and shareholders who have expressed excitement for what this opportunity means. since the announcement we've spoken with many employees suppliers customers and shareholders who have expressed excitement for what this opportunity means We discussed our confidence in becoming even better able to serve a broader mix of customers in the construction and maintenance of essential energy process, production, transmission infrastructure, downstream processing, and gas utilities activities. we discussed our confidence in becoming even better able to serve a broader mix of customers in the construction and maintenance of essential energy process production transmission infrastructure downstream processing and gas utilities activities This combination will allow for enhanced opportunities in alternative energy, AI-driven infrastructure, electrification, RNG, mining, and other industrial markets. this combination will allow for enhanced opportunities in alternative energy ai-driven infrastructure electrification rng mining and other industrial markets These are areas with significant runways and bring additional opportunities to drive value creation. these are areas with significant runways and bring additional opportunities to drive value creation At the same time, integration planning is underway with joint MRC Global DNOW teams meeting with the initial work to set us on the path for what the combined company will ultimately become. at the same time integration planning is underway with joint mrc global dnow teams meeting with the initial work to set us on the path for what the combined company will ultimately become As the team embarks on this collective effort, they will focus on several areas that will be critical once the transaction is completed, including bringing together our organizations and retaining key talent, offering products and services to one another's customers, and working to realize the $70 million of annual cost synergies the company is expected to generate within three years following closing. As a reminder, these cost synergies are expected to be derived from public company costs, corporate and IT systems, and operational and supply chain efficiencies. The bedrock to the success of DNOW and MRC Global joining together is our expected substantial cash flow generation capabilities and robust balance sheet, providing a strong foundation for continued investment in organic and inorganic growth and driving shareholder value. Our supplier relationships have always been incredibly important to our success. As the team embarks on this collective effort, they will focus on several areas that will be critical once the transaction is completed, including bringing together our organizations and retaining key talent, offering products and services to one another's customers, and working to realize the $70 million of annual cost synergies the company is expected to generate within three years following closing. as the team embarks on this collective effort they will focus on several areas that will be critical once the transaction is completed including bringing together our organizations and retaining key talent offering products and services to one another's customers and working to realize the $70 million of annual cost synergies the company is expected to generate within three years following closing As a reminder, these cost synergies are expected to be derived from public company costs, corporate and IT systems, and operational and supply chain efficiencies. as a reminder these cost synergies are expected to be derived from public company costs corporate and it systems and operational and supply chain efficiencies The bedrock to the success of DNOW and MRC Global joining together is our expected substantial cash flow generation capabilities and robust balance sheet, providing a strong foundation for continued investment in organic and inorganic growth and driving shareholder value. the bedrock to the success of dnow and mrc global joining together is our expected substantial cash flow generation capabilities and robust balance sheet providing a strong foundation for continued investment in organic and inorganic growth and driving shareholder value Our supplier relationships have always been incredibly important to our success. our supplier relationships have always been incredibly important to our success Through this transaction, we expect to build upon those valued partnerships, serve our customers more holistically, and grow the combined business. This opportunity to bring our two organizations together is thanks to the tremendous efforts of my DNOW colleagues and the MRC Global team. As the customary regulatory and shareholder approval processes proceed, I want to highlight that the final S-4 Definitive Proxy Statement was filed yesterday, and DNOW and MRC Global each filed a Pre-Merger Notification and Report Form under the HSR Act on August 1st. We look forward to welcoming MRC Global and their valued team members in due course and bringing our organizations together to drive growth and value for our customers, partners, and shareholders alike. We cannot wait to see all we will accomplish together. Now I'll turn to some comments on our results by region. Through this transaction, we expect to build upon those valued partnerships, serve our customers more holistically, and grow the combined business. through this transaction we expect to build upon those valued partnerships serve our customers more holistically and grow the combined business This opportunity to bring our two organizations together is thanks to the tremendous efforts of my DNOW colleagues and the MRC Global team. this opportunity to bring our two organizations together is thanks to the tremendous efforts of my dnow colleagues and the mrc global team As the customary regulatory and shareholder approval processes proceed, I want to highlight that the final S-4 Definitive Proxy Statement was filed yesterday, and DNOW and MRC Global each filed a Pre-Merger Notification and Report Form under the HSR Act on August 1st. as the customary regulatory and shareholder approval processes proceed i want to highlight that the final s-4 definitive proxy statement was filed yesterday and dnow and mrc global each filed a pre-merger notification and report form under the hsr act on august 1st We look forward to welcoming MRC Global and their valued team members in due course and bringing our organizations together to drive growth and value for our customers, partners, and shareholders alike. we look forward to welcoming mrc global and their valued team members in due course and bringing our organizations together to drive growth and value for our customers partners and shareholders alike We cannot wait to see all we will accomplish together. we cannot wait to see all we will accomplish together Now I'll turn to some comments on our results by region. now i'll turn to some comments on our results by region In the U.S., revenue was $528 million, up $54 million, or 11% sequentially. Sequential growth was driven by Whitco Supply and Energy Centers locations. We experienced strong sequential growth geared towards customer midstream project investments in the quarter, including a $5 million project pulled forward into Q2 that was previously scheduled for the third quarter. We also saw sequential growth in U.S. upstream as customers continue to pursue efficiencies driven by longer laterals, resulting in fewer drilling days, fewer drilling rigs, and completions crews. However, production volumes are resilient and in some areas growing. We continue to adjust our model to the market environment, investing in areas of growing demand while pruning costs in areas of reduced activity, in combination with increasing efficiencies to maximize profitability. An emerging trend as operators focus on efficiencies is their need for larger centralized tank batteries and more specialized material. In the U.S., revenue was $528 million, up $54 million, or 11% sequentially. in the u.s revenue was $528 million up $54 million or 11% sequentially Sequential growth was driven by Whitco Supply and Energy Centers locations. sequential growth was driven by whitco supply and energy centers locations We experienced strong sequential growth geared towards customer midstream project investments in the quarter, including a $5 million project pulled forward into Q2 that was previously scheduled for the third quarter. we experienced strong sequential growth geared towards customer midstream project investments in the quarter including a $5 million project pulled forward into q2 that was previously scheduled for the third quarter We also saw sequential growth in U.S. upstream as customers continue to pursue efficiencies driven by longer laterals, resulting in fewer drilling days, fewer drilling rigs, and completions crews. we also saw sequential growth in u.s upstream as customers continue to pursue efficiencies driven by longer laterals resulting in fewer drilling days fewer drilling rigs and completions crews However, production volumes are resilient and in some areas growing. however production volumes are resilient and in some areas growing We continue to adjust our model to the market environment, investing in areas of growing demand while pruning costs in areas of reduced activity, in combination with increasing efficiencies to maximize profitability. we continue to adjust our model to the market environment investing in areas of growing demand while pruning costs in areas of reduced activity in combination with increasing efficiencies to maximize profitability An emerging trend as operators focus on efficiencies is their need for larger centralized tank batteries and more specialized material. an emerging trend as operators focus on efficiencies is their need for larger centralized tank batteries and more specialized material This type of shift from smaller tank batteries to larger centralized tank batteries tends to favor DNOW due to our fabrication infrastructure and our inventory and service capabilities to service larger size projects like these centralized tank batteries. As a reminder, DNOW is focused on providing products and supply chain solutions to customers to extract, produce, separate, and move large volumes of fluids through pipe, valves, fittings, and infrastructure as our customers deliver production volumes to the market. In U.S. Process Solutions, revenue was relatively flat sequentially. We continue to see strength in flex flow water management solutions across a number of basins as produced water disposal services demand remains high for our leased water disposal and transfer assets. According to an industry U.S. This type of shift from smaller tank batteries to larger centralized tank batteries tends to favor DNOW due to our fabrication infrastructure and our inventory and service capabilities to service larger size projects like these centralized tank batteries. this type of shift from smaller tank batteries to larger centralized tank batteries tends to favor dnow due to our fabrication infrastructure and our inventory and service capabilities to service larger size projects like these centralized tank batteries As a reminder, DNOW is focused on providing products and supply chain solutions to customers to extract, produce, separate, and move large volumes of fluids through pipe, valves, fittings, and infrastructure as our customers deliver production volumes to the market. as a reminder dnow is focused on providing products and supply chain solutions to customers to extract produce separate and move large volumes of fluids through pipe valves fittings and infrastructure as our customers deliver production volumes to the market In U.S. in u.s Process Solutions, revenue was relatively flat sequentially. process solutions revenue was relatively flat sequentially We continue to see strength in flex flow water management solutions across a number of basins as produced water disposal services demand remains high for our leased water disposal and transfer assets. we continue to see strength in flex flow water management solutions across a number of basins as produced water disposal services demand remains high for our leased water disposal and transfer assets According to an industry U.S. according to an industry u.s Water Solutions report, produced water volumes are projected to be up about 2% in 2025, and produced water recycling volumes handled by midstream infrastructure companies are projected to be up 13% for the year, presenting growth opportunities for DNOW water management solutions, which we are capturing. In Canada, revenue was $48 million for the quarter, down $14 million, primarily due to the seasonal breakup period each year where road access to oil and gas assets is restricted, reducing activity in the second quarter. When comparing the second quarter to prior years, this year's breakup impact on revenue was higher than average, impacted by additional macro impacts such as tariff uncertainty, the recent Canadian federal election, consolidating customer activity, and non-repeating project and turnaround work sequentially. We continue to look for organic opportunities for growth in Canada, focused on end-market diversification and energy evolution opportunities. Water Solutions report, produced water volumes are projected to be up about 2% in 2025, and produced water recycling volumes handled by midstream infrastructure companies are projected to be up 13% for the year, presenting growth opportunities for DNOW water management solutions, which we are capturing. water solutions report produced water volumes are projected to be up about 2% in 2025 and produced water recycling volumes handled by midstream infrastructure companies are projected to be up 13% for the year presenting growth opportunities for dnow water management solutions which we are capturing In Canada, revenue was $48 million for the quarter, down $14 million, primarily due to the seasonal breakup period each year where road access to oil and gas assets is restricted, reducing activity in the second quarter. in canada revenue was $48 million for the quarter down $14 million primarily due to the seasonal breakup period each year where road access to oil and gas assets is restricted reducing activity in the second quarter When comparing the second quarter to prior years, this year's breakup impact on revenue was higher than average, impacted by additional macro impacts such as tariff uncertainty, the recent Canadian federal election, consolidating customer activity, and non-repeating project and turnaround work sequentially. when comparing the second quarter to prior years this year's breakup impact on revenue was higher than average impacted by additional macro impacts such as tariff uncertainty the recent canadian federal election consolidating customer activity and non-repeating project and turnaround work sequentially We continue to look for organic opportunities for growth in Canada, focused on end-market diversification and energy evolution opportunities. we continue to look for organic opportunities for growth in canada focused on end-market diversification and energy evolution opportunities For international, revenue was $52 million, sequentially lower by $11 million, or 17%, in line with our May guided $10 million sequential decline due to non-repeating first quarter project activity. Brownfield activity in the UK remains steady, while capital project investments are slow due to uncertainty regarding the renewal and approval of North Sea oil and gas leases. In Norway, activity was led by increasing oil production and demand for gas, coupled with opportunities for additional sales from customer investments in carbon capture, hydrogen, and offshore wind. The acquisition of Natron International closed in the second quarter and expands DNOW's electrical products opportunities to participate more broadly in Singapore and in the Asia Pacific region. I would like to make a few comments about several additional growth markets we continue to pursue. For international, revenue was $52 million, sequentially lower by $11 million, or 17%, in line with our May guided $10 million sequential decline due to non-repeating first quarter project activity. for international revenue was $52 million sequentially lower by $11 million or 17% in line with our may guided $10 million sequential decline due to non-repeating first quarter project activity Brownfield activity in the UK remains steady, while capital project investments are slow due to uncertainty regarding the renewal and approval of North Sea oil and gas leases. brownfield activity in the uk remains steady while capital project investments are slow due to uncertainty regarding the renewal and approval of north sea oil and gas leases In Norway, activity was led by increasing oil production and demand for gas, coupled with opportunities for additional sales from customer investments in carbon capture, hydrogen, and offshore wind. in norway activity was led by increasing oil production and demand for gas coupled with opportunities for additional sales from customer investments in carbon capture hydrogen and offshore wind The acquisition of Natron International closed in the second quarter and expands DNOW 's electrical products opportunities to participate more broadly in Singapore and in the Asia Pacific region. the acquisition of natron international closed in the second quarter and expands dnow 's electrical products opportunities to participate more broadly in singapore and in the asia pacific region I would like to make a few comments about several additional growth markets we continue to pursue. i would like to make a few comments about several additional growth markets we continue to pursue In the energy evolution arena, which includes activity primarily associated with carbon capture and storage, direct air capture, and RNG-related projects, we experienced sequential growth driven from CCUS project activity and from direct air capture destruction. In the rapidly expanding data center market, we provided valves to a general contractor for a newly constructed data center project where we expect to gain additional revenues in the third quarter. Quoting activity increased in the quarter in the RNG-related markets, indicating increased interest in pipe, valves, and fittings as construction firms work to win and execute projects tied to the continuing build-out of the RNG export market. Looking ahead, we see interest in DNOW's products and services growing with several industrial adjacent markets and activity tied to geothermal, water, wastewater, and mining investments. All are areas of interest for DNOW. In the energy evolution arena, which includes activity primarily associated with carbon capture and storage, direct air capture, and RNG-related projects, we experienced sequential growth driven from CCUS project activity and from direct air capture destruction. in the energy evolution arena which includes activity primarily associated with carbon capture and storage direct air capture and rng-related projects we experienced sequential growth driven from ccus project activity and from direct air capture destruction In the rapidly expanding data center market, we provided valves to a general contractor for a newly constructed data center project where we expect to gain additional revenues in the third quarter. in the rapidly expanding data center market we provided valves to a general contractor for a newly constructed data center project where we expect to gain additional revenues in the third quarter Quoting activity increased in the quarter in the RNG-related markets, indicating increased interest in pipe, valves, and fittings as construction firms work to win and execute projects tied to the continuing build-out of the RNG export market. quoting activity increased in the quarter in the rng-related markets indicating increased interest in pipe valves and fittings as construction firms work to win and execute projects tied to the continuing build-out of the rng export market Looking ahead, we see interest in DNOW 's products and services growing with several industrial adjacent markets and activity tied to geothermal, water, wastewater, and mining investments. looking ahead we see interest in dnow 's products and services growing with several industrial adjacent markets and activity tied to geothermal water wastewater and mining investments All are areas of interest for DNOW. all are areas of interest for dnow To provide our products and solutions while expanding and diversifying our business. Turning to capital allocation, our core long-term priorities remain the same. We will balance accretive organic and inorganic growth with opportunistic share repurchases. Our decision to combine with MRC Global is directly in line with this approach and will enable us to capture compelling and diverse growth opportunities with our expanded and complementary portfolio of services and product offerings. As is typical with transactions of this nature, we have suspended our share repurchase program until the close of the MRC Global transaction. Our near-term focus is on successfully completing the transaction with MRC Global and planning for the seamless integration of our two companies. In the meantime, we are pursuing potential bolt-on acquisitions and Process Solutions to better serve the needs of our customers. With that, let me hand it over to Mark. To provide our products and solutions while expanding and diversifying our business. to provide our products and solutions while expanding and diversifying our business Turning to capital allocation, our core long-term priorities remain the same. turning to capital allocation our core long-term priorities remain the same We will balance accretive organic and inorganic growth with opportunistic share repurchases. we will balance accretive organic and inorganic growth with opportunistic share repurchases Our decision to combine with MRC Global is directly in line with this approach and will enable us to capture compelling and diverse growth opportunities with our expanded and complementary portfolio of services and product offerings. our decision to combine with mrc global is directly in line with this approach and will enable us to capture compelling and diverse growth opportunities with our expanded and complementary portfolio of services and product offerings As is typical with transactions of this nature, we have suspended our share repurchase program until the close of the MRC Global transaction. as is typical with transactions of this nature we have suspended our share repurchase program until the close of the mrc global transaction Our near-term focus is on successfully completing the transaction with MRC Global and planning for the seamless integration of our two companies. our near-term focus is on successfully completing the transaction with mrc global and planning for the seamless integration of our two companies In the meantime, we are pursuing potential bolt-on acquisitions and Process Solutions to better serve the needs of our customers. in the meantime we are pursuing potential bolt-on acquisitions and process solutions to better serve the needs of our customers With that, let me hand it over to Mark. with that let me hand it over to mark

Speaker 3: Thank you, Dave, and good morning, everyone. Total revenue for the second quarter of 2025 was $628 million, up 5%, or $29 million from the first quarter of 2025. At the top end of our guide from our May call, EBITDA excluding other costs or EBITDA for the second quarter was $51 million, or 8.1% of revenue, up $5 million sequentially. The second quarter also marked the 13th consecutive quarter where DNOW has delivered EBITDA at or above the 6.9% level. U.S. revenue for the second quarter of 2025 totaled $528 million, an increase of $54 million, or up 11% from the first quarter of 2025. Year-over-year, U.S. revenue increased $16 million, or up 3%. U.S. Energy Centers contributed approximately 72% of total U.S. revenue in the second quarter, and U.S. Process Solutions contributed approximately 28%. Thank you, Dave, and good morning, everyone. thank you dave and good morning everyone Total revenue for the second quarter of 2025 was $628 million, up 5%, or $29 million from the first quarter of 2025. total revenue for the second quarter of 2025 was $628 million up 5% or $29 million from the first quarter of 2025 At the top end of our guide from our May call, EBITDA excluding other costs or EBITDA for the second quarter was $51 million, or 8.1% of revenue, up $5 million sequentially. at the top end of our guide from our may call ebitda excluding other costs or ebitda for the second quarter was $51 million or 8.1% of revenue up $5 million sequentially The second quarter also marked the 13th consecutive quarter where DNOW has delivered EBITDA at or above the 6.9% level. the second quarter also marked the 13th consecutive quarter where dnow has delivered ebitda at or above the 6.9% level U.S. revenue for the second quarter of 2025 totaled $528 million, an increase of $54 million, or up 11% from the first quarter of 2025. u.s revenue for the second quarter of 2025 totaled $528 million an increase of $54 million or up 11% from the first quarter of 2025 Year- over- year, U.S. revenue increased $16 million, or up 3%. year- over- year u.s revenue increased $16 million or up 3% U.S. u.s Energy Centers contributed approximately 72% of total U.S. revenue in the second quarter, and U.S. energy centers contributed approximately 72% of total u.s revenue in the second quarter and u.s Process Solutions contributed approximately 28%. process solutions contributed approximately 28% In Canada, for the second quarter, revenue totaled $48 million, a decrease of $14 million, or 23% from the first quarter of 2025, as seasonality drove sequential revenue lower. Canada's revenue historically declined in the second quarter due to the seasonal breakup period where heavy equipment access to production areas is restricted. International revenue for the second quarter of 2025 was $52 million, down $11 million, or 17% sequentially, as expected based on the $15 million first quarter international projects we discussed last quarter, partially offset with increased project activity elsewhere. Overall, DNOW gross margins for the second quarter were 22.9%, down slightly sequentially, and up 110 basis points when compared to the second quarter of 2024. In Canada, for the second quarter, revenue totaled $48 million, a decrease of $14 million, or 23% from the first quarter of 2025, as seasonality drove sequential revenue lower. in canada for the second quarter revenue totaled $48 million a decrease of $14 million or 23% from the first quarter of 2025 as seasonality drove sequential revenue lower Canada's revenue historically declined in the second quarter due to the seasonal breakup period where heavy equipment access to production areas is restricted. canada's revenue historically declined in the second quarter due to the seasonal breakup period where heavy equipment access to production areas is restricted International revenue for the second quarter of 2025 was $52 million, down $11 million, or 17% sequentially, as expected based on the $15 million first quarter international projects we discussed last quarter, partially offset with increased project activity elsewhere. international revenue for the second quarter of 2025 was $52 million down $11 million or 17% sequentially as expected based on the $15 million first quarter international projects we discussed last quarter partially offset with increased project activity elsewhere Overall, DNOW gross margins for the second quarter were 22.9%, down slightly sequentially, and up 110 basis points when compared to the second quarter of 2024. overall dnow gross margins for the second quarter were 22.9% down slightly sequentially and up 110 basis points when compared to the second quarter of 2024 Warehousing, selling, and administrative, or WSA, for the quarter was $112 million, in line with our expectations from last quarter after considering the more than $3 million second quarter costs incurred related to the announced merger with MRC Global. We anticipate various other costs in future quarters as we move towards closing the transaction. In the second quarter, we reported $10 million of depreciation and amortization expense, and total company operating profit was $32 million. The U.S. generated $30 million of operating profit, Canada was breakeven in the quarter, and our international segment delivered $2 million in operating profit in the second quarter of 2025. Moving to income taxes in the second quarter of 2025, DNOW's income tax expense was $7 million, and our effective tax rate, as computed on the face of the income statement, was 21.9%. Warehousing, selling, and administrative, or WSA, for the quarter was $112 million, in line with our expectations from last quarter after considering the more than $3 million second quarter costs incurred related to the announced merger with MRC Global. warehousing selling and administrative or wsa for the quarter was $112 million in line with our expectations from last quarter after considering the more than $3 million second quarter costs incurred related to the announced merger with mrc global We anticipate various other costs in future quarters as we move towards closing the transaction. we anticipate various other costs in future quarters as we move towards closing the transaction In the second quarter, we reported $10 million of depreciation and amortization expense, and total company operating profit was $32 million. in the second quarter we reported $10 million of depreciation and amortization expense and total company operating profit was $32 million The U.S. generated $30 million of operating profit, Canada was breakeven in the quarter, and our international segment delivered $2 million in operating profit in the second quarter of 2025. the u.s generated $30 million of operating profit canada was breakeven in the quarter and our international segment delivered $2 million in operating profit in the second quarter of 2025 Moving to income taxes in the second quarter of 2025, DNOW's income tax expense was $7 million, and our effective tax rate, as computed on the face of the income statement, was 21.9%. moving to income taxes in the second quarter of 2025 dnow's income tax expense was $7 million and our effective tax rate as computed on the face of the income statement was 21.9% The effective tax rate for the quarter was favorably impacted by tax benefits associated with vesting of stock awards during the quarter. We estimate our 2025 full-year effective tax rate to be approximately 26%-28%. Net income attributable to DNOW Inc for the second quarter was $25 million, or $0.23 per fully diluted share. On a non-GAAP basis, Q2 2025 net income attributable to DNOW Inc, excluding other costs, was $29 million, or $0.27 per fully diluted share. Moving to the balance sheet, at the end of the second quarter, we had $0 debt and a cash position of $232 million, an increase of $13 million from the first quarter. We ended the quarter with total liquidity of $582 million, comprising our net cash position of $232 million + $350 million in additional credit facility availability. The effective tax rate for the quarter was favorably impacted by tax benefits associated with vesting of stock awards during the quarter. the effective tax rate for the quarter was favorably impacted by tax benefits associated with vesting of stock awards during the quarter We estimate our 2025 full-year effective tax rate to be approximately 26%- 28%. we estimate our 2025 full-year effective tax rate to be approximately 26%- 28% Net income attributable to DNOW Inc for the second quarter was $25 million, or $0.23 per fully diluted share. net income attributable to dnow inc for the second quarter was $25 million or $0.23 per fully diluted share On a non-GAAP basis, Q2 2025 net income attributable to DNOW Inc, excluding other costs, was $29 million, or $0.27 per fully diluted share. on a non-gaap basis q2 2025 net income attributable to dnow inc excluding other costs was $29 million or $0.27 per fully diluted share Moving to the balance sheet, at the end of the second quarter, we had $0 debt and a cash position of $232 million, an increase of $13 million from the first quarter. moving to the balance sheet at the end of the second quarter we had $0 debt and a cash position of $232 million an increase of $13 million from the first quarter We ended the quarter with total liquidity of $582 million, comprising our net cash position of $232 million + $350 million in additional credit facility availability. we ended the quarter with total liquidity of $582 million comprising our net cash position of $232 million + $350 million in additional credit facility availability Our existing $500 million revolving credit facility extends into December of 2026, providing DNOW with immediate access to capital under the facility. As previously announced, we have also secured additional commitments to expand our existing credit facility by $250 million at the close of the merger, further enhancing our liquidity and capital allocation flexibility. Accounts receivable was $440 million at the end of the second quarter, similar to the first quarter of 2025 levels. Days sales outstanding, or DSO, was 64 days at the end of the second quarter, a three-day improvement from the first. Inventory was $383 million at the end of the second quarter, down $2 million from the first quarter of 2025, with a strong annualized turn rate of 5.1x, improving from our first quarter turn rate of 4.8x. Our existing $500 million revolving credit facility extends into December of 2026, providing DNOW with immediate access to capital under the facility. our existing $500 million revolving credit facility extends into december of 2026 providing dnow with immediate access to capital under the facility As previously announced, we have also secured additional commitments to expand our existing credit facility by $250 million at the close of the merger, further enhancing our liquidity and capital allocation flexibility. as previously announced we have also secured additional commitments to expand our existing credit facility by $250 million at the close of the merger further enhancing our liquidity and capital allocation flexibility Accounts receivable was $440 million at the end of the second quarter, similar to the first quarter of 2025 levels. accounts receivable was $440 million at the end of the second quarter similar to the first quarter of 2025 levels Days sales outstanding, or DSO, was 64 days at the end of the second quarter, a three-day improvement from the first. days sales outstanding or dso was 64 days at the end of the second quarter a three-day improvement from the first Inventory was $383 million at the end of the second quarter, down $2 million from the first quarter of 2025, with a strong annualized turn rate of 5.1 x, improving from our first quarter turn rate of 4.8 x. inventory was $383 million at the end of the second quarter down $2 million from the first quarter of 2025 with a strong annualized turn rate of 5.1 x improving from our first quarter turn rate of 4.8 x As we've outlined in the past, we take a strategic approach to intentionally invest in inventory that will support our customers as we proactively navigate the challenges posed by tariffs. Accounts payable was $318 million at the end of the second quarter, a decrease of $11 million from the first quarter. For the second quarter of 2025, working capital excluding cash as a percentage of annualized second quarter revenue improved to 15.6%. In the second quarter of 2025, we generated $45 million of cash from operating activities and invested $4 million for capital expenditures to support growth, primarily in our U.S. Process Solutions business. Under our new share repurchase program that commenced in January, we repurchased $19 million in the second quarter, bringing the cumulative repurchases under our share repurchase program to $27 million year to date through June 30, 2025. As we've outlined in the past, we take a strategic approach to intentionally invest in inventory that will support our customers as we proactively navigate the challenges posed by tariffs. as we've outlined in the past we take a strategic approach to intentionally invest in inventory that will support our customers as we proactively navigate the challenges posed by tariffs Accounts payable was $318 million at the end of the second quarter, a decrease of $11 million from the first quarter. accounts payable was $318 million at the end of the second quarter a decrease of $11 million from the first quarter For the second quarter of 2025, working capital excluding cash as a percentage of annualized second quarter revenue improved to 15.6%. for the second quarter of 2025 working capital excluding cash as a percentage of annualized second quarter revenue improved to 15.6% In the second quarter of 2025, we generated $45 million of cash from operating activities and invested $4 million for capital expenditures to support growth, primarily in our U.S. in the second quarter of 2025 we generated $45 million of cash from operating activities and invested $4 million for capital expenditures to support growth primarily in our u.s Process Solutions business. process solutions business Under our new share repurchase program that commenced in January, we repurchased $19 million in the second quarter, bringing the cumulative repurchases under our share repurchase program to $27 million year to date through June 30, 2025. under our new share repurchase program that commenced in january we repurchased $19 million in the second quarter bringing the cumulative repurchases under our share repurchase program to $27 million year to date through june 30 2025 Over the last 12 months, we've completed acquisitions totaling $122 million. We've generated $210 million in free cash flow and have converted over 100% of our EBITDA to free cash flow, while returning $39 million to our shareholders through share repurchases and increasing our cash balances by $35 million. Our commitment to growing the company through a combination of organic initiatives and M&A remains a key priority. We continue to be debt-free, have no interest payments, while keeping cash flow generation a top priority. With that, let me turn the call back to Dave. Over the last 12 months, we've completed acquisitions totaling $122 million. over the last 12 months we've completed acquisitions totaling $122 million We've generated $210 million in free cash flow and have converted over 100% of our EBITDA to free cash flow, while returning $39 million to our shareholders through share repurchases and increasing our cash balances by $35 million. we've generated $210 million in free cash flow and have converted over 100% of our ebitda to free cash flow while returning $39 million to our shareholders through share repurchases and increasing our cash balances by $35 million Our commitment to growing the company through a combination of organic initiatives and M&A remains a key priority. our commitment to growing the company through a combination of organic initiatives and m&a remains a key priority We continue to be debt-free, have no interest payments, while keeping cash flow generation a top priority. we continue to be debt-free have no interest payments while keeping cash flow generation a top priority With that, let me turn the call back to Dave. with that let me turn the call back to dave

Speaker 4: Thank you, Mark. Now switching to our outlook for the third quarter. In the U.S., second quarter revenue was higher than expected due to third quarter forecasted projects pulling forward into the second quarter. As such, we expect U.S. third quarter revenue to be relatively flat compared to the second quarter as we continue to face sector headwinds impacted by midstream project timing and offset by continued progress in our energy evolution and industrial adjacent market penetration. In Canada, we expect to see a seasonal increase in revenue sequentially coming out of the second quarter breakup. However, we anticipate continued softness in the Canada market impacted by U.S. trade negotiations, tariff uncertainty, and political posturing impacting customer investments. Internationally, we expect sequential top-line growth due to increases in project activity. Thank you, Mark. thank you mark Now switching to our outlook for the third quarter. now switching to our outlook for the third quarter In the U.S., second quarter revenue was higher than expected due to third quarter forecasted projects pulling forward into the second quarter. in the u.s second quarter revenue was higher than expected due to third quarter forecasted projects pulling forward into the second quarter As such, we expect U.S. third quarter revenue to be relatively flat compared to the second quarter as we continue to face sector headwinds impacted by midstream project timing and offset by continued progress in our energy evolution and industrial adjacent market penetration. as such we expect u.s third quarter revenue to be relatively flat compared to the second quarter as we continue to face sector headwinds impacted by midstream project timing and offset by continued progress in our energy evolution and industrial adjacent market penetration In Canada, we expect to see a seasonal increase in revenue sequentially coming out of the second quarter breakup. in canada we expect to see a seasonal increase in revenue sequentially coming out of the second quarter breakup However, we anticipate continued softness in the Canada market impacted by U.S. trade negotiations, tariff uncertainty, and political posturing impacting customer investments. however we anticipate continued softness in the canada market impacted by u.s trade negotiations tariff uncertainty and political posturing impacting customer investments Internationally, we expect sequential top-line growth due to increases in project activity. internationally we expect sequential top-line growth due to increases in project activity Taken all together, we expect DNOW's third quarter sequential revenues to increase in the low single-digits percentage range from the second quarter. We expect third quarter EBITDA to approach 8% of revenues. We reaffirm our view that full-year 2025 revenues will be flat to up on the high single-digit percentage range from 2024 levels, and full-year 2025 EBITDA could approach 8% of revenue. We are also reaffirming our target of free cash flow in 2025 of $150 million. In closing, I'd like to again recognize and thank our DNOW team for their unyielding focus in serving our customers and the continued execution of our strategy. Their efforts have enabled solid results for the quarter, posting revenues at the top end of our second quarter projections and delivering record-setting second quarter EBITDA. Taken all together, we expect DNOW's third quarter sequential revenues to increase in the low single-digits percentage range from the second quarter. taken all together we expect dnow's third quarter sequential revenues to increase in the low single-digits percentage range from the second quarter We expect third quarter EBITDA to approach 8% of revenues. we expect third quarter ebitda to approach 8% of revenues We reaffirm our view that full-year 2025 revenues will be flat to up on the high single-digit percentage range from 2024 levels, and full-year 2025 EBITDA could approach 8% of revenue. we reaffirm our view that full-year 2025 revenues will be flat to up on the high single-digit percentage range from 2024 levels and full-year 2025 ebitda could approach 8% of revenue We are also reaffirming our target of free cash flow in 2025 of $150 million. we are also reaffirming our target of free cash flow in 2025 of $150 million In closing, I'd like to again recognize and thank our DNOW team for their unyielding focus in serving our customers and the continued execution of our strategy. in closing i'd like to again recognize and thank our dnow team for their unyielding focus in serving our customers and the continued execution of our strategy Their efforts have enabled solid results for the quarter, posting revenues at the top end of our second quarter projections and delivering record-setting second quarter EBITDA. their efforts have enabled solid results for the quarter posting revenues at the top end of our second quarter projections and delivering record-setting second quarter ebitda Moving forward, we remain focused on advancing our strategy and planning for the close of our transaction to combine with MRC Global. This is a transformative milestone in the strategic advancement of DNOW, and we are all eager to bring together our teams and pursue growth through an expanded suite of products and services, all to serve a diverse and growing customer base. With that, let's open the call for questions. Moving forward, we remain focused on advancing our strategy and planning for the close of our transaction to combine with MRC Global. moving forward we remain focused on advancing our strategy and planning for the close of our transaction to combine with mrc global This is a transformative milestone in the strategic advancement of DNOW, and we are all eager to bring together our teams and pursue growth through an expanded suite of products and services, all to serve a diverse and growing customer base. this is a transformative milestone in the strategic advancement of dnow and we are all eager to bring together our teams and pursue growth through an expanded suite of products and services all to serve a diverse and growing customer base With that, let's open the call for questions. with that let's open the call for questions

Speaker 6: Thank you. 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 with Stifel. Your line is open. Thank you. thank you 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. 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. we'll pause for just a moment to compile the q&a roster Your first question comes from the line of Nathan Jones with Stifel. your first question comes from the line of nathan jones with stifel Your line is open. your line is open

Speaker 7: Good morning. This is Adam Farley on for Nathan. Good morning. good morning This is Adam Farley on for Nathan. this is adam farley on for nathan

Speaker 4: Hi, Adam. Hi, Adam. hi adam

Speaker 3: Morning, Adam. Morning, Adam. morning adam

Speaker 7: Morning. Maybe starting first with the merger with MRC, thinking about, thinking through the work, what are the most difficult parts of the integration likely to be? How do you manage the risks? How do you keep your employees focused during this period? Morning. morning Maybe starting first with the merger with MRC , thinking about, thinking through the work, what are the most difficult parts of the integration likely to be? maybe starting first with the merger with mrc thinking about thinking through the work what are the most difficult parts of the integration likely to be How do you manage the risks? how do you manage the risks how How do you keep your employees focused during this period? how do you keep your employees focused during this period

Speaker 4: Our orientation, Adam, is around bringing the notion to our employees that this flat out is going to make DNOW and MRC Global combined a better company. We've done transformational combinations in our history. The first cardinal rule is we're going to focus on the customer post-close like we are today. It's all about the customer. Our orientation, Adam, is around bringing the notion to our employees that this flat out is going to make DNOW and MRC Global combined a better company. our orientation adam is around bringing the notion to our employees that this flat out is going to make dnow and mrc global combined a better company We've done transformational combinations in our history. we've done transformational combinations in our history The first cardinal rule is we're going to focus on the customer post-close like we are today. the first cardinal rule is we're going to focus on the customer post-close like we are today It's all about the customer. it's all about the customer We're going to align our teams early in the process, get everyone focused on external matters, that is, managing the supply chain, working very closely with the manufacturers we support, becoming better distributors to the manufacturers we support, focusing on our customers and being a better supplier to them with a broader array of products and solutions, with more locations closer to them, with a broader array of inventory, and simply just a company much better able to satisfy customer requirements as they evolve, especially in this consolidation experience we're seeing with our top customers. The focus is on how do we grow the business going forward. That's the focus. Having done this before, you really have to, the focus must be an external one. It must be focused on the supply chain and our customers and getting everyone pumped about the future. We're going to align our teams early in the process, get everyone focused on external matters, that is, managing the supply chain, working very closely with the manufacturers we support, becoming better distributors to the manufacturers we support, focusing on our customers and being a better supplier to them with a broader array of products and solutions, with more locations closer to them, with a broader array of inventory, and simply just a company much better able to satisfy customer requirements as they evolve, especially in this consolidation experience we're seeing with our top customers. we're going to align our teams early in the process get everyone focused on external matters that is managing the supply chain working very closely with the manufacturers we support becoming better distributors to the manufacturers we support focusing on our customers and being a better supplier to them with a broader array of products and solutions with more locations closer to them with a broader array of inventory and simply just a company much better able to satisfy customer requirements as they evolve especially in this consolidation experience we're seeing with our top customers The focus is on how do we grow the business going forward. the focus is on how do we grow the business going forward That's the focus. that's the focus Having done this before, you really have to, the focus must be an external one. having done this before you really have to the focus must be an external one It must be focused on the supply chain and our customers and getting everyone pumped about the future. it must be focused on the supply chain and our customers and getting everyone pumped about the future We've got a high-caliber team that's focused on the integration, and we can talk more about that in a bit. We've got a high-caliber team that's focused on the integration, and we can talk more about that in a bit. we've got a high-caliber team that's focused on the integration and we can talk more about that in a bit

Speaker 7: All right, that's a good caller. Dave, you know, maybe thinking about 2025 guidance, is it safe to assume the year is heading towards maybe the top half of the current guidance? Do you have any color on if customers are telling you anything about possible budget exhaustion in the fourth quarter? Just any detail on the back half? All right, that's a good caller. all right that's a good caller Dave, you know, maybe thinking about 2025 guidance, is it safe to assume the year is heading towards maybe the top half of the current guidance? dave you know maybe thinking about 2025 guidance is it safe to assume the year is heading towards maybe the top half of the current guidance Do you have any color on if customers are telling you anything about possible budget exhaustion in the fourth quarter? do you have any color on if customers are telling you anything about possible budget exhaustion in the fourth quarter Just any detail on the back half? just any detail on the back half

Speaker 4: In the answer to the first part of your question, I wouldn't bias the guide towards the top end. I think it's safer to be in the middle of that range. We've got an exciting second half of the year planned out, but we'll see some of our customers with budget exhaustion, most notably in the fourth quarter, and that's factored in there. In terms of what was the second part of your question? I'm sorry, Adam. In the answer to the first part of your question, I wouldn't bias the guide towards the top end. in the answer to the first part of your question i wouldn't bias the guide towards the top end I think it's safer to be in the middle of that range. i think it's safer to be in the middle of that range We've got an exciting second half of the year planned out, but we'll see some of our customers with budget exhaustion, most notably in the fourth quarter, and that's factored in there. we've got an exciting second half of the year planned out but we'll see some of our customers with budget exhaustion most notably in the fourth quarter and that's factored in there In terms of what was the second part of your question? in terms of what was the second part of your question I'm sorry, Adam. i'm sorry adam

Speaker 7: What are your assumptions around fourth quarter seasonality and budget exhaustion? What are your assumptions around fourth quarter seasonality and budget exhaustion? what are your assumptions around fourth quarter seasonality and budget exhaustion

Speaker 4: Yeah, I think it's going to be in line with what we normally experience. There's nothing saying it would be more pronounced. I think it'll be pretty much consistent in that 5% range we've experienced over the last several years. I think that's probably a good bet for the fourth quarter. Yeah, I think it's going to be in line with what we normally experience. yeah i think it's going to be in line with what we normally experience There's nothing saying it would be more pronounced. there's nothing saying it would be more pronounced I think it'll be pretty much consistent in that 5% range we've experienced over the last several years. i think it'll be pretty much consistent in that 5% range we've experienced over the last several years I think that's probably a good bet for the fourth quarter. i think that's probably a good bet for the fourth quarter

Speaker 7: Okay, thanks for taking my questions. I'll hop back in queue. Okay, thanks for taking my questions. okay thanks for taking my questions I'll hop back in queue. i'll hop back in queue

Speaker 4: You're welcome. Thanks, Adam. You're welcome. you're welcome Thanks, Adam. thanks adam

Speaker 6: Your next question comes from the line of Jeff Robertson with Water Tower Research. Your line is open. Your next question comes from the line of Jeff Robertson with Water Tower Research. your next question comes from the line of jeff robertson with water tower research Your line is open. your line is open

Speaker 1: Thank you. Good morning. Dave, in your comments with respect to the MRC combination, you said you've had some discussions with vendors and customers, and I know the $70 million of estimated cost synergies is mostly related to corporate costs. Are you seeing opportunities at this early stage that you can drive some synergies with vendors and with customers that ultimately add to those costs and accretion over time? Thank you. thank you Good morning. good morning Dave, in your comments with respect to the MRC combination, you said you've had some discussions with vendors and customers, and I know the $70 million of estimated cost synergies is mostly related to corporate costs. dave in your comments with respect to the mrc combination you said you've had some discussions with vendors and customers and i know the $70 million of estimated cost synergies is mostly related to corporate costs Are you seeing opportunities at this early stage that you can drive some synergies with vendors and with customers that ultimately add to those costs and accretion over time? are you seeing opportunities at this early stage that you can drive some synergies with vendors and with customers that ultimately add to those costs and accretion over time

Speaker 4: Yeah, we spend a good deal of time on estimating those synergies, and I'm not going to raise the number. It's going to take a lot of work to get there. We've just kicked off a joint MRC Global DNOW team with high-caliber talent from both organizations, both groups having deep understanding of the respective organizations, and the focus is on people and talent and growth. Tomorrow, once we close the deal, we want to be focused on growing our business and being a better distributor to our customers, like I said. My focus is on growth and the promise of what this combination can mean, really not from combining locations, certainly not considering how that will transpire as we go through this integration process. Yeah, we spend a good deal of time on estimating those synergies, and I'm not going to raise the number. yeah we spend a good deal of time on estimating those synergies and i'm not going to raise the number It's going to take a lot of work to get there. it's going to take a lot of work to get there We've just kicked off a joint MRC Global DNOW team with high-caliber talent from both organizations, both groups having deep understanding of the respective organizations, and the focus is on people and talent and growth. we've just kicked off a joint mrc global dnow team with high-caliber talent from both organizations both groups having deep understanding of the respective organizations and the focus is on people and talent and growth Tomorrow, once we close the deal, we want to be focused on growing our business and being a better distributor to our customers, like I said. tomorrow once we close the deal we want to be focused on growing our business and being a better distributor to our customers like i said My focus is on growth and the promise of what this combination can mean, really not from combining locations, certainly not considering how that will transpire as we go through this integration process. my focus is on growth and the promise of what this combination can mean really not from combining locations certainly not considering how that will transpire as we go through this integration process The focus remains on growth and the promise of the combination, rather than focusing on field consolidations where we're going to realize most of the benefits from the complementary nature of each of the firms. The focus remains on growth and the promise of the combination, rather than focusing on field consolidations where we're going to realize most of the benefits from the complementary nature of each of the firms. the focus remains on growth and the promise of the combination rather than focusing on field consolidations where we're going to realize most of the benefits from the complementary nature of each of the firms

Speaker 1: As you look at the combined company, Dave, are you seeing, or do you expect that with less exposure to upstream than DNOW standalone has, do you see that as an increased visibility in the future earnings power of the company as you have less tie to the drilling and completion capital cycles? As you look at the combined company, Dave, are you seeing, or do you expect that with less exposure to upstream than DNOW standalone has, do you see that as an increased visibility in the future earnings power of the company as you have less tie to the drilling and completion capital cycles? as you look at the combined company dave are you seeing or do you expect that with less exposure to upstream than dnow standalone has do you see that as an increased visibility in the future earnings power of the company as you have less tie to the drilling and completion capital cycles

Speaker 4: It certainly will make the combined company less, you know, focused on upstream in particular, but we still see that as an important part of our business. We want to grow our position in upstream, but I think that diversification is the real opportunity here. MRC Global has built very strong end markets where we play such a small role. We can use our complementary locations, sales teams, non-crossover customer access to grow both sides of the businesses. I think the real opportunity there is to, you know, rely on cross-selling to grow the company. It certainly will make the combined company less, you know, focused on upstream in particular, but we still see that as an important part of our business. it certainly will make the combined company less you know focused on upstream in particular but we still see that as an important part of our business We want to grow our position in upstream, but I think that diversification is the real opportunity here. we want to grow our position in upstream but i think that diversification is the real opportunity here MRC Global has built very strong end markets where we play such a small role. mrc global has built very strong end markets where we play such a small role We can use our complementary locations, sales teams, non-crossover customer access to grow both sides of the businesses. we can use our complementary locations sales teams non-crossover customer access to grow both sides of the businesses I think the real opportunity there is to, you know, rely on cross-selling to grow the company. i think the real opportunity there is to you know rely on cross-selling to grow the company

Speaker 1: Lastly, do you anticipate a lot of that coming from electrification in terms of AI and just other build-out of the grid? I think that's part of the strength of MRC was exposure to the gas utilities and products markets. Lastly, do you anticipate a lot of that coming from electrification in terms of AI and just other build-out of the grid? lastly do you anticipate a lot of that coming from electrification in terms of ai and just other build-out of the grid I think that's part of the strength of MRC was exposure to the gas utilities and products markets. i think that's part of the strength of mrc was exposure to the gas utilities and products markets

Speaker 4: Yeah, Brad, you want to hit that a little bit? Yeah, Brad, you want to hit that a little bit? yeah brad you want to hit that a little bit

Speaker 5: Yeah, good morning, Jeff. I think Dave in his prepared remarks identified a number of growing industrial markets. Electrification, of course, as you know, we've seen many of the OFS sector, as well as other providers, work to move away from fossil fuels on the electrification side. Of course, AI data centers is a very exciting space. I think the combination of our companies going forward would just bring more capabilities around that area. I know we highlighted a successful win selling some valves to a data center project. I think the prior quarter we highlighted winning feed gas, 5,000 fittings on a feed gas line to a power plant that's feeding the data center. We're starting to see more and more opportunities in our quotations and our business development efforts, really focusing on those growing end markets that we identified. Yeah, good morning, Jeff. yeah good morning jeff I think Dave in his prepared remarks identified a number of growing industrial markets. i think dave in his prepared remarks identified a number of growing industrial markets Electrification, of course, as you know, we've seen many of the OFS sector, as well as other providers, work to move away from fossil fuels on the electrification side. electrification of course as you know we've seen many of the ofs sector as well as other providers work to move away from fossil fuels on the electrification side Of course, AI data centers is a very exciting space. of course ai data centers is a very exciting space I think the combination of our companies going forward would just bring more capabilities around that area. i think the combination of our companies going forward would just bring more capabilities around that area I know we highlighted a successful win selling some valves to a data center project. i know we highlighted a successful win selling some valves to a data center project I think the prior quarter we highlighted winning feed gas, 5,000 fittings on a feed gas line to a power plant that's feeding the data center. i think the prior quarter we highlighted winning feed gas 5,000 fittings on a feed gas line to a power plant that's feeding the data center We're starting to see more and more opportunities in our quotations and our business development efforts, really focusing on those growing end markets that we identified. we're starting to see more and more opportunities in our quotations and our business development efforts really focusing on those growing end markets that we identified Certainly, midstream, we've had tremendous growth there, approximating 27% of DNOW revenue this quarter. As you look further downstream with opportunities with RNG export, we're seeing opportunities there. We're seeing, as I mentioned, opportunities with data center, data center construction, and then the power generation side on that too, and what that means for the future of natural gas demand, as some analysts are projecting natural gas operating rigs to grow potentially here in the second half, certainly into 2026. That certainly helps us on the upstream side as well. We're excited about the future and what the combination of these two companies can bring to many of these diversified industrial markets. Certainly, midstream, we've had tremendous growth there, approximating 27% of DNOW revenue this quarter. certainly midstream we've had tremendous growth there approximating 27% of dnow revenue this quarter As you look further downstream with opportunities with RNG export, we're seeing opportunities there. as you look further downstream with opportunities with rng export we're seeing opportunities there We're seeing, as I mentioned, opportunities with data center, data center construction, and then the power generation side on that too, and what that means for the future of natural gas demand, as some analysts are projecting natural gas operating rigs to grow potentially here in the second half, certainly into 2026. we're seeing as i mentioned opportunities with data center data center construction and then the power generation side on that too and what that means for the future of natural gas demand as some analysts are projecting natural gas operating rigs to grow potentially here in the second half certainly into 2026 That certainly helps us on the upstream side as well. that certainly helps us on the upstream side as well We're excited about the future and what the combination of these two companies can bring to many of these diversified industrial markets. we're excited about the future and what the combination of these two companies can bring to many of these diversified industrial markets

Speaker 1: Thank you, Brad. Thank you, Brad. thank you brad

Speaker 6: If you would like to ask a question, press star, then the number one on your telephone keypad. Your next question comes from the line of Blake McLean with Daniel Energy Partners. Please go ahead. If you would like to ask a question, press star, then the number one on your telephone keypad. if you would like to ask a question press star then the number one on your telephone keypad Your next question comes from the line of Blake McLean with Daniel Energy Partners. your next question comes from the line of blake mclean with daniel energy partners Please go ahead. please go ahead

Speaker 2: Hey, good morning, you all. Hey, good morning, you all. hey good morning, you all

Speaker 4: Morning. Morning. morning

Speaker 5: Morning, Blake. Morning, Blake. morning blake

Speaker 3: Hi, Blake. Hi, Blake. hi blake

Speaker 2: I appreciate all the color this morning, and I appreciate really that last series of questions and answers around kind of the total end market portfolio and the opportunities and threats there. Maybe just expanding on that a little bit, how do you think about how the mix of [NewCo] evolves over the next one, two, three years as it relates to those total end market, you know, that portfolio of total end markets? I appreciate all the color this morning, and I appreciate really that last series of questions and answers around kind of the total end market portfolio and the opportunities and threats there. i appreciate all the color this morning and i appreciate really that last series of questions and answers around kind of the total end market portfolio and the opportunities and threats there Maybe just expanding on that a little bit, how do you think about how the mix of [ NewCo ] evolves over the next one, two, three years as it relates to those total end market, you know, that portfolio of total end markets? maybe just expanding on that a little bit how do you think about how the mix of[ newco] evolves over the next one two three years as it relates to those total end market you know that portfolio of total end markets

Speaker 5: Thank you for the question. I think, in our previous merger call announcement, we talked about what combined co-end market would look like, from an upstream, roughly about $5.3 billion in revenue, about 41% of that upstream, about 21% of that midstream, about 17% gas utilities, or 21% gas utilities, in the balance downstream industrials. We're excited about certainly increased diversification there. I think it offsets some of the cyclicality in the upstream market, certainly that we're accustomed to over the many years here at DNOW. I would say, moving forward, many of those industrial markets are projected to grow with various degrees of CAGRs. Certainly the gas utilities sector, I believe, is increasingly going through modernization and replacement as population grows and demand increases there. Thank you for the question. thank you for the question I think, in our previous merger call announcement, we talked about what combined co-end market would look like, from an upstream, roughly about $5.3 billion in revenue, about 41% of that upstream, about 21% of that midstream, about 17% gas utilities, or 21% gas utilities, in the balance downstream industrials. i think in our previous merger call announcement we talked about what combined co-end market would look like from an upstream roughly about $5.3 billion in revenue about 41% of that upstream about 21% of that midstream about 17% gas utilities or 21% gas utilities in the balance downstream industrials We're excited about certainly increased diversification there. we're excited about certainly increased diversification there I think it offsets some of the cyclicality in the upstream market, certainly that we're accustomed to over the many years here at DNOW . i think it offsets some of the cyclicality in the upstream market certainly that we're accustomed to over the many years here at dnow I would say, moving forward, many of those industrial markets are projected to grow with various degrees of CAGRs. i would say moving forward many of those industrial markets are projected to grow with various degrees of cagrs Certainly the gas utilities sector, I believe, is increasingly going through modernization and replacement as population grows and demand increases there. certainly the gas utilities sector i believe is increasingly going through modernization and replacement as population grows and demand increases there AI, the demand for more gigawatts tied to AI development and data center construction, that's an exciting area, I think, for NewCo, really with the exposure that both companies have traditionally had and are gaining because it's a new growth area both on the power gen side, on the general contractor side with the construction, with the operators, and some of these hyperscalers like Meta, Microsoft, and others. We're starting to see more activity and build relationships there. Also, continue to build out midstream infrastructure to really satisfy that, call it, five nines of reliability for power demand for those data centers. Really exciting is RNG. We commented on a couple of wins there. We've seen our quote backlog tied to RNG continually increase here quarter-over-quarter. We hope to get some of those across the finish line over the next four to six quarters here. AI, the demand for more gigawatts tied to AI development and data center construction, that's an exciting area, I think, for NewCo , really with the exposure that both companies have traditionally had and are gaining because it's a new growth area both on the power gen side, on the general contractor side with the construction, with the operators, and some of these hyperscalers like Meta, Microsoft, and others. ai the demand for more gigawatts tied to ai development and data center construction that's an exciting area i think for newco really with the exposure that both companies have traditionally had and are gaining because it's a new growth area both on the power gen side on the general contractor side with the construction with the operators and some of these hyperscalers like meta microsoft and others We're starting to see more activity and build relationships there. we're starting to see more activity and build relationships there Also, continue to build out midstream infrastructure to really satisfy that, call it, five nines of reliability for power demand for those data centers. also continue to build out midstream infrastructure to really satisfy that call it five nines of reliability for power demand for those data centers Really exciting is RNG. really exciting is rng We commented on a couple of wins there. we commented on a couple of wins there We've seen our quote backlog tied to RNG continually increase here quarter- over- quarter. we've seen our quote backlog tied to rng continually increase here quarter- over- quarter We hope to get some of those across the finish line over the next four to six quarters here. we hope to get some of those across the finish line over the next four to six quarters here They are long cycle projects as U.S. and Western Canadian companies look to expand their export liquefaction terminals and to be able to capture demand from Europe and Asia to help feed those markets on a global RNG basis. Those are some of the exciting opportunities we have looking forward. I think NewCo and its combination with our combined sales force, our success, prior success with customers, and our supplier relationships can present an exciting opportunity going forward in the market. They are long cycle projects as U.S. and Western Canadian companies look to expand their export liquefaction terminals and to be able to capture demand from Europe and Asia to help feed those markets on a global RNG basis. they are long cycle projects as u.s and western canadian companies look to expand their export liquefaction terminals and to be able to capture demand from europe and asia to help feed those markets on a global rng basis Those are some of the exciting opportunities we have looking forward. those are some of the exciting opportunities we have looking forward I think NewCo and its combination with our combined sales force, our success, prior success with customers, and our supplier relationships can present an exciting opportunity going forward in the market. i think newco and its combination with our combined sales force our success prior success with customers and our supplier relationships can present an exciting opportunity going forward in the market

Speaker 2: Okay, appreciate that color. I mean, we would agree that the growth profile in a lot of those places just feels different, right? One more, just kind of maybe quick follow-up. Could you talk a little bit about impact from tariffs in the back half of the year and how you guys are sort of thinking about that and navigating those challenges in this environment? Okay, appreciate that color. okay appreciate that color I mean, we would agree that the growth profile in a lot of those places just feels different, right? i mean we would agree that the growth profile in a lot of those places just feels different right One more, just kind of maybe quick follow-up. one more just kind of maybe quick follow-up Could you talk a little bit about impact from tariffs in the back half of the year and how you guys are sort of thinking about that and navigating those challenges in this environment? could you talk a little bit about impact from tariffs in the back half of the year and how you guys are sort of thinking about that and navigating those challenges in this environment

Speaker 4: Yeah. I'll take that one. We've seen some positive impact from tariffs from a product cost perspective. We've seen product costs go up a little bit. We've seen that from tariffs. We've also seen it from general inflation, which we began to experience before the tariff impacts. We're seeing most of our sales growth coming through volume, not price. About 80% of our sales growth has come from selling more products versus the increase in price. Yeah. yeah I'll take that one. i'll take that one We've seen some positive impact from tariffs from a product cost perspective. we've seen some positive impact from tariffs from a product cost perspective We've seen product costs go up a little bit. we've seen product costs go up a little bit We've seen that from tariffs. we've seen that from tariffs We've also seen it from general inflation, which we began to experience before the tariff impacts. we've also seen it from general inflation which we began to experience before the tariff impacts We're seeing most of our sales growth coming through volume, not price. we're seeing most of our sales growth coming through volume not price About 80% of our sales growth has come from selling more products versus the increase in price. about 80% of our sales growth has come from selling more products versus the increase in price We haven't really seen much price impact from the tariffs quite yet. There's been a kind of a governor on margin impacts due to tariffs because there's hyper-intensive competition out there, especially as we're in kind of a slower market in some of the end markets. One thing I want to say about that is, despite the tariffs, despite supply chain uncertainty, despite some political events that complicate managing the supply chain, we expect, and our forecasts suggest this will be our fifth consecutive year of growth in an environment where the market has contracted three consecutive years. We're making gains in energy evolution and the adjacent markets where we've been pursuing growth. We're able to fill some of those market activity declines by expanding our focus, often with the same customers that we're doing upstream and midstream business with. We're growing our business organically. We're making smart acquisitions. We haven't really seen much price impact from the tariffs quite yet. we haven't really seen much price impact from the tariffs quite yet There's been a kind of a governor on margin impacts due to tariffs because there's hyper-intensive competition out there, especially as we're in kind of a slower market in some of the end markets. there's been a kind of a governor on margin impacts due to tariffs because there's hyper-intensive competition out there especially as we're in kind of a slower market in some of the end markets One thing I want to say about that is, despite the tariffs, despite supply chain uncertainty, despite some political events that complicate managing the supply chain, we expect, and our forecasts suggest this will be our fifth consecutive year of growth in an environment where the market has contracted three consecutive years. one thing i want to say about that is despite the tariffs despite supply chain uncertainty despite some political events that complicate managing the supply chain we expect and our forecasts suggest this will be our fifth consecutive year of growth in an environment where the market has contracted three consecutive years We're making gains in energy evolution and the adjacent markets where we've been pursuing growth. we're making gains in energy evolution and the adjacent markets where we've been pursuing growth We're able to fill some of those market activity declines by expanding our focus, often with the same customers that we're doing upstream and midstream business with. we're able to fill some of those market activity declines by expanding our focus often with the same customers that we're doing upstream and midstream business with We're growing our business organically. we're growing our business organically We're making smart acquisitions. we're making smart acquisitions We're integrating those businesses smartly. We want to grow all the end markets in the standalone DNOW and in NewCo. We want to grow our business, and we've been very successful at doing so. We talked about the second quarter having the highest EBITDA second quarter in our history. That's something to say after three years of market decline. We're excited about where we are. We're excited about how the strengths of the product offerings are so complementary in this merger. We'll have more locations with access to more customers with a better array of products and services. We start off strong. We have two lean organizations who are focused on the customer. Our cultures are similar, and we see coming together as a real opportunity. Both organizations see that. We're integrating those businesses smartly. we're integrating those businesses smartly We want to grow all the end markets in the standalone DNOW and in NewCo . we want to grow all the end markets in the standalone dnow and in newco We want to grow our business, and we've been very successful at doing so. we want to grow our business and we've been very successful at doing so We talked about the second quarter having the highest EBITDA second quarter in our history. we talked about the second quarter having the highest ebitda second quarter in our history That's something to say after three years of market decline. that's something to say after three years of market decline We're excited about where we are. we're excited about where we are We're excited about how the strengths of the product offerings are so complementary in this merger. we're excited about how the strengths of the product offerings are so complementary in this merger We'll have more locations with access to more customers with a better array of products and services. we'll have more locations with access to more customers with a better array of products and services We start off strong. we start off strong We have two lean organizations who are focused on the customer. we have two lean organizations who are focused on the customer Our cultures are similar, and we see coming together as a real opportunity. our cultures are similar and we see coming together as a real opportunity Both organizations see that. both organizations see that We're very excited about where we're at, how we've been able to weather slower times and produce record earnings and reliably generate free cash flow. I just want to mention one statistic. At the end of 2023, we had $299 million in cash. 18 months later, we have $232 million in cash. In that timeframe, we spent $357 million on M&A and share repurchases. We're an active growing organization, and we're going to be even more so as we combine together with MRC Global. We're excited about where we're at. We want to grow all our end markets. We generate cash and can grow inorganically and organically, and we're excited about that. Tariffs, as they settle, can be a very positive impact to growth going forward. We just haven't seen much of it yet. Gross margins remain strong. We're very excited about where we're at, how we've been able to weather slower times and produce record earnings and reliably generate free cash flow. we're very excited about where we're at how we've been able to weather slower times and produce record earnings and reliably generate free cash flow I just want to mention one statistic. i just want to mention one statistic At the end of 2023, we had $299 million in cash. 18 months later, we have $232 million in cash. at the end of 2023 we had $299 million in cash 18 months later we have $232 million in cash In that timeframe, we spent $357 million on M&A and share repurchases. in that timeframe we spent $357 million on m&a and share repurchases We're an active growing organization, and we're going to be even more so as we combine together with MRC Global. we're an active growing organization and we're going to be even more so as we combine together with mrc global We're excited about where we're at. we're excited about where we're at We want to grow all our end markets. we want to grow all our end markets We generate cash and can grow inorganically and organically, and we're excited about that. we generate cash and can grow inorganically and organically and we're excited about that Tariffs, as they settle, can be a very positive impact to growth going forward. tariffs as they settle can be a very positive impact to growth going forward We just haven't seen much of it yet. we just haven't seen much of it yet Gross margins remain strong. gross margins remain strong My final comment to your question, or I kind of deviate a little bit in the answer, but very excited about where we're at. McLean, thanks. My final comment to your question, or I kind of deviate a little bit in the answer, but very excited about where we're at. my final comment to your question or i kind of deviate a little bit in the answer but very excited about where we're at McLean, thanks. mclean thanks

Speaker 2: Yeah, thanks very much. Great color. Yeah, thanks very much. yeah thanks very much Great color. great color

Speaker 6: Your next question comes from the line of Jeff Robertson with Water Tower Research. Your line is open. Your next question comes from the line of Jeff Robertson with Water Tower Research. your next question comes from the line of jeff robertson with water tower research Your line is open. your line is open

Speaker 1: Thanks, Dave. Just as a follow-up in the DNOW second quarter, I think you said that's the highest adjusted EBITDA. I think it's maybe since it's been a public company, but the EBITDA margin was 8.1%, which is the best it's been since the first quarter of 2023. I know that was above expectations. Were there some things in the quarter that drove that outperformance? Thanks, Dave. thanks dave Just as a follow-up in the DNOW second quarter, I think you said that's the highest adjusted EBITDA. just as a follow-up in the dnow second quarter i think you said that's the highest adjusted ebitda I think it's maybe since it's been a public company, but the EBITDA margin was 8.1%, which is the best it's been since the first quarter of 2023. i think it's maybe since it's been a public company but the ebitda margin was 8.1% which is the best it's been since the first quarter of 2023 I know that was above expectations. i know that was above expectations Were there some things in the quarter that drove that outperformance? were there some things in the quarter that drove that outperformance

Speaker 4: I think the biggest driver was growth in midstream. We've talked about this with you, Jeff, and on these public calls before. Midstream business tends to have lower gross margins because the order sizes tend to be much larger, but the cost to service that activity is lower as well. In fact, you can see midstream activity with greater fall through at the earnings line. I think the biggest driver in improved earnings and for us able to have our best second quarter EBITDA and above 8% EBITDA performance in the quarter was largely driven by growth in midstream. We're very excited about midstream for this second half of the year or for the third quarter, for sure. We'll see some tailing off in the fourth quarter, like we discussed. I think the biggest driver was growth in midstream. i think the biggest driver was growth in midstream We've talked about this with you, Jeff, and on these public calls before. we've talked about this with you jeff and on these public calls before Midstream business tends to have lower gross margins because the order sizes tend to be much larger, but the cost to service that activity is lower as well. midstream business tends to have lower gross margins because the order sizes tend to be much larger but the cost to service that activity is lower as well In fact, you can see midstream activity with greater fall through at the earnings line. in fact you can see midstream activity with greater fall through at the earnings line I think the biggest driver in improved earnings and for us able to have our best second quarter EBITDA and above 8% EBITDA performance in the quarter was largely driven by growth in midstream. i think the biggest driver in improved earnings and for us able to have our best second quarter ebitda and above 8% ebitda performance in the quarter was largely driven by growth in midstream We're very excited about midstream for this second half of the year or for the third quarter, for sure. we're very excited about midstream for this second half of the year or for the third quarter for sure We'll see some tailing off in the fourth quarter, like we discussed. we'll see some tailing off in the fourth quarter like we discussed

Speaker 1: Thank you for the color. Thank you for the color . thank you for the color

Speaker 4: Thank you. Thank you. thank you

Speaker 6: Thank you for your questions. That concludes the question and answer session of today's call. Mr. Brad Wise, I turn the call back over to you for a final remark. Thank you for your questions. thank you for your questions That concludes the question and answer session of today's call. that concludes the question and answer session of today's call Mr. Brad Wise, I turn the call back over to you for a final remark. mr brad wise i turn the call back over to you for a final remark

Speaker 5: Thank you, everyone, for joining us today and your interest in DNOW. We'll look forward to discussing our third quarter 2025 results on our next earnings conference call in November. Hope everyone has a wonderful Wednesday, and with that, we'll turn it back to the operators to conclude the call. Thank you, everyone, for joining us today and your interest in DNOW. thank you everyone for joining us today and your interest in dnow We'll look forward to discussing our third quarter 2025 results on our next earnings conference call in November. we'll look forward to discussing our third quarter 2025 results on our next earnings conference call in november Hope everyone has a wonderful Wednesday, and with that, we'll turn it back to the operators to conclude the call. hope everyone has a wonderful wednesday and with that we'll turn it back to the operators to conclude the call

Speaker 6: Thank you for joining today's conference call. You may now disconnect. Thank you for joining today's conference call. thank you for joining today's conference call You may now disconnect. you may now disconnect