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Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<ul><li>DNOW’s existing fulfillment model is contributing to increased earnings and free cash flow capacity through industry cycles.</li><li>1H24 revenue totaled $1,196 million compared with $1,178 million in 1H23, despite a 5% decline in the average global rig count. US revenue totaled $947 million in 1H24 compared with $883 million in 1H23 despite a 24% decline in the average US rig count.</li><li>US gains reflect increased market share and a partial contribution from the $185 million Whitco acquisition, which closed March 12, 2024. Free cash flow totaled $98 million in 1H24. </li></ul>

DNOW’s existing fulfillment model is contributing to increased earnings and free cash flow capacity through industry cycles.1H24 revenue totaled $1,196 million compared with $1,178 million in 1H23, despite a 5% decline in the average global rig count. US revenue totaled $947 million in 1H24 compared with $883 million in 1H23 despite a 24% decline in the average US rig count.US gains reflect increased market share and a partial contribution from the $185 million Whitco acquisition, which closed March 12, 2024. Free cash flow totaled $98 million in 1H24. 

DNOW, Inc. - Positioned for an Evolving Energy Market

<ul><li>DNOW’s underlying strategy is to increase earnings and free cash flow by gaining share in its traditional energy markets, while capitalizing on new revenue opportunities in the energy evolution and adjacent industrial markets.</li><li>DNOW is reaping the rewards of management’s efforts to provide procurement and supply chain solutions to customers through innovative technology and an efficient regionalized distribution model to increase market share and profitability.</li><li>Using the rig count as an activity proxy, average revenue per global rig in 2Q24 was $4,086 (~$1.5 million annualized), a 19% increase Q/Q and 12% Y/Y.</li></ul>

DNOW’s underlying strategy is to increase earnings and free cash flow by gaining share in its traditional energy markets, while capitalizing on new revenue opportunities in the energy evolution and adjacent industrial markets.DNOW is reaping the rewards of management’s efforts to provide procurement and supply chain solutions to customers through innovative technology and an efficient regionalized distribution model to increase market share and profitability.Using the rig count as an activity proxy, average revenue per global rig in 2Q24 was $4,086 (~$1.5 million annualized), a 19% increase Q/Q and 12% Y/Y.

DNOW, Inc. - Free Cash Flow Profile Supports Management's Value Proposition

<ul><li>The 1Q24 Whitco Supply acquisition diversified DNOW’s customer base and added new revenue opportunities in the midstream markets.</li><li>Management now expects FY24 revenue to increase in the mid- to high single digits range from FY23 and for adjusted EBITDA margin to be in line with FY23.</li><li>Management lifted its FY24 free cash flow outlook to ~$200 million from ~$150 million.</li></ul>

The 1Q24 Whitco Supply acquisition diversified DNOW’s customer base and added new revenue opportunities in the midstream markets.Management now expects FY24 revenue to increase in the mid- to high single digits range from FY23 and for adjusted EBITDA margin to be in line with FY23.Management lifted its FY24 free cash flow outlook to ~$200 million from ~$150 million.

DNOW, Inc. - FY24 Free Cash Flow Outlook Lifted

<ul><li>DNOW’s FY23 financial results benefited from the initiatives management put in place several years ago to position the company as a strategic supply chain partner for its vendors and customers.</li><li>FY23 revenue increased 9% Y/Y, including +20% and +11% gains in its drilling and production and fittings and flanges product lines.</li><li>Capital spending cycles across all segments of the energy industry drive the majority of DNOW’s revenue. </li></ul>

DNOW’s FY23 financial results benefited from the initiatives management put in place several years ago to position the company as a strategic supply chain partner for its vendors and customers.FY23 revenue increased 9% Y/Y, including +20% and +11% gains in its drilling and production and fittings and flanges product lines.Capital spending cycles across all segments of the energy industry drive the majority of DNOW’s revenue. 

DNOW, Inc. - Customer-Driven Model Drives Market Share Gains

<ul><li>DNOW’s business has been resilient in the face of a declining US rig count through the first three quarters of 2023.</li><li>3Q23 US revenue was $448 million, 3% higher than 3Q22 despite an 11% fall in the average rig count.</li><li>On a per rig basis, US 3Q23 revenue averaged ~<span style="font-size: var(--content-font-size);">$689,000, a 20% Y/Y gain</span></li></ul>

DNOW’s business has been resilient in the face of a declining US rig count through the first three quarters of 2023.3Q23 US revenue was $448 million, 3% higher than 3Q22 despite an 11% fall in the average rig count.On a per rig basis, US 3Q23 revenue averaged ~$689,000, a 20% Y/Y gain

NOW, Inc. - Resilient Model Withstands Industry Headwinds

United States

NOW Inc distributes oil drilling equipment across the globe. The Company provides maintenance, repair, and operating supplies for the global energy and industrial markets.

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NOW Inc (DNOW US)

DNOW, Inc. - Positioned for an Evolving Energy Market

DNOW’s existing fulfillment model is contributing to increased earnings and free cash flow capacity through industry cycles. 1H24 revenue totaled...

Water Tower Research

DNOW, Inc. - Free Cash Flow Profile Supports Management's Value Proposition

DNOW’s underlying strategy is to increase earnings and free cash flow by gaining share in its traditional energy markets, while capitalizing on new...

Water Tower Research

DNOW, Inc. - FY24 Free Cash Flow Outlook Lifted

The 1Q24 Whitco Supply acquisition diversified DNOW’s customer base and added new revenue opportunities in the midstream markets.

Water Tower Research

NOW, Inc. - Resilient Model Withstands Industry Headwinds

DNOW’s business has been resilient in the face of a declining US rig count through the first three quarters of 2023. 3Q23 US revenue was $448...

Water Tower Research

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52-week Range

Market Cap (USDm)

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DNOW, Inc. - Positioned for an Evolving Energy Market

DNOW’s existing fulfillment model is contributing to increased earnings and free cash flow capacity through industry cycles. 1H24 revenue totaled...

Water Tower Research

DNOW, Inc. - Free Cash Flow Profile Supports Management's Value Proposition

DNOW’s underlying strategy is to increase earnings and free cash flow by gaining share in its traditional energy markets, while capitalizing on new...

Water Tower Research

DNOW, Inc. - FY24 Free Cash Flow Outlook Lifted

The 1Q24 Whitco Supply acquisition diversified DNOW’s customer base and added new revenue opportunities in the midstream markets.

Water Tower Research

DNOW, Inc. - Customer-Driven Model Drives Market Share Gains

DNOW’s FY23 financial results benefited from the initiatives management put in place several years ago to position the company as a strategic...

Water Tower Research

NOW, Inc. - Resilient Model Withstands Industry Headwinds

DNOW’s business has been resilient in the face of a declining US rig count through the first three quarters of 2023. 3Q23 US revenue was $448...

Water Tower Research