DNOW confirms 2025 revenue and EBITDA goals as MRC Global merger progresses

Key Highlights from DNOW Inc.'s Q2 2025 Earnings Call

During the recent earnings call, DNOW Inc. (DNOW) shared insights into its second-quarter performance and future outlook. The company reported a significant milestone, with EBITDA reaching $51 million, marking the best second quarter in its public company history. This figure represents 8.1% of total revenue, which came in at $628 million—up 5% compared to the previous quarter. The management team emphasized that this growth was more than double the midpoint of their guidance provided in May.

David A. Cherechinsky, President and CEO, highlighted the resilience of gross margins, which remained at 22.9%. He also pointed out that the midstream business now accounts for 27% of total revenue, doubling its contribution since the end of 2023. This growth reflects the company’s strategic focus on expanding its presence in key sectors.

Strategic Moves and Financial Position

The company has made progress on its merger with MRC Global, with integration planning already underway. Management aims to achieve $70 million in annual cost synergies within three years post-closing. DNOW also continued its share repurchase program, spending $27 million year-to-date. However, the program has been paused pending the completion of the MRC Global transaction.

As of the end of the second quarter, DNOW had no debt and a cash balance of $232 million—an increase of $13 million from the first quarter. This strong financial position underscores the company's disciplined capital allocation strategy.

Regional Performance and Outlook

U.S. revenue grew by 11% sequentially to $528 million, driven by midstream project investments and steady demand in water management. International revenue declined to $52 million, a drop of 17% from the previous quarter, primarily due to nonrepeating first-quarter activity. Canada saw a seasonal decline in revenue to $48 million, impacted by restricted access during the breakup period and broader macroeconomic factors.

CFO Mark B. Johnson confirmed that the company is on track with its guidance for the full year. He noted that third-quarter revenues are expected to grow in the low single-digits percentage range from the second quarter, with EBITDA approaching 8% of revenue. For the full year, DNOW expects revenues to be flat to up in the high single-digit percentage range from 2024 levels, with EBITDA potentially reaching 8% of revenue. The company also reaffirmed its target of generating $150 million in free cash flow for 2025.

Operational and Strategic Focus

Management expressed confidence in the company’s strategic direction, emphasizing the transformative potential of the MRC Global merger. They highlighted the need to focus on external factors such as supply chain and customer needs during the integration process. Cherechinsky noted that while the merger presents challenges, it also offers opportunities for growth and diversification.

Analysts raised questions about the impact of tariffs, electrification, and customer budget constraints. Cherechinsky acknowledged that some customers may face budget exhaustion, particularly in the fourth quarter, but stated that these factors are already accounted for in the guidance.

Risks and Challenges

Despite the positive momentum, management identified several risks, including macroeconomic headwinds, market uncertainty, and price-sensitive environments. Integration risks associated with the MRC Global merger were also highlighted, with a focus on retaining key talent and achieving the targeted $70 million in cost synergies.

Analysts expressed concerns about the complexity of the integration process and the ability to realize forecasted synergies. However, they also recognized the potential for growth and expansion in new markets.

Final Thoughts

DNOW delivered its strongest second quarter EBITDA in company history, driven by midstream growth and operational execution. The company remains focused on strategic initiatives, including the MRC Global merger, while maintaining a disciplined approach to capital allocation and navigating ongoing market uncertainties. With a solid financial foundation and a clear strategic vision, DNOW is well-positioned to continue delivering value to stakeholders in the coming quarters.