DNOW — Second Quarter 2026 Earnings Summary

Financial Performance

• Revenue for the quarter ended June 30, 2026, was $1,307 million, representing a 10% sequential increase from Q1 2026 ($1,183 million) and a 13% increase compared to Q2 2025 ($628 million).
• Gross profit was $243 million (18.6% of revenue), while adjusted gross profit was $272 million (20.8% of revenue).
• Net loss attributable to DNOW Inc. was $21 million ($0.11 per diluted share), compared to a net loss of $44 million ($0.24 per diluted share) in Q1 2026 and net income of $14 million ($0.13 per diluted share) in Q2 2025.
• Adjusted net income attributable to DNOW Inc. was $21 million ($0.12 per diluted share).
• Adjusted EBITDA was $60 million (4.6% of revenue), up 54% sequentially from $39 million in Q1 2026 and up from $51 million in Q2 2025.
• Cash flow from operating activities was $133 million, compared to a use of $95 million in Q1 2026 and $83 million in Q2 2025.
• Free cash flow for the quarter was $124 million, calculated as operating cash flow of $133 million less $9 million in capital expenditures.
• Cash and cash equivalents were $114 million at June 30, 2026, down from $164 million at December 31, 2025.
• Total long-term debt was $474 million at June 30, 2026, up from $411 million at December 31, 2025.
• Net debt was $360 million, resulting in a net debt leverage ratio of 1.7x based on trailing twelve-month adjusted EBITDA of $211 million.
• Inventory decreased to $1,062 million at June 30, 2026, from $1,192 million at December 31, 2025.

Guidance and Future Outlook

• Management expressed confidence in the second half of the year, citing encouraging results from integration initiatives and operational efficiency drives.
• The company highlighted a commitment to disciplined capital allocation and long-term growth prospects.

Business Segments and Product Lines

• U.S. segment revenue increased 13% sequentially, with U.S. midstream revenues surpassing $1 billion on an annualized basis for the first time in company history.
• Both the gas utility and upstream sector revenues delivered their strongest sequential percentage growth since 2022.
• International revenue was $151 million for the quarter, up from $52 million in Q2 2025.
• Canada revenue was $47 million for the quarter, down from $48 million in Q2 2025.

Market and Competitive Landscape

• The company noted strong collections improved the quality and liquidity of accounts receivable.
• Inventory streamlining initiatives further enhanced cash generation.

Risks and Challenges

• The press release references forward-looking statements involving risks and uncertainties that could cause actual results to differ materially, referring readers to SEC filings for specific risk factors.
• A $4 million impairment charge was recorded related to the operating right-of-use asset for a corporate office lease in Houston, Texas, due to the decision to permanently vacate the premises.
• Foreign currency losses of $1 million were included in "other" costs for the quarter.

Management Commentary and Tone

• David Cherechinsky, President and CEO, described the quarter's performance as "significantly improved," highlighting the record $133 million operating cash flow.
• Management noted that total repurchases of $75 million in the first half of 2026 represented more shares purchased in these two quarters than in the previous 10 quarters combined.
• The CEO thanked the team for deepening customer and supplier relationships and advancing integration initiatives.

Other Key Points

• The company repurchased $25 million of common stock in Q2 2026 and $75 million year-to-date under its $160 million share repurchase program.
• The company changed its inventory valuation method for U.S. inventories from moving average cost to LIFO in Q4 2025, with retrospective application to all periods presented.
• Inventory-related transaction charges of $3 million were recorded in Q2 2026, including $3 million for inventory step-up and write-downs.
• Transaction-related charges for the quarter included $6 million, covering transaction costs, retention bonus accruals, and integration expenses.
• Stock-based compensation was $4 million for the quarter.
• Weighted-average common shares outstanding were 182 million for the quarter.