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Introduction & Market Context
DNOW Inc. (NYSE:DNOW) released its second quarter 2025 earnings presentation on August 6, revealing sequential revenue growth and improved margins amid the announcement of a strategic merger with MRC Global (NYSE:MRC). The company’s stock responded positively in premarket trading, jumping 10.24% to $16.80, reflecting investor optimism about the quarterly results and merger announcement.
The energy and industrial distributor, which operates with 160 locations and 2,575 employees globally, demonstrated resilience in its core U.S. market while facing headwinds in international operations. This performance comes against the backdrop of varying regional market conditions in the energy sector.
Quarterly Performance Highlights
DNOW reported Q2 2025 revenue of $628 million, representing a 5% sequential increase from the $599 million reported in Q1, though slightly down 1% year-over-year. The company achieved GAAP net income of $25 million, translating to diluted earnings per share of $0.23, while non-GAAP net income reached $29 million with diluted EPS of $0.27.
As shown in the following quarterly highlights:
Gross margins improved to 22.9%, showing year-over-year growth, while EBITDA reached $51 million, representing 8.1% of revenue. This performance demonstrates DNOW’s ability to enhance profitability despite mixed revenue results across different segments. The company also continued its share repurchase program, buying back $19 million in shares during Q2 and $27 million year-to-date, signaling management’s confidence in the company’s outlook.
Segment Performance Analysis
DNOW’s performance varied significantly across its geographical segments in Q2 2025. The U.S. segment led growth with a $16 million (3%) year-over-year revenue increase, while both Canada and International segments experienced declines of $8 million (-14%) and $13 million (-20%) respectively.
The segment breakdown reveals the regional challenges and opportunities facing the company:
The U.S. segment benefited from an acquisition and stronger midstream activity, while Canada faced sector headwinds and weaker project activity. The International segment’s decline was attributed to reduced project activity in the North Sea and Asia Pacific regions, as well as unfavorable foreign exchange rate impacts. Overall, these mixed regional performances resulted in a slight year-over-year revenue decrease of $5 million (-1%).
Looking at longer-term performance trends, DNOW has shown consistent improvement in key financial metrics:
Strategic Initiatives
The most significant strategic development announced in the Q2 presentation is DNOW’s merger agreement with MRC Global. This combination aims to create a premier energy and industrial solutions provider with enhanced global reach and expanded product portfolios.
The merger is positioned as a value-creating transaction for shareholders:
The company emphasized that this strategic combination will strengthen cash flow generation and provide greater capital allocation flexibility. This move aligns with DNOW’s broader strategic growth plan, which focuses on increasing shareholder value through sustainable earnings and free cash flow.
DNOW’s capital allocation framework continues to be supported by a strong balance sheet with no debt and ample liquidity of $582 million. The company is pursuing a multi-faceted approach to growth:
This strategic roadmap highlights DNOW’s commitment to both organic growth in core energy markets and expansion into adjacent industrial sectors, supported by strategic acquisitions and shareholder-friendly capital allocation.
Forward-Looking Statements
Looking ahead, DNOW provided an optimistic outlook for Q3 2025 and reaffirmed its full-year targets. The company expects continued sequential revenue growth in Q3, with EBITDA targeted at 8% of revenue.
The key takeaways and outlook present a positive forward trajectory:
Management highlighted the strong first half of 2025, during which the company generated $41 million in free cash flow. The continued strength in the midstream sector is expected to support growth in the coming quarters, while the merger with MRC Global represents a transformative opportunity for the company.
For the full year 2025, DNOW reaffirmed its revenue, EBITDA, and free cash flow targets, demonstrating confidence in its ability to execute on its strategic initiatives despite varying regional market conditions.
The positive premarket stock movement of 10.24% on August 6 suggests that investors are responding favorably to both the quarterly results and the strategic merger announcement, contrasting with the negative reaction to Q1 results earlier in the year. With a strong balance sheet, improving margins, and a transformative merger underway, DNOW appears positioned to enhance its competitive standing in the energy and industrial distribution market.
Full presentation:
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