10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED March 31, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-36325

DNOW INC.

(Exact name of registrant as specified in its charter)


Delaware		46-4191184
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

7402 North Eldridge Parkway,

Houston, Texas 77041

(Address of principal executive offices)

(281) 823-4700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	DNOW	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 3, 2024, the registrant had 106,802,549 shares of common stock (excluding 2,124,030 unvested restricted shares), par value $0.01 per share, outstanding.

DNOW INC.

TABLE OF CONTENTS


Part I - Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023	3

	Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2024 and 2023	4

	Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended March 31, 2024 and 2023	5

	Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2024 and 2023	6

	Consolidated Statements of Stockholders' Equity (Unaudited) for the three months ended March 31 , 2024 and 2023	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	25

Part II - Other Information

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 5.	Other Information	26

Item 6.	Exhibits	27

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

DNOW INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	March 31, 2024			December 31, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	188		$	299
Receivables, net		410			384
Inventories, net		428			366
Prepaid and other current assets		19			19
Total current assets		1,045			1,068
Property, plant and equipment, net		137			131
Deferred income taxes		112			118
Goodwill		192			139
Intangibles, net		59			28
Other assets		49			45
Total assets	$	1,594		$	1,529

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	339		$	288
Accrued liabilities		112			120
Other current liabilities		11			10
Total current liabilities		462			418
Long-term operating lease liabilities		33			30
Other long-term liabilities		20			18
Total liabilities		515			466
Commitments and contingencies
Stockholders' equity:
Preferred stock - par value $0.01; 20 million shares authorized; no shares issued and outstanding		—			—
Common stock - par value $0.01; 330 million shares authorized; 106,783,725 and 106,257,565 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively		1			1
Additional paid-in capital		2,031			2,032
Accumulated deficit		(807	)		(828	)
Accumulated other comprehensive loss		(149	)		(145	)
DNOW Inc. stockholders' equity		1,076			1,060
Noncontrolling interest		3			3
Total stockholders' equity		1,079			1,063
Total liabilities and stockholders' equity	$	1,594		$	1,529

See notes to unaudited consolidated financial statements.

DNOW INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In millions, except per share data)


	Three Months Ended March 31,
	2024		2023
Revenue	$	563	$	584
Operating expenses:
Cost of products		434		447
Warehousing, selling and administrative		101		102
Operating profit		28		35
Other income (expense)		1		—
Income before income taxes		29		35
Income tax provision		8		3
Net income		21		32
Net income attributable to noncontrolling interest		—		1
Net income attributable to DNOW Inc.	$	21	$	31
Earnings per share attributable to DNOW Inc. stockholders:
Basic	$	0.20	$	0.28
Diluted	$	0.19	$	0.28
Weighted-average common shares outstanding, basic		106		110
Weighted-average common shares outstanding, diluted		107		111

See notes to unaudited consolidated financial statements.

DNOW INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In millions)


	Three Months Ended March 31,
	2024			2023
Net income	$	21		$	32
Other comprehensive income:
Foreign currency translation adjustments		(4	)		1
Comprehensive income		17			33
Comprehensive income attributable to noncontrolling interest		—			1
Comprehensive income attributable to DNOW Inc.	$	17		$	32

See notes to unaudited consolidated financial statements.

DNOW INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)


	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net income	$	21		$	32
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		7			6
Provision for inventory		3			1
Stock-based compensation		2			3
Deferred income taxes		6			—
Other, net		3			6
Change in operating assets and liabilities, net of effects of acquisitions:
Receivables		23			(25	)
Inventories		3			(26	)
Prepaid and other current assets		2			(3	)
Accounts payable, accrued liabilities and other, net		11			—
Net cash provided by (used in) operating activities		81			(6	)
Cash flows from investing activities:
Business acquisitions, net of cash acquired		(185	)		—
Purchases of property, plant and equipment		(1	)		(5	)
Other, net		(2	)		—
Net cash provided by (used in) investing activities		(188	)		(5	)
Cash flows from financing activities:
Repurchases of common stock		(1	)		(33	)
Other, net		(3	)		(1	)
Net cash provided by (used in) financing activities		(4	)		(34	)
Effect of exchange rates on cash and cash equivalents		—			1
Net change in cash and cash equivalents		(111	)		(44	)
Cash and cash equivalents, beginning of period		299			212
Cash and cash equivalents, end of period	$	188		$	168

See notes to unaudited consolidated financial statements.

DNOW INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In millions)


	Attributable to DNOW Inc. Stockholders
			Additional			Retained			Accum. Other								Total
	Common		Paid-In			Earnings			Comprehensive			Treasury			Noncontrolling		Stockholders’
	Stock		Capital			(Deficit)			Income (Loss)			Stock			Interest		Equity
December 31, 2022	$	1	$	2,066		$	(1,075	)	$	(150	)	$	—		$	2	$	844
Net income		—		—			31			—			—			1		32
Common stock repurchased		—		—			—			—			(36	)		—		(36	)
Common stock retired		—		(33	)		—			—			33			—		—
Stock-based compensation		—		3			—			—			—			—		3
Exercise of stock options		—		1			—			—			—			—		1
Shares withheld for taxes		—		(1	)		—			—			—			—		(1	)
Other comprehensive income		—		—			—			1			—			—		1
March 31, 2023	$	1	$	2,036		$	(1,044	)	$	(149	)	$	(3	)	$	3	$	844

December 31, 2023	$	1	$	2,032		$	(828	)	$	(145	)	$	—		$	3	$	1,063
Net income		—

SEC Form 10-Q filed by DNOW Inc.