DNOW Inc.

Good morning. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the D Now second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Mr. Brad Wise, Vice President of Digital Strategy Investor Relations, you may begin your conference.

Thank you, Jeannie. Good morning, and welcome to D Now second quarter 2025 earnings conference call. We appreciate you joining us, and thank you for your interest in D Now. With me today is David Cheruchinsky, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer. We operate under the D Now brand, which is also our New York Stock Exchange ticker symbol. Please note that some of the statements we make during this call, including responses to your questions, may contain forecasts, projections, and estimates, including but not limited comments about our outlook for the company's business. These are forward-looking statements within the meetings of the US Federal Securities Based on limited information as of today, August 6, 2025, which is subject to change. They are subject to risks and uncertainties, and actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or later in the year. We do not undertake any obligation to publicly update or revise any forward-looking statements for any reason. In addition, this conference call contains time-sensitive information that reflects management's best judgment at the time of the live call. I refer you to the latest forms 10-K and 10-Q that D Now has on file for the US Securities Exchange Commission for a more detailed discussion of the major risk factors affecting our business. Further information, as well as supplemental financial and operating information, may be found within our earnings release on our website, .Dnow.com, or in our filings with the SEC. In an effort to provide investors with additional information regarding our results, as determined by US GAAP, you'll note we disclose various non-GAAP financial measures in our earnings, press releases, and other public disclosures. These are non-GAAP financial measures. Earnings before interest, taxes, depreciation, and amortization, or EBITDA, excluding other costs. EBITDA, excluding other costs as a percentage of revenue. Net income, attributable to D Now, Inc., excluding other costs. Deluded earnings per share, attributable to D Now, Inc. Stockholders, excluding other costs. And free cash flow. Please refer to a reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure and the supplemental information available at the end of our earnings release. As of this morning, the investor relations section of our website contains a presentation covering our key results and takeaways for the second quarter, 2025. A replay of today's call will be available on the site for the next 30 days. Now, let me turn the call over to Dave.

Thank you, Brad, and good morning, everyone. We have quite a bit to cover, from our second quarter results and achievements, to the outlook for our business, and some updates on the MRC global transaction. I'd like to start by acknowledging the continued solid execution by our team, driving an exceptional first half of the year despite macroeconomic headwinds. In recent growth years, such as 2021 and 2022, U.S. rigs and completions grew on a -over-year basis, which created more opportunities for targeted growth. However, in this current softer market, achieving growth necessitates greater focus and a concerted effort to identify and execute on the prospects that meet our strategic and financial goals. Our relentless commitment to serving our customers and supplying them with the best solutions and -for-purpose products from the top manufacturers are instrumental to our success. I am proud of our team's performance, and I'm thankful for their efforts and their desire to win the market. The second quarter of 2025 represents the best second quarter EBITDA results in our public company history at $51 million. This achievement is a result of the steadfast execution by our team, where market activity has actually declined sequentially in -over-year. And as I stated in our first quarter call, this is important to emphasize, given the misunderstood perception that upstream sector activity alone drives opportunities for DNO. Revenue for the second quarter was $628 million, up 5% from the first quarter, and twice the midpoint of the sequential guidance we gave in May. Gross margins remained resilient at 22.9%, in line with our expectations, and better than the full year 2024 average, despite being challenged in a more price-sensitive environment. EBITDA for the quarter was $51 million, again, a second quarter company best, up 11% sequentially. EBITDA as a percentage revenue was 8.1%, beating our second quarter target, and demonstrating continued earning strength. US activity drove strong sequential revenue gains, up 11%, driven by midstream strength, with additional contribution from steady demand for our water management solutions. Our midstream business in the second quarter grew to approximately 27% of total DNO revenue. And over the prior six quarters, we have more than doubled our midstream revenue percentage contribution from the end of 2023, demonstrating our ability to diversify into and expand within this key strategic and growing sector. On the upstream production side, US operators remain disciplined, focused on balance sheet management and profitability, rather than prioritizing production growth targets. This has resulted in customers maintaining a limited project backlog, driven partially by market uncertainties, and adopting a cautious approach to additional spending, while seeking inventory preservation and asset expansion, primarily through M&A. Most of our large public upstream customers have scheduled activity for this year at or close to maintenance production levels, which provides DNO with a steady base of revenue and cashflow. During the quarter, our strength in managing the balance sheet and income statement yielded free cashflow of 41 million, and afforded us the opportunity to continue repurchasing shares. Through the end of the second quarter and year to date, we have purchased 27 million in shares under our new program authorized earlier this year. Even still, we expanded our cash balance to 232 million, and continue to carry no debt, enhancing our already solid financial position. Before I move to our results on a regional basis, I wanted to share a brief update about our recently announced combination with MRC Global. Since the announcement, we've spoken with many employees, suppliers, customers, and shareholders, who have expressed excitement for what this opportunity means. We discussed our confidence in becoming even better able to serve a broader mix of customers in the construction and maintenance of essential energy process, production, transmission infrastructure, downstream processing, and gas utilities activities. This combination will allow for enhanced opportunities in alternative energy, artificial intelligence infrastructure, electrification, LNG, mining, and other industrial markets. These are areas with significant runways and bring additional opportunities to drive value creation. At the same time, integration planning is underway, with joint MRC Global DINOW teams meeting with the initial work to set us on the path for what the combined company will ultimately become. As the team embarks on this collective effort, they will focus on several areas that will be critical once the transaction is completed, including bringing together our organizations and retaining key talent, offering products and services to one another's customers, and working to realize the $70 million annual cost synergies the company is expected to generate within three years following closing. As a reminder, these cost synergies are expected to be derived from public company costs, corporate and IT systems, and operational and supply chain deficiencies. The bedrock to the success of DINOW and MRC Global joining together is our expected substantial cash flow generation capabilities and robust balance sheet, providing a strong foundation for continued investment in organic and inorganic growth and driving shareholder value. Our supplier relationships have always been incredibly important to our success. Through this transaction, we expect to build upon those valued partnerships, serve our customers more holistically, and grow the combined business. This opportunity to bring our two organizations together is thanks to the tremendous efforts of my DINOW colleagues and the MRC Global team. As the customary regulatory and shareholder approval processes proceed, I want to highlight that the final S4 Defendant Proxy Statement was filed yesterday, and DINOW and MRC Global each filed a pre-merger notification and report form under the HSR Act on August 1st. We look forward to welcoming MRC Global and their valued team members in due course and bringing our organizations together to drive growth and value for our customers, partners, and shareholders alike. We cannot wait to see all we will accomplish together. Now I'll turn to some comments on our results by region. In the US, revenue was 528 million, up 54 million, or 11% sequentially. Sequential growth was driven by WICCOSupply and Energy Center's locations. We experienced strong sequential growth geared towards customer midstream project investments in the quarter, including a $5 million project pulled forward into QQ that was previously scheduled for the third quarter. We also saw sequential growth in US upstream as customers continue to pursue efficiencies driven by longer laterals, resulting in fewer drilling days, fewer drilling rigs, and completions crews. However, production volumes are resilient and in some areas, growing. We continue to adjust our model to the market environment, investing in areas of growing demand while pruning costs in areas of reduced activity, in combination with increasing efficiencies to maximize profitability. An emerging trend as operators focus on efficiencies is their need for larger centralized tank batteries and more specialized material. This type of shift from smaller tank batteries to larger centralized tank batteries tends to favor DNO due to our fabrication infrastructure and our inventory and service capabilities to service larger size projects like these centralized tank batteries. And as a reminder, DNO is focused on providing products and supply chain solutions to customers to extract, produce, separate, and move large volumes of fluids through pipe valves, fittings, infrastructure, as our customers deliver production volumes to the market. In US process solutions, revenue was relatively flat sequentially. We continue to see strength in flex flow water management solutions across a number of basins. As produced water disposal services, demand remains high for our least water disposal and transfer assets. According to an industry US Water Solutions report, produced water volumes are projected to be up about 2% in 2025 and produced water recycling volumes handled by midstream infrastructure companies are projected to be up 13% for the year, presenting growth opportunities for DNO water management solutions, which we are capturing. In Canada, revenue was 48 million for the quarter, down 14 million, primarily due to the seasonal breakup period each year where road access to oil and gas assets is restricted, reducing activity in the second quarter. When comparing the second quarter to prior years, this year's breakup impact on revenue was higher than average, impacted by additional macro impacts such as tariff uncertainty, the recent Canadian federal election, consolidating customer activity, and non-repeating project and turnaround work sequentially. We continue to look for organic opportunities for growth in Canada, focused on end market diversification and energy evolution opportunities. For international revenue was 52 million, sequentially lower by 11 million or 17%, in line with our May guided $10 million sequential decline due to non-repeating first quarter project activity. Brownfield activity in the UK remained steady, while capital project investments are slow due to uncertainty regarding the renewal and approval of North Sea oil and gas leases. In Norway, activity was led by increasing oil production and demand for gas, coupled with opportunities for additional sales from customer investments in carbon capture, hydrogen, and offshore wind. The acquisition of Natron International closed in the second quarter, and expands DNO's electrical products opportunities to participate more broadly in Singapore and in the Asia Pacific region. And now I'd like to make a few comments about several additional growth markets we continue to pursue. In the energy evolution arena, which includes activity primarily associated with carbon capture and storage, direct air capture, and RNG related projects, we experienced sequential growth, driven from CCUS project activity and from direct air capture construction. In the rapidly expanding data center market, we provided valves to a general contractor for a newly constructed data center project where we expect to gain additional revenues in the third quarter. Quoting activity increased in the quarter, in the LNG related markets, indicating increased interest in pipe valves and fittings as construction firms work to win and execute projects tied to the continuing buildup of the LNG export market. Looking ahead, we see interest in DNO's products and services growing with several industrial adjacent markets, an activity tied to geothermal, water, wastewater, and mining investments. All are areas of interest for DNO to provide our products and solutions while expanding and diversifying our business. Turning to capital allocation, our core long-term priorities remain the same. We will balance accretive organic and inorganic growth with opportunistic share repurchases. Our decision to combine with MRC Global is directly in line with this approach and will enable us to capture compelling and diverse growth opportunities with our expanded and complementary portfolio of services and product offerings. As is typical with transactions of this nature, we have suspended our share repurchase program until the close of the MRC Global transaction. Our near-term focus is on successfully completing the transaction with MRC Global and planning for the seamless integration of our two companies. In the meantime, we are pursuing potential both on acquisitions and process solutions to better serve the needs of our customers. With that, let me hand it over to Mark.

Thank you, Dave, and good morning, everyone. Total revenue for the second quarter of 2025 was $628 million, up 5%, or $29 million, from the first quarter of 2025, at the top end of our guide from our May call. EBITDA, excluding other costs, or EBITDA, for the second quarter was $51 million, or .1% of revenue, up 5 million sequentially. The second quarter also marked the 13th consecutive quarter where DNow has delivered EBITDA at or above the .9% level. U.S. revenue for the second quarter of 2025 totaled $528 million, an increase of $54 million, or up 11% from the first quarter of 2025. Year over year, U.S. revenue increased $16 million, or up 3%. U.S. energy centers contributed approximately 72% of total U.S. revenue in the second quarter, and U.S. process solutions contributed approximately 28%. In Canada, for the second quarter, revenue totaled $48 million, a decrease of $14 million, or 23% from the first quarter of 2025, as seasonality drove sequential revenue lower. Canada's revenue historically declines in the second quarter due to the seasonal breakup period where heavy equipment access to production areas is restricted. International revenue for the second quarter of 2025 was $52 million, down $11 million, or 17% sequentially. As expected, based on the $15 million first quarter international projects we discussed last quarter, partially offset with increased project activity elsewhere. Overall, D&O gross margins for the second quarter were 22.9%, down slightly sequentially, and up 110 basis points when compared to the second quarter of 2024. Warehousing selling and administrative, or WSA, for the quarter was $112 million. In line with our expectations from last quarter, after considering the more than $3 million second quarter costs incurred related to the announced merger with MRC Global, we anticipate various other costs in future quarters as we move towards closing the transaction. In the second quarter, we reported $10 million of depreciation and amortization expense, and total company operating profit was $32 million. The U.S. generated $30 million of operating profit. Canada was break even in the quarter, and our international segment delivered $2 million in operating profit in the second quarter of 2025. Moving to income taxes in the second quarter of 2025, D&O's income tax expense was $7 million. And our effective tax rate as computed on the face of the income statement was 21.9%. The effective tax rate for the quarter was favorably impacted by tax benefits associated with vesting of stock awards during the quarter. We estimate our 2025 full year effective tax rate to be approximately 26 to 28%. Net income attributable to D&O Inc. for the second quarter was $25 million, or 23 cents per fully diluted share. And on a non-GAAP basis, Q2 2025 net income attributable to D&O Inc. excluding other costs was $29 million, or 27 cents per fully diluted share. Moving to the balance sheet, at the end of the second quarter we had zero debt, and a cash position of $232 million, an increase of 13 million from the first quarter. We ended the quarter with total liquidity of $582 million, comprising our net cash position of $232 million, plus $350 million in additional credit facility availability. Our existing $500 million revolving credit facility extends into December of 2026, providing D&O with immediate access to capital under the facility. As previously announced, we have also secured additional commitments to expand our existing credit facility by $250 million at the close of the merger, further enhancing our liquidity and capital allocation flexibility. Accounts receivable was $440 million at the end of the second quarter, similar to the first quarter of 2025 levels. Days sales outstanding, or DSO, was 64 days at the end of the second quarter, a three-day improvement from the first. Inventory was $383 million at the end of the second quarter, down two million from the first quarter of 2025, with a strong annualized turn rate of 5.1 times, improving from our first quarter turn rate of 4.8 times. As we've outlined in the past, we take a strategic approach to intentionally invest in inventory that will support our customers as we proactively navigate the challenges posed by tariffs. Accounts payable was $318 million at the end of the second quarter, a decrease of $11 million from the first quarter. And for the second quarter of 2025, working capital excluding cash as a percentage of annualized second quarter revenue improved to 15.6%. In the second quarter of 2025, we generated $45 million of cash from operating activities and invested $4 million for capital expenditures to support growth, primarily in our US Process Solutions business. Under our new share repurchase program that commenced in January, we repurchased $19 million in the second quarter, bringing the cumulative repurchases under our share repurchase program to $27 million year to date through June 30, 2025. Now over the last 12 months, we've completed acquisitions totaling $122 million. We've generated $210 million in free cash flow and have converted over 100% of our EVDA to free cash flow while returning $39 million to our shareholders through share repurchases and increasing our cash balances by $35 million. Our commitment to growing the company through a combination of organic initiatives and M&A remains a key priority. We continue to be debt free, have no interest payments while keeping cash flow generation a top priority. And with that, let me turn the call back to Dave.

Thank you, Mark. Now switching to our outlook for the third quarter. In the US, second quarter revenue was higher than expected due to three Q forecasted projects pulling forward into two Q. As such, we expect US third quarter revenue to be relatively flat compared to the second quarter. As we continue to face sector headwinds impacted by midstream project timing and offset by continued progress in our energy evolution and industrial adjacent market penetration. In Canada, we expect to see a seasonal increase in revenue sequentially coming out of the second quarter breakup. However, we anticipate continued softness in the Canada market impacted by US trade negotiations, tariff uncertainty and political posturing impacting customer investment. Internationally, we expect sequential top line growth due to increases in project activity. Taken all together, we expect DNO's third quarter sequential revenues to increase in the low single digits percentage range from the second quarter. We expect third quarter EBITDA to approach 8% of revenues. We reaffirm our view that full year 2025 revenues will be flat to up on the high single digit percentage range from 2024 levels. And full year 2025 EBITDA could approach 8% of revenue. We are also reaffirming our target of free cashflow in 2025 of 150 million. In closing, I'd like to again recognize and thank our DNO team for their unyielding focus and serving our customers and the continued execution of our strategy. Their efforts have enabled solid results for the quarter, hosting revenues at the top end of our second quarter projections and delivering record setting second quarter EBITDA. Moving forward, we remain focused on advancing our strategy and planning for the close of our transaction to combine with MRC Global. This is a transformative milestone in the strategic advancement of DNO. And we are all eager to bring together our teams and pursue growth through an expanded suite of products and services, all to serve a diverse and growing customer base. With that, let's open the call for questions.

Thank you. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Nathan Jones with Stiefel. Your line is open.

Hey, good morning. This is Adam Farley on for Nathan.

Hi, Adam. Morning, Adam.

Hey, morning. Maybe starting first with the merger with MRC. Thinking

about,

thinking through the work, what are the most difficult parts of integration likely to be? How do you manage the risk? And how do you keep your employees focused during this period?

Well, our orientation, Adam, is around bringing the notion to our employees that this flat out is gonna make DNO and MRC Global combined a better company. We've done transformational combinations in our history. And the first cardinal rule is we're gonna focus on the customer, post-closed like we are today. It's all about the customer. We're going to align our teams early in the process. Get everyone focused on external matters, that is managing the supply chain, working very closely with the manufacturers we support, becoming better distributors to the manufacturers we support, focusing on our customers and being a better supplier to them with a broader array of products and solutions, with more locations closer to them, with a broader array of inventory, and simply just a much, a company much better able to satisfy customer requirements as they evolve, especially in this consolidation experience we're seeing with our top customers. So the focus is on how do we grow the business going forward. That's the focus. You know, having done this before, you really have to, the focus must be an external one. It must be focused on the supply chain and our customers and getting everyone pumped about the future. We've got a high caliber team that's focused on

the integration. We can talk more about that in a bit. All right, that's a good color. Dan,

you know, I've been thinking about 25 guidance. Is it safe to assume the year is heading towards maybe the top half of the current guidance? And do you have any color on if customers are telling you anything about possible budget exhaustion in the fourth quarter? Or just any detail on the back half?

Yeah, in the answer to the first part of your question, I wouldn't bias the guide towards the top end. You know, I think it's safer to be in the middle of that range. You know, we've got a exciting second half of the year planned out, but we'll see some of our customers with budget exhaustion, most notably in the fourth quarter. And that's factored in there. In terms of what was the second part of your question? I'm sorry, Adam.

Yeah, I agree with one of your assumptions around fourth quarter seasonality and budget exhaustion.

Yeah, I think it's gonna be in line with what we normally experience. There's nothing saying it would be more pronounced. I think it'll be pretty much consistent in that 5% range we've experienced over the last several years. I think that's probably a

good bet for the fourth quarter. Okay, thanks for my questions. I'll hop back into you. You're welcome. Thanks, Adam.

Your next question comes from the line of Jeff Robertson with Water Tower Research. Your line is open.

Thank you. Good morning. Dave, in your comments with respect to the MRC combination, you said you've had some discussions with vendors and customers. And I know the $70 million of estimated cost energies is mostly related to corporate costs. Are you seeing opportunities at this early stage that you can drive some synergies with vendors and with customers that ultimately add to those costs and accretion over time?

Yeah, we spend a good deal of time on estimating those synergies. And I'm not gonna raise the number, but it's gonna take a lot of work to get there. We've just kicked off a joint MRC Global Dino team with high caliber talent from both organizations, both groups having deep understanding of the respective organizations. And the focus is on people and talent and growth. Tomorrow, once we close the deal, we wanna be focused on growing our business and being a better distributor to our customers, like I said. So my focus is on growth and the promise of what this combination can mean, really not from combining locations, it's certainly not considering how that will transpire as we go through this integration process. So the focus remains on growth and the promise of the combination rather than focusing on field consolidations where we're gonna realize most of the benefits from the complimentary nature of each of the firms.

As you looked at the combined company, Dave, are you seeing or do you expect that with less exposure to upstream than Dino standalone has, do you see that as a increased visibility in the future earnings power of the company as you're less tied to the drilling and completion capital cycles?

Well, it certainly will make the combined company less focused on upstream in particular, but we still see that as an important part of a business. We wanna grow our position in upstream, but I think that diversification is the real opportunity here. MRC has built very strong end markets where we play such a small role. We can use our complimentary locations, sales teams, non-crossover customer access to grow both sides of the businesses. So I think the real opportunity there is to rely on cross-selling to grow the company.

And then lastly, do you anticipate a lot of that coming from electrification in terms of AI and just other build out of the grid? I think that's part of the strength of MRC was exposure to the gas utilities and products markets.

Yeah, Brad, you wanna hit that a little bit?

Yeah, good morning, Jeff. Yeah, I think Dave in his prepared remarks identified a number of growing industrial markets, electrification of courses. We've seen many of the OFS sector as well as other providers work to move away from fossil fuels on the electrification side. Of course, AI data centers is a very exciting space. I think the combination of our companies going forward would just bring more capabilities around that area. I know we highlighted a successful win, selling some valves to the data center project. I think the prior quarter we highlighted winning feed gas, 5,000 fittings on a feed gas line to a power plant that's feeding a data center. So we're starting to see more and more opportunities in our quotations and our business development efforts, really focusing on those growing and markets that we identified. Certainly midstream had tremendous growth there, approximating 27% of the now revenue this quarter. And then as you look down, further downstream with opportunities with LNG export, we're seeing opportunities there. We're seeing, as I mentioned, opportunities with data center, data center construction, and then the power generation side on that too and what that means for the future of natural gas demand. As some analysts are projecting, natural gas operating rigs to grow, potentially here second half, certainly in the 2026. So that certainly helps us on the upstream side as well. So we're excited about the future and what the combination of these two companies can bring to many of these diversified industrial markets.

Thank

you,

Brett. Again, if you would like to ask a question, press star, then the number one on your telephone keypad. And your next question comes from the line of Blake McLean with Daniel Energy Partners. Please, go ahead.

Hey, good morning, y'all. Morning. Morning, Blake. Hi, Blake. Hey, I appreciate all the color this morning and I appreciate really that last series of question and answers around kind of the total end market portfolio and the opportunities and threats there. Maybe just like expanding on that a little bit. How do you think about how the mix of NewCo sort of evolves over the next one, two, three years as it relates to those sort of total end market, that portfolio of total end markets?

Well, thank you for the question. Yeah, I think in our previous merger call announcement, we talked about what CombineCo end market would look like from an upstream, roughly about $5.3 billion in revenue, about 41% for that upstream, about 21% of that midstream, about 70% gas utilities or 21% gas utilities and in the balanced downstream industrial. So we're excited about certainly increased diversification there, I think offset some of the cyclicality in the upstream market, certainly that we're accustomed to over the many years here at Dnow. I would say moving forward, many of those industrial markets are projected to grow with various degrees of CAGRs. Certainly the gas utilities sector, I believe, is increasingly going through modernization and replacement as population grows and demand increases there. The demand for more gigawatts tied to AI development and data center construction, that's an exciting area, I think for NewCo, really with the exposure that both companies have traditionally had and are gaining because it's a new growth area, both on the PowerGen side, on the general contractor side with the construction, with the operators and some of these hyperscalers like Meta, Microsoft and others, we're starting to see more activity and build relationships there and then also continue to build out midstream infrastructure to really satisfy that, call it five nines of reliability for power demand for those data centers. And then really exciting is LNG. We commented on a couple of wins there. We've seen our quote backlog tied to LNG continually increase here quarter over quarter. We hope to get some of those across the finish line over the next four to six quarters here. They are long cycle projects as US and Western Canadian companies look to expand their export liquefaction terminals and to be able to capture demand from Europe and Asia to help feed those markets on a global LNG basis. So those are some of the exciting opportunities we have looking forward and I think NewCo in its combination with our combined sales force, our success, prior success with customers and our supplier relationships can present a exciting opportunity going forward in the market.

Okay, appreciate that color. I mean, we would agree that the growth profile in a lot of those places just feels different, right? One more just kind of maybe quick follow up. Could you talk a little bit about impact from tariffs in the back half of the year and how you guys are sort of thinking about that and navigating those challenges in this environment?

Yeah, I'll take that one. So we've seen some positive impact from tariffs from a product cost perspective. So we've seen product costs go up a little bit. We've seen that from tariffs. We also seen it from general inflation, which we began to experience before the tariff impacts. We're seeing most of our sales growth coming through volume, not price, so about 80% of our sales growth has come from selling more products versus the increase in price. So we haven't really seen much price impact from the tariffs quite yet. And then there's been, there's been a kind of a governor on margin impacts through the tariffs because there's hyper intensive competition out there, especially as we're in kind of a slower market in some of the end markets. But one thing I wanna say about that is, despite the tariffs, despite supply chain uncertainty, despite some political events that complicate managing the supply chain, we expect and our forecast suggests this'll be our fifth consecutive year of growth in an environment where the market has contracted three consecutive years. So we're making gains in energy evolution in the adjacent markets where we've been pursuing growth. We're able to fill some of those market activity declines by expanding our focus, often with the same customers that we're doing upstream and midstream business with. So we're growing our business organically, we're making smart acquisitions, we're integrating those businesses smartly, and we wanna grow all the end markets in the standalone D now and in NUCO. We wanna grow our business, and we've been very successful at doing so. We talked about the second quarter having the highest EBITDA second quarter in our history. That's something to say after three years of market decline. So we're excited about where we are. We're excited about how the strengths of the product offerings are so complimentary in this merger. We'll have more locations with access to more customers with a better rate of product services customers. So we start off strong. We have two lean organizations who are focused on the customer. Our cultures are similar, and we see coming together as a real opportunity. Both organizations see that. So we're very excited about where we're at, how we've been able to weather slower times and produce record earnings and reliably generate free cash flow. I just wanna mention one statistic. At the end of 2023, we had $299 million in cash. 18 months later, we have $232 million in cash. In that timeframe, we spent $357 million on M&A and share repurchases. So we're an active, growing organization, and we're gonna be even more so as we combine together with MRC Global. So we're excited about where we're at. We wanna grow all our end markets. We generate cash and can grow inorganically and organically, and we're excited about that. Tariffs, as they settle, can be a very positive impact to growth going forward. We just haven't seen much of it yet. Gross margins remain strong, my final comment to your question, where I kinda deviate a little bit in the answer, but very excited about where we're at, McLean, thanks.

Yeah, thanks very much, Greg Cohen.

Your next question comes from the line of Jeff Robertson with Water Tower Research. Your line is open.

Thanks, Dave. Just as a follow-up in the D-NOW second quarter, I think you said that's the highest, just at EBITDA. I think maybe since being a public company, but the EBITDA margin was 8.1%, which is the best it's been since the first quarter of 2023, and I know that was above expectations. Were there some things in the quarter that drove that outperformance? Well,

I think the biggest driver was growth in midstream. Now, we've talked about this with you, Jeff, and on these public calls before, midstream business tends to have lower gross margins, because your order sizes tend to be much larger, but the cost to service that activity is lower as well. In fact, you can see midstream activity with greater fall through at the earnings line. So I think the biggest driver in improved earnings, and for us able to have our best second quarter EBITDA in a high and above 8% EBITDA performance in the quarter, was largely driven by growth in midstream, and we're very excited about midstream for this second half of the year, or for third quarter, for sure, and then we'll see some tailing off in the fourth quarter like we discussed.

Thank you for the call, Mark. Thank you.

Thank you for your questions. That concludes the question and answer session of today's call. Mr. Brad Wise, I turn the call back over to you for final remarks.

Well, thank you everyone for joining us today and your interest in DNow. We'll look forward to discussing our third quarter 2025 results on our next earnings conference call in November. Hope everyone has a wonderful Wednesday, and with that, we'll turn it back to the operator to conclude the call.

Thank you for joining today's conference call. You may now disconnect.