NOW Inc. Reports Third Quarter 2021 Results

November 03, 2021 at 06:45 AM EDT

Earnings Conference Call

November 3, 2021

8:00 a.m. CT

1 (800) 446-1671 (within North America)

1 (847) 413-3362 (outside of North America)

Webcast: ir.dnow.com

NOW Inc. (NYSE: DNOW) announced results for the third quarter ended September 30, 2021.

Third Quarter 2021 Financial Highlights

Revenue was $439 million for the third quarter of 2021
Net income was $5 million and non-GAAP net income excluding other costs was $6 million for the third quarter of 2021
Diluted earnings per share was $0.05 and non-GAAP diluted earnings per share excluding other costs was $0.05 for the third quarter of 2021
Non-GAAP EBITDA excluding other costs for the third quarter of 2021 was $15 million
Cash and cash equivalents was $312 million and long-term debt was zero at September 30, 2021
Free cash flow for the third quarter of 2021 was $22 million

David Cherechinsky, President and CEO of NOW Inc., added, “I am delighted to report this quarter that the Company once again achieved solid results with better-than-expected sequential revenue growth of 10 percent, a third consecutive quarter of record-breaking gross margins and EBITDA excluding other costs of $15 million, well above expectations. Our strategic execution accelerated these results and generated $22 million in free cash flow in a period where we would have historically consumed cash.

Despite facing the pervasive effects of the continued worldwide pandemic, particularly global supply chain disruptions, product scarcity, industry labor shortages and elevated transportation costs, our global DNOW team delivered as a reliable source of critical products and services for our customers amid growing demand.

Looking ahead to full-year 2021 results, we expect revenue to be largely unchanged from full-year 2020. However, with stronger gross margins and a now much leaner cost structure, we anticipate full-year 2021 EBITDA improvement over full-year 2020 to be near $90 million, representing a fundamental shift in the capabilities of the Company and its earnings potential, laying the groundwork for a strong 2022.”

Prior to the earnings conference call a presentation titled “NOW Inc. Third Quarter 2021 Key Takeaways” will be available on the Company’s Investor Relations website.

About NOW Inc.

NOW Inc. is one of the largest distributors to energy and industrial markets on a worldwide basis, with a legacy of over 150 years. NOW Inc. operates primarily under the DistributionNOW and DNOW brands. Through its network of approximately 195 locations and 2,400 employees worldwide, NOW Inc. offers a comprehensive line of products and solutions for the upstream, midstream and downstream energy and industrial sectors. Our locations provide products and solutions to exploration and production companies, energy transportation companies, refineries, chemical companies, utilities, manufacturers and engineering and construction companies.

Statements made in this press release that are forward-looking in nature are intended to be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and may involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by NOW Inc. with the U.S. Securities and Exchange Commission, which identify significant risk factors which could cause actual results to differ from those contained in the forward-looking statements.

NOW INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)

	September 30,			December 31,
	2021			2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	312		$	387
Receivables, net		299			198
Inventories, net		244			262
Prepaid and other current assets		19			14
Total current assets		874			861
Property, plant and equipment, net		115			98
Deferred income taxes		1			1
Goodwill		66			−
Intangibles, net		11			−
Other assets		37			48
Total assets	$	1,104		$	1,008
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	243		$	172
Accrued liabilities		105			95
Other current liabilities		27			5
Total current liabilities		375			272
Long-term operating lease liabilities		17			25
Other long-term liabilities		13			12
Total liabilities		405			309
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; 110,558,831 and
109,951,610 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		1			1
Additional paid-in capital		2,059			2,051
Accumulated deficit		(1,215	)		(1,208	)
Accumulated other comprehensive loss		(146	)		(145	)
Total stockholders' equity		699			699
Total liabilities and stockholders' equity	$	1,104		$	1,008

NOW INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In millions, except per share data)

	Three Months Ended									Nine Months Ended
	September 30,						June 30,			September 30,
	2021			2020			2021			2021			2020

Revenue	$	439		$	326		$	400		$	1,200		$	1,300
Operating expenses:
Cost of products		343			264			315			944			1,053
Warehousing, selling and administrative		86			83			85			250			310
Impairment charges		−			−			−			4			320
Operating profit (loss)		10			(21	)		−			2			(383	)
Other expense		(3	)		−			(1	)		(5	)		(2	)
Income (loss) before income taxes		7			(21	)		(1	)		(3	)		(385	)
Income tax provision (benefit)		2			1			1			4			(2	)
Net income (loss)	$	5		$	(22	)	$	(2	)	$	(7	)	$	(383	)
Earnings (loss) per share:
Basic earnings (loss) per common share	$	0.05		$	(0.20	)	$	(0.02	)	$	(0.06	)	$	(3.50	)
Diluted earnings (loss) per common share	$	0.05		$	(0.20	)	$	(0.02	)	$	(0.06	)	$	(3.50	)
Weighted-average common shares outstanding, basic		111			109			110			110			109
Weighted-average common shares outstanding, diluted		111			109			110			110			109

NOW INC.
SUPPLEMENTAL INFORMATION

BUSINESS SEGMENTS (UNAUDITED)
(In millions)

	Three Months Ended						Nine Months Ended
	September 30,				June 30,		September 30,
	2021		2020		2021		2021		2020
Revenue:
United States	$	312	$	228	$	296	$	860	$	929
Canada		68		42		51		177		161
International		59		56		53		163		210
Total revenue	$	439	$	326	$	400	$	1,200	$	1,300

NOW INC.
SUPPLEMENTAL INFORMATION (CONTINUED)
U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP RECONCILIATIONS
NET INCOME (LOSS) TO NON-GAAP EBITDA EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)
(In millions)

	Three Months Ended									Nine Months Ended
	September 30,						June 30,			September 30,
	2021			2020			2021			2021			2020

GAAP net income (loss) ⁽¹⁾	$	5		$	(22	)	$	(2	)	$	(7	)	$	(383	)
Interest, net		−			−			−			−			−
Income tax provision (benefit)		2			1			1			4			(2	)
Depreciation and amortization		6			6			6			18			23
Other costs ⁽²⁾		2			−			1			7			334
EBITDA excluding other costs	$	15		$	(15	)	$	6		$	22		$	(28	)
EBITDA % excluding other costs ⁽³⁾		3.4	%		(4.6	%)		1.5	%		1.8	%		(2.2	%)

NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS) EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)
(In millions)

	Three Months Ended								Nine Months Ended
	September 30,					June 30,			September 30,
	2021		2020			2021			2021			2020

GAAP net income (loss)⁽¹⁾	$	5	$	(22	)	$	(2	)	$	(7	)	$	(383	)
Other costs, net of tax ^{(4) (5)}		1		5			2			8			340
Net income (loss) excluding other costs ⁽⁵⁾	$	6	$	(17	)	$	–		$	1		$	(43	)

DILUTED EARNINGS (LOSS) PER SHARE TO NON-GAAP DILUTED EARNINGS (LOSS) PER SHARE EXCLUDING OTHER COSTS
RECONCILIATION (UNAUDITED)

	Three Months Ended								Nine Months Ended
	September 30,					June 30,			September 30,
	2021			2020		2021			2021			2020

GAAP diluted earnings (loss) per share ⁽¹⁾	$	0.05	$	(0.20	)	$	(0.02	)	$	(0.06	)	$	(3.50	)
Other costs, net of tax ⁽⁴⁾		−		0.04			0.02			0.07			3.10
Diluted earnings (loss) per share excluding other costs⁽⁵⁾	$	0.05	$	(0.16	)	$	–		$	0.01		$	(0.40	)

(1)		In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in our quarterly earnings press releases and other public disclosures. The non-GAAP financial measures include: (i) earnings before interest, taxes, depreciation and amortization (EBITDA) excluding other costs, (ii) net income (loss) excluding other costs and (iii) diluted earnings (loss) per share excluding other costs. Each of these financial measures excludes the impact of certain other costs and therefore has not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included in the schedules herein.
(2)		For the nine months ended September 30, 2021, other costs primarily included impairment charges and transaction-related expenses, which were included in operating profit, and the increase in the fair value of contingent consideration liabilities, which was included in other expense.
(3)		EBITDA % excluding other costs is defined as EBITDA excluding other costs divided by Revenue.
(4)		For the nine months ended September 30, 2021, other costs, net of tax, primarily included expenses of $1 million from changes in the valuation allowance recorded against the Company’s deferred tax assets and $7 million related to impairment charges and transaction-related expenses. The Company has excluded the impact of these items on its valuation allowance in computing net income (loss) excluding other costs.
(5)		Totals may not foot due to rounding.