Good morning. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the NOW Inc. fourth quarter and full year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Telephone keypad. If you would like to withdraw your question, press star one again. Thank you. Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference. Well, good morning, John. Good morning, everyone.

Welcome to NOW Inc.'s fourth quarter and full year 2024 earnings conference call. We appreciate you joining us, and thank you for your interest in NOW Inc. With me today is David Cherechinsky, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer. We operate under the NOW Inc. 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 to comments about our outlook for the company's business. These are forward-looking statements within the meaning of the US Federal Securities Laws based on limited information as of today, February 13, 2024, 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. Refer you to the latest forms 10-K and 10-Q that NOW Inc. has on file with the US Securities and 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 at ir.nowinc.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 that we disclose various non-GAAP financial measures in our earnings releases and other public disclosures. These non-GAAP financial measures include 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 NOW Inc., excluding other costs, and diluted earnings per share attributable to NOW Inc. stockholders excluding other costs, and finally free cash flow. Please refer to a reconciliation on 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 results and key takeaways for the fourth quarter and full year 2024. A replay of today's call will also be available on our site for the next thirty days. Now let me turn the call over to Dave.

Brad, and good morning, everyone. I want to start where I'll end my prepared remarks with a glimpse into the full year 2025. We are forecasting growth in 2025 despite expectations that the activities that drive our revenues will decline for the third year in a row. We expect we could post our fifth consecutive year of growth despite the potential of three consecutive years of market activity declines, expected to the end of 2025. This is notable given the perception that upstream sector headwinds limit growth opportunities for NOW Inc. I'm confident in our ability to overcome these headwinds because of my fellow employees. As we close the books on 2024, and look ahead optimistically, I want to extend my deepest gratitude to our employees for their skills, aptitude, energy, and most importantly, their attitude. The character of our people shines through in the attitude they project. From their unwavering support for our suppliers, to the relentless urgency they show in taking care of our customers and helping them succeed. To the way they help and encourage each other, acting as cheerleaders for their teammates. These are the qualities that set us apart. This is why we win. We inspire one another. I know this from personal experience. The notes of encouragement and support I received from employees, these small acts of kindness mean as much to me as if they were coming from a member of my family. Thank you. Our people are the secret sauce. The elements of our strategy are how we succeed. There are four signature elements to our strategy that afford us maximum flexibility in the market, give us an effective edge on the competition, and provide a winning platform that keeps our fellow employees excited about the future. First, the strength in our…

Thank you, Dave, and good morning, everyone. Total fourth quarter 2024 revenue was $571 million, down six percent or $35 million from the third quarter. On a full year basis, total 2024 revenue was $2.373 billion up $52 million from 2023 or an increase of two percent. EBITDA excluding other costs or EBITDA for the fourth quarter was $45 million or 7.9% of revenue. On a full year basis, total 2024 EBITDA was $176 million or 7.4% of revenue US revenue for the fourth quarter 2024 totaled $451 million a decrease of $31 million or six percent from the third quarter 2024. On a full year basis, 2024 US revenue totaled $1.88 billion up seven percent or $131 million from 2023. US energy centers contributed approximately seventy-three percent of total US revenue in the fourth quarter. And US Process Solutions contributed the remainder. In Canada, for the fourth quarter, revenue totaled $66 million an increase of $1 million or two percent from the third quarter of 2024. Despite an unfavorable impact of $2 million from foreign currency changes. On a full year basis, 2024 Canada revenue totaled $253 million down ten percent or $29 million from 2023. Impacted unfavorably by $4 million from foreign currency changes. International revenue for the fourth quarter of 2024 was $54 million a decrease of $5 million or eight percent sequentially. We experienced some project delays in the international segment in the fourth quarter that shifted into the first half of 2025. On a full year basis, 2024 international revenue totaled $240 million down seventeen percent or $50 million from 2023. A year with heavy project activity. When looking back before 2023, the 2024 revenue delivered surpassed both revenue in 2021 and 2022. But this year, we not only expanded revenue over those years, but…

Thank you, Mark. Switching to our outlook for 2025. In the US, as customer budgets reset, we expect upstream customer spending to be lower year over year due to efficiency gains in drilling and completions, yet budgets are allocated primarily to maintain current production levels noting some have announced modest production growth in the Permian. We expect continued investment in midstream infrastructure and new projects based on increased demand for natural gas, from a combination of increased electrical demand due to growth in data centers, reshoring, or manufacturing, and expected increases in LNG export capacity. 2023 and 2024 were heavy build-up years for one of our largest customers. With orders being placed to meet demand, as well as forecasted activity with twelve to eighteen months line of sight. In 2025, that customer plans to exhaust existing inventory and only place fabrication orders for project-specific needs versus large-scale production planning. This will post NOW Inc. sales declines in fabrication by about $40 million in 2025. Also, we expect about a $30 million reduction in revenues from 2024 business that was bid out at margins lower than the cost to service those revenues. So we sidestepped low margin dilutive activities that were picked up by competitors. As a result, we expect our US business to grow from 2024 levels as we look to capture market share and continue to execute on growing in the midstream and industrial adjacent markets. Combined with the expected revenue contributions from the Trojan acquisition. In Canada, we expect customers to look to maintain production given the fluidity impact of tariffs on the sector, and impacts to our business, our outlook is more opaque than normal. However, for modeling purposes, we see a flat scenario playing out in Canada for the year. Internationally, we see a flat scenario…

Thank you. At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. Your first question comes from the line of Nathan Jones with Stifel. Please go ahead.

Good morning, everyone. Looks like you should've done the share repurchase yesterday. For sure. I guess I'll start with the topic du jour around tariffs. I've viewed you guys as one of the few industrial net beneficiaries from tariffs as it's typically not only accretive to your revenue, but also accretive to gross margins. We have seen steel prices spike up over the last few weeks, unsurprisingly. Can you talk about what's baked into the guidance? That you've given for 2025? And maybe just remind us of how those inflationary pressures on steel prices pass through your business.

Okay. In terms of how we've kind of metered in the impact of tariffs on our first quarter and full year guidance, you know, we expect that there'll be varying degrees of implementation of tariffs. Maybe not the full amount, but it could be. And that's baked into our forecast. We gave a wider range of revenue possibilities in our forecast than we normally do. But to your point, Nathan, tariffs generally should be constructive to gross margins and revenues. Now if the tariffs were too widespread and they could become revenue disruptive. We don't see that. And the reason we don't see that is, you know, it's probably at least sixteen percent of the steel products we sell are sourced from the United States. So that we have a little bit of a hedge there with. And we think, you know, we'll have a mix of products that will work with our various supply sources around the world to mitigate, you know, the average cost of the products we sell to our customers. So I think we have the ability. I think we'll see higher costs for the arresting of deflation we've experienced that'll be a positive. And I think we'll see the recurrence of inflation, at least at a moderate level, which should help gross margins and the bottom line performance of the business. In terms of the sourcing and where the tariffs are being applied. Mexico and Canada are very low sources of products for us. The primary one would be China, but that's gonna be a smaller portion of the overall total of goods we sell.

Is that the primary driver of that wide range? I mean, flat to up high single digits is a pretty wide range. Is the primary input there the, you know, the potential for tariffs at the top and bottom of that range, and what are the other inputs that split the top and the bottom?

Well, I would say that the tariffs are probably at the lower end of that range. I think that the things that excite us about 2025 is we're seeing more interest in midstream, you know, a very important target end market for us. We've doubled our position in midstream. We expect to exploit that in the New Year. If we see the kind of if we see activity higher than what we expect, that would move us up that the midpoint of that range. Contrarily, if we see some of the government subsidies for, you know, our big push in energy evolution in adjacent markets and infrastructure-related spend that could bring us down in that within that spectrum on that range of guidance. Those are probably the main things. We do expect some shrinkage in upstream, like I said in my prepared remarks, but, you know, we expect, you know, some real strength in midstream. And that's a big organizational push, not just from our WITCO team, but our legacy folks as well, so we expect growth there.

I guess my last question was just gonna be around upstreamness obviously a focus from the new administration on increasing domestic production. You and it doesn't sound like you think that's gonna happen. So not in terms of, you know, higher rig count, so just any insights you can give us on what you're hearing from your customers about their intentions to drill and produce more or not based on current US policy.

Well, you know, I think our assessment of what's probable in upstream is just based on what we're hearing from our customers and from the people that really cover the industry well. Now it doesn't mean and we do have customers that feel liberated by a less, you know, a less controlling administration, and they're gonna they're gonna simply invest more and take more risk and spend more because they because the sentiments change. So we do have customers that are gonna change their budgets favorably in that regard. But, you know, the heavyweight we're using in our assessment of upstream is just what our customers are saying. But I do think, you know, there's a wildcard. I mean, you know, could things be better in upstream than we think? We're not counting on that right now.

Awesome. Thanks very much for taking my questions.

Thank you.

Your next question comes from the line of Jeff Robertson with Water Tower Research. Please go ahead.

Thank you. Good morning. Dave, on the Trojan acquisition, can you talk about how much exposure NOW Inc. had prior to this, to what to the water transfer business especially in a place like the Permian Basin? And then secondly, does the addition of Trojan allow NOW Inc. to pull through more of your other products to essentially sell bigger tickets to the customers?

Brad, you wanna take that and, you know, start with just the pumps and flexible and how this leverages that.

Yeah. Good morning, Jeff. Thank you for your question. Yeah. We're really excited about the Trojan acquisition and the opportunity that fits nicely into our, you know, water solutions business within our process solutions group. You know, if you look at where FlexFlow plays, predominantly in areas that have a saltwater disposal injection sites, subservice permits and injection sites. And then also in production where you have a higher water to oil ratio, FlexFlow that has, you know, carved out a real nice market niche there, and we're growing that business. They tend to be, you know, higher volumes, higher capacity. You know, over the few years we've owned FlexFlow, they've actually declined the number of water transfer opportunities just because it's just not the right technology fit for the fleet we have. That's operating in the US and in Canada. When we came into contact with the Trojan opportunity, it really expanded, you know, a gap in the water solutions market where we really weren't playing. We do have some small fleet of water transfer pumping rental options within our Odessa pumps fleet. So there's a small overlap there, but really, Trojan's done a nice job of carving out a niche of not only renting, you know, pumping assets for what I call, you know, temporary water transfer market also selling product as a distributor supplier. And then recently, really coming out with the Sable automation business, which is really kind of a nice glue that kind of brings that all together and offers a really nice package solution offering to an operator, a water operator, or a production operator to allow them to turnkey and outsource moving that water a number of locations. So kind of minimal overlap with what we have with FlexFlow and Odessa Puff. There's some complementary areas but we think there's gonna be opportunity for revenue synergies with Trojan and with our process solutions group.

Brad, does the Sable system allow you to integrate some of the automation platform you have, I think, with FlexFlow into a I guess, a broader package that you can supply to customers?

Yeah. It does, Jeff. You know, Trojan has a SCADA platform that's really kind of like a rental software as a service model. It's been very popular with customers. They're growing that. We see a large area of growth opportunity with that platform, really not only in the oil and gas market, but also some adjacent markets like agricultural processing and other areas. You know, we've mentioned in prior earnings call FlexFlow, we have our OPiWatch platform. That, you know, is a real-time monitoring solution for not only rental SWD units, but also permanent SWD units. So our teams are working together with Trojan and FlexFlow. I you know, identifying opportunities on the technology and looking to potentially merge that in the future, although we haven't done anything from that since pretty early at the moment.

Thanks. And then lastly on Trojan, can you bring their business to some of the other basins that you operate in?

Yeah. For sure. You know, they're predominantly in, again, the higher water to oil ratio upstream markets, so kind of, you know, Permian, Southwest area, know, with NOW Inc.'s footprint, as Dave mentioned in his prepared remarks, not only do we think we can expand to our current customers that they're not servicing in the market footprint, we expanded geographically into the Williston Basin into Canada and other areas. So we're excited about the opportunity to expand Trojan's customer base, but also geographical reach.

And just a question, Dave, on revenue. In your comments, I think you mentioned that essentially production volumes and obviously with Trojan water handling volumes are becoming a better proxy for NOW Inc.'s business as opposed to capital spending on things like the rig count. So if we are to assume that US production grows slightly, then that essentially is where you're getting the expectation that US revenues also grow with it. Is that the right way to think about your business at this point?

Well, what I said, Jeff, was, you know, rigs in completions still are good barometers for NOW Inc.'s revenue opportunities. In fact, they're probably the preeminent two. However, process solutions, which is twenty-seven percent of our US business and growing. Of course, we've been investing heavily there and will continue to do so. They're seeing, you know, much more water-oriented revenue opportunities, which are, you know, disconnected from rigs and partly disconnected from rigs and completions. We see that as a bit of a hedge. So it's not all of our it's not the prime driver of revenues. It's still rigs and completions, but it's an avenue for us to diversify our target end markets, and we're doing that with the acquisitions we've made, including, Trojan.

Thank you. I'll get back in the queue.

Okay. Thanks.

Your next question comes from the line of Josh Jane with Daniel Energy Partners. Please go ahead.

Thanks. Good morning. First one for me was talked a lot about the US. Could you talk about your outlook for not only Canada, then also international markets in 2025 where there are opportunities and some areas that might be challenged over the course of this year?

Yeah. We I did touch on Canada and international, but just briefly in my prepared remarks, we expect relatively flat activity in Canada. And we expect the same for international. 2023 was a very big project year for us in international. Talked in our prepared remarks how we saw revenues decline due to the reduction in projects in 2024, and know, we've been kinda recasting our position in international with a focus on improving profitability. You've got we're really strong in the North Sea and the international electrical business, in the UK and Australia. Middle East, we're less strong elsewhere. We're making adjustments there. So that's gonna impact revenues, generally, at least in the first half negatively. So we're forecasting international to be flat. But that's it. You know, that could springboard into, you know, really focusing on the places international over strong as we remove those distractions where we weren't, well, you know, they'll see platform for growth there.

And then on the M&A side, just given that you were able to do a couple of deals, especially the larger one earlier in the year, could you speak to the M&A just general environment today? If you're seeing more opportunities come through your pipeline, then maybe six to nine months ago. And how we should be thinking that against your return to shareholder framework, which has been among especially with your most recent announcement, one of the most aggressive across the entire OFS universe. Just talk about how you're balancing those and you know, opportunities for M&A that you're seeing today.

Yeah. We are seeing a similar stream of opportunities. Not a big increase, not a big decrease. At this point in this cycle. Of course, we like I said earlier, we had our biggest acquisition year since 2015 and 2024. Those are harder to come by and things just worked out with us being the natural operator. And those being prime synergistic revenue synergistic opportunities for us. So we're, you know, we're cultivating that list of options, of opportunities and it's gonna come down to timing and price like it always does. Now in terms of how do we manage both inorganic expenditures and share repurchases, we think we could do both. We think we can like Mark talked about, we're gonna be we generated about $80 million in cash last year from inventory from our core business, inventory decline from our core business. Next year, we're gonna be adding inventory to our core business and to our acquisitions, so we'll consume cash there. But we can fund organic growth and do M&A and also, you know, execute on our share repurchase program. So we think we could do all three things. We will do so opportunistically. The right deal comes along, and right now, we're really more in an M&A play. Because there's not a lot of organic growth up there. But we're gonna we're gonna favor M&A if the right deal comes along. If it doesn't, we're gonna favor share repurchases. But we think you know, we ended the year. We ended last year, I think, at $291 million in cash. We spent over $300 million in acquisitions in 2024. We ended the year with $256 million in cash. And we completed our share repurchase program. So we did all of it. In 2024, and we think we could do the same in 2025.

Understood. Thank you. I'll turn it back.

Thanks for the question. Thank you, John.

As there are no further questions, this time, Mr. Brad Wise, I turn the call back over to you.

Thank you, everyone, for joining us today and your interest in NOW Inc. We look forward to discussing our first quarter 2025 results on our next earnings conference call in May. Hope everyone has a wonderful Thursday. And with that, we'll turn it back to the operator to conclude the call.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.