DNOW Raises 2026 Cash Flow Outlook as Q3 EBITDA Rises

DNOW Inc. (DNOW) raised its full-year operating cash flow outlook after stronger earnings and working-capital efficiency helped the energy and industrial products distributor generate $120 million of cash from operations in the third quarter of 2026. Revenue increased across all three geographic segments, while adjusted EBITDA rose 26.7% from the preceding quarter and the company made further progress integrating MRC Global.

For the three months ended Sept. 30, DNOW reported revenue of $1.337 billion, up 2.3% sequentially, despite $15 million of international project revenue shifting into future periods. Adjusted EBITDA, a non-GAAP measure, reached $76 million, representing 5.7% of revenue. The margin improved by 110 basis points from the second quarter.

GAAP net income attributable to DNOW was $26 million, or 1.9% of revenue. Adjusted EBITDA excluded items including $24 million of depreciation and amortization, an $11 million increase in the LIFO reserve, $6 million of stock-based compensation and $3 million of net transaction-related adjustments.

Revenue Growth Across Geographic Segments

The United States remained DNOW’s largest geographic business, generating $1.125 billion, or 84% of consolidated third-quarter revenue. International operations contributed $156 million, or 12%, while Canada produced $56 million, or 4%.

By end market, upstream customers accounted for $486 million, or 36% of revenue. Gas utilities generated $321 million, representing 24%, followed by midstream at $292 million, or 22%. Downstream and industrial customers contributed the remaining $238 million, or 18%.

The company said third-quarter revenue grew sequentially in each of its three geographic segments. The delayed international projects limited reported revenue during the period, with the associated sales expected in future periods.

MRC Global Integration Advances

DNOW expects to reach an annualized cost-synergy exit rate of about $32 million by the end of 2026 from its integration of MRC Global. That would represent 46% of its three-year target of $70 million. The company said facility consolidations and related efficiencies were running ahead of plan.

The targeted savings are divided among corporate and public-company costs, operational and supply-chain efficiencies, and corporate and information-technology systems. DNOW’s revised plan calls for $17 million of the annual synergy opportunity in 2026, $21 million in 2027 and $32 million in 2028.

Beyond cost reductions, the company identified cross-selling, coordinated sales pipelines and the use of complementary inventory as potential revenue opportunities. DNOW is also migrating upstream and midstream locations to an optimized SAP enterprise resource planning platform and pursuing an integrated sourcing strategy intended to improve bid competitiveness and capture additional revenue.

Cash Flow Supports Debt Reduction and Buybacks

Cash provided by operating activities totaled $120 million in the quarter, supported by stronger earnings and improved working-capital metrics. Working capital excluding cash was 17.6% of annualized third-quarter revenue, marking a sequential improvement.

DNOW reduced net debt by $95 million during the quarter. At Sept. 30, the company had $112 million of cash and $377 million of debt, resulting in net debt of $265 million. Its non-GAAP net debt leverage ratio was 1.1 times trailing 12-month adjusted EBITDA of $236 million.

Total liquidity stood at $568 million, with access to an additional $500 million accordion. Third-quarter capital expenditure was $14 million, directed toward growth and ERP initiatives.

The company repurchased $17 million of shares during the quarter at an average price of $15.50 per share. Year-to-date repurchases totaled $92 million, while cumulative purchases under the $160 million authorization reached $129 million.

2026 Outlook

DNOW expects fourth-quarter revenue to decline sequentially by a high-single-digit percentage because of seasonality. Even with that decline, the company projects full-year revenue modestly above the midpoint of its previous $5.0 billion to $5.1 billion guidance range.

Fourth-quarter adjusted EBITDA is targeted at 4.5% of revenue. DNOW also expects its full-year adjusted EBITDA margin to be modestly above its previous guidance.

The company raised its full-year outlook for net cash provided by operating activities to approaching $200 million, compared with its previous guidance of approaching a range of $125 million to $200 million.

DNOW cautioned that forward-looking expectations could differ materially from actual results. Key uncertainties reflected in the presentation include the timing of international projects, the expected seasonal fourth-quarter revenue decline and the execution of integration, systems migration and synergy initiatives.