DNOW - NYSE

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" Stifel, Nicolaus & Company, Incorporated, Research Division

" Water Tower Research LLC

" Stifel, Nicolaus & Company, Incorporated, Research Division

Good morning. My name is Van, and I will be your conference operator today. At this time, I would like to welcome everyone to the DNOW Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Thank you. Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference.

Well, good morning, and thank you, Van, and welcome to DNOW's Third Quarter 2025 Earnings Conference Call. We appreciate you joining us and thank you for your interest in DNOW. 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 DNOW brand, which is also our New York Stock Exchange ticker symbol. Please note that some of the statements we make during this call, including the 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 U.S. federal securities laws based on limited information as of today, November 5, 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 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 DNOW has on file with the U.S. 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.dnow.com or in our filings with the SEC. In an effort to provide investors with additional information regarding our results as determined by U.S. GAAP, you'll note that we disclose various non-GAAP financial measures in our earnings press releases and other public disclosures. These are non-GAAP financial measures and include earnings before interest, taxes, depreciation, amortization or EBITDA, excluding other costs. EBITDA, excluding other costs as a percentage of revenue, net income attributable to DNOW Inc., excluding other costs, diluted earnings per share attributable to DNOW 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 in 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 third quarter of 2025. A replay of today's call will be available on the site for the next 30 days. Please note that the results presented today are for DNOW only and do not include any results from MRC Global, which remains a separate independent company until our merger transaction with them is completed. Now let me turn the call over to Dave.

Thank you, Brad, and good morning, everyone. I am impressed with the performance our DNOW team has delivered and confident 2025 will mark the fifth consecutive year of revenue growth despite 3 years of market softness. The third quarter delivered our strongest revenue since 4Q 2019, and we converted that revenue far more efficiently, producing greater than 7x the EBITDA dollars achieved on a comparable revenue in that prior period. Our performance continues to be driven by a steadfast focus on customers, disciplined cost management and greater operational leverage while focusing our resources and our strengths where the customer sees value. The announced merger with MRC Global has yet to close, but we have received shareholder and regulatory approvals. I'm excited about collaborating to build a stronger, more durable and more impressive future together. Regarding our third quarter results, revenue for the third quarter grew in line with our guided forecast to $634 million and to a level we haven't seen since before 2020. In the third quarter, we delivered EBITDA of $51 million or 8% of revenue, reflecting continued earnings durability and a marked improvement year-over-year. Activity resulting in demand for our products and services remained healthy. Operators continue to prudently deploy capital with a keen focus on production volume economics and deployment of resources. As crude oil production, natural gas and produced water volume modestly grew, this requires infrastructure and together drove customer demand for our pipe, valves, fittings, pumps and fabricated process, automation, production and measurement equipment. In today's market, improved capital efficiency and customer consolidation has led to a period of operators optimizing their production portfolio and cautiously evaluating market growth opportunities. It's encouraging to see continued capital investment in the gathering and transmission midstream sectors, primarily driven by increased demand for power and LNG exports. A continued strength is this team's disciplined approach to working capital management. During the quarter, we improved our inventory turn rates and days sales outstanding, demonstrating efficient use of our balance sheet. When combined with earnings, we delivered $39 million in free cash flow for the third quarter, elevating our year-to-date free cash flow to $58 million, which we expect could approach $150 million for the full year 2025. Our overall achievements are representative of the strong focus by our teams to deliver a solutions-oriented approach to our customers' challenges. Now to some comments on our results by region. In the U.S., revenue was $527 million, lower by $1 million sequentially despite a 5% sequential contraction in U.S. rig count and a 6% decline in U.S. completions in the third quarter. Our U.S. Energy Centers business increased in the Permian and in the Northeast, combined with steady activity in the Northwest and Southeast. Operator improvements in drilling efficiency, combined with the incorporation of digital tools and AI are extending the economic life of existing acreage. As a result, we remain in a period of industry optimization and experts believe rig counts are at or below levels needed to maintain current U.S. onshore production. In the Haynesville, demand for our products improved, primarily tied to the new construction of tank batteries, gathering lines, storage and distribution of natural gas linked to increased demand for power generation and LNG exports. DNOW is positioned well to capture revenue and market share from these opportunities. Operators remain focused on leveraging drilling and completions efficiencies, driving the need for more -- for larger, more centralized tank batteries with specialized equipment. This shift tends to favor DNOW due to our fabrication capacity, inventory and service capabilities. The midstream sector is active with customers allocating capital to gathering, transmission and takeaway projects to meet the growing downstream demand. During the quarter, the midstream sector accounted for 24% of overall DNOW revenue. Midstream activity was strong and held steady with demand for pipe, valves and fittings supporting several capital projects. One project consisted of a new 400-mile 42-inch pipeline and corresponding lateral to connect the processing plant project, which provides more flexibility for the operator to deliver natural gas to premier markets and trading hubs and its ability to support power plant and data center growth. Moving to U.S. Process Solutions. Demand for aftermarket pump services remained strong and has grown on a year-over-year basis. We remain focused on expanding our pump and service revenue to additional downstream markets winning orders with numerous chemical processing companies along the Gulf Coast. For our water management business in Flex Flow and Trojan, rental activity remained steady with strong performance in the U.S. and Canada. We see increased demand for higher horsepower rental pumping units where operators are requesting larger assets to move greater volumes of produced water. Our Flex Flow engineering teams are working on retrofitting several existing H-pump units to take advantage of the shift in customer preference. We have secured orders for several H-pump rental units targeting the growing CO2 sequestration space. As more operators look to expand enhanced oil recovery applications as well as fund future CCUS projects, we believe there will be prospects to rent and sell these pumps. Since acquiring EcoVapor in December of 2022, we have expanded our product offering to drive increased market opportunities for our gas treating technology. I'm delighted to highlight the great work our product development team has done over the past year to unlock several opportunities. First, during the quarter, we shipped a O2E 2000 unit to a landfill gas operator. The E2000 is a much higher capacity unit designed to treat larger volumes of landfill gas by removing oxygen, allowing the treated gas to be moved to the midstream market for sale. Second, several of our customers have requested a combined gas treating and liquids removal process unit to handle larger volumes of saturated gas. In response, we developed the DryOxo and delivered our first unit to an RNG customer in the quarter. The DryOxo product is suitable for many RNG applications from small dairies and swine farms to large landfills, unlocking revenue growth for EcoVapor. And finally, we designed and shipped several new Oxygen Sentinel units, which enable operators to treat gas with higher H2S concentrations found in natural gas applications. In Canada, revenue was $53 million for the quarter, up $5 million or 10% sequentially, in line with our guide. Activity increased from the second quarter breakup period. Third quarter Canada rig count compared to the same period in 2024 was 15% lower year-over-year. As such, we are optimizing our footprint to improve our cost structure. Despite lower activity on a year-over-year basis, we see opportunities for several top operators and EPCs to drive future growth. For international, revenue was $54 million, sequentially up by $2 million or 4%. During the quarter, we saw growth in the Middle East and Singapore. Singapore activity in the fabrication yards remained strong, driven by high demand for FPSO conversions for Brazil, West Africa and Guyana alongside LNG module fabrication aligned with the global emphasis on energy security. Moving to digital. I'd like to share an example of how we are using digital technology to provide real-time information for our customers to provide better planning, improving on-time deliveries and yield higher fill rates from inventory to help improve inventory turn rates and customer satisfaction. For one of our larger customers, our DigitalNOW analytics team built a solution that provides real-time data and visibility to their demand for pipe in comparison to DNOW's on-hand and on-order inventory. This digital tool has enabled better planning and communication to fulfill customer pipe demand, resulting in a more efficient supply chain. Turning to capital allocation. Our long-term priorities remain unchanged. We will invest in organic growth in additional market sectors to help drive diversification of revenue, coupled with inorganic opportunities that drive accretive results where we are the national natural operator. A key area of interest for us is acquisitions, primarily in Process Solutions to further build out our service and product offering 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 third quarter of 2025 was $634 million, up 1% or up $6 million from the second quarter of 2025 and marks the highest revenue quarter in almost 6 years. EBITDA, excluding other costs or EBITDA for the third quarter was $51 million or 8% of revenue, marking the 14th consecutive quarter where DNOW has delivered approximately 7% EBITDA or better. Another notable improvement in performance can be seen when we compare the period starting when we became a stand-alone public company in the second half of 2014 through the end of 2019. That 5-plus year period delivered accumulated EBITDA performance of less than 1% of revenue. And now comparing this to the period after our transformation years of 2020 and 2021, we've averaged 7.8% EBITDA as a percent of revenue, which clearly speaks to solid execution of our strategy to improve profitability and grow earnings. U.S. revenue for the third quarter of 2025 totaled $527 million, effectively flat sequentially and an increase of $45 million or 9% from last year. U.S. Energy Centers contributed approximately 73% of total U.S. revenue in the third quarter, and U.S. Process Solutions contributed approximately 27%. In Canada, for the third quarter, revenue totaled $53 million, an increase of $5 million or 10% sequentially. The international revenue of $54 million for the third quarter was up $2 million or 4% sequentially. Overall, DNOW gross margins for the third quarter were 22.9%, flat sequentially and up 60 basis points compared to the third quarter of 2024. Now warehousing, selling and administrative or WSA for the quarter was $112 million, unchanged from the second quarter. We anticipate various other merger transaction costs in the future quarters. In the third quarter, we reported $11 million of depreciation and amortization expense and total company operating profit was $33 million, led by our U.S. segment that generated $28 million with the balance derived from our Canada and International segments, generating $2 million and $3 million, respectively. Now moving to income taxes. In the third quarter of 2025, DNOW's income tax expense was $7 million. And our effective tax rate as computed on the face of the income statement was 21.9%. We estimate our 2025 full year effective tax rate to be approximately 26% to 27%. Net income attributable to DNOW Inc. for the third quarter was $25 million or $0.23 per fully diluted share. And on a non-GAAP basis, Q3 2025 net income attributable to DNOW Inc., excluding other costs, was $28 million or $0.26 per fully diluted share. Moving to the balance sheet. At the end of the third quarter, we had 0 debt and an improved cash position of $266 million, an increase of $34 million sequentially. We ended the quarter with total liquidity of $629 million, comprising our net cash position of $266 million plus $363 million in additional credit facility availability. Accounts receivable was $429 million at the end of the third quarter with -- days sales outstanding or DSO of 62 days, a 2-day improvement from the second quarter. Inventory was $377 million at the end of the third quarter, down $6 million from the second quarter of 2025, with a strong annualized turn rate of 5.2x and a record high since 4Q 2021. Accounts payable was $305 million at the end of the third quarter, a decrease of $13 million from the second quarter. And for the third quarter of 2025, working capital, excluding cash as a percentage of annualized third quarter revenue was 15.6%. In the third quarter of 2025, we generated $43 million of cash from operating activities and invested $4 million of capital expenditures to support growth initiatives, primarily in Process Solutions and midstream areas. Year-to-date, share repurchases were unchanged from the second quarter at $27 million. And since our inaugural buyback program began, we have repurchased over 8.7 million shares of common stock, returning capital to shareholders. Over the last 12 months, we've completed acquisitions totaling $122 million, generated $177 million in free cash flow, which represents an EBITDA to free cash flow conversion of over 90%, while returning $32 million to our shareholders through share repurchases and increasing our cash balance by $5 million. Our commitment to growing the company through a combination of organic initiatives and M&A remains a key priority. And with that, let me turn the call back to Dave.

Thank you, Mark. Before I get to the outlook for the fourth quarter, I'd like to make some additional comments on the announced merger with MRC Global. We see the combined company bringing together unparalleled access to industry-leading energy, gas utility and industrial products, service and solutions from both companies to serve a broader and more diversified mix of customers. This combination enhances DNOW's earnings durability, cash flow, financial position and ability to capitalize on growth across a broad range of attractive sectors. We expect the transaction to generate $70 million of annual cost synergies within 3 years following the closing through public company costs, corporate and IT systems and operational and supply chain efficiencies. Combined with synergy realization, we project a solid free cash flow business and we will pursue deleveraging, having previously noted a target of a net cash position by the end of the first full year post close, timing subject to change based on future M&A. Recently, we publicly announced our future leadership team comprised of respected leaders from both companies who collectively possess deep industry knowledge, bringing with them serious tenure, meaning they've endured and learned from the rigors in our industry and know how to avoid pitfalls and seize opportunities in our business. Their experience, expertise and proven track records in talent management, their deep respect for fellow team members and a strong focus on the customer will enable us to grow in the energy, gas utility and industrial sectors. Our integration teams have been hard at work to determine how to best bring our two companies together, including how to harness the combined company talent to position us for success as we move forward. Capitalizing on the deep supplier and customer affection, we will retain the MRC Global brand in multiple sectors to include gas utility, downstream and will be a strong additional brand in our international segment. While there remains work ahead, I am confident that as we progress, our customers and suppliers will recognize DNOW for providing an expanded range of products, comprehensive solutions and greater value to support the efficiency of their operations. Now I'd like to switch to our outlook for the fourth quarter. In the U.S. and Canada, we expect typical fourth quarter seasonality. Therefore, we expect a seasonal decrease in revenue sequentially. Internationally, we expect activity to be relatively flat sequentially. And we expect DNOW's fourth quarter revenue compared to the fourth quarter of 2024 to be up in the mid-single-digit percentage range, but down sequentially seasonally. We expect full year 2025 EBITDA could approach 8% of revenues, and our 2025 full year free cash flow could approach $150 million. In closing, I'd like to thank our DNOW team for their stellar performance. In a year that has had its share of macro challenges, including a continuation of customer consolidations, geopolitical uncertainty tied to tariffs and OPEC+ policy shifts impacting our industry, we are excited about how well we have navigated and grown our business. We ended the quarter adding to an already stellar balance sheet with $266 million in cash and 0 debt. We will continue to focus on what sets DNOW apart, our team members, our culture and proven track record of improving business unit performance, prioritizing customer service, innovation and supply chain management, combined with a solutions-oriented approach that delivers value for our customers and suppliers while maintaining a balance sheet, which provides a solid foundation for continued growth. We believe 2025 will represent our fifth consecutive year of growth and are forecasting our best full year earnings ever as a public company in terms of total EBITDA results. I would like to thank all the women and men of DNOW for their continued hard work and dedication to our pursuit of excellence. With that, let's open the call for questions.

[Operator Instructions] Your first question comes from the line of Nathan Jones from Stifel.

This is Adam Farley on for Nathan. Starting on MRC, with another quarter to explore the merger, have you gained any new insight into the opportunities to drive additional cost synergies or maybe give you more confidence in achieving your cost synergy target?

Well, our focus -- really since we announced the proposed merger in June, late June, our immediate priorities are around connecting our sales teams to grow the business once we come together. Our integration teams have been focused on itemizing those things that can enable us to achieve the $70 million in synergy savings. We've asked them to identify how much is available, what the timing would be and they're pursuing that $70 million target. That number, we don't have a change for that number. We're focused on delivering that. But the immediate priorities, and I really want our employees to hear this, is we want to retain the top talent in our company on both sides to be a better distributor, to the suppliers we support and a better supplier to our customers. Our focus is on growing the business while we achieve those savings. And by retaining the top talent and having a singular focus on our customer, we can maximize our performance at the top line and the bottom line in that regard, whether we get there through $70 million in savings or more.

Okay. Fair enough. Maybe following up on that last point. What do you think are going to be the most difficult parts of the integration? How do you manage the risk? And do you think you have all the systems and processes in place to limit disruption during the integration and really focus on growth here?

I think that the opportunity is to sell the story to our fellow team members about the future for the company. By doing so, we can keep them engaged in the future, focused on the future. We'll be a company better able to address the wide array of challenges our customers face. We'll be better able to do that. And we need the top talent in the industry to stay with us on a go-forward basis. The biggest challenge is to motivate, promote the future, get folks engaged. And we'll do that the moment we close, we'll be on the ground in key locations, promoting the story and the future and the promise of these two great companies coming together. The challenge is to then leverage that enthusiasm, grow our relationships with customers, avoid the spotty revenue leakage, which we will experience and then we'll get it back as we prove to the customers we're better as a combined company, and then we'll provide a platform for growth. Our sales teams can work together on revenue synergies and the possibilities of selling from locations that they didn't have access to before for product lines we didn't support within DNOW or MRC didn't support and sell those to their current customers. So I think the opportunity is for growth and the vehicle and to avoid the risk is to keep our top talent engaged and focused on the future.

[Operator Instructions] Our next question comes from the line of Jeff Robertson from Water Tower Research.

Dave, it sounds like from your comments with respect to U.S. revenue that you continue to gain share with your E&P operator customers. Is there still a lot of room for that as you look into 2026?

Well, I think as the two companies come together, we can grow that in a combined sense better than we can separately. We talked a little bit about this. Adam asked about it a bit ago about savings as we come together, we will have resources -- we'll have some overlap resources, which we can deploy more efficiently to grow business with our existing customers and prospective customers. So I think that's going to be one of our top opportunities is to take advantage of where we see some crossover primarily in upstream to be -- to become a more powerful, more beneficial supporter for our customers, prove that to them and win that business, take that market share in the combined sense. So that's a big focus for us, Jeff.

And you called out Flex Flow and EcoVapor and then highlighted the midstream growth opportunity. Can you provide any visibility as you think about that into 2026 and what impacts those types of opportunities have on D&O's margins?

Brad, do you want to speak to Flex Flow and Trojan.

Yes, Jeff, thank you for the question. With regard to Flex Flow and Trojan, they make up our water management solutions group, which is primarily focused on the upstream produced water infrastructure. And as you know, year-over-year barrels grew in the U.S. And so especially in areas of the Permian, there's increasingly a number of barrels of produced water per barrel of oil, requiring assets to be able to transfer that water and then pump those at off-site locations, usually miles away to a permitted SWD location. So that presents opportunities for DNOW to provide water management solutions. We package that also with an automation package that came with the Trojan acquisition. So our solutions offering is kind of growing as those produced water barrels are growing. Now in prior calls, I think we've called out opportunities where we've been able to leverage those solutions from the upstream into different market sectors. Dave talked a little bit about CO2 and CCUS projects. And as those ramp up, -- we've successfully deployed some of our Flex Flow H-pump rental units into CO2 applications. We've also got additional Flex Flow units at some refining locations, so kind of in the downstream firewater service locations. We've deployed some Trojan assets into agricultural processing. So there certainly is opportunities to leverage our knowledge and our asset base from that upstream into additional sectors. As far as 2026, still early to kind of forecast that, but our plans are to continue to evaluate the business to grow, to invest organically in those assets to grow our fleet and footprint. And certainly, there's more opportunities not only in the U.S., but Canada and international.

Brad, Dave highlighted the DigitalNOW and some of the things you're doing with your -- to integrate your customers with supply chain solutions. Does the MRC Global customer base offer margin accretive opportunities to extend that platform and bring them -- or to bring some of their customers onto that platform?

Yes, I think so. I'll start and maybe Dave or Mark might have a comment. But as far as understanding MRC Global's technology, I think it's early for us, but we're during this period before the completion of the merger or kind of having a better understanding. But if you review their release this morning, they talked about the ERP deployment and -- the ERP certainly offers long-term benefits to the company going forward. It's a state-of-the-art system that really lends itself to improved inventory management and visibility, order processing efficiency, supply chain optimization, improved financial control, customer service enhancement and then certainly more data-driven solutions. So I think collectively, we're really excited about that investment and the future of what that ERP system could do to the combined company. Within DNOW, we operate on SAP. We've got our technology stack as well. We've invested and deployed solutions through our DigitalNOW initiative. And so we're excited about the future as we bring these companies together and really kind of put together a digital strategy going forward that allows us to better serve our customers and differentiate DNOW in the marketplace versus our competitors.

And Mark, if I can ask one question. I think you said for the full year 2026, the effective tax rate would be 26% to 27% compared to 21.9% in the third quarter. Does that imply that there's an increase in the effective rate in the fourth quarter?

Yes. That range is for 2025. And you're right, yes, we expect some discrete items in the fourth quarter having a little higher tax burden. So that tax rate is probably is in line with kind of where we've estimated it over the last several quarters for the full year.

Van, this is Dave.

Dave, please go ahead, sir.

If we don't have a question or queued up, I want to hit a couple of additional topics before we break.

Okay. I think Nathan Jones has a follow-up question.

Maybe we can talk about gross margins, came in strong again, up 60 basis points year-over-year. Maybe some color on how price cost is tracking in the business, maybe your expectations for product line inflation for the balance of '25 and into 2026.

I'll take a crack at that, Adam. Our focus has always been on maximizing gross margins. We provide a lot of services to our customers. We try to gain reciprocation, provide the kind of value that drives greater margins. And we focus on higher-margin product lines, higher-margin services, et cetera. The companies we buy tend to have gross margins, sometimes much better gross margins than our core business. So that's a focus for us. That's enabled us for us to see significant legacy improvement in gross margins over the years and to sustain markets -- margins in a low inflation environment. I think we are in an inflationary environment. Lead times for a while were extending and helped gross margins. Tariffs have helped pricing or have helped increase resale prices. And we try to navigate that real well to drive improved gross margins over time, although we're in a pretty competitive environment right now, I'd call it hypercompetitive. A lot of bidding. We've got strong competition out there who focus on price, sometimes as the weapon to feed a more service-oriented company. And we're still doing very well in that space. So that's going to be our continued focus into 2026. It's going to really depend on end market growth. We expect LNG and midstream and other components of our business to grow, we'll focus on growing gross margins there. And then we'll have to be a little bit more tactical about how we maximize gross margins in the more flatter sectors, which we'll talk about on our next call.

Okay. That's helpful. And then Brad hit on this a little bit earlier, but can you provide an update on your growth opportunities in adjacent industrial markets? And maybe remind us what your exposure is to data centers and maybe the opportunity set there to go after the opportunities that require cable pumps and PVF for cooling in data centers?

Yes, Adam, I'll start and maybe Dave or Mark or have a follow-up comment. But as we've talked about in the last couple of earnings calls, we've really made an intentional effort to grow our midstream business. This quarter and the third quarter amounted to 24% overall DNOW revenue, largely aided by our acquisition of Whitco. And we're seeing continued investment in midstream. A lot of it's on the natural gas side, right, of course, tied to increased export flows of LNG and then power gen, the ability to generate power, whether on the grid or off the grid and temporary power seems to be a pretty hot commodity in the investor side right now, obviously leading to the growth in data centers and the demand for power that's needed there. For DNOW, on the data center side, if you think about the feed gas going into permanent power locations, natural gas-fired turbines to generate power, that's a sweet spot for us, providing pipe valves and fittings and fabricated equipment. Dave highlighted a success story we had there in the midstream sector with a customer that is kind of in the Southwest in the Texas area, growing their opportunities to be able to provide more natural gas for power gen for to feed data centers. And then internationally, we have opportunities with MacLean Electrical on the cable side. Coming back to the U.S. within the data center four walls, they tend to be more industrial PVF product lines. We've been successful in selling valves in some of the data centers that have been built through general contractors. We're anxious to see how successful MRC Global has been in that area. I think combined, that could be a real sweet spot for the combined company. And then really on the cooling side, I mentioned the PVF on the cooling side, but also with our U.S. Process Solutions business, being able to offer pumps, the cool, the servers within the data center lends us -- lends certainly growth opportunities. But if we look at outside of upstream, we really got some bright spots in midstream for growth. I think we feel like that's a growth area for 2026 as well. RNG, we talked about the 3 products that our product development group within our EcoVapor business has developed to really seize opportunities in the RNG side, which is landfill gas and swine farm dairy farm. And then also tied to the data center growth, we think dry gas areas in the future may see an increase in rig count, whether that's Haynesville, whether it's Marcellus. We're seeing data centers grow in investments in the Northeast with traditional stranded takeaway assets in the Northeast, I think being able to find a home for that gas in the Northeast out of the Marcellus to data centers, I think that's certainly a growth opportunity for us in the future. So we're excited about all those prospects. And let's not forget about Energy Evolution and CCUS, those are projects coming down the future for us. And then, of course, we know MRC Global is very big in gas utilities. We're excited about gas utilities future and what growth that might be able to provide for us in the future as our companies come together.

There are no further questions. Mr. David Cherechinsky, you may now proceed with your remarks. Thank you.

Okay. So there's a few things I wanted to cover. I expected them to come up on the call if they didn't, and I've been getting some off-line questions about them. So I'm going to address them. Number one, we just got the green light from the regulatory bodies that our merger has been cleared from those bodies. We're working on finishing off customary closing conditions. Our teams are working to get closed as soon as possible, and it's possible to be closed in the coming days. So we're very excited about that. MRC Global just released their earnings this morning. I do want to make some comments on it, a little awkward on a DNOW earnings call. We are two separate companies, but we're close enough to the finish line that I'll take some small liberties here. MRC Global implemented an ERP system across a large distribution network of at least 130 locations by my count. MRC Global's business, like DNOW's is a high transaction volume, low dollar value business, and with that, an ERP implementation is a complicated exercise. MRC characterized their issues with implementing the ERP as an isolated onetime event. We see it as a moment in time and recoverable. DNOW implemented SAP in a similar context after making two large acquisitions, and we experienced something very similar, and we recovered, and it seems MRC is already on the path to recovery. I encourage folks to read the MRC Global earnings release on the third quarter 2025 results. They did a real nice job explaining what happened with the language like experienced significant challenges that adversely affected their results. Financial and operating performance improved dramatically by the end of the third quarter and more normalized performance continued through the month of October. So very encouraging words. They anticipate to grow in the mid- to high single digits going into the fourth quarter where they normally decline like we do. That's a very nice encouraging sentiment in their earnings release. So I'm encouraged by where MRC Global is. They will get past this. We experienced a similar issue and recovered. And I want to add this, MRC Global is a 100-year-old successful enterprise. They're smart business people. And finally, they just implemented a world-class ERP. The opportunity is where I see this as an opportunity. They're now on a truly modern enterprise-wide system, linking all of their U.S. businesses. This will help them be more efficient, assess inventory requirements, allow for more fluid movement of inventory across the large network, help with pricing and price optimization to win more business and help with pricing to improve margins as well. So MRC Global has done the heavy lifting, and we're very excited about having kind of gone through this cauldron and coming out a much better company going forward. So I wanted to make those comments. I'm excited about our imminent coming together with another great company, and I'm excited that they've gotten the pain behind them. Anyway, I'll close with that. Brad, do you want to close this out?

Sure. And thank you, Dave. Appreciate the additional comments, and thank you, everybody, for joining us today and your interest in DNOW. We look forward to discussing our fourth quarter and full year 2025 results on our next earnings call in February of 2026. Hope everybody has a wonderful Wednesday. And with that, we'll turn it back to the operator to conclude the call.