Good morning. My name is Jeannie, and I will be your conference operator today. I would like to welcome everyone to the DNOW Second Quarter 2025 Earnings Conference Call. Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference.

Thank you, Jeannie. Good morning, and welcome to DNOW's Second Quarter 2025 Earnings Conference Call. We appreciate your participation and interest in DNOW. Joining me today are David Cherechinski, 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 ticker symbol on the New York Stock Exchange. Please be aware that some statements made during this call, including responses to questions, may include forecasts, projections, and estimates, particularly regarding our business outlook. These forward-looking statements align with the definitions set by U.S. federal securities laws and are based on limited information as of today, August 6, 2025, which may change. They come with risks and uncertainties, and actual results could differ significantly. No one should assume these forward-looking statements will remain valid later in the quarter or in the year ahead. We do not have any obligation to update or revise these forward-looking statements. Additionally, this conference call includes time-sensitive information that reflects management's best judgment at the time of the call. For a more detailed discussion on the major risk factors impacting our business, please refer to the latest Forms 10-K and 10-Q that DNOW has filed with the U.S. Securities and Exchange Commission. Additional information, as well as supplementary financial and operating data, can be found in our earnings release on our website at ir.dnow.com or in our SEC filings. To provide investors with more information regarding our results, as defined by U.S. GAAP, we disclose various non-GAAP financial measures in our earnings press releases and other public disclosures. These non-GAAP measures include earnings before interest, taxes, depreciation, and amortization (EBITDA), EBITDA 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 the reconciliation of these non-GAAP financial measures to their most comparable GAAP measures in the supplemental information at the end of our earnings release. As of this morning, the Investor Relations section of our website features a presentation outlining our key results and takeaways for the second quarter of 2025. A replay of today's call will be available on the site for the next 30 days. Now let me hand 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 year-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 the best solutions and fit-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 and year-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 DNOW. 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 of revenue was 8.1%, beating our second quarter target and demonstrating continued earnings strength. U.S. 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 DNOW revenue. And over the prior 6 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, U.S. 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 DNOW with a steady base of revenue and cash flow. During the quarter, our strength in managing the balance sheet and income statement yielded free cash flow 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 DNOW 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 of annual cost synergies the company is expected to generate within 3 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 efficiencies. The bedrock to the success of DNOW 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 DNOW colleagues and the MRC Global team. As the customary regulatory and shareholder approval processes proceed, I want to highlight that the final S-4 definitive proxy statement was filed yesterday, and DNOW and MRC Global each filed a premerger notification and report form under the HSR Act on August 1. 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 U.S., revenue was $528 million, up $54 million or 11% sequentially. Sequential growth was driven by Whitco supply and energy centers locations. We experienced strong sequential growth geared towards customer midstream project investments in the quarter, including a $5 million project pulled forward into 2Q that was previously scheduled for the third quarter. We also saw sequential growth in U.S. 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 DNOW due to our fabrication infrastructure and our inventory and service capabilities to service larger-sized projects like these centralized tank batteries. And as a reminder, DNOW 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 U.S. Process Solutions, revenue was relatively flat sequentially. We continue to see strength in FlexFlow water management solutions across a number of basins as produced water disposal services demand remains high for our leased water disposal and transfer assets. According to an industry U.S. 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 DNOW 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 nonrepeating 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 nonrepeating first quarter project activity. Brownfield activity in the U.K. 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 DNOW'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 biddings as construction firms work to win and execute projects tied to the continuing build-out of the LNG export market. Looking ahead, we see interest in DNOW's products and services growing with several industrial adjacent markets and activity tied to geothermal, water, wastewater and mining investments. All are areas of interest for DNOW 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 bolt-on acquisitions in 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 8.1% of revenue, up $5 million sequentially. The second quarter also marked the 13th consecutive quarter where DNOW has delivered EBITDA at or above the 6.9% 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, DNOW 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 breakeven 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, 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%. 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 DNOW Inc. for the second quarter was $25 million or $0.23 per fully diluted share. And on a non-GAAP basis, Q2 2025 net income attributable to DNOW Inc., excluding other costs, was $29 million or $0.27 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 DNOW 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 3-day improvement from the first. Inventory was $383 million at the end of the second quarter, down $2 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 have 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 U.S. 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 EBITDA 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 U.S., second quarter revenue was higher than expected due to 3Q forecasted projects pulling forward into 2Q. As such, we expect U.S. 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 U.S. trade negotiations, tariff uncertainty and political posturing impacting customer investments. Internationally, we expect sequential top line growth due to increases in project activity. Taken all together, we expect DNOW'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 in 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 cash flow in 2025 of $150 million. In closing, I'd like to again recognize and thank our DNOW team for their unyielding focus in serving our customers and the continued execution of our strategy. Their efforts have enabled solid results for the quarter, posting 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 DNOW, 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.

Your first question comes from Nathan Jones with Stifel.

This is Adam Farley on for Nathan. Maybe starting first with the merger with MRC. Thinking about what are the most difficult parts of the integration likely to be? How do you manage the risk? And how do you keep your employees focused during this period?

Our goal, Adam, is to convey to our employees that merging DNOW and MRC Global will create a stronger company. We have successfully executed transformational mergers in the past, and our primary focus after the merger will remain on our customers, just as it is now. It's all about prioritizing the customer. We plan to bring our teams together early in the integration process, ensuring everyone is dedicated to external operations, managing the supply chain, closely collaborating with our manufacturers, and enhancing our distribution capabilities. This will help us provide a wider selection of products and solutions, with more locations and inventory closer to our customers. Ultimately, we aim to be a company that better meets changing customer needs, particularly as we witness consolidation among our key clients. Our main objective is to grow the business moving forward. Based on our past experiences, maintaining an external focus on the supply chain and our customers is vital, as well as energizing everyone about the future. We have a talented team committed to the integration, and we can discuss this further shortly.

That's good color. Dave, maybe 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? Just any detail on the back half.

In response to the first part of your question, I wouldn't lean towards the top end of the guidance. It's more prudent to stay in the middle of that range. We have a promising second half of the year planned, but we anticipate some customers experiencing budget exhaustion, particularly in the fourth quarter, and that has been included in our considerations. As for the second part of your question, I'm sorry, Adam; could you remind me what it was?

Yes. What are your assumptions around fourth quarter seasonality and budget exhaustion?

Yes. I think it's going to be in line with what we normally experience. There's nothing to say it would be more pronounced. I think it will 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.

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

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 synergies 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?

Yes. We spent a good deal of time on estimating those synergies. And I'm not going to raise the number. It's going to take a lot of work to get there. We've just kicked off a joint MRC Global DNOW team with high-caliber talent from both organizations, both groups having a deep understanding of the respective organizations and the focus is on people, talent, and growth. Tomorrow, once we close the deal, we want to 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 but 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 going to realize most of the benefits from the complementary nature of each of the firms.

As you look at the combined company, Dave, are you seeing or do you expect that with less exposure to upstream than DNOW stand-alone has, do you see that as an 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 our business. We want to grow our position in upstream. But I think the diversification is the real opportunity here. MRC has built very strong end markets where we play such a small role. We can use our complementary locations, sales teams, and 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.

Yes, I think Dave in his prepared remarks identified several growing industrial markets, particularly electrification, as we've observed many in the OFS sector and other providers transitioning away from fossil fuels. The AI data center market is particularly exciting. I believe the combination of our companies going forward will enhance our capabilities in that area. We recently achieved success by selling valves to a data center project, and the prior quarter, we secured pipe valves and fittings for a feed gas line to a power plant that supplies a data center. We're increasingly finding opportunities in our quotations and business development efforts focused on the identified growing end markets. Midstream has experienced significant growth, accounting for about 27% of DNOW revenue this quarter. Additionally, we see opportunities downstream with LNG export and data center construction. Regarding power generation, this has implications for future natural gas demand, especially as some analysts expect growth in natural gas operating rigs in the latter part of this year and into 2026. This certainly benefits us on the upstream side as well. We're optimistic about the future and what the merger of these two companies can contribute to various diversified industrial markets.

Your next question comes from Blake McLean with Daniel Energy Partners.

I appreciate the insights shared this morning, particularly the recent discussion about the overall end market portfolio, including the opportunities and challenges it presents. Could you elaborate on how you envision the mix of NewCo evolving over the next few years in relation to that overall end market portfolio?

Well, thank you for the question. Yes, I think in our previous merger call announcement, we talked about what the combined company's end market would look like from an upstream, roughly about $5.3 billion in revenue, about 41% of that upstream, about 21% of that midstream, about 17% gas utilities or 21% gas utilities and the balance downstream industrial. So we're excited about certainly increased diversification there, I think, to 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. AI, 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 power generation 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 continued build-out of midstream infrastructure to really satisfy that, call it, 5 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 backlog tied to LNG continually increase here quarter-over-quarter. We hope to get some of those across the finish line over the next 4 to 6 quarters here. They are long-cycle projects as U.S. 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 and its combination with our combined sales force, our previous successes with customers and our supplier relationships can present an exciting opportunity going forward in the market.

I 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 the 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?

Yes, 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've 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 a kind of a governor on margin impacts due to 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 want to 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 will be our fifth consecutive year of growth in an environment where the market has contracted for 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 want to grow all the end markets in the stand-alone DNOW and in NewCo. We want to 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, how we've been able to weather slower times and produce record earnings and reliably generate free cash flow. I just want to mention one statistic. At the end of 2023, we had $299 million in cash. Eighteen 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 going to be even more so as we combine together with MRC Global. So we're excited about where we're at. We want to 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 or I kind of deviate a little bit in the answer, but I'm very excited about where we're at, McLean. Thanks.

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

Dave, just as a follow-up in the DNOW second quarter, I think you said that's the highest adjusted 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. And we've talked about this with you, Jeff, and on these public calls before. Midstream business tends to have lower gross margins because the 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 and above 8% EBITDA performance in the quarter was largely driven by growth in midstream, and we're very excited about midstream for the second half of the year or for the third quarter for sure, and then we'll see some tailing off in the fourth quarter like we discussed.

Thank you. 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 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.