and many more. The $1 million sequential increase primarily reflects a higher average debt balance during the second quarter. Interest expense is forecast to decline slightly into the third quarter. Moving to income taxes, changes, and geographic mix of projected earnings, including first-half 2026 LIFO charges, led to a revision of our forecasted annual effective tax rate. Applying this revised rate to our year-to-date results generated second quarter income tax expense of $12 million, producing an effective tax rate of negative 133% for the quarter and a year-to-date effective tax rate of 5.8%. For modeling purposes, we currently expect a full year 2026 GAAP effective tax rate in the mid-to-high single digits. However, the actual rate may vary depending in part on the level of earnings, including LIFO adjustments during the second half of the year. Net cash taxes for the quarter were $9 million. Net loss attributable to D-NOW for the second quarter was $21 million, or 11 cents per fully diluted share. On a non-GAAP basis, second quarter adjusted net income attributable to D-NOW was $21 million, or 12 cents per fully diluted share. Moving on to the balance sheet, at the end of the second quarter, accounts receivable was $889 million, flat sequentially, an impressive feat despite revenue increasing 10% from the first quarter, driving day sales outstanding, or DSO, to 62 days, down seven days sequentially. This improvement was accelerated and ahead of our prior expectations as intentional initiatives by our credit, sales, and operations team members paired with ERP optimization efforts yielded greater improved working capital efficiency. Inventory was $1.1 billion at the end of the second quarter, down $131 million from the first quarter, with an annualized turn rate of 4.0 times. The reduction reflects measurement period adjustments to opening balance sheet inventory reserves associated with the MRC global acquisition of $53 million, $19 million in increased LIFO reserve and continued execution of inventory optimization initiatives. Accounts payable was $711 million at the end of the second quarter, or 61 days payable outstanding. Working capital excluding cash as a percentage of annualized second quarter revenue improved 19 to 19.4%. In the second quarter of 2026, we generated $133 million of cash from operating activities, driven by improvements in working capital efficiencies, and a significant improvement in cash flow reflects the benefits of our ongoing focus on working capital management, inventory optimization, and operational execution. During the quarter, we invested $9 million in capital expenditures, and additionally, we repurchased $25 million in shares in the second quarter. To date, we repurchased $112 million under the current share repurchase program and a total of $192 million cumulatively across the current and previous share repurchase programs. Our balance sheet remains strong with total liquidity of $472 million, including $358 million in availability under our revolving credit facility and $114 million of cash at quarter end. Our total debt balance was $474 million at the end of the second quarter. Net debt was $360 million, resulting in a trailing 12-month EBITDA net debt leverage ratio of 1.7 times. Our $850 million revolving credit facility matures in November 2030, providing us with long-term financial flexibility. In the second quarter, we continued to make progress on cost synergy realizations. with our first year expectation to approximate $30 million on a 2026 exit rate basis, significantly exceeding our original year one exit rate estimate of $17 million. Our annualized synergy target remains $70 million by the end of year three. And overall, the second quarter marks a notable step forward in our transformation as we delivered improved revenue performance, enhanced profitability, disciplined working capital management, and strong cash generation. And with that, let me turn the call back to Dave.

Thank you, Mark. Now switching to our outlook for the third quarter and full year of 2026. As we reach the halfway point of 2026, we are focused on execution across numerous opportunities and end markets while simultaneously capturing the merger benefit realization. I'm pleased with what we have accomplished and I'm excited about the future. The second quarter represented an important step forward. We expect the business to continue benefiting from revenue recapture, gas utility durability, midstream infrastructure demand and opportunities across data centers, LNG, mining, water and broader infrastructure-led markets. At the same time, we expect downstream and industrial revenues to remain more timing sensitive. I'm encouraged by the level of engagement and progress we are making to better position us for the upcoming turnaround season. We expect sequential third quarter growth in the U.S. as we make additional progress on executing on our integration plan, recover the revenue we want, and continue our path to optimize the MRC Global U.S. ERP. We also expect sequential growth in the international and in Canada. Taken together, we expect D-NOW's third quarter revenues to be up sequentially in the low to mid-single-digit percentage range, compounding the solid second-quarter growth with EBITDA targeted in the 5% to 5.5% range above our prior guide, which would result in higher EBITDA to revenue flow-throughs than we normally experience. On a full-year basis, we are raising our prior guide and expect revenues to approach approximately $5 to $5.1 billion, with EBITDA as a percentage of revenue to approach 4.5%. In closing, I'm encouraged by the progress and meaningful step change we made in the second quarter. I am thrilled with our significantly improved performance, highlighted by $133 million of cash flow from operating activities, a record second quarter achievement. Strong collections improved the quality and liquidity of accounts receivable, while inventory streamlining further enhanced exceptional cash generation. Revenue increased to $1.3 billion during the quarter, represented a 10% sequential increase and a strong 13% increase in the U.S. segment. Adjusted EBITDA rose substantially to 60 million, up 54% sequentially, reflecting stronger volumes and execution of the integration and cost management initiatives. For the first time, U.S. midstream revenues surpassed $1 billion on an annualized basis, while both the gas utility and upstream sector revenues delivered their strongest sequential quarter percentage growth since 2022. During the quarter, our net debt leverage ratio improved while we returned capital to shareholders through our share repurchase program, demonstrating the strength of our cash generation and commitment to disciplined capital allocation. Total repurchases reached $75 million in the first half of 2026, representing more shares purchased in these two quarters than in the previous 10 quarters combined. The continued investment in our own shares reflects our confidence in the execution of our strategy and long-term growth prospects. I would like to thank our entire team for their efforts to deepen relationships with customers and suppliers, advance our integration initiatives, and drive greater operational efficiency with dedication and commitment to growth. Our actions are producing encouraging results and may continue to take the decisive steps to position D now for long-term success. I'm very proud of the progress we've made during the quarter and confident about the second half of the year. With that, let's open the call for questions.

Thanks, Dave. And at this time, I would like to remind everyone, in order to ask a question, press star and then the number one on your telephone keypad. Once again, star one. In the interest of time, we ask that you please limit your questions to one primary and one follow-up. Thanks for understanding. and we will pause just a moment to compile the Q&A roster. All right. It looks like our first question comes from the line of Alex Raggio with Texas Capital. Alex, please go ahead.

Thank you. Good morning. Nice quarter. Thank you. Thank you, Alex. Could you speak to additional working capital gains that could be achieved over the coming quarters or so?

Working capital needs?

Alex, that's the question?

Gains. Oh, gains. Working capital gains.

Okay. So, you know, our two big primary assets are inventory and accounts receivable. We talked on our last call about really using our excess level of inventory as a commercial lever, and we did that in the second quarter, and that shows. So we're careful about making sure we replace the stuff we need to grow our gas utility Midstream, all of our sector businesses, but we're careful about that. But we recognize we have excess inventory in the system. We're going to bring that down by another 25, 50 million during the rest of the year. So inventory streamlining is a big focus for us. In terms of accounts receivable, we made really nice gains in our DSOs in the quarter. They improved by seven days. which I don't know if we've ever been able to do that before. Of course we had some long sluggish unpaid invoices due to system issues which we've resolved. We're making very nice progress there but still there is additional receivables reductions we expect primarily in the fourth quarter as we see our seasonal decline in revenues in 4Q. So that could be another 25 to 50 million plus earnings driving significant cash from operating activities. But those would be the two main levers. We expect CapEx to be pretty similar quarter on quarter, but otherwise AR and inventory, we see those as opportunities and also necessary avenues for additional customer support as we finance receivables with revenue growth and we want to make sure we have the right inventory to capitalize on growth and data centers and LNG and really strong progression in all the sectors except for downstream as we talked about earlier on the call.

And then secondly, you mentioned you were encouraged by the upcoming turnaround season. Can you comment on or give us a little bit of help in understanding your visibility on that, understanding that sometimes those turnaround projects get pushed when the customer is being so active and unwilling to kind of take systems offline. But maybe comment on your visibility and confidence that the fall turnaround season is going to play out as planned.

Yeah, good question, Alex. You want to give some color on that, Brad, in terms of timing and where we are in the process?

Yeah, well, good morning, Alex. Thank you for the question. You know, we track We have a lot of downstream refining customers specifically, and we, of course, track turnarounds and timing of turnarounds. Over the last couple of years, or last year, was a pretty good turnaround season for the MRC global business. We've seen, obviously, with the challenges we had with the ERP system, we have spoken previously about the inability to participate meaningfully in that prior turnaround season last year. But if you look at projects, if you look at, you know, what we're tracking, we believe, you know, to be a similar year to last year, but we think our... And Dave talked about us repairing our relationships with those refineries, with those customers, as we improve our systems, as we... We talked about stabilize and optimize the MRC platform. So we... Our salespeople are focused on targeting that business, and we think we will go into the turnaround season, which really we're looking at more pre-buys toward the end of the third quarter, kind of more of a bookings backlog starts to build, and then as we get to 4Q with the execution that Dave talked about in 1Q of 27. So we are optimistic about... growth there on a year-over-year basis. Talking with our sales and ops team about the opportunity looks similar to last year. Now, we're all seeing refineries utilization run very high. We made reference to that in our prepared remarks. And any time refineries are run hard for a long time with high utilization, they're going to need more maintenance. So we think this kind of sets up a constructive Thank you. Great.

Thanks, Alex. All right. Our next question comes from the line of Adam Farley with Steve Wolf. Adam, please go ahead.

Good morning, everyone.

Morning, Adam.

And I'm going to be starting it on MRC. Could you provide an update on how the MRC platform and ERP system is performing? Are you seeing improved performance in the system? Are you seeing improved service levels to customers? Maybe just talk about some of the internal metrics and track to gauge ERP improvements.

Yeah, we're seeing really widespread performance improvements as it relates to picking materials in the warehouse, to processing paperwork more timely to data analysis for back office review of what's working, what's not working. We continue to see operational benefits from the improvements we've invested in making the systems that support Oracle at MRC work better. So we're seeing nice gains there. Basically, speed has been the gains we've made over the last 90 days.

You guys, great to hear. And then maybe on the up and midstream conversions to SAP, you know, completing your 17th location, can you just remind us on what's left in the pipeline to convert over to SAP? You know, how are those locations that have been converted all day performing and, you know, just any other, are there any other locations that need to be converted over to SAP?

Yeah, that's been one of the most promising areas. You know, like I said in the last couple of calls, kind of a nexus of strength from D-NOW and MRC really happens less on the process solutions, gas utilities, and downstream side, but the real strength, the real power that comes from the combination happens in upstream and midstream. So we focused on that area for those sectors to really provide a system that supports delighting the customer in a way where we could take back market share. So we've implemented SAP in 17 locations. We've been careful to measure the handoff of revenues from billings that used to happen in the MRC system onto SAP, and we're measuring to make sure that that baton passing is working, that the inventories, the revenues, the customer focus, the increased customer focus that comes from those overlap locations is intensifying. and we're benefiting from that. So we're tracking on a per customer basis, are we gaining in that handoff? Very important to us and we are gaining. And we saw that in this really strong upstream growth in the U.S., which from the first quarter to second quarter we haven't seen for four years. So we're very excited about that. But that process is working. We internally call it, you know, these are locations that have been liberated. They're on a system that is optimized, that's been in place for several years, that makes it very easy to be responsive and fast in terms of customer requests, requirements, fulfillments, et cetera, reporting, et cetera. So we think we're pretty juiced in terms of our ability to grow that business and that's showing in the numbers.

That's great to hear. I'll hop back into you.

Thank you, Adam. And our next question comes from the line of Chuck Minervino with Susquehanna. Chuck, please go ahead.

Hi, good morning.

Morning. Hi, Chuck.

I was just wondering if you could talk a little bit about the full year guide. Seems like it would imply a bit of a decline in 4Q, a decent-sized decline. Just wondering if you guys are kind of just anticipating seasonality there. If that's just like the baseline assumption and we'll see how things go, just given some of the momentum in the business, just kind of curious what you're thinking about there for 4Q.

Yeah, that's a great question. Both companies on a standalone basis experience a fourth quarter decline. D-NOW's fourth quarter decline tended to be around 6% to 8% of revenues from 3Q to 4Q. MRC's was closer to to 10% overall, and maybe closer to 13% for gas utilities. So we do expect a seasonal decline, despite what we expect would be additional market share gains, recovered revenues, improvements in sales to data centers, et cetera. But yes, we are forecasting a fourth quarter decline. That seasonality will be there. As each quarter goes by, we expect to be more efficient. We expect to modestly increase gross margin percent. But we do expect some seasonal gravity like we both historically have experienced.

And just on that, I'm just kind of curious on the assumption there. Is that just like your baseline assumption and It's possible it can do better or worse than that. You pretty much have the purchase orders in hand at this point that gives you that visibility into 4Q. Just kind of curious how much variability there is to that number.

That's not a good question. There is variability. We tend to – we know from a project perspective or have a good feel from a project perspective how much will land in 3Q and 4Q. Day-to-day business, it's a harder read, Chuck. but it is our going in assumption that 4Q will largely track, well, we've modeled it a little bit better than the expected seasonal declines, but that's our going in expectations. We know that the best two quarters for gas utilities, for example, are 2Q and 3Q. And for downstream, 1Q and 3Q are the best quarters there. So we expect an incline in gas utilities and downstream in 3Q. And like Brad talked about earlier, we expect, you know, we're talking to downstream customers to stay ready for the 1Q turnaround. We're doing pre-buys. We're planning for that. But we won't really see the benefits of the downstream degrees of recovery until 1Q returns. But we will see an amputation 3Q. But yeah, that 4Q decline is, we feel pretty comfortable that'll happen. But there is variability to your question.

And just one last one since on the guidance. I think last year, last quarter, it wasn't guidance, but you kind of talked about maybe a 350 million EBITDA number for 2027. Just curious if you gained some confidence in that, lost confidence, just any sort of update there and how you're feeling about that number.

Yeah, we gained confidence over the last 90 days in our ability for that glimpse into 2027. Again, we caveated it as not guidance, but we see the possibility of growth in sector expansion upstream, midstream, and gas utilities next year. We see the market's going to grow for those three sectors next year. We expect to to take back market share, to grow market share in upstream and midstream. We expect midstream to expand and gas utilities to get better again next year. Plus, we're going to be taking back revenues as kind of the fourth leg there in our confidence in a 6.5%, 7% revenue growth going into 2027. And then some modest improvements in gross margins and then efficiencies as we exit 2026 staying in place for next year. So we see that $350 million as plausible and our teams are focused on that target. How much revenue are we going to be able to get back? How much expense are we going to need to keep in place? What's the right nexus of growth and kind of mid P&L or expense management it takes to get to that kind of earnings growth going into the new year and we feel really more confident today than we did 90 days ago.

Thank you very much.

Welcome.

All right. Thanks, Chuck. And our next question comes from the line of Chris Dankert with DA Davidson. Chris, please go ahead.

Hey, morning, guys. Thanks for taking the question. Again, just given the excitement around data center and water solutions, could you kind of remind us just relative size of those businesses and the kind of growth you were seeing in the quarter?

Well, data centers, you know, we forecast could be in the $40 to $50 million this year. I think the last number we cited was around $30 million expectations, I think we said in May. We see that as... for 2026 anyway is a growing opportunity and we're excited about it. We have our sales teams focused on it. In terms of water solutions, you know, is that a, Mark, is that a $150 million business with, you know, with premium margins as we talked about in the opening part of the call, but it's a business where we've done most of our recent acquisitions and where we hope to do more in the coming years. So I think it's in that range. It's an important diversified element of our process solution strategy, and we expect to grow that business.

Yeah, that's helpful. And then just on some of the ERP mitigation efforts, I know we had some extra hands helping out, I guess. How are we thinking about either those positions rolling off, moving to other roles, just relatively speaking, the cost to mitigate, how are we thinking about that roll-off?

Yeah, on the last call, we estimated that the total of costs for consulting help on E&P stabilization efforts, contract labor, overtime, temps, et cetera, we estimated that to be in about 8.5 million per quarter in the second quarter. We expect that number to come down about a million in 3Q and another million in 4Q. In terms of the number of temps we have in place, That number is pretty stable. I think we set around 115, 119 last quarter. I think it's still in that range. We grew substantially. We're still working through system improvements. We're realizing those improvements. But like I said last quarter, our thumb is on the scale for revenue retrieval over discrete immediate expense management. So we do expect those numbers to come down, as I suggested. And then we expect significant efficiencies as we end the year, you know, generally in the business.

Got it. Very, very, very helpful and definitely encouraging. Thanks, guys.

Thanks, Chris. Thank you, Chris.

All right. Thank you, Chris. And our next question comes from the line of Jeff Robertson with Water Tower Research. Jeff, please go ahead.

Thank you, Dave. With respect to recapturing revenues, can you talk a little bit about what you see the size of that opportunity being in the sense that that could be independent of customers increasing their activity? And then how does that play into your margin thinking as you look out into 2027?

Jeff, I'm sorry. I missed the first part of your question. I'm sorry. Can you repeat it, please?

Sure. When you think about recapturing revenue, from customers. Can you talk a little bit about the opportunity there that would be independent of customers increasing their own activity levels? And then how, if you focus on recapturing the revenues that you want, which implies the higher margin revenues, how does that play into your thinking about margins in 2027?

Okay, that's a good question. I mean, we We are seeing some of our customers spending more money, and of course that's an opportunity for us, no matter how effective our take-back efforts are. When customers' demands increase, we tend to benefit from it. We have a lot of locations, plenty of inventory, the best people in the business, so we're going to benefit regardless. In terms of our ability to take back those revenues, we're working towards that. That's represented in our guide. We feel, like I said last quarter and will reaffirm today, we feel very solid about our ability there in upstream, midstream gas utilities as evidenced by strong sequential growth from 1Q to 2Q. And in downstream, when you look at what happened in downstream, we were sidelined in some of the facilities. We're seeing our customers ask us to come back. We had long-term relationships and our customers are asking to come back. We're seeing some real avenues for taking advantage of the turnaround season coming up in a few quarters, so we're poised for that. In terms of what that means for pricing, there's no doubt that recapturing some of these projects with those customers, gaining back some of the market share, did require some teaser-level margins to get back in the door, but we see that as an opportunity now as we reestablish ourselves as the premier provider of solutions for our customers, especially as we grow those revenues, grow those purchases with our suppliers, achieve greater levels of vendor consideration and support from our suppliers. We expect to be able to push price, and we'll do that. But, you know, we're focused on volume and then gross margins and then efficiencies to drive significantly improved cash flows and earnings. But that's kind of a progression. But we feel good about that. The sequencing will get us to where we want to be as we gave with the glimpse of 2027. Thank you.

Thanks, Jeff.

Thank you, Jeff. And our last question today comes from the line of Joshua Jane with Daniel Energy Partners. Josh, please go ahead.

Thanks. Good morning. First question. Morning. First one is just on the U.S. upstream business. Could you discuss your outlook for the back half of the year and into 2027? So we've seen the private companies drive a lot of the rate count increase. But based on just what you're seeing today, does that momentum continue or Any insight into how the large publics are thinking about spending over the next 12 to 18 months would be helpful as my first question. Thanks.

Yeah, Josh, I'll take that and maybe Dave or Mark can follow up. You know, we've certainly seen, you know, steady improvement in the upstream market. You know, domestically in the U.S., you know, we're majority land, not necessarily offshore land. Offshore has become an increasingly smaller piece of our overall portfolio. We do do some offshore in the international area, but U.S. recount has kind of slowly recovered here. I think it's projected to increase further in 27 from an outlook standpoint. However, a lot of our customers are still exhibiting capital discipline. as WTI price has been higher. We have seen a lot of the large publics kind of maintain their capex for the full year, maintain their production guides. But, yeah, I agree with your commentary. I mean, some of the smaller and the private companies are taking advantage of price as long as they can get access to high-spec rig equipment. and other OFS capability. But, you know, we see the upstream as, you know, growing, you know, this year, certainly potentially growing next year. And, you know, as our recovery efforts are kind of simultaneously, you know, following the market there, we think that's a good piece of growth opportunity for D-NOW. I think that was just under now 40% of our overall revenue, but We expect that to be a growth lever for us in the future.

Thanks for that. And then moving on internationally as my follow-up, maybe you could just talk a bit more about the impact of the Middle East and just your view there of what it will ultimately take for activity to get back to, I guess what we would call, and many more.

except for project lumpiness and our ability to seize projects, which we see more as an upside of the Middle East than anything, we don't see much negative impact going forward. But we could see some growth as things settle down in the Middle East, but I think it'd be marginal. In terms of where we're underserved internationally, I think we had two businesses Within D-NOW, we're focused more so on electrical distribution. At MRC, a much larger business is focused on valves. I mean, I think our opportunity is to marry up a broader product offering for our customers and grow. I don't think, you know, we don't see any obvious areas of footprint underserved areas internationally. We think we're pretty, you know, well-positioned Even though we're small in the Middle East, we're well positioned in the North Sea, in the UK, in Australia, in Singapore, and elsewhere. I think we're poised to really take advantage of each other's complementary strengths. And we've organized a new team internationally, and I think we're going to take advantage of what we've brought together more than anything.

Thanks. I'll turn it back.

Thank you.

Thanks, Josh. And thank you all for your questions. That does conclude the question and answer session of today's call. Mr. Brad Wise, I will turn it back over to you for final remarks.

Well, thank you to everyone for joining us today and your interest in D-NOW. We look forward to discussing our third quarter 2026 results at our next earnings conference call in November. Hope everybody has a wonderful Thursday. With that, I'll turn it all back over to Greg.

Great. Thank you, Brad. Thank you, ladies and gentlemen, for joining us today. That does conclude today's conference call. You may now disconnect. Have a great day, everyone.