Welcome to the Second Quarter Earnings Conference Call. My name is Sylvia, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. I will now turn the call over to Senior Vice President and Chief Financial Officer, Dan Molinaro. Mr. Molinaro, you may begin. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Thank you Sylvia, and welcome, everyone, to the NOW, Inc. Second Quarter 2015 Earnings Conference Call. We appreciate you joining us this morning and thanks for your interest in NOW, Inc. With me this morning is Robert Workman, President and CEO of NOW, Inc.; and Dave Cherechinsky, Corporate Controller and Chief Accounting Officer. NOW, Inc. operates primarily under the DistributionNOW and Wilson Export brands, and you'll hear us refer to DistributionNOW and DNOW, which is our New York Stock Exchange ticker symbol, throughout our conversations this morning. Before we begin this discussion on NOW, Inc.'s financial results for the second quarter ended June 30, 2015, please note that some of the statements we make during this call 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, which is subject to change. They are subject to risks and uncertainties and actual results may differ materially. No one should assume that these forward-looking statements remain valid later in the quarter or later in the year. I refer you to our latest Forms 10-K and 10-Q that NOW, Inc. has on file with the U.S. Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business.…

Thank you. We will now begin the question-and-answer session. And our first question comes from Matt Duncan from Stephens.

Good morning, guys. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Good morning, Matt. Robert R. Workman - President, Chief Executive Officer & Director: Good morning, Matt.

First question, Robert, just on all the M&A that you guys have done recently, I can certainly appreciate you may not want to size up each deal individually. But can you give us some idea how much you've added to annual sales with Odessa Pumps and Challenger combined, which appear to be the two bigger ones that you've done since the last call? Robert R. Workman - President, Chief Executive Officer & Director: Yes, we're not going to comment on Challenger yet because we haven't acquired them. And there is no guarantee that it will pass HSR, so we're going to leave that one out of the commentary. But we've had $5 million added in Q4 last year and we had $49 million added in Q1 and we had $30 million added in Q2 and we expect $25 million added in this quarter.

Okay. Roughly how big is the Odessa Pumps business if you go back to pre-downturn? How big is that business? And then in terms of their product lines, are you guys going to be able to take most of what they sell and spread it across your footprint or are some of their pump lines especially going to have some geographic restrictions to them? Robert R. Workman - President, Chief Executive Officer & Director: Well, we'll continue to give you our acquisition revenues added in the quarter, but I'm not going to separate out each acquisition. But it was big enough that we had to file HSR. Odessa Pumps has a wide range of products that they represent, one of which overlaps with ours which is National Oilwell Varco multiplex pumps, which are those large triplex pumps that we fabricate skids for and put prime movers and build buildings and ship to the oil plays to move fluids through pipelines. So that's a complementary product line for us. We have three facilities in DistributionNOW that do that alone. The other product lines they represent are a variety of styles of pumps that have specific applications, and these are tightly managed channels to market. So one pump of their product line, the manufacturer may say, hey, it's nationwide, get after it, do everything you can to grow revenue. One of their product line the manufacturer may say, 'hey, it's nationwide. Get after it. Do everything you can to grow revenue'. One of their other product lines may say, 'no, we only want you to stay in your current geographic area. Do not go outside of these bounds.' And so there's going to be a mix of both of those and so we plan to start from the position of living within those constraints by each manufacturer and then hopefully gain their confidence in how we grow their revenue streams in whatever geographic region we're allowed to participate and then our goal would be for them to come back and say, 'you guys have done a really good. Try this area or take it to this area where we're not doing so well'. So it's going to be a mixed bag; some immediately we can sell everywhere, some we'll have to stick within their geography.

Okay. And then just a couple quick numbers question and I'll hop back in queue. Dan, what was free cash flow in the quarter? And then also I missed the numbers you gave on the breakdown of revenues between Energy Branches and Supply Chain, if you could just give me that again, I'd appreciate it. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: The Energy Branch was 76% and supply Chain was 24%, which is real close to what the first quarter was, too, Matt, obviously with revenue down and the upstream piece is down further. Free cash flow would be probably a minus 20%.

Okay. Thanks. I'll hop back in queue. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Sure.

And the next question comes from Walter Liptak from Global Hunter.

Hi, thanks. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Hey, Walt, how are you doing?

Hey, good. Just a follow-on to the last one on acquisitions, with the revenue compressing on some of the acquisitions, how are you going about with evaluation and how should we think about accretion in 2016? Robert R. Workman - President, Chief Executive Officer & Director: Well, most of the acquisitions we've completed so far are affected by the energy market, whether they are overseas or in the states. And so we've looked at valuations based on their current P&L and we're living within those same multiples we've always talked about in that four to six range based on the current P&L. So they're immediately accretive deals for us as we acquire them at really reasonably prices. And then obviously when the market recovers, the multiples that we paid would have looked a lot better than the four to six range. So we're living in a word we wouldn't be doing acquisitions if we felt like the energy market would never rebound, and we don't want to wait until the market starts strengthening to start doing acquisitions because at that point you're going to pay a lot more than you do now. So we're trying to take advantage of the down market.

Okay. Yeah, that sounds promising. And then you mentioned artificial lift a couple of times and I wonder if there's a way that we can get more color on it. I mean when an artificial lift goes in, how much revenue is there attributed to it and what kind of penetration rates are we looking at as producers try and increase production? Robert R. Workman - President, Chief Executive Officer & Director: It's hard to quantify artificial lift per well because there's not like it's one system. So in some cases, like in Australia, we're selling the big bean (38:54) unit, the pump jack plus the sucker rods plus the new rod pump which is a lot more expensive than a customer that's pulling pumps out of the ground that we'll repair and bring back to them to run back down in a hole. So artificial lift is a broad range of different levels of revenue depending on what kind of project it is. We also do plunger lift systems, we do progressing cavity pump systems, we do hydraulic pumping units, so it depends on the customer's field and which kind of artificial lift they are employing. And it's really hard to quantify that across any of our geographies because there's different products involved that are sold actually through the branches, okay. So it's not a separate unit that does artificial lift. It's part of our branch business.

Okay. Got it. Well, it sounds like this is kind of a bright spot to look forward to in the back half of the year. I wonder about the trends. Have you started seeing artificial lift pick up during the quarter or is it something that you expect in the back half to get better? Robert R. Workman - President, Chief Executive Officer & Director: No. It's been increasing, I would say starting a little bit in Q1 and then much heavier in Q2, and we expect it to continue to climb in Q3. The degree is almost impossible to forecast because you never know what customers are going to do with respect to working over their wells, but it is a bright spot in our revenue stream.

Okay, got it. All right. Thank you.

And the next question comes from Jeff Hammond from KeyBanc Capital Markets. Robert R. Workman - President, Chief Executive Officer & Director: Hi, Jeff.

Hi, guys. This is James filling in for Jeff. Robert R. Workman - President, Chief Executive Officer & Director: Okay.

Just starting with the International segment, first half running at a 35% core decline and of course you guys did talk about the puts and takes there in the quarter. How are you guys thinking about the back half here for that segment, for that business? Robert R. Workman - President, Chief Executive Officer & Director: Well, the International segment for us is by far the lumpiest piece of our business because it's so project oriented in that we ship large amounts of goods to like an Iraq field or into Asia or a rig gets pulled into Singapore and they have to do a big refurbishment job, which could be large order. So it's never consistent based on rig count like Canada and the U.S. The Canada and U.S. are much more closely correlated to rig count shift. So we had some projects in Q2 that were pushed to Q3, but they weren't enough that you're going to see a massive pop in our International revenues. It's a pretty depressed market. It's very volatile right now for all of the reasons I mentioned earlier with all of the things going on in the Middle East and the Chinese economy and the rest and the North Sea and the offshore drillers. So we don't have big hopes that you're going to see a big pop in revenue in the International segment, especially with as depressed as the offshore market is right now.

And then you also provided a lot of great color regarding the pricing environment for line pipe and tubulars. Does the pricing erosion sort of sustain at this $11 million level or is there further downside to go? Robert R. Workman - President, Chief Executive Officer & Director: Well, there's two areas of the market that are depressing those margins, which would be further deterioration in pricing and in an over-supply that continues to cause issues in the line pipe market as well. So we didn't experience any sequential decline in Q2 from Q1. We just repeated what we experienced in Q1. I think if we have any margin decline, it won't be from any kind of pricing concessions. It's going to be from further project bidding and people trying to dump inventory where they've got an oversupply. So we could see more pricing pressure in Q3 and Q4 just simply due to that.

Okay. Thanks. I'll get back in the queue.

And our next question comes from Sam Darkatsh from Raymond James. Robert R. Workman - President, Chief Executive Officer & Director: Hey, Sam. Sam J. Darkatsh - Raymond James & Associates, Inc.: Good morning, Rob. Rob, Dan, Dave, how are you? Robert R. Workman - President, Chief Executive Officer & Director: We're fine. How are you? Sam J. Darkatsh - Raymond James & Associates, Inc.: I'm doing fine. Thank you. A couple of quick questions, and one of them is piggybacking on a prior question. You mentioned not just the artificial lift but there's median of factors that are allowing you to outgrow or outperform the rig declines in the U.S. and Canada, be it with maintenance projects, be it Southern Utica, Midstream Rockies, new awards, what have you. How sustainable or what's the trend of that over the next couple quarters in terms of what your expected performance might be versus rig count in 3Q and 4Q in the U.S. and Canada? Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Well, we've grown the organic piece less M&A over the last three quarters, only slightly in Q1 but even more significantly in Q2. I don't know where that could go from here. It really depends on what happens to our competitors in this depressed market. A lot of that's market share gains because they either don't have the balance sheets to fund their businesses or they're closing locations or were winning contracts, and it's hard to forecast how those are going to turn out. So, I would simply, for modeling purposes, assume that we're going to repeat our current global annual revenue per rig going forward based on whatever you think the market's going to do from a rig count perspective and then just add in…

And the next question comes from Chuck Minervino from Susquehanna.

Hi. Good morning. Robert R. Workman - President, Chief Executive Officer & Director: Hi, Chuck.

Hi, Chuck.

I just wanted to touch on margins a little bit more here. I think you mentioned in your prepared remarks that you reduced head count another 80 employees or something in July. I'm assuming you're kind of prepping for a little bit of a slower for longer kind of rig count period. Can you talk about assuming your revenues are roughly flat in 3Q, how you see margins transpiring for some of these other business lines in 3Q, 4Q?

This is Dave, Chuck. We see our current expense level being in that $151 million, maybe south by $5 million in the third quarter and fourth quarter. We, like Robert had said earlier, pulled $41 million expense out of the business on a quarterly basis, so we're real sensitive to cutting too much before what ultimately will be a recovery. So we think $150 million, maybe $5 million less in the third quarter and fourth quarters, that would be a target number. In terms of gross margins, like we alluded to earlier, there's still over costed pipe in the market, and there's a big influx of goods coming in from overseas, which are further pressuring costs and replacement cost for inventory. So we'll see pressures on that. So we'll try to offset that as much as possible with cost reductions, recognizing we're getting close to going too far if the recovery is imminent, but our real offset to that would be product cost and deflationary impacts. Robert R. Workman - President, Chief Executive Officer & Director: And let me expand on that a little bit. Dave quoted the $151 million number. That's with acquisitions. So if you look at our expense base that we had starting in Q4, it was $179 million a quarter. We dropped that without acquisitions in Q2 to $138 million. That's a huge reduction in our business and we're getting to the point now where we have to really think about each step we take going forward. I wouldn't expect that $138 million without acquisitions to drop much further than the $135 million number, but the $151 million number could actually go up. We already closed Odessa Pumps, so that will add expenses.

That's right. Robert R. Workman - President, Chief Executive Officer & Director: And if we close Challenger, that's going to add more expenses. So you'll see revenue come with those as well, but $151 million could actually grow, depending on our success rate of closing acquisitions, but our core business will continue to reduce expenses.

Got it. Okay. And you mentioned Challenger there. I think you also mentioned in your prepared remarks an incremental $25 million of revenues in 3Q from acquisitions, is that excluding Challenger or is that assuming that closes? Robert R. Workman - President, Chief Executive Officer & Director: Yeah. We never assume we're going to close a deal and include numbers. So that only includes all acquisitions through Odessa Pumps. Now, we're hitting with this historically in August, a slow period in the government, so while we got early termination on Odessa Pumps, we don't expect the same thing to happen for Challenger simply because they're on vacations and on the beaches and all that neat stuff. So, we did not include any expense forecast or any revenue improvements related to Challenger in our numbers.

Got it, so that's more likely a 4Q kind of impact, assuming it does close? Robert R. Workman - President, Chief Executive Officer & Director: If the government gives us early termination, which we're not expecting, but say they do, then it'll close in the quarter, but if things go the way we think they will, it might be a close, the first day of the fourth quarter.

Got it. One last one for me, just more I guess a little bit more theoretical. This destocking process, you guys seem like you're willing to take your inventories down, let them kind of run lower, I'm sure your customer are doing the same, cannibalizing what they have to. In your experience in this space, going back to your time at NOV as well, how long, I mean, if you say you stay in like this kind of a flat rig count environment for a while, is there a point when customers have to stop destocking and when that kind of opportunity runs out and they're forced to start buying equipment again. Robert R. Workman - President, Chief Executive Officer & Director: Yeah. Our rule of thumb is, as a rig, as one rig gets stacked, it has enough inventory on it to support operating rig for anywhere from six weeks to eight weeks. So, the big deal here is, there's probably two rigs and three rigs and four rigs stacked for every rig operating right now, so that's quite a bit of inventory to support these rigs. But it was a very nice uptick with respect to seeing the amount of inventory that the 15 rigs-or-so in July that got put back to work had to acquire in order to operate. So, this game is always – this (52:23) business is always about being able to forecast the future, which is really hard, whether you're in the pipe market or the drilling market or the valve market. So, our challenge will be to see the rig count improving fast enough to get our inventories up, so that we can meet demand from the customers and that'll just be something we'll have to do as a touch and go as we go forward.

Actually just one last one then. Those incremental revenues that you got from those rigs going back to work, I don't know if you could break it out that way, but would you say that that was accretive to margins, those incremental revenues? Robert R. Workman - President, Chief Executive Officer & Director: Absolutely, because if you think about a branch that had to get those orders out to those rigs, they didn't add any expense to do that unless it was freight or fuel, but we didn't add head count to do that. So, most of the margin flows straight to the bottom line.

Got it. Thank you. Thank you very much.

Our following question comes from Flavio Campos from Credit Suisse. Robert R. Workman - President, Chief Executive Officer & Director: Hey Flavio. Flavio S. Campos - Credit Suisse Securities (USA) LLC (Broker): Hi there, thank you. Thank you for taking my questions. So, just from a more high level perspective, on the acquisitions we've seen so far, we've seen a little bit of everything, right (53:37) with pumps distribution, which is a little bit on the higher margin, good for mix, we've seen PVF on the downstream and midstream, and we're seeing international targets as well. Are we agnostic throughout these three strategies, do we have any preferences towards any specific area for acquisitions or is the company going to remain opportunistic here? Robert R. Workman - President, Chief Executive Officer & Director: Yeah, we're definitely going to remain opportunistic but we do have the core areas that we have stated, you know, in every meeting we have had with shareholders about where we are going to invest, it's also in our presentation as well. But we're going to stick within our focus with respect to growing our presence in the downstream and midstream markets or strengthening our upstream presence or expanding geographically internationally or growing our core product lines, like valve actuation, electrical and the rest. So, that's kind of been our tragedy since day one and all of our acquisitions so far have been within that frame of mind? Flavio S. Campos - Credit Suisse Securities (USA) LLC (Broker): Perfect. That's helpful. And when you look at your footprint right now, we've had the 26 branch closures, now the ERP is behind you, I know that originally the strategy with Wilson was to focus on the branch strategy and not as much on the DC model that Wilson…

Well, this is Dave, Flavio. Our gross margins are lower than they were in the depths of the last cycle, in part because today we're seeing $46 oil where August 2009, the last big downturn, we had $71 oil prices, so manufacturers, distributors, customers, everyone is scrambling to generate cash and there's additional influx of products coming into the market where this wasn't happening six years ago. So with more products coming in everyone is trying to offload inventory, especially the smaller players trying to generate cash. So we're seeing kind of an anomalous impact that didn't persist as long as it's persisting now in the last downturn. So, what we need is some resumptions in rig activity and we're seeing a little bit of that percolate but that's going to be delayed as oil prices are so low. So this is lower than we saw last time. Robert R. Workman - President, Chief Executive Officer & Director: And Flavio, just to give you a couple of data points, for one particular grade of pipe, which was a ERW import X42, in December 2008 the price per ton was $1550, and at the bottom of the drop in the 2008-2009 cycle was $720. When we started out in October 2014 at $820, higher than the $720 bottom in the last cycle and the latest data we've got shows it's below $600 now, so it's more severe this cycle than last. Flavio S. Campos - Credit Suisse Securities (USA) LLC (Broker): That makes sense. That makes sense. Very, very helpful. Thank you for taking my questions.

Our last question will come from Sean Meakim from JPMorgan. Robert R. Workman - President, Chief Executive Officer & Director: Hey, Sean.

Hey, Sean.

Thanks. Good morning. Just wanted to touch a little bit more on working capital, you noted that a lot of the changes underway inside the company aren't really showing up yet in the metrics given the downturn. Can you give us a sense of how much of the changes are structural versus cyclical, meaning any recovery, could you see a faster closing of the gap towards some of your targets given the progress that you made? Robert R. Workman - President, Chief Executive Officer & Director: What kind of targets are you referring to, Sean?

For working capital relative to revenue. Robert R. Workman - President, Chief Executive Officer & Director: Okay. Okay. Got it. Yeah, we're clearly not where we want to be. So we started this process thinking we'd see some recovery. We saw 2009 as a proxy for what's going to happen this year, that hasn't happened. So we have more inventory than we'd normally have. We're burning that down. We're seeing some very nice progress in our accounts receivable reductions. It's going to take a little longer to get to those working capital targets, but it is except for market share, or growth in how we take care of our customers, cleaning up that balance sheet is priority number one around here. So you will see improvements in the third quarter and, you know, graduated improvements in the coming quarters as well, so that's a top priority, in absolute dollar terms, like Dan as said, we have made progress, in ratio terms we have not, but that's the number one focus here.

Okay. And then just one last thing on the shifts in the rig count, last cycle versus this cycle, in the current environment, (1:00:05) even more towards the high-spec rigs is the ones that have kept working. In a recovery, I think we're likely to see the high-spec rigs that are available go back to work first. Given that shift in mix compared to last cycle coming out of the downturn, how does that impact your business? Robert R. Workman - President, Chief Executive Officer & Director: So outside of the one-time pops we're going to get because some of these rigs are going to have to buy a lot of material to get back to work. On a regular maintenance perspective, month-to-month, they're very similar in how much goods they consume. It's a different mix and some of the – they consume less goods, but the goods are a lot more expensive because they have a lot more high-tech equipment on there. So generally, we – and we've done this – we did that through last year actually. In 2014, we started measuring revenue per rig and comparing some of the SCR and the mechanical rigs to the AC rigs, and it was almost negligible, the difference amount of revenue it took to maintain those rigs on an operating basis.

And margins any different or margins are also very similar? Robert R. Workman - President, Chief Executive Officer & Director: They are very similar. Almost every contractor we sell to we've got a contract with. And so, it's not like we can price these orders as they order. It's automatically system priced and we know the margins.

Right. Okay. That makes sense. Thanks, Robert.

We have no further questions. I'd like to turn the call back over to Mr. Molinaro. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Actually, Robert will wrap it up. Robert R. Workman - President, Chief Executive Officer & Director: I want to thank everybody for their interest in DistributionNOW and we look forward to talking to you next quarter about our results in Q3. Thanks. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Thank you.

Thank you.

Thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.