Thank you, and good morning, everybody. Before I begin, please note today's presentation may contain some forward-looking statements. I encourage you to review our safe harbor statement and other filings with the SEC and our earnings release. I wanted to open the slide to talk about DNOW from an investment standpoint. What is the investment thesis for our company?
We became a public company in 2014, spun off from National Oilwell Varco, and really have gone through a transformation since that time period. Along the way, we've increasingly diversified to more what I call industrial markets. Still, the majority of our exposure from a revenue perspective is in the upstream market. We'll talk a little bit about that.
Coming off of our merger with MRC Global of November of last year, we're now seeing some strength in some other sectors that I'd like to talk about today as well. Gas utilities being one, but also upstream, midstream, and downstream industrial. So more of a balanced portfolio of opportunities and sector exposure for DNOW.
As my predecessor just commented here, the U.S. oil and production has been increasing even though rig count's been, over the last several years, declining, completion's declining. When volumes increase, that's a benefit for DNOW. I think it's cool to talk about volume growth because it directly benefits DNOW. We provide pipe valves and fittings, so the infrastructure to the oil field. We provide pumps and fabricated equipment.
I'll also talk a little bit about data center build-out and what that's doing to secular demand for DNOW, both in the midstream and the downstream and industrial side. We believe we're a scaled platform of higher value. Not only does DNOW distribute products, but we provide solutions. We provide services that are sticky with our customers, that are more than just selling commodities to our customers.
I mentioned there's expanding midstream opportunities here, as well as the other sectors I've talked about. From a balance sheet perspective, very strong balance sheet position, free cash flow profile. We'll talk about that. The theme here is earnings durability for DNOW and our working capital management. The increased efficiency there is allowing us to invest in the business, both organically and inorganically. I'll talk about that, supported by that strong balance sheet.
Last but not least, on the bottom right, really kind of continued our integration with MRC Global that we closed in November of 2025. Significant. Some opportunity to grow our margins. We're focused on that integration. If you listen to our prior earnings calls, we had some ERP disruption associated with MRC Global's U.S. business. We characterized that when we closed the deal as not stabilized.
We've made tremendous progress there. We believe the system is stabilized. We're in kind of an optimization phase as we go forward. So we have some temporary elevated costs there we expect to mitigate as we go forward in the year. We're focused on revenue recovery with our customers as associated with that disruption as well as market share growth. While we're doing that, we're going to high grade the business.
We're looking at growing product margins, looking at growing operating profit as well as EBITDA margins. Part of that improved profitability is we told the public we think we'll save about $70 million in cost synergies over a three-year period. In year one, we talked about initially $17 million savings at the end of year one. We've recently upgraded that to $30 million in year one. We're kind of ahead of the game here when it comes to the cost synergies. We haven't upgraded the full three-year.
That maintains it at $70 million. DNOW is a premier energy and industrial solutions provider. We have a balanced portfolio of products. We have access to a lot of opportunities for long-term growth. We've been operating actually for 160 years and our legacy headquartered in Houston, Texas.
We have a comprehensive network of branches, super centers, where we hold a lot of more kind of speculative inventory. We do large project execution super centers. We have RDC, regional distribution centers, that support inventory replenishment across our network. Then we have a number of customer on-site locations where we do integrated supply. I'll talk a little bit about that.
That's also complemented by a highly efficient digital infrastructure that we're continuing to invest in. We integrate with our customers from a B2B standpoint. We have online e-commerce platforms both on the legacy DNOW side and the MRC Global side. Today, we've got 300 locations, 5,100 employees. The first half run rate of revenue are about $2.5 billion. We forecasted full year revenue kind of in the $5, just over the $5 billion level. We're kind of on track there.
Our key markets where we play, U.S., Canada, U.K., Europe, Middle East, and Southeast Asia. Just a quick highlight on our second quarter results. Revenue, $1.3 billion. We saw really nice growth coming off the first quarter, a 10% sequential increase in growth that was led by the U.S. that grew 13% sequentially. Our EBITDA was kind of at a low point in 1Q of $39 million.
We grew that 54% to $60 million. Part of that recovery coming out of that ERP disruption we saw on that U.S. MRC Global business. We're making nice progress there. You can see that start to materialize in our bottom line number there. What's also exciting is a second quarter record of cash flow from ops of $133 million. That's an all-time record for DNOW.
We normally generate more cash in the second half of the year than we do the first half of the year. It was nice to see being able to start to improve our AR balance and really start to solve some of the riddles we had with that ERP disruption we have talked about. Important metric to us not only is growing EBITDA, but is also working capital as a percent of revenue.
Last quarter, it was 25.5%. We've improved that to 19%, so we're getting more efficient with our inventory. We're getting more efficient with our DSOs and lowering our DSOs. We expect improvement there. Capital allocation, we like to really have a flexible capital allocation model that's opportunistic. In the quarter, we repurchased $25 million worth of shares. That's coming off a first quarter high of $50 million in share repurchases.
That gets us $75 million for the first half of 2026. In the second quarter, we assumed some debt from MRC Global, so we reduced that debt by $95 million. That is resulting in a net debt of $360 million coming out of the second quarter. Just to look at our consolidated revenue composition for the first half of 2026. We report by geographical segment, so U.S., International, Canada.
You can see we are largely United States levered, 84% there, 12% International, 4% Canada. If you looked at the legacy MRC business, they had a pretty large international business, primarily a valve distributor that was complementary to DNOW's international business, which is primarily electrical distribution. If you look at in the middle by end market, you could see the diversification, right? Upstream are roughly 39% of our revenue, gas utilities 23%, midstream 20%, and downstream industrial 18%.
By product group, this gives you an idea of the products we provide our customers. Roughly 29% valves, automation, measurement, and instrumentation. Pipe gas products would be the gas utilities products we provide. The pumps production and process equipment is the process solutions products that we provide to the market. By end market and sector, just a snapshot of the diversification by reporting segment. You see the U.S., International, Canada.
If you look at Canada to the right, it is 79% upstream. That is what DNOW used to look like prior to acquiring Whitco in 2024, which doubled our midstream exposure. With the combination with MRC Global November last year, you are looking at a much more diversified energy and industrial distributor here. So how we go to market is we provide products coupled with services, coupled with solutions across three channels.
On the left would be our branch operations. This is your brick and mortar. This is your branches that are maintaining customer intimacy close to the customer. We want to forward deploy inventory as close to the customer because a lot of the upstream business is about being able to service that customer in a short lead times, be able to supply their needs out of inventory.
So it is super important there. That is backed up by a super center model that Legacy DNOW really transformed coming out of 2020 and 2021 into a super center model that lowered our fixed costs, went to a much more variable cost model to allow us to scale up and scale down to the market. The RDC approach, we talked about a little bit earlier to replenish those forward deployed inventory and branches, and then complemented by an online channel as well.
This meets the demand for our customers. As my predecessor was presenting in front of us, this meets the demand to provide operators with pipe valves and fittings, with gas products, with pumps and fabricated equipment. We handle both day-to-day maintenance as well as capital projects on the business. In the middle is our integrated onsite model.
That is a very sticky relationship with the customer. We are on-site. We are sharing operating goals and sharing a vision where the customer outsources a portion of their supply chain to DNOW. We in many cases have different models with different operators. We could be managing warehouses. We are managing inventory management. We are doing goods receipts and replenishment and shipping and packing and kitting and shipping out the warehouse. We are doing procurement services for them. We are doing project surplus management.
A lot of different à la carte options we put together. A lot of our large upstream customers as well as gas utilities customers really like this model because it helps them really lower their operating expenses and reduces their deployed capital that they could put elsewhere. On the far right are process solutions. This really meets the demand for pumps, process, and production equipment.
I have a graph that shows you the kind of upstream where a lot of these play, but this is the distribution of pumps, air compressors, fabricated equipment out of our Houston Tomball location, as well as our Casper, Wyoming location in the U.S. We also have rental and automation equipment and gas upgrading and gas management. I alluded to this a little bit earlier when I started. Thematically, we're increasing our diversification.
If you look at 2017- 2023, prior to the Whitco acquisition we did, DNOW was greater than 70% upstream. We were susceptible to the cycles in the upstream. When rig counts declined, completions declined. We felt that as far as top line, and so we're adjusting costs. It's helped that customers have come out of, I believe, 2019, 2020, more capital discipline. That helps us plan our inventory better.
That's been a benefit. The increased diversification, now we're less than 40%. We see that as a strength as well as the capital discipline by our customers. Just real quick, the four sectors, what's driving that for us on upstream E&P capital spending. Upstream's production's expanding. We used to talk about rig count. We used to talk about completions and oil price.
Now those have been trending lower over the past several years, but production volume has been up, most notably because of longer laterals. DNOW is an infrastructure play and the volume is what's important to us that flows through the pipes, the valves and the fittings that we provide and the equipment and the pumps.
To the right is the midstream, so increased exposure to midstream with natural gas demand, LNG export growth and data centers. Gas utilities, these are LDCs, that their annual budget, their CapEx, is really tied to infrastructure modernization and service area growth. It's not tied to oil price, not tied to rig count, not tied to frac spread. Their budget's based on tax rates and annual rate hikes.
Last but not least, we have downstream industrial, where we have refinery exposure, petrochemical exposure, where there are turnarounds, and then industrial CapEx in mining and data centers, RNG and natural gas. So pretty diversified set. If I do a little bit deeper dive into the secular demands, I know it's a busy slide.
I won't go through all of them, but on the upstream, we've talked about increased volumes. We talked about longer laterals. That's increasing production. A number of acquisitions we've done in our process solutions group has built a water management group, through our Flex Flow business, through our Trojan Rentals business, and through other acquisitions. That's been a real growth area for us on the produced water and the water management side.
As customers are more focused on capital discipline, that's kind of helped us do a better job planning our inventory to kind of work through the cycles. On the gas utilities side, it's really about those customers have a set budget a year to spend. They're going to spend it, and it's a matter of whether they're going to point it towards aged infrastructure or modernization initiatives versus growth. So think single-family residential housing, think commercial development.
That would be the growth side for gas utilities versus the modernization side. Midstream is exciting area for us. It's growing with the investment of a lot of midstream customers, really tied to natural gas, either takeaway expansion or NGL expansion, as well as LNG expansion out of the Gulf Coast or Western Canada, in addition to the power demand for data centers. We'll talk a little bit about that.
Downstream and industrial, refineries are high utilization right now. They're running hard. So we expect probably the latter half of this year and into 2027 to be pretty good turnaround season for us for the refineries. The chemicals market's soft right now on a year-over-year basis as projects.
They went through a kind of a bigger project cycle in 2024 and 2025. We expect that to hopefully rebound in the future there. We do have some exposure really on our process solution side on the pumps and side with fabricated equipment with water, wastewater, mining, and a data center investment. This is a look at an upstream tank battery. Many of our operating customers build and design these.
They could be tank or tankless, but this gives you a feel for what DNOW provides across the whole tank battery, and it's pretty much everything other than the tanks. If I can orient you on the bottom right of the slide, those are the wellheads where the oil, gas, and produced water mixture come in. They flow through heater treaters and bulk separators, where we're separating into three phases.
DNOW supplies all of that fabricated equipment, pressurized vessels. The crude oil leg goes to storage and then typically through a LACT unit, which is the cash register oil field. That's how the mineral owners get paid. We supply that as well. The produced water leg, we provide water transfer, saltwater disposal units, temporary rental horizontal pumping units. On the gas treating side, we provide that as well.
So over the years with our acquisition, we've increasingly kind of vertically integrated on different products in this kind of upstream onshore facility. I'm excited to talk a little bit about data centers because it's really driving some opportunities for DNOW on the midstream side and on the industrial side. As more data centers are built, tremendous demand on natural gas, natural gas demand.
DNOW sells large diameter pipe, large diameter fittings, segmentable fittings, excuse me, valves. So we're seeing growth in our midstream sector driven by demand for infrastructure build-out for data centers. On the cooling side within the fence line of the data centers, we certainly have been selling what we call industrial pipe valves and fittings, some pumps and an automation and controls capability through our Edge Controls acquisition earlier this year in the first quarter.
We are excited about the data center opportunities going into the future here. Quick note on our capital allocation framework shifting here. We really have a strong foundation for growth and we invest organically in inventory. We finance customer receivables. We are a low CapEx company, typically Legacy DNOW about $20 million a year, and MRC somewhere between $10 million - $15 million a year typical CapEx. We are low CapEx.
We are focused on MRC Global acquisition or integration. We talked about returning capital to shareholders, $75 million year to date this year on our $160 million share repurchase program that was authorized in January of 2025. Our CEO likes to talk about M&A as part of DNOW's DNA, and we pursue accretive M&A. I have a slide on M&A in a little bit. You could see the cumulative share repurchases under our program here.
Just calling out the third quarter of 2025 here during the HSR filing for MRC Global, we had to pause the repurchases. You saw a pause there at the $27 million level. We are a highly opportunistic capital allocation framework for DNOW. We think part of our growth strategy certainly incorporates inorganic growth. We talked about organic growth a little bit earlier, but we feel like we have had a track record of success with 25 acquisitions since we spun off in 2014.
Most notably in 2025, coming together was our first public-to-public deal with MRC Global in November of last year. Earlier this year, in the first quarter, we did Edge Controls. Edge Controls is a controls and automation business that basically allows, from a digital standpoint, to connect all of our systems, and also customer systems from an automation and control and SCADA standpoint.
We are excited about that technology and to be able to better bundle our solutions to E&P operators, midstream data center operators, et cetera. That is an exciting area for us. What we look for are margin-accretive companies. We do not look for turnaround companies that have a competitive advantage. We do want to continue to focus on our pump and process solutions area. Those tend to be accretive on the margin side to the overall base business, I will say.
With MRC now coming into the fold, they have not done an acquisition in quite some time, so we think there are opportunities to expand our products and our reach into the gas utility side, on the meter side. International, there are some opportunities there.
We, of course, want to leverage product lines and solutions to be able to grow organic share, and then also with a mindset of continuing to increase our diversification. Just kind of as a wrap-up slide, kind of thematically, DNOW, we are diversifying, again, in these industrial markets. We are still, like I said, 39% upstream-levered. Upstream is our core.
We are not going away from upstream. We want to grow upstream, and in fact, we have been doing so while we diversify and grow into other sectors. We have a scaled platform for higher-value solutions exposure. We have got a strong balance sheet. We assumed the MRC debt when we closed the deal in November of last year, so we paid down debt, and we will look to do so in the future.
We will continue with integrating the two companies to realize the $70 million in cost synergies, and also to take advantage of revenue synergies between the two companies on a go-forward basis while we look at margin expansion opportunities.
Our first quarter, if you listen to our first quarter call, we kind of hit a low point on profitability at 3.3% EBITDA as a percent of revenue. Second quarter, much higher than that. We guided to full year of 4.5%, so that includes some increased margin expansion in the third quarter that we guided to as well. Excited about the future, excited about the growth sectors we have coming out of the integration. Thank you very much.