CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

1. Organization and Basis of Presentation

Nature of Operations

Basis of Presentation

Change in Accounting Principle

Use of Estimates

Recently Issued Accounting Standards

2. Revenue

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed on contacts with an original expected duration of more than one year. The Company's contracts are predominantly short term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC Topic 606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations when the performance obligation is part of a contract that has an original expected duration of one year or less.

Allowance for Credit Losses

Contract Balances

3. Inventories, net

4. Accrued Liabilities

5. Debt

6. Stockholders’ Equity

Preferred Stock

Common Stock

On November 6, 2025, the Company issued 82 million shares of common stock to former shareholders of MRC Global in connection with the closing of its acquisition of MRC Global.

Consolidated Variable Interest Entities (“VIE”)

7. Accumulated Other Comprehensive Income (Loss) (“AOCI”)

8. Business Segments

9. Income Taxes

11. Stock-based Compensation and Outstanding Awards

12. Commitments and Contingencies

13. Acquisitions

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Company Overview

Operating Environment Overview

Longer Term Outlook

Results of Operations

Liquidity and Capital Resources

Cash Flows

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

1. Organization and Basis of Presentation

Nature of Operations

Basis of Presentation

Change in Accounting Principle

Use of Estimates

Recently Issued Accounting Standards

2. Revenue

Remaining Performance Obligations

Allowance for Credit Losses

Contract Balances

3. Inventories, net

4. Accrued Liabilities

5. Debt

6. Stockholders’ Equity

Preferred Stock

Common Stock

On November 6, 2025, the Company issued 82 million shares of common stock to former shareholders of MRC Global in connection with the closing of its acquisition of MRC Global.

Share Repurchase Program

Consolidated Variable Interest Entities (“VIE”)

7. Accumulated Other Comprehensive Income (Loss) (“AOCI”)

8. Business Segments

9. Income Taxes

10. Earnings Per Share

11. Stock-based Compensation and Outstanding Awards

12. Commitments and Contingencies

13. Acquisitions

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Company Overview

Operating Environment Overview

Longer Term Outlook

Results of Operations

Liquidity and Capital Resources

Cash Flows

In December 2025, the FASB issued Accounting Standards Update (“ASU”) 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements which clarifies the interim reporting requirements by improving navigability of Topic 270 and more clearly specifying what disclosures are required in an interim reporting period. It is not intended to significantly change interim reporting or expand or reduce interim disclosure requirements. ASU 2025-11 is effective for public business entities for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing the impact of the provisions of ASU 2025-11 in its consolidated financial statements and its disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which is intended to modernize the accounting for internal-use software costs by removing the previous “development stage” model and introducing a model that aligns with current software development methods, such as the agile approach. Capitalization of eligible costs will begin when management has authorized and committed to funding the software project and it is probable the project will be completed and the software will be used for the function intended. This update will be effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual periods. Entities may apply the guidance using a prospective, retrospective or modified transition approach. Early adoption is permitted as of the beginning of an annual period. The Company is currently assessing the impact of the provisions of ASU 2025-06 in its consolidated financial statements and its disclosures.

Disaggregated Revenue

Legal Claims and Matters

Customer Contracts

Purchase Commitments

Warranty Claims

Letters of Credit

Key Drivers of Our Business

Recent Trends and Outlook

Upstream

Gas Utilities

Downstream and Industrial

Midstream

Supply Chain

Disaggregated Revenue

Legal Claims and Matters

Customer Contracts

Purchase Commitments

Warranty Claims

Letters of Credit

Key Drivers of Our Business

Recent Trends and Outlook

Upstream

Gas Utilities

Downstream and Industrial

Midstream

Supply Chain

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED March 31, 2026


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-36325

DNOW INC.

(Exact name of registrant as specified in its charter)


Delaware		46-4191184
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
7402 North Eldridge Parkway, Houston, Texas 77041		(281) 823-4700
(Address of principal executive offices)		(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	DNOW	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2026, the registrant had 182,545,984 shares of common stock (excluding 2,552,478 unvested restricted shares), par value $0.01 per share, outstanding.

DNOW INC.

TABLE OF CONTENTS


Part I - Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of March 31, 2026 (Unaudited) and December 31, 2025	3

	Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2026 and 2025	4

	Consolidated Statements of Comprehensive (Loss) Income (Unaudited) for the three months ended March 31, 2026 and 2025	5

	Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2026 and 2025	6

	Consolidated Statements of Stockholders' Equity (Unaudited) for the three months ended March 31, 2026 and 2025	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	28

Part II - Other Information

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mining Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

	Signature	31

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

DNOW INC.

(In millions, except share and per share data)


	March 31, 2026			December 31, 2025
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	116		$	164
Receivables, net		889			874
Inventories, net		1,193			1,192
Prepaid and other current assets		52			48
Total current assets		2,250			2,278
Property, plant and equipment, net		261			264
Operating right-of-use assets		161			160
Deferred income taxes		12			11
Goodwill		652			617
Intangibles, net		563			565
Other assets		28			29
Total assets	$	3,927		$	3,924

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	662		$	653
Accrued liabilities		254			300
Other current liabilities		13			21
Total current liabilities		929			974
Long-term debt		571			411
Long-term operating lease liabilities		118			129
Deferred income taxes		95			99
Other long-term liabilities		71			73
Total liabilities		1,784			1,686
Commitments and contingencies (Note 12)
Stockholders' equity:
Common stock - par value $0.01; 330 million shares authorized; 182,671,497 and 186,125,254 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively		2			2
Additional paid-in capital		3,142			3,193
Accumulated deficit		(880	)		(836	)
Accumulated other comprehensive loss		(126	)		(126	)
DNOW Inc. stockholders' equity		2,138			2,233
Noncontrolling interests		5			5
Total stockholders' equity		2,143			2,238
Total liabilities and stockholders' equity	$	3,927		$	3,924

See notes to unaudited consolidated financial statements.

DNOW INC.

(In millions, except per share data)


	Three months ended March 31,
	2026			2025
Revenue	$	1,183		$	599
Cost of products		990			461
Gross profit		193			138
Selling, general and administrative expenses		243			109
Operating (loss) profit		(50	)		29
Other (expense) income		(10	)		—
(Loss) income before income taxes		(60	)		29
Income tax (benefit) provision		(16	)		7
Net (loss) income		(44	)		22
Net (loss) income attributable to noncontrolling interests		—			1
Net (loss) income attributable to DNOW Inc.	$	(44	)	$	21

(Loss) earnings per share attributable to DNOW Inc. stockholders:
Basic	$	(0.24	)	$	0.19
Diluted	$	(0.24	)	$	0.19
Weighted-average common shares outstanding, basic		186			106
Weighted-average common shares outstanding, diluted		186			107

See notes to unaudited consolidated financial statements.

DNOW INC.

(In millions)


	Three months ended March 31,
	2026			2025
Net (loss) income	$	(44	)	$	22
Other comprehensive (loss) income:
Foreign currency translation adjustments, net of tax benefit of $1 and nil for the three months ended March 31, 2026 and 2025, respectively		—			3
Comprehensive (loss) income		(44	)		25
Comprehensive income attributable to noncontrolling interests		—			1
Comprehensive (loss) income attributable to DNOW Inc.	$	(44	)	$	24

See notes to unaudited consolidated financial statements.

DNOW INC.

(In millions)


	Three months ended March 31,
	2026			2025
Cash flows from operating activities:
Net (loss) income	$	(44	)	$	22
Adjustments to reconcile net (loss) income to net cash used in operating activities
Depreciation and amortization		23			11
Increase in LIFO reserve		16			1
Provision for inventory		5			—
Stock-based compensation		5			4
Deferred income taxes		(8	)		5
Operating lease expense		18			4
Other, net		5			2
Change in operating assets and liabilities, net of effects of acquisitions:
Receivables		(26	)		(52	)
Inventories		(17	)		(32	)
Prepaid and other current assets		(2	)		8
Accounts payable		6			28
Accrued liabilities and other, net		(76	)		(17	)
Net cash used in operating activities		(95	)		(16	)
Cash flows from investing activities:
Business acquisitions, net of cash acquired		(46	)		—
Purchases of property, plant and equipment		(8	)		(6	)
Other, net		1			1
Net cash used in investing activities		(53	)		(5	)
Cash flows from financing activities:
Borrowings under the revolving credit facility		253			—
Repayments under the revolving credit facility		(93	)		—
Repurchases of common stock		(50	)		(8	)
Shares withheld for taxes		(5	)		(7	)
Other, net		(4	)		(2	)
Net cash provided by (used in) financing activities		101			(17	)
Effect of exchange rates on cash and cash equivalents		(1	)		1
Net change in cash and cash equivalents		(48	)		(37	)
Cash and cash equivalents, beginning of period		164			256
Cash and cash equivalents, end of period	$	116		$	219
Supplemental disclosures of cash flow information:
Income taxes paid, net	$	2		$	2
Interest paid		5			—
Non-cash investing and financing activities:
Accrued purchases of property, plant and equipment	$	6		$	1
Acquisition measurement period adjustment		8			—

See notes to unaudited consolidated financial statements.

DNOW INC.

(In millions)


				Attributable to DNOW Inc. Stockholders
	Common Stock					Additional			Retained			Accum. Other								Total
	Shares			Common		Paid-In			Earnings			Comprehensive			Treasury			Noncontrolling		Stockholders’
	Outstanding			Stock		Capital			(Deficit)			Income (Loss)			Stock			Interests		Equity
December 31, 2024		106		$	1	$	2,023		$	(747	)	$	(153	)	$	—		$	4	$	1,128
Net income		—			—		—			21			—			—			1		22
Common stock repurchased		—			—		—			—			—			(8	)		—		(8	)
Common stock retired		—			—		(5	)		—			—			5			—		—
Stock-based compensation		—			—		4			—			—			—			—		4
Exercise of stock options		—			—		1			—			—			—			—		1
Shares withheld for taxes		—			—		(7	)		—			—			—			—		(7	)
Other comprehensive income		—			—		—			—			3			—			—		3
March 31, 2025		106		$	1	$	2,016		$	(726	)	$	(150	)	$	(3	)	$	5	$	1,143

December 31, 2025		186		$	2	$	3,193		$	(836	)	$	(126	)	$	—		$	5	$	2,238
Net loss		—			—		—			(44	)		—			—			—		(44	)
Common stock repurchased		—			—		—			—			—			(51	)		—		(51	)
Common stock retired		(4	)		—		(51	)		—			—			51			—		—
Stock-based compensation		—			—		5			—			—			—			—		5
Vesting of restricted stock		1			—		—			—			—			—			—		—
Shares withheld for taxes		—			—		(5	)		—			—			—			—		(5	)
March 31, 2026		183		$	2	$	3,142		$	(880	)	$	(126	)	$	—		$	5	$	2,143

See notes to unaudited consolidated financial statements.

DNOW INC.

Notes to Unaudited Consolidated Financial Statements

DNOW Inc. (“DNOW” or the “Company”) is a holding company headquartered in Houston, Texas that was incorporated in Delaware on November 22, 2013. We operate primarily under the DNOW and MRC Global brands along with several affiliated brands operating in local, regional or international markets that are tied to prior acquisitions. DNOW is a leading distributor of pipe, valves, fittings (“PVF”), pumps and fabricated process and production equipment through its approximately 300 locations in the United States (“U.S.”), Canada and select international locations which are geographically positioned to serve the energy and industrial markets.

On June 26, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MRC Global Inc. (“MRC Global”) in an all-stock transaction, inclusive of MRC Global's debt. On November 6, 2025 (the “Closing Date”), DNOW completed its acquisition of MRC Global. The merger was accounted for as a business combination in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, where DNOW was the accounting acquirer. See Note 13 “Acquisitions” for additional information.

The Company provides quality products customers require to build and maintain essential infrastructure and operating equipment across the upstream, gas utilities, downstream, energy transition and industrial and midstream markets as well as innovative supply chain solutions, technical product expertise and a robust digital platform to customers globally through our leading position across each of our diversified end-markets including the following sectors:

•

Upstream: exploration, production and extraction of oil and gas, as well as the use and disposal of produced water

•

Gas Utilities: gas utilities (storage and distribution of natural gas)

•

Downstream and Industrial: downstream and industrial including crude oil refining, petrochemical and chemical processing, general industrials, pharmaceutical, mining, water/wastewater treatment, data centers, liquefied natural gas (“LNG”) terminals and renewable natural gas (“RNG”) facilities

•

Midstream: gathering and transmission infrastructure for processing and transmission of oil, gas or water

The Company offers a comprehensive portfolio of products, including an extensive array of PVF, gas products, pumps, fabricated equipment, oilfield supply, valve automation and modification, measurement, instrumentation and other general and specialty products from its global network of suppliers. Additionally, through the Company’s DigitalNOW® and MRCGO™ e-commerce platforms, customers can leverage technology across business applications to source products and solve a wide array of complex operational and product sourcing challenges.

The unaudited consolidated financial information included in this report has been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and Article 10 of the Securities and Exchange Commission (“SEC”) Regulation S-X. All intercompany transactions and accounts have been eliminated. Variable interest entities for which the Company is the primary beneficiary are fully consolidated with the equity held by the outside stockholders and their portion of net (loss) income reflected as noncontrolling interests in the accompanying consolidated financial statements. The principles for interim financial information do not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s most recent Annual Report on Form 10-K. In the opinion of the Company’s management, the consolidated financial statements include all adjustments, which are of a normal recurring nature unless disclosed otherwise, necessary for a fair presentation of the results for the interim periods. The results of operations for the three months ended March 31, 2026, are not necessarily indicative of the results to be expected for the full year.

During the fourth quarter of 2025, DNOW changed its inventory valuation method for U.S. inventories from the moving average cost method to the Last-In, First-Out (“LIFO”) method. The effects of the change in accounting principle have been retrospectively applied to all periods presented. For the three months ended March 31, 2025, this change resulted in an increase of $1 million in cost of products and a decrease of $1 million in net income attributable to DNOW Inc. Refer to Note 1 “Organization and Basis of Presentation” of the Notes to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, for further information related to the change in accounting principle.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported and contingent amounts of assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires more detailed information related to types of expenses in commonly presented captions in income statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company will not early adopt, and is currently assessing the impact of the provisions of ASU 2024-03 on its consolidated financial statements and its disclosures.

Substantially all of the Company's revenue is recognized at a point in time once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the product is shipped, delivered or picked up by the customer. The Company does not grant extended payment terms. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to proper government authorities. Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods and are recorded in cost of products.

The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for products sold. Revenue is recorded at the transaction price net of estimates of variable consideration, which may include product returns, trade discounts and allowances. The Company accrues for variable consideration using the expected value method. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Amounts received in advance of shipment are deferred and recognized when the performance obligations are satisfied. In some cases, particularly with third-party pipe shipments, the Company considers shipping and handling costs to be separate performance obligations, and as such, the Company records the revenue and cost of products when the performance obligation is fulfilled. While a small proportion of the Company's sales, the Company occasionally recognizes revenue under a bill and hold arrangement. Recognition of revenue on bill and hold arrangements occurs when control transfers to the customer provided that the reason for the bill and hold arrangement is substantive, the product is separately identified as belonging to the customer, ready for physical transfer and unavailable to be used or directed to another customer.

The Company leases operating equipment to customers through operating and sales-type leases, where the lessor for tax purposes is considered to be the owner of the equipment during the term of the lease. For the three months ended March 31, 2026 and 2025, rental revenue totaled $23 million and $23 million, respectively, reflecting amounts earned under the Company’s lease agreements during the period.

Allowance for credit losses is estimated based on an evaluation of accounts receivable aging and the related historical loss experience. In accordance with ASU 2025-05, the Company assumes that current conditions as of the balance sheet date will remain unchanged over the remaining life of the asset when estimating expected credit losses on current trade receivables and contract assets. Judgments in the estimate of allowance for credit losses include global economic and business conditions, oil and gas industry and market conditions, customers' financial conditions and accounts receivable past due. As of March 31, 2026 and December 31, 2025, the allowance for credit losses totaled $19 million and $14 million, respectively.

Contract assets consist of retainage amounts held as a form of security by customers until the Company satisfies its remaining performance obligations as well as amounts recognized in situations where invoicing is delayed until customer-specific documentation requirements are met. Contract assets are considered accounts receivable for which only the passage of time is required before payment is due. As of March 31, 2026 and December 31, 2025, contract assets were $21 million and $55 million, respectively, and were included in receivables, net in the consolidated balance sheets. For the three months ended March 31, 2026, the decrease in contract assets was primarily attributable to a reduction in orders awaiting customer-specific documentation required prior to invoicing in the Company’s U.S. and International segments. The Company generally accounts for the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less; however, these expenses are not material.

Contract liabilities primarily consist of deferred revenues recorded when customer payments are received or due in advance of the Company satisfying its contractually agreed performance obligations, including refundable amounts and other accrued customer liabilities. Revenue recognition is deferred to a future period until those performance obligations are satisfied. As of March 31, 2026 and December 31, 2025, contract liabilities were $51 million and $50 million, respectively, and were included in accrued liabilities in the consolidated balance sheets. For the three months ended March 31, 2026, the increase in contract liabilities was primarily related to net current year customer deposits of approximately $9 million, partially offset by recognizing revenue of approximately $8 million that was deferred as of December 31, 2025.

The Company's disaggregated revenue represents the business of selling products and service offerings to the energy sector across each of the Upstream (exploration, production and extraction), Gas Utilities (storage and distribution of natural gas), Downstream and Industrial (crude oil refining, petrochemical and chemical processing and general industrials) and Midstream (gathering, processing and transmission of oil and gas) sectors in each of the Company's reportable segments. Each of the Company's end markets and geographical reportable segments are impacted and influenced by varying factors, including macroeconomic environment, commodity prices, maintenance and capital spending and exploration and production activity. As such, the Company believes that this information is important in depicting the nature, amount, timing and uncertainty of our contracts with customers.

The following table presents our revenue disaggregated by revenue source (in millions):


	United States		Canada		International		Total
Three months ended March 31, 2026
Upstream	$	358	$	41	$	69	$	468
Gas Utilities		269		—		—		269
Downstream and Industrial		158		6		69		233
Midstream		200		4		9		213
Total revenues	$	985	$	51	$	147	$	1,183

Three months ended March 31, 2025
Upstream	$	312	$	53	$	54	$	419
Gas Utilities		8		—		—		8
Downstream and Industrial		34		4		9		47
Midstream		120		5		—		125
Total revenues	$	474	$	62	$	63	$	599

The Company uses the LIFO method of valuation for U.S. inventories. The use of the LIFO method has the effect of reducing net income during periods of rising inventory costs (inflationary periods) and increasing net income during periods of falling inventory costs (deflationary periods). Valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, the Company bases interim LIFO calculations using current month end perpetual inventory balances, except in those instances where better information regarding projected year-end balances is available.

Inventories consist primarily of (in millions):


	March 31, 2026			December 31, 2025
U.S. finished goods inventory at average cost	$	1,099		$	1,078
Outside U.S. finished goods inventory at average cost		152			154
Total finished goods inventory		1,251			1,232
Less: Excess of average cost over LIFO cost (LIFO reserve)		(43	)		(27	)
Less: Other inventory reserves		(15	)		(13	)
Inventories, net	$	1,193		$	1,192

Accrued liabilities consist of (in millions):


	March 31, 2026		December 31, 2025
Compensation and other related expenses	$	80	$	118
Contract liabilities		51		50
Taxes (non-income)		33		32
Current portion of operating lease liabilities		48		45
Accrued selling, general and administrative expenses		21		36
Other		21		19
Accrued liabilities	$	254	$	300

On November 6, 2025, the Company, together with certain direct and indirect subsidiaries of the Company (collectively, the “Borrowers”), entered into an Amended and Restated Credit Agreement with a syndicate of lenders and Wells Fargo Bank, National Association, serving as the administrative agent, (the “Amended Credit Facility”), that amends and restates the Company’s existing senior secured asset-based credit facility (the “Existing Credit Facility”). The Amended Credit Facility amends certain terms, provisions and covenants of the Existing Credit Facility, including, among other things: (i) extending the maturity date under the Existing Credit Facility to November 6, 2030; (ii) providing for an $850 million revolving credit facility, with an incremental accordion feature that permits increases in aggregate revolving commitments by up to $500 million (for total commitments of up to $1.35 billion); and (iii) increasing availability as compared to the Existing Credit Facility by expanding the borrowing base definition to include certain rental equipment assets.

The obligations under the Amended Credit Facility are secured by substantially all the assets of the Company and its subsidiaries. The Amended Credit Facility contains customary covenants, representations and warranties and events of default. The Amended Credit Facility also includes a springing financial covenant that requires the Company to maintain, during any period when availability falls below specified thresholds, a fixed charge coverage ratio (as defined in the Amended Credit Facility) of at least 1.00:1.00.

Borrowings under the Amended Credit Facility bear an interest rate at the Company’s option, (i) for borrowings denominated in U.S. dollars, at (a) the base rate plus the applicable margin or (b) the term Secured Overnight Financing Rate (“SOFR”) for the applicable interest period, plus the applicable margin and (ii) for borrowings denominated in Canadian dollars, at (a) the base rate plus the applicable margin or (b) the adjusted term Canadian Overnight Repo Rate Average (“CORRA”) plus the applicable margin. In each case, the applicable margin is based on the Company’s fixed charge coverage ratio. The Amended Credit Facility includes a commitment fee of 25 basis points on the unused portion of commitments. Commitment fees incurred during the period were included in other (expense) income in the consolidated statements of operations.

Availability under the Amended Credit Facility is limited to the lesser of the commitments and a borrowing base comprised of eligible accounts receivable, eligible inventory and eligible rental equipment assets of the Borrowers and subsidiary guarantors. The Amended Credit Facility provides for an $850 million global revolving credit facility, of which up to $75 million is available for the Company’s Canadian subsidiaries. The Company has the right, subject to certain conditions, to increase the aggregate principal amount of commitments under the credit facility by $500 million. The Amended Credit Facility also provides a letter of credit sub-facility of $50 million. As of March 31, 2026 and December 31, 2025, the Company had $571 million and $411 million, respectively, borrowed

against the the Amended Credit Facility and approximately $263 million in availability (as defined in the Amended Credit Facility) as of March 31, 2026. The interest rate was approximately 5.0% and 5.0% at March 31, 2026 and December 31, 2025, respectively. The Company is not obligated to pay back the principal of borrowings until the maturity date of the Amended Credit Facility, subject to mandatory prepayments.

The Company issued $15 million in letters of credit under the Amended Credit Facility.

The Company has authorized 20 million shares of undesignated preferred stock. The Board of Directors has the authority to issue shares of the preferred stock. As of March 31, 2026 and December 31, 2025, there were no shares of preferred stock issued or outstanding.

On January 24, 2025, the Company’s Board of Directors authorized a share repurchase program to purchase up to $160 million of its outstanding common stock. The Company may from time to time repurchase common stock through various methods, including, but not limited to, open market, privately negotiated transaction, or by other means which comply with applicable state and federal securities laws. The amount and timing of any repurchase will depend on several factors, including share price, general business and market conditions, and alternative investment opportunities. The share repurchase program does not obligate the Company to repurchase shares and may be suspended or discontinued at any time at the Company's discretion. All shares repurchased shall be retired pursuant to the terms of the share repurchase program. Depending on the timing of the retirement and cash settlement of the repurchased shares, the Company could have shares held in treasury stock until retired. For the three months ended March 31, 2025, total shares repurchased included 155,313 shares, or $3 million, held in treasury stock and subsequently retired in April 2025. Share repurchases made are subject to a 1% excise tax. The impact of this 1% excise tax was less than $1 million for the three months ended March 31, 2026 and 2025.

Information regarding the shares repurchased is as follows:


	Three months ended March 31,
	2026		2025
Total cost of shares repurchased (1) (in millions)	$	50	$	8
Average price per share (1)	$	11.92	$	17.14
Number of shares repurchased		4,201,928		443,806

(1)

Excludes 1% excise tax on share repurchases.

The Company conducts certain operations through contractual arrangements with certain entities that are considered VIEs. The Company is the primary beneficiary and consolidates the VIEs as it has the power to direct the activities that most significantly affect the VIEs’ economic performance and has the obligation to absorb the VIEs’ losses or the right to receive benefits. For the three months ended March 31, 2026, net loss attributable to noncontrolling interests was less than $1 million and for the three months ended March 31, 2025, net income attributable to noncontrolling interests was approximately $1 million.

The assets of the VIEs can only be used to settle its own obligations and its creditors have no recourse to the Company’s assets. As of March 31, 2026 and December 31, 2025, the VIEs’ assets were primarily current assets of $20 million and $24 million, respectively, and the liabilities were primarily current liabilities of $5 million and $8 million, respectively.

The components of AOCI are as follows (in millions):


	Foreign Currency Translation Adjustments
	Three months ended March 31,
	2026			2025
Beginning balance	$	(126	)	$	(153	)
Net current-period other comprehensive income, net of tax		—			3
Ending balance	$	(126	)	$	(150	)

The Company’s reporting currency is the U.S. dollar. A majority of the Company’s international entities in which there is a substantial investment have the local currency as their functional currency. As a result, foreign currency translation adjustments resulting from the

process of translating the entities’ financial statements into the reporting currency are reported in other comprehensive income or loss in accordance with ASC Topic 830, “Foreign Currency Matters.”

The Company has three reportable segments – United States, Canada and International. These segments were determined primarily based on geographic markets. The Chief Operating Decision Maker (“CODM”) uses operating profit to evaluate segment performance and allocate resources. Operating profit is revenue less cost of products, selling, general and administrative expenses and impairment and other charges. The Company’s President and Chief Executive Officer has been identified as the CODM. The Company has disclosed for each reportable segment the significant expense categories that are reviewed by the CODM in the tables below and there are no additional significant expenses within the expense categories presented.

The following table presents results of operations of the Company’s reportable segments (in millions):


	United States			Canada		International		Total
Three months ended March 31, 2026
Revenue	$	985		$	51	$	147	$	1,183
Cost of products		839			39		112		990
Gross Profit		146			12		35		193
Selling, general and administrative expenses		200			11		32		243
Operating (loss) profit	$	(54	)	$	1	$	3		(50	)
Other expense									(10	)
Loss before income taxes								$	(60	)

Three months ended March 31, 2025
Revenue	$	474		$	62	$	63	$	599
Cost of products		364			46		51		461
Gross Profit		110			16		12		138
Selling, general and administrative expenses		89			12		8		109
Operating profit	$	21		$	4	$	4		29
Other income									—
Income before income taxes								$	29

The following table presents depreciation and amortization of the Company’s reportable segments (in millions):


	Three months ended March 31,
	2026		2025
Depreciation and amortization
United States	$	22	$	10
Canada		—		1
International		1		—
Total	$	23	$	11

The following table presents property, plant and equipment, net and total assets of the Company’s reportable segments (in millions):


	March 31, 2026		December 31, 2025
Property, plant and equipment, net
United States	$	236	$	237
Canada		9		10
International		16		17
Total	$	261	$	264

Total assets
United States	$	3,303	$	3,222
Canada		139		166
International		485		536
Total	$	3,927	$	3,924

The effective tax rate for the three months ended March 31, 2026 was 26.7% compared to 24.1% for the corresponding period of 2025. In general, the Company's effective tax rate differs from the U.S. statutory rate due to recurring items, such as differing tax rates on income earned in foreign jurisdictions, nondeductible expenses, and state income taxes. The effective tax rate for the three months ended March 31, 2026, was higher than the effective tax rate for the three months ended March 31, 2025, primarily due to discrete tax benefits recognized in the quarter which increase the effective tax rate as a result of the loss before income taxes reported in the period.

The Company is subject to taxation in the U.S., various states, and foreign jurisdictions. Tax years that remain subject to examination vary by legal entity but are generally open in the U.S. for the tax years ending after 2021 and outside the U.S. for the tax years ending after 2019.

For the three months ended March 31, 2026 and 2025, dilutive shares of 5 million and 1 million, respectively, were excluded from the computation of diluted earnings per share due to the Company recognizing a net loss for the period or due to their antidilutive effect.

Basic and diluted earnings per share are as follows (in millions, except share and per share data):


	Three months ended March 31,
	2026			2025
Numerator:
Net (loss) income attributable to DNOW Inc.	$	(44	)	$	21
Less: net income attributable to participating securities		—			—
Net (loss) income attributable to DNOW Inc. stockholders	$	(44	)	$	21
Denominator:
Weighted average basic common shares outstanding		185,760,166			105,976,409
Effect of dilutive securities		—			767,580
Weighted average diluted common shares outstanding		185,760,166			106,743,989
(Loss) earnings per share attributable to DNOW Inc. stockholders:
Basic	$	(0.24	)	$	0.19
Diluted	$	(0.24	)	$	0.19

Under ASC Topic 260, “Earnings Per Share”, the two-class method requires a portion of net income attributable to DNOW Inc. to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends or dividend equivalents, if declared. Net loss is not allocated to unvested awards in periods the Company determined that those shares are not obligated to participate in losses. For the periods that the Company recognized net income, net income attributable to these participating securities was excluded from net income attributable to DNOW Inc. stockholders in the numerator of the earnings per share computation.

In 2024, the Company’s shareholders approved the DNOW Inc. 2024 Omnibus Incentive Plan, which allows awards to be granted until 2034, for the granting of restricted stock awards (“RSAs”), restricted stock units (“RSUs”), phantom shares, performance stock awards (“PSAs”), stock options and stock appreciation rights.

For the three months ended March 31, 2026, the Company granted 1,130,708 shares of RSAs with a weighted average fair value of $11.85 per share and 109,741 shares of RSUs with a weighted average fair value of $11.85 per share. In addition, the Company granted PSAs to senior management employees with potential payouts varying from zero to 823,840 shares. PSAs of 67,296 and 159,822 were issued during the three months ended March 31, 2026 and 2025, respectively, based on performance above the specified target of achievement for performance share unit awards granted in 2023 and 2022, respectively. The RSAs and RSUs vest on the third and fifth anniversaries of the date of grant. The PSAs can be earned based on performance against established metrics over a three-year performance period.

Stock-based compensation expense for the three months ended March 31, 2026 totaled $5 million compared to $4 million for the corresponding period of 2025.

The Company is involved in various claims, regulatory agency audits and pending or threatened legal actions involving a variety of matters with entities such as suppliers, customers, parties to acquisitions and divestitures, government authorities and other external parties. The Company regularly reviews and records the estimated probable liability in an amount believed to be sufficient and continues to periodically reexamine the estimates of probable liabilities and any associated expenses to make appropriate adjustments to such estimates as necessary. These estimated liabilities are based on the Company’s assessment of the nature of these matters, their progress toward resolution, the advice of legal counsel and outside experts as well as management’s intention and past experience

regarding the valuation of these claims. The Company has also assessed the potential for additional losses above the amounts accrued as well as potential losses for matters that are not probable but are reasonably possible. The total potential loss on these matters cannot be determined. While the Company has established estimates it believes to be reasonable under the facts known, the outcomes of litigation and similar disputes are often difficult to reliably predict and may result in decisions or settlements that are contrary to, or in excess of, the Company's expectations.

The Company’s business is affected both directly and indirectly by governmental laws and regulations relating to the oilfield service industry in general, as well as by environmental and safety regulations that specifically apply to the Company’s business. Although the Company has not incurred material costs in connection with its compliance with such laws, there can be no assurance that other developments, such as new environmental laws, regulations and enforcement policies hereunder may not result in additional, presently unquantifiable costs or liabilities to the Company. The Company does not accrue for contingent losses that, in its judgment, are considered to be reasonably possible, but not probable. Estimating reasonably possible losses also requires the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties.

Asbestos Claims. The Company is one of many defendants in lawsuits that plaintiffs have brought seeking damages for personal injuries that exposure to asbestos allegedly caused. Plaintiffs and their family members have brought these lawsuits against a large volume of defendant entities as a result of the various defendants’ manufacture, distribution, supply or other involvement with asbestos, asbestos-containing products or equipment or activities that allegedly caused plaintiffs to be exposed to asbestos. These plaintiffs typically assert exposure to asbestos as a consequence of third-party manufactured products that the Company’s subsidiary, MRC Global (US) Inc., purportedly distributed. As of March 31, 2026, the Company is a named defendant in approximately 446 lawsuits involving approximately 500 claims. No asbestos lawsuit has resulted in a judgment against the Company to date, with the majority being settled, dismissed or otherwise resolved. Applicable third-party insurance has substantially covered these claims, and insurance should continue to cover a substantial majority of existing and anticipated future claims. Accordingly, the Company has recorded a liability for its estimate of the most likely settlement of asserted claims and a related receivable from insurers for its estimated recovery, to the extent the Company believes that the amounts of recovery are probable.

The Company annually conducts analyses of its asbestos-related litigation to estimate the adequacy of the reserve for pending and probable asbestos-related claims. Given these estimated reserves and existing insurance coverage that has been available to cover substantial portions of these claims, the Company believes that its current accruals and associated estimates relating to pending and probable asbestos-related litigation likely to be asserted in the future are currently adequate. This belief, however, relies on a number of assumptions, including:

•

That its future settlement payments, disease mix and dismissal rates will be materially consistent with historic experience;

•

That future incidences of asbestos-related diseases in the U.S. will be materially consistent with current public health estimates;

•

That the rates at which future asbestos-related mesothelioma incidences result in compensable claims filings against the Company will be materially consistent with its historic experience;

•

That insurance recoveries for settlement payments and defense costs will be materially consistent with historic experience;

•

That legal standards (and the interpretation of these standards) applicable to asbestos litigation will not change in material respects;

•

That there are no materially negative developments in the claims pending against the Company; and

•

That key co-defendants in current and future claims remain solvent.

If any of these assumptions prove to be materially different in light of future developments, liabilities related to asbestos-related litigation may be materially different than amounts accrued or estimated. Further, while the Company anticipates that additional claims will be filed in the future, the Company is unable to predict with any certainty the number, timing and magnitude of such future claims. In addition, applicable insurance policies are subject to overall caps on limits, which coverage may exhaust the amount available from insurers under those limits. In those cases, the Company is seeking indemnity payments from responsive excess insurance policies, but other insurers may not be solvent or may not make payments under the policies without contesting their liability. In the Company's opinion, there are no pending legal proceedings that are likely to have a material adverse effect on its consolidated financial statements.

Unclaimed Property Audit. The Company is subject to state laws relating to abandoned and unclaimed property, and states routinely audit the records of companies to assess compliance with such laws. The Company is currently undergoing a multi-state unclaimed property audit. The timing and outcome of the multi-state unclaimed property audit cannot be predicted. The Company has reserved all of its rights, claims, and defenses. If the Company is found to be in noncompliance with applicable unclaimed property laws or the manner in which those laws are interpreted or applied, states may determine that they are entitled to the Company's remittance of unclaimed or abandoned property and further may seek to impose other costs, including penalties and interest. The Company intends to vigorously contest the above matter; however, an adverse decision in this matter could have an adverse impact on the Company, its financial condition, results of operations and cash flows.

Product Claims. From time to time, in the ordinary course of its business, the Company's customers may claim that the products the Company distributes are defective or require repair or replacement under warranties that either the Company or the

manufacturer may provide to the customer. These proceedings are, in the opinion of management, ordinary and routine matters incidental to the Company's normal business. The Company's purchase orders with its suppliers generally require the manufacturer to indemnify the Company against any product liability claims, leaving the manufacturer ultimately responsible for such claims. In many cases, state, provincial or foreign law provides protection to distributors for these types of claims, shifting the responsibility to the manufacturer. In some cases, the Company may be required to repair or replace products for the benefit of its customers and seek recovery from the manufacturer for the related expenses. In the Company's opinion, the likelihood that the ultimate disposition of any of these claims and legal proceedings will have a material adverse effect on the Company's consolidated financial statements is remote.

The Company has contracts and agreements with many of its customers that dictate certain terms of its sales arrangements (pricing, deliverables, etc.). While the Company makes every effort to abide by the terms of these contracts, certain provisions are complex and may be subject to varying interpretations. Under the terms of these contracts, the Company's customers have the right to audit the Company's adherence to the contract terms. Historically, any settlements that have resulted from these customer audits have been immaterial to the Company's consolidated financial statements.

The Company has purchase obligations consisting primarily of inventory purchases made in the normal course of business to meet operating needs. While the Company's vendors often allow the Company to cancel these purchase orders without penalty, in certain cases, cancellations may subject the Company to cancellation fees or penalties depending on the terms of the contract.

The Company is involved from time to time in various warranty claims, which arise in the ordinary course of business. Historically, any settlements that have resulted from these warranty claims have been immaterial to the Company's consolidated financial statements.

The Company maintains credit arrangements with several banks providing standby letters of credit, including bid and performance bonds, and other bonding requirements. As of March 31, 2026, the Company was contingently liable for approximately $27 million of outstanding standby letters of credit and surety bonds. The Company does not believe, based on historical experience and information currently available, that it is probable that any amounts will be required to be paid on those letters of credit and surety bonds.

2026 Acquisition

For the three months ended March 31, 2026, the Company completed an acquisition of Edge Controls (“Edge”) for a purchase price consideration of approximately $46 million, net of cash acquired. Edge is a leading provider of automation & controls, SCADA, pump, motor and drive products and services and expands the Company's product range, enhances the Company’s automation capabilities and ability to deliver higher-value, integrated solutions to the Company's customers. The Company has included the financial results of Edge in its consolidated financial statements from the date of the acquisition.

The Company completed its preliminary valuations as of the acquisition date of the acquired net assets and recognized goodwill of $27 million and intangible assets of $5 million in the U.S. segment, which are subject to change. The primary areas of the preliminary valuation that are not yet finalized relate to adjustments to working capital and intangible assets. If additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), the Company will refine its estimate of fair value to allocate the purchase price more accurately; any such revisions are not expected to be significant. The goodwill recognized is primarily attributable to expected synergies and is deductible for income tax purposes. The Company has not presented supplemental pro forma information because the acquired operations did not materially impact the Company’s consolidated operating results.

2025 Acquisitions

MRC Global Acquisition. In 2025, the Company completed the acquisition of MRC Global in an all-stock transaction for a purchase price consideration of $1,763 million, net of cash acquired. MRC Global shareholders received 0.9489 shares of DNOW common stock for each share of MRC Global common stock. Existing indebtedness of MRC Global was repaid at acquisition.

The Company completed its preliminary valuations as of the acquisition date of the acquired net assets and recognized goodwill of $383 million, $289 million in the U.S. segment and $94 million in the International segment and intangible assets of $510 million in the U.S. segment, which are subject to change. The fair values of trade names in the acquisition were determined using a relief-from-royalty method, and customer relationships acquired were determined using a multi-period excess earnings method. These methods utilize unobservable inputs that are significant to these fair value measurements and thus classified as Level 3 inputs. The amounts recognized for assets acquired and liabilities assumed are provisional and subject to revision as more information becomes available. The primary areas of the preliminary valuation that are not yet finalized relate to the fair values of certain intangible assets pending the completion of a final third-party valuation report, the final determination of net working capital and the tax basis of acquired assets and assumed liabilities. The Company expects to finalize the valuation and the purchase price allocation as soon as practicable but no later than one year from the acquisition date. Any adjustments to these provisional amounts will be recorded as an adjustment to goodwill.

For the three months ended March 31, 2026, the Company recognized measurement period adjustments based on information that was received subsequent to the acquisition date that related to conditions that existed as of the acquisition date. The adjustments resulted in a $16 million decrease to working capital, $6 million decrease to lease liabilities, an increase of $3 million to deferred income tax liabilities, a $2 million increase to lease assets, a $2 million increase to property, plant and equipment, net and a $1 million decrease in accumulated other comprehensive loss. The net impact of these adjustments was an $8 million increase to goodwill.

Singapore Acquisition. The Company completed its valuations as of the acquisition date of the acquired net assets and recognized goodwill of $3 million and intangible assets of $2 million in the International segment. The goodwill recognized is primarily attributable to expected synergies and is not deductible for income tax purposes. For the three months ended March 31, 2026, the Company recognized measurement period adjustments based on information that was received subsequent to the acquisition date that related to conditions that existed as of the acquisition date. These adjustments resulted in a decrease of less than $1 million to current assets and an increase of less than $1 million to goodwill.

Some of the statements in this document including information referenced or incorporated by reference from our other filings with the SEC, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements typically are identified by use of terms such as “anticipates”, “assumes”, “believes”, “budget”, “estimates”, “expects”, “goal”, “guidance”, “plans”, “may,” “will”, “might”, “would”, “should”, “seeks”, “project”, “predict”, “potential”, “currently”, “continue”, “intends”, “outlook”, “forecasts”, “targets”, “reflects”, “could”, or other similar words and phrases, although some forward-looking statements could be expressed differently. Forward-looking statements are current only as of the date they are made. You should be aware that our actual results could differ materially from results anticipated in the forward-looking statements due to a number of factors and risks many of which are outside of our control, including, but not limited to, changes in oil and gas prices, changes in the energy markets, customer demand for our products, changes in trade policies including the imposition or elimination of additional tariffs and duties, significant changes in the size of our customers, difficulties encountered in integrating mergers and acquisitions (including but not limited to certain risks relating to any mergers or acquisitions, such as: the timing of the closing of the merger or acquisition; the risk that the conditions to the transaction are not satisfied on a timely basis or at all or the failure of the transaction to close for any other reason or to close on the anticipated terms; the possibility that regulatory approvals for any dispositions or acquisitions will not be received on a timely basis, if at all, or that such approvals may require modification to the terms of the mergers or remaining businesses; the risk that the expected benefits, synergies and cost reduction efforts of the mergers or acquisitions may not be fully achieved in a timely manner, or at all), successful integration of the business of MRC Global into our business, general volatility in the capital markets, ability to complete the share repurchase program, changes in applicable government regulations, increased borrowing costs, geopolitical conditions and tensions (including Iran, the Ukraine and Middle East conflicts and their regional and global impacts) or any litigation arising out of or related thereto, impairments in long-lived assets, the occurrence of cyber incidents, or failure by us or our third-party service providers to maintain cybersecurity and the integrity of confidential data, and worldwide and national economic conditions and activity. You should also consider carefully the statements under “Risk Factors,” as disclosed in our Form 10-K and any of our subsequent SEC filings, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and that are otherwise described from time to time in our SEC reports as filed. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward-looking statements. We undertake no obligation to update any such factors or forward-looking statements to reflect new information, future events or developments, or otherwise, except to the extent required by applicable law.

The following discussion should be read in conjunction with the unaudited consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in the most recent Annual Report on Form 10-K.

DNOW is a holding company headquartered in Houston, Texas that was incorporated in Delaware on November 22, 2013. We operate primarily under the DNOW and MRC Global brands along with several affiliated brands operating in local, regional or international markets that are tied to prior acquisitions.

On June 26, 2025, DNOW entered into the Merger Agreement with MRC Global in an all-stock transaction, inclusive of MRC Global's debt. On November 6, 2025, DNOW completed its acquisition of MRC Global.

We are a premier provider of energy and industrial solutions with a legacy of over 160 years as a global leader in the distribution of PVF, gas products, pumps and fabricated process and production equipment and a wide range of MRO consumables and related products. We operate across diversified sectors of the energy value chain and industrial end-markets, including:

•

Upstream: exploration, production and extraction of oil and gas, as well as the use and disposal of produced water

•

Gas Utilities: gas utilities (storage and distribution of natural gas)

•

Midstream: gathering and transmission infrastructure for processing and transmission of oil, gas or water

We offer a comprehensive portfolio of products, including an extensive array of PVF, gas products, valve automation, valve modification, gaskets, fasteners, electrical components, instrumentation, artificial lift, pumping systems, process and production equipment, production measurement technology, MRO consumables and a variety of both general and specialty products. Our team of approximately 5,200 employees support our customers through approximately 300 strategic locations including regional distribution centers, super centers, branches and corporate offices.

We derive our revenue predominantly from the sale of PVF, pumps, and fabricated equipment to upstream, gas utilities, downstream, energy transition and industrial and midstream markets customers globally. Our business is dependent upon both the current conditions and future prospects in these industries and, in particular, our customers' maintenance and expansionary operating and capital expenditures. The outlook for customer spending is influenced by numerous factors, including the following:

•

Oil and Natural Gas Demand and Prices. Sales of PVF and infrastructure products to the oil and natural gas industry constitute a significant portion of our sales. As a result, we depend upon the maintenance and capital expenditures of oil and natural gas companies to explore for, extract, produce and process oil, natural gas and refined products. Demand for oil and natural gas, current and projected commodity prices and the costs necessary to produce oil and gas impact customer capital spending, additions to and maintenance of pipelines, refinery utilization and petrochemical processing activity. Additionally, as these participants rebalance their capital investment away from traditional, carbon-based energy toward alternative sources, we expect to continue to supply them and enhance our product and service offerings to support their changing requirements, including in areas such as carbon capture utilization and storage, biofuels, RNG, offshore wind and hydrogen processing.

•

Gas Utility and Energy Infrastructure Integrity and Modernization. Ongoing maintenance and upgrading of existing energy facilities, pipelines and other infrastructure equipment is a meaningful driver for business across the sectors we serve. This is particularly true for the Gas Utilities sector. Activity with customers in this sector is driven by upgrades and replacement of existing infrastructure as well as new residential and commercial development. Continual maintenance of an aging network of pipelines and local distribution networks is a critical requirement for these customers irrespective of broader economic conditions. As a result, this revenue from this sector tends to be more stable over time than our traditional oilfield-dependent businesses and fluctuates based on gas utility customer annual budgets, independently of commodity prices.

•

Economic Conditions. Changes in the general economy, political affairs, government policies or in the energy sector (domestically or internationally) can cause demand for fuels, feedstocks and petroleum-derived products to vary, thereby causing demand for the products we distribute to materially change.

•

Manufacturer and Distributor Inventory Levels of PVF, Pumps, Fabricated Equipment and Related Products. Manufacturer and distributor inventory levels of PVF and related products can change significantly from period to period. Increased inventory levels by manufacturers or other distributors can cause an oversupply of PVF and related products in the industry sectors we serve and reduce the prices that we are able to charge for the products we distribute. Reduced prices, in turn, would likely reduce our profitability. Conversely, decreased manufacturer inventory levels may ultimately lead to increased demand for our products and often result in increased pricing, revenue and improved profitability.

•

Steel Prices, Availability and Supply and Demand. Fluctuations in steel prices can lead to volatility in the pricing of the products we distribute, especially carbon steel line pipe products, which can influence the buying patterns of our customers. A majority of the products we distribute contain various types of steel. The worldwide supply and demand for these products and other steel products that we do not supply impact the pricing and availability of our products and, ultimately, our sales and operating profitability. Additionally, supply chain disruptions with key manufacturers or in markets in which we source products can impact the availability of inventory we require to support our customers. Furthermore, logistical challenges, including inflation and availability of freight providers and containers for shipping can also significantly impact our profitability and inventory lead-times. These constraints can also present an opportunity, as our supply chain expertise allows us to meet customer expectations when the competition may not.

Recent geopolitical developments, including military conflict involving Iran, have contributed to increased volatility in global energy markets, financial markets and international supply chains. While the full impact of these conditions continues to evolve, management is actively monitoring potential effects on customer demand, costs, logistics and overall macroeconomic conditions. Oil and gas producers have generally remained disciplined in their capital expenditures and have generally not increased production beyond their ability to fund their expenditures from prudent borrowings and cash flow from operations. We expect this trend to continue.

The U.S. government has imposed tariffs on steel products, which were expanded throughout 2025. A significant portion of the products that we sell are made from steel. In addition, a portion of the products that we sell are sourced from China and India, including certain valve sub-assemblies and pump sub-components that are finished in the U.S. The tariffs on products from Canada and Mexico have a lesser direct impact on our business as they do not represent a significant portion of the products that we purchase from those countries for resale to our customers. Even so, a significant portion of our U.S. inventory and products are domestically made but some products, such as valves and pumps, often have a significant portion of non-U.S. components, and we do import some valves, pumps and other products. In many instances, we have successfully collaborated with our customers to implement tariff pass-throughs throughout 2025 and into 2026. However, in some instances, tariffs raised infrastructure costs for our customers, making projects less viable and resulting in delays or cancellations among certain downstream clients.

The U.S. Supreme Court has now invalidated the use of the International Emergency Economic Powers Act (“IEEPA”) to impose tariffs. The overall impact on tariffs is unknown at this time. The administration has already relied on other statutory authorities to maintain or adjust tariffs, and those sector-specific tariffs remain fully in effect. Notably, Section 232 tariffs on steel and aluminum remain in effect.

We see the evolution in energy transition investments to reduce atmospheric carbon, source carbon capture, storage and new energy streams as an opportunity for DNOW to supply many of the current products and services we provide, as well as an opportunity to partner and source from new suppliers to expand our offering and to meet our customers’ needs for their energy evolution investments. A number of our larger customers are leading the investments in energy evolution projects where we expect to continue to support them while expanding our product and solution offerings to meet their changing requirements. Part of our growth strategy is to expand our revenues by targeting new customers in non-oil and gas end markets, in addition to servicing those customers that will play a part in the future of the evolving mix of traditional and new sources of energy.

The Upstream sector of our business includes the traditional exploration, production and extraction of oil and gas, as well as the use and disposal of produced water, and is the most cyclical of our markets. In the three months ended March 31, 2026, this sector represented 39% of our total Company revenue. The Upstream sector revenue increased 12% in the three months ended March 31, 2026 compared to the corresponding period of 2025. During the three months ended March 31, 2026, West Texas Intermediate (“WTI”) oil prices averaged $71.98 per barrel, up 0.2% from the corresponding period of 2025. Natural gas prices also drive customer activity and have experienced volatility but increased throughout 2025, driven by climate and seasonal weather patterns, increased LNG exports and lower storage levels.

Recent industry reports have projected flat to lower upstream customer spending levels in 2026, due to current supply and demand projections. We also expect our larger public customers will remain disciplined and consistent with their commitments to their budgets, maintaining returns to their shareholders and operating within their cash flow requirements. Despite this, we expect opportunities for revenue synergies from cross-selling products related to our acquisitions will support growth in this sector. We also expect incremental growth in water management and disposal solutions, supported by our Flex Flow and Trojan offerings, as customers seek to optimize operating costs and manage produced water volumes more effectively.

The majority of the revenue in this sector comes from large independents and major exploration and production companies, which are expected to strongly influence the increase in capital spending in the coming years for this sector.

The Gas Utilities sector contributed 23% of our total Company revenue in the three months ended March 31, 2026, and will represent a greater proportion of revenue in the future following the November 2025 acquisition of MRC Global. Market growth fundamentals of this sector are positive due to the demand for natural gas, distribution integrity upgrade programs as well as new home construction in certain U.S. states. The majority of the work we perform with our gas utility customers are multi-year programs where they continually evaluate, monitor and implement measures to improve their pipeline distribution networks, ensuring the safety and the integrity of their system. As of 2025, which is the most recently available information, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) estimates approximately 33% of the gas distribution main and service line miles are over 40 years old or of unknown origin. This infrastructure requires continuous replacement and maintenance as these gas distribution networks continue to age. We supply many of the replacement products including valves, line pipe, smart meters, risers and other gas products. A large percentage of the line pipe we sell is sold to our gas utilities customers for line replacement and new sections of their distribution network. As our gas utility customers connect new homes and businesses to their gas distribution network, the growth in the housing market creates new revenue opportunities for our business to supply the related infrastructure products. Some of our customers in this sector support both gas and electric distribution, and certain customers have announced allocating a higher proportion of their capital budget to electric distribution. However, based on market fundamentals, the need for natural gas to fuel new electric generation facilities and new market share opportunities, we expect the Gas Utilities sector to continue to have steady growth in the coming years. Additionally, due to its reduced dependency on energy demand and commodity prices, this sector is less volatile than the others.

Downstream and Industrial sector generated 20% of our total Company revenue in the three months ended March 31, 2026. We expect this sector to deliver strong growth in the coming years driven by increased customer activity levels related to maintenance, repair and operations (“MRO”) activities, project turnaround activity in refineries and chemical plants and new energy transition related projects. Additionally, we have expanded into new markets, including mining and data centers. We are also negotiating master service agreements with targeted owners and subcontractors for PVF work in new data center cooling systems. While still early, we are seeing encouraging momentum in both areas. This sector has a significant amount of project activity, which can create substantial variability between quarters.

The outlook for energy transition projects within the Downstream and Industrial sector is supported by government incentives and policies. Many of our customers have made commitments to net zero emissions to address climate change. Our customer base represents many of the primary leaders in the energy transition movement, and they are positioned to lead the effort to decarbonize through nearer-term efforts such as renewable or biodiesel refineries and offshore wind power generation as well as longer-term efforts

such as carbon capture and storage and hydrogen. However, as U.S. government support is waning for these projects even while European government support continues, we are monitoring our customers' plans for, and the pace of development of, these projects.

DNOW’s Midstream sector is primarily U.S. based and driven by the increased demand for pipelines and gathering systems. In the three months ended March 31, 2026, this sector represented 18% of our total Company revenue. The Midstream sector revenue increased 70% in the three months ended March 31, 2026 compared to the corresponding period of 2025. The outlook in 2026 is expected to have growth primarily driven by demand for natural gas infrastructure as LNG exports continue to rise and gas fired power generation increases for data centers. This market driver is anticipated to positively impact the Midstream sector, contributing to growth. The revenue profile for this sector tends to be volatile between quarters, as it can often be tied to large projects.

Furthermore, as new LNG capacity comes online this drives the need for associated pipeline infrastructure, which several LNG projects are expected to do in 2026. U.S. natural gas production is expected to rise, leading to the need for additional pipeline infrastructure and gathering systems. Rising electricity consumption from AI-driven data centers creates the need for additional natural gas transportation, which is also expected to drive growth in this sector.

In some cases, the market drivers for the Midstream sector are also tied to the same drivers as the Upstream sector, but on a one to two quarter lag. To the extent completion activity and related production increase, this could also have the impact of improving our revenue opportunities in the Midstream sector. New well completions and higher production levels drive the need for additional surface equipment and gathering and processing infrastructure, benefiting this sector's revenue. Following the acquisition of MRC Global, we have enhanced our capabilities in large-bore valves, larger outside diameter pipe, measurement and instrumentation and valve actuation and automation that are in demand when the Midstream sector expands. We believe the combined company is well positioned to capture midstream growth opportunities both domestically and internationally, supported by an expanded footprint and integrated solutions offering.

Occasionally, the U.S. imposes tariffs on certain imported products that we distribute. These tariffs typically lead to an increase in the prices we pay for these products. Despite these cost pressures, we are generally able to mitigate the impact by leveraging our long-standing relationships with suppliers and the substantial volume of our purchases. These factors enable us to secure market-competitive pricing even in the face of rising costs.

Our supply chain expertise, strong relationships with key suppliers, and effective inventory management allow us to navigate both inflationary and deflationary market conditions. This strategic approach ensures that we can maintain stability in our operations despite external economic pressures. Furthermore, our contracts with customers typically include provisions that allow us to respond quickly to price increases. These contractual mechanisms enable us to pass along cost increases to our customers.

It is important to note that these challenges are dynamic and continue to evolve. If additional pricing fluctuations arise due to tariffs or quotas, the ultimate effect on our revenue and cost of products—which are determined using the LIFO inventory costing methodology—remains uncertain and subject to volatility.

Our results are dependent on, among other factors, the level of worldwide oil and gas drilling and completions, well remediation activity, crude oil and natural gas prices, capital spending by oilfield service companies and drilling contractors, and the worldwide oil and gas inventory levels. Key industry indicators for the first quarter of 2026 and 2025 and the fourth quarter of 2025 include the following:


					%					%
					1Q26 v					1Q26 v
	1Q26*		1Q25*		1Q25			4Q25*		4Q25
Active Rigs:
U.S.		548		588		(6.8	%)		548		0.0	%
Canada		201		216		(6.9	%)		185		8.6	%
International		1,083		1,097		(1.3	%)		1,066		1.6	%
Worldwide		1,832		1,901		(3.6	%)		1,799		1.8	%

WTI ($/bbl)	$	71.98	$	71.84		0.2	%	$	59.64		20.7	%
Natural Gas Prices ($/MMBtu)	$	4.79	$	4.15		15.4	%	$	3.75		27.7	%
Hot-Rolled Coil Prices (steel) ($/short ton)	$	923.51	$	753.21		22.6	%	$	828.78		11.4	%
U.S. Wells Completed		2,885		2,879		0.2	%		3,055		(5.6	%)

* Monthly averages for the quarters indicated, except for U.S. Wells Completed. See sources on following page.

The following table details the U.S., Canadian and international rig activity and West Texas Intermediate oil prices for the past nine quarters ended March 31, 2026. During the third quarter of 2025, Baker Hughes’s methodology for calculating rig counts in the Kingdom of Saudi Arabia has been updated effective for periods beginning January 2024. As a result, previously reported international rig counts have been recast to conform to the updated methodology.

Sources: Rig count: Baker Hughes, Inc. (www.bakerhughes.com); West Texas Intermediate Crude and Natural Gas Prices: Department of Energy, Energy Information Administration (“EIA”) (www.eia.gov); Hot-Rolled Coil Prices: SteelBenchmarker™ Hot Roll Coil USA (www.steelbenchmarker.com); U.S. Wells Completed: Department of Energy, Energy Information Administration (www.eia.gov) (As revised).

The worldwide quarterly average rig count increased 1.8% (from 1,799 rigs to 1,832 rigs) and the U.S. remained flat (at 548 rigs) in the first quarter of 2026 compared to the fourth quarter of 2025. The average price per barrel of WTI Crude increased 20.7% (from $59.64 per barrel to $71.98 per barrel), and average natural gas prices increased 27.7% (from $3.75 per MMBtu to $4.79 per MMBtu) in the first quarter of 2026 compared to the fourth quarter of 2025. The average price per short ton of Hot-Rolled Coil increased 11.4% (from $828.78 per short ton to $923.51 per short ton) in the first quarter of 2026 compared to the fourth quarter of 2025. U.S. Wells Completed declined 5.6% (from 3,055 completion count to 2,885 completion count) in the first quarter of 2026 compared to the fourth quarter of 2025.

We play a vital role in supporting customers’ supply chains, providing essential products for energy and industrial markets, including infrastructure across upstream, gas utilities, midstream, downstream, energy transition and industrial sectors. Our business depends on both capital and maintenance spending by our customers. Global oil and gas consumption is rising due to population growth and expanding energy needs in emerging markets. The EIA projects world energy consumption to increase 34% between 2022 and 2050, with significant growth in renewables (118%), natural gas (29%) and hydrocarbon-based liquids (23%). U.S. oil production is expected to peak at 14 million barrels per day in 2028 and gradually decline, while natural gas production will grow, largely driven by LNG

expansion and power generation. The gas utilities industry is expected to grow as aging distribution networks prompt replacement and modernization. PHMSA estimates that roughly 33% of gas distribution lines are over 40 years old or of unknown origin, driving ongoing maintenance. Housing market growth further increases demand for related infrastructure products. According to the EIA, the U.S. will remain a net exporter of petroleum products due to expanded terminal capacity, with strong markets for our goods and services. This projected increase in oil and gas to meet the rise in international energy demand continues to provide a robust market for our existing goods and services. We anticipate future growth from energy transition projects, as traditional energy customers shift capital to these areas. Our established relationships and experience position us well for this evolving market. The U.S. midstream sector is expanding, particularly in natural gas infrastructure to meet LNG export and power demands. Federal policies have accelerated project reviews and simplified processes for pipeline development. Globally, refining capacity—especially in Asia and the Middle East—is projected to outpace demand growth later in the decade; the U.S. market remains stable but faces planned capacity reductions. As refineries age or convert to renewable fuels, we supply critical infrastructure for continued operations and conversions. The U.S. chemicals market is expected to grow steadily, while short term cycles will exist, and remain globally competitive through 2040, due to feedstock cost advantage from shale gas and natural gas liquids (“NGLs”). The European market is transitioning toward specialty and sustainable chemicals with commodity chemicals declining. Demand for our products is shaped by operational budgets, capacity expansions, and compliance needs.

The results of operations are presented before consideration of the noncontrolling interests. Our results of operations are as follows (in millions):


	Three months ended March 31,
	2026			2025
Revenue:
United States	$	985		$	474
Canada		51			62
International		147			63
Total revenue	$	1,183		$	599

Operating (loss) profit:
United States	$	(54	)	$	21
Canada		1			4
International		3			4
Total operating (loss) profit	$	(50	)	$	29

Other (expense) income		(10	)		—
(Loss) income before income taxes		(60	)		29
Income tax (benefit) provision		(16	)		7
Net (loss) income		(44	)		22
Net (loss) income attributable to noncontrolling interests		—			1
Net (loss) income attributable to DNOW Inc.	$	(44	)	$	21

Gross Profit	$	193		$	138
Adjusted Gross Profit (1)	$	256		$	141
Adjusted EBITDA (1)	$	39		$	46

(1)

Adjusted Gross Profit and Adjusted EBITDA are non-GAAP financial measures. For a reconciliation of these measures to an equivalent GAAP measure, see pages 24-25 herein.

Revenue. Our revenue was $1,183 million for the three months ended March 31, 2026, compared to $599 million for the corresponding period of 2025, an increase of $584 million or 97.5%.

U.S. Segment—Revenue was $985 million for the three months ended March 31, 2026, an increase of $511 million or 107.8% compared to the corresponding period of 2025. The increase was primarily driven by incremental revenue from the MRC Global acquisition completed in the fourth quarter of 2025.

Canada Segment—Revenue was $51 million for the three months ended March 31, 2026, a decrease of $11 million or 17.7% compared to the corresponding period of 2025. The decrease was primarily due to lower project-related activity.

Our Canadian revenue was approximately 4% of total revenue for the three months ended March 31, 2026, compared to 10% for the three months ended March 31, 2025. We are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar. Our Canadian revenue is favorably impacted as the U.S. dollar weakens relative to the Canadian dollar, and unfavorably impacted as the

U.S. dollar strengthens relative to the Canadian dollar. Our Canadian segment revenue was favorably impacted by approximately $2 million due to changes in foreign currency exchange rates over the prior year.

International Segment—Revenue was $147 million for the three months ended March 31, 2026, an increase of $84 million or 133.3% compared to the corresponding period of 2025. The increase was primarily due to the acquisition of MRC Global in the fourth quarter of 2025.

Our international revenue was approximately 13% of total revenue for the three months ended March 31, 2026, compared to 11% for the three months ended March 31, 2025. We are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar. Our international revenue is favorably impacted as the U.S. dollar weakens relative to other foreign currencies, and unfavorably impacted as the U.S. dollar strengthens relative to other foreign currencies. Our international segment revenue was favorably impacted by approximately $3 million due to changes in foreign currency exchange rates over the prior year.

Gross Profit. Our gross profit was $193 million (16.3% of revenue) for the three months ended March 31, 2026, compared to $138 million (23.0% of revenue) for the three months ended March 31, 2025. The $55 million increase was primarily attributable to an increase in revenue due to the acquisition of MRC Global in November 2025. Compared to average cost, our LIFO inventory costing methodology increased cost of products by $16 million for the three months ended March 31, 2026, compared to a $1 million increase in cost of products for the three months ended March 31, 2025.

Adjusted Gross Profit. Adjusted Gross Profit increased to $256 million (21.6% of revenue) for the three months ended March 31, 2026 from $141 million (23.5% of revenue) for the three months ended March 31, 2025, an increase of $115 million. The increase was primarily driven by the U.S. and International segments, partially offset by the Canada segment. The reduced margin percentage is primarily driven by the impact of MRC Global contributions.

Adjusted Gross Profit is a non-GAAP financial measure. We define Adjusted Gross Profit as revenues, less cost of products, plus amortization of intangibles, plus inventory-related charges incremental to normal operations, plus transaction costs associated with acquisitions, such as inventory fair value step-up or write-downs, and plus or minus the impact of our LIFO inventory costing methodology. We present Adjusted Gross Profit because we believe it is a useful indicator of our operating performance without regard to items, such as amortization of intangibles that can vary substantially from company to company depending upon the nature and extent of acquisitions. Similarly, the impact of the LIFO inventory costing method can cause results to vary substantially from company to company depending upon whether they elect to utilize LIFO and depending upon which method they may elect. We use Adjusted Gross Profit as a key performance indicator in managing our business. We believe that gross profit is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to Adjusted Gross Profit.

The following table reconciles gross profit, as derived from our consolidated financial statements, with Adjusted Gross Profit, a non-GAAP financial measure (in millions):


	Three months ended March 31,
	2026		As a % of revenue			2025		As a % of revenue
Gross profit, as reported	$	193		16.3	%	$	138		23.0	%
Amortization of intangibles		6					2
Increase in LIFO reserve		16					1
Inventory-related transaction charges		41					—
Adjusted Gross Profit	$	256		21.6	%	$	141		23.5	%

Selling, general and administrative (“SG&A”) expenses. SG&A expenses were $243 million for the three months ended March 31, 2026, compared to $109 million for the corresponding period of 2025, an increase of $134 million. The increase was primarily driven by incremental expenses from the MRC Global acquisition completed in the fourth quarter of 2025. SG&A expenses include branch location, distribution center and regional expenses (including costs such as compensation, benefits and rent) as well as depreciation and corporate selling, general and administrative expenses.

Operating (loss) profit. Our operating loss was $50 million for the three months ended March 31, 2026, compared to an operating profit of $29 million for the corresponding period of 2025, a decrease of $79 million primarily due to inventory-related transaction charges, our LIFO inventory costing methodology, reduced margins and increases in incremental SG&A expenses associated with the MRC Global acquisition.

U.S. Segment—Operating loss was $54 million for the three months ended March 31, 2026, a decrease of $75 million compared to the corresponding period of 2025. Operating profit decreased primarily due to inventory-related transaction charges, our LIFO inventory costing methodology and increases in incremental expenses associated with the MRC Global acquisition.

Canada Segment—Operating profit was $1 million for the three months ended March 31, 2026, a decrease of $3 million compared to the corresponding period of 2025. Operating profit decreased primarily due to the decline in revenue discussed above.

International Segment—Operating profit of $3 million for the three months ended March 31, 2026, a decrease of $1 million compared to the corresponding period of 2025.

Other (expense) income. Other expense was $10 million for the three months ended March 31, 2026 and was primarily attributable to

interest expense on borrowings associated with the acquisition of MRC Global completed in the fourth quarter of 2025. Other (expense) income was nil for the corresponding period of 2025.

Income tax (benefit) provision. The effective tax rate for the three months ended March 31, 2026, was 26.7% compared to 24.1% for the corresponding period of 2025. In general, the Company's effective tax rate differs from the U.S. statutory rate due to recurring items, such as differing tax rates on income earned in foreign jurisdictions, nondeductible expenses and state income taxes. The effective tax rate for the three months ended March 31, 2026, was higher than the effective tax rate for the three months ended March 31, 2025, primarily due to discrete tax benefits recognized in the quarter which increase the effective tax rate as a result of the loss before income taxes reported in the period.

Net (loss) income attributable to DNOW Inc. Our net loss attributable to DNOW Inc. was $44 million for the three months ended March 31, 2026, compared to net income attributable to DNOW Inc. of $21 million for the three months ended March 31, 2025, a decrease of $65 million due to inventory-related transaction charges, our LIFO inventory costing methodology, reduced margins and increases in incremental SG&A expenses associated with the MRC Global acquisition.

Adjusted EBITDA. Adjusted EBITDA, a non-GAAP financial measure, was $39 million (3.3% of revenue) for the three months ended March 31, 2026, compared to $46 million (7.7% of revenue) for the three months ended March 31, 2025. Our Adjusted EBITDA decreased $7 million over the period primarily due to reduced margins and increases in incremental SG&A expenses associated with the MRC Global acquisition.

We define Adjusted EBITDA as net (loss) income plus interest, taxes, depreciation and amortization and excluding other costs, such as stock-based compensation, restructuring and exit costs, transaction-related charges, long-lived asset impairments (including goodwill and intangible assets), inventory-related charges incremental to normal operations and plus or minus the impact of our LIFO inventory costing methodology. Transaction-related charges include transaction costs, inventory fair value step-up and write-down, retention bonus accruals and integration expenses associated with acquisitions. This financial measure excludes the impact of certain amounts and is not calculated in accordance with GAAP. A reconciliation of this non-GAAP financial measure, to its most comparable GAAP financial measure, is included below.

We believe Adjusted EBITDA provides investors with a helpful measure for comparing our operating performance with the performance of other companies that may have different financing and capital structures or tax rates. We believe it is a useful indicator of our operating performance without regard to items, such as amortization of intangibles, which can vary substantially from company to company depending upon the nature and extent of acquisitions. Similarly, the impact of the LIFO inventory costing method can cause results to vary substantially from company to company depending upon whether they elect to utilize LIFO and depending upon which method they may elect. We use Adjusted EBITDA internally to evaluate and manage the Company’s operations because we believe it provides useful supplemental information regarding the Company’s ongoing operating performance. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. We believe that net (loss) income attributable to DNOW Inc. is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to Adjusted EBITDA.

The following table reconciles net (loss) income attributable to DNOW Inc., as derived from our consolidated financial statements, with Adjusted EBITDA, a non-GAAP financial measure (in millions):


	Three months ended March 31,
	2026			As a % of revenue			2025			As a % of revenue
Net (loss) income attributable to DNOW Inc.	$	(44	)		(3.7	)%	$	21			3.5	%
Net income attributable to noncontrolling interests		—						1
Interest expense (income), net		8						(1	)
Income tax (benefit) provision		(16	)					7
Depreciation and amortization		23						11
Stock-based compensation (1)		4						3
Increase in LIFO reserve		16						1
Transaction-related charges (2)		5						2
Inventory-related transaction charges (3)		41						—
Restructuring and exit costs (2)		—						1
Other (4)		2						—
Adjusted EBITDA	$	39			3.3	%	$	46			7.7	%

(1)

For the three months ended March 31, 2026 and 2025, stock-based compensation excludes $1 million and less than $1 million, respectively, as such amounts were reported in transaction-related charges.

(2)

Transaction-related charges and restructuring and exit costs are included in selling, general and administrative expenses.

(3)

Inventory-related transaction charges are included in cost of products. For the three months ended March 31, 2026, inventory-related transaction charges included $41 million of charges related to inventory step-up.

(4)

For the three months ended March 31, 2026, other costs included $2 million related to foreign currency losses.

We assess liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. We expect resources to be available to reinvest in existing businesses, strategic acquisitions and capital expenditures to meet short and long-term objectives. We believe that cash on hand, cash generated from expected results of operations and amounts available under our revolving credit facility will be sufficient to fund operations, anticipated working capital needs and other cash requirements, including capital expenditures and our share repurchase program.

As of March 31, 2026 and December 31, 2025, we had cash and cash equivalents of $116 million and $164 million, respectively. As of March 31, 2026, $108 million of our cash and cash equivalents were maintained in the accounts of our various foreign subsidiaries. During the first three months of 2026, we repatriated $31 million from our foreign subsidiaries. The Company makes a determination each period concerning its intent and ability to indefinitely reinvest the cash held by its foreign subsidiaries. The Company has not recorded deferred income taxes on undistributed foreign earnings that it considers to be indefinitely reinvested. Future changes to our indefinite reinvestment assertion could result in additional taxes (withholding and/or state taxes), offset by any available foreign tax credits.

We maintain an $850 million five-year senior secured revolving credit facility that will mature on November 6, 2030. Availability under the revolving credit facility is limited to the lesser of the commitments and a borrowing base comprised of eligible account receivables, eligible inventory and eligible rental equipment assets of the Borrowers and subsidiary guarantors. As of March 31, 2026, we had $571 million borrowings against our revolving credit facility and had approximately $263 million in availability (as defined in the Credit Agreement). The credit facility includes a springing financial covenant that requires us to maintain, during any period when availability falls below specified thresholds, a minimum fixed charge coverage ratio (as defined in the Credit Agreement). The credit facility contains usual and customary affirmative and negative covenants for credit facilities of this type including financial covenants. As of March 31, 2026, we were in compliance with all covenants. We continuously monitor compliance with our debt covenants. A default, if not waived or amended, would prevent us from taking certain actions, such as incurring additional debt.

In connection with acquisitions in 2024, 2025 and 2026, the Company is committed to total future retention payments of up to $11 million payable in 2027, 2028 and 2029. Payments are due to various employees if non-financial post combination service conditions are met pursuant to the terms and conditions of the retention agreements.

The following table summarizes our net cash flows (used in) provided by operating activities, investing activities and financing activities for the periods presented (in millions):


	Three months ended March 31,
	2026			2025
Net cash used in operating activities	$	(95	)	$	(16	)
Net cash used in investing activities		(53	)		(5	)
Net cash provided by (used in) financing activities		101			(17

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

DNOW Inc. 10-Q