DNOW Inc. (NYSE: DNOW) doubles revenue post-merger but reports first-half loss
Rhea-AI Filing Summary
DNOW Inc. reported much higher scale in 2026 but weaker profitability. Revenue reached $1,307 million in the second quarter and $2,490 million for the first half, compared with $628 million and $1,227 million a year earlier, reflecting the November 2025 MRC Global acquisition and growth across upstream, gas utilities, downstream and midstream customers. Gross profit increased to $243 million in the quarter and $436 million year to date.
Selling, general and administrative expenses rose to $238 million in the quarter and $481 million for the first half, and an impairment charge plus higher other expense led to a net loss attributable to DNOW of $21 million in the quarter and $65 million year to date, versus net income of $14 million and $35 million in 2025; diluted EPS was a loss of $0.11 for the quarter and $0.35 for the first half. Cash declined to $114 million at June 30, 2026 while long‑term debt under the amended $850 million asset‑based credit facility increased to $474 million, with about $358 million of availability. Operating cash flow was $38 million in the first half, alongside $61 million used in investing activities and $24 million used in financing, including $75 million of share repurchases covering 6.1 million shares. DNOW also acquired Edge Controls for approximately $46 million, recording $27 million of goodwill and expanding its automation and controls offering, and continues to manage asbestos‑related and unclaimed‑property matters using accruals and insurance consistent with current assessments.
Positive
- First-half 2026 revenue grew to $2,490 million from $1,227 million a year earlier, reflecting the added scale from the MRC Global acquisition and higher activity across upstream, gas utilities, downstream and midstream customers.
- Adjusted EBITDA was $99 million for the first six months of 2026, slightly above $97 million in the prior-year period, indicating that underlying cash earnings have remained broadly stable while the business footprint expanded.
Negative
- Net results swung to a loss, with a $21 million second-quarter 2026 net loss and a $65 million first-half loss, compared with net income of $14 million and $35 million in the corresponding 2025 periods; diluted EPS moved from $0.32 to a loss of $0.35 year to date.
- Balance-sheet leverage increased as long-term debt under the revolving credit facility rose to $474 million at June 30, 2026 from $411 million at year-end 2025, while cash and cash equivalents declined to $114 million from $164 million.
Filing Explained
The filing puts common shares at 180,910,798 on June 30, with repurchase capacity noncommitted and debt secured by company assets.
The
The authorized
DNOW's amended asset-based facility matures on
If availability falls below specified thresholds, the facility's springing covenant requires a fixed-charge coverage ratio of at least 1.00:1.00; the company also had
Key Figures
Key Terms
Last-In, First-Out (LIFO) financial
Variable Interest Entities financial
Amended and Restated Credit Agreement financial
Performance stock awards financial
Accumulated Other Comprehensive Income (Loss) financial
Asbestos Claims financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did DNOW (DNOW) revenue perform in Q2 and the first half of 2026?
What were DNOW (DNOW) net income and EPS for Q2 and first-half 2026?
What is DNOW (DNOW) current debt and liquidity position as of June 30, 2026?
How much stock did DNOW (DNOW) repurchase in the first half of 2026?
What acquisitions has DNOW (DNOW) recently completed and at what cost?
How are DNOW (DNOW) business segments contributing to revenue in 2026?
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
(Exact name of registrant as specified in its charter)
|
||
(State or other jurisdiction of incorporation or organization) |
|
(IRS Employer Identification No.) |
|
( |
|
(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 |
|
|
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.
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).
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.
|
☒ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|
|||
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging growth company |
|
|
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 July 29, 2026, the registrant had
1
DNOW INC.
TABLE OF CONTENTS
Part I - Financial Information |
||||
|
|
|
|
|
Item 1. |
|
Financial Statements |
|
3 |
|
|
|
|
|
|
|
Consolidated Balance Sheets as of June 30, 2026 (Unaudited) and December 31, 2025 |
|
3 |
|
|
|
|
|
|
|
Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2026 and 2025 |
|
4 |
|
|
|
|
|
|
|
Consolidated Statements of Comprehensive (Loss) Income (Unaudited) for the three and six months ended June 30, 2026 and 2025 |
|
5 |
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2026 and 2025 |
|
6 |
|
|
|
|
|
|
|
Consolidated Statements of Stockholders' Equity (Unaudited) for the three and six months ended June 30, 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 |
|
20 |
|
|
|
|
|
Item 3. |
|
Quantitative and Qualitative Disclosures About Market Risk |
|
30 |
|
|
|
|
|
Item 4. |
|
Controls and Procedures |
|
31 |
|
|
|
|
|
Part II - Other Information |
||||
|
|
|
|
|
Item 1. |
|
Legal Proceedings |
|
32 |
|
|
|
|
|
Item 1A. |
|
Risk Factors |
|
32 |
|
|
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
|
32 |
|
|
|
|
|
Item 3. |
|
Defaults Upon Senior Securities |
|
32 |
|
|
|
|
|
Item 4. |
|
Mining Safety Disclosures |
|
32 |
|
|
|
|
|
Item 5. |
|
Other Information |
|
32 |
|
|
|
|
|
Item 6. |
|
Exhibits |
|
33 |
|
|
|
|
|
|
|
Signature |
|
34 |
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DNOW INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share and par value)
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
(Unaudited) |
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Receivables, net |
|
|
|
|
|
|
||
Inventories, net |
|
|
|
|
|
|
||
Prepaid and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
|
||
Operating right-of-use assets |
|
|
|
|
|
|
||
Deferred income tax assets |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangibles, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued liabilities |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term debt |
|
|
|
|
|
|
||
Long-term operating lease liabilities |
|
|
|
|
|
|
||
Deferred income tax liabilities |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Stockholders' equity: |
|
|
|
|
|
|
||
Common stock - par value $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
DNOW Inc. stockholders' equity |
|
|
|
|
|
|
||
Noncontrolling interests |
|
|
|
|
|
|
||
Total stockholders' equity |
|
|
|
|
|
|
||
Total liabilities and stockholders' equity |
|
$ |
|
|
$ |
|
||
See notes to unaudited consolidated financial statements.
3
DNOW INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In millions, except per share data)
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment and other charges |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating profit (loss) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other (expense) income, net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
(Loss) income before income taxes |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Income tax provision (benefit) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Net (loss) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net (loss) income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income attributable to DNOW Inc. |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) earnings per share attributable to DNOW Inc. stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Weighted-average common shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
See notes to unaudited consolidated financial statements.
4
DNOW INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
(In millions)
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net (loss) income |
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments, net of tax |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Comprehensive (loss) income |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Comprehensive income attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
||||
Comprehensive (loss) income attributable to DNOW Inc. |
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
See notes to unaudited consolidated financial statements.
5
DNOW INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
|
Six months ended June 30, |
|
|||||
|
2026 |
|
|
2025 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
||
Net (loss) income |
$ |
( |
) |
|
$ |
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities |
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
||
Increase in LIFO reserve |
|
|
|
|
|
||
Provision for inventory |
|
|
|
|
|
||
Impairment and other charges |
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
||
Deferred income taxes |
|
( |
) |
|
|
|
|
Operating lease expense |
|
|
|
|
|
||
Other, net |
|
|
|
|
|
||
Change in operating assets and liabilities, net of effects of acquisitions: |
|
|
|
|
|
||
Receivables |
|
( |
) |
|
|
( |
) |
Inventories |
|
|
|
|
( |
) |
|
Prepaid and other current assets |
|
( |
) |
|
|
|
|
Accounts payable |
|
|
|
|
|
||
Accrued liabilities and other, net |
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
||
Business acquisitions, net of cash acquired |
|
( |
) |
|
|
( |
) |
Purchases of property, plant and equipment |
|
( |
) |
|
|
( |
) |
Other, net |
|
|
|
|
|
||
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
||
Borrowings under the revolving credit facility |
|
|
|
|
|
||
Repayments under the revolving credit facility |
|
( |
) |
|
|
|
|
Repurchases of common stock |
|
( |
) |
|
|
( |
) |
Shares withheld for taxes |
|
( |
) |
|
|
( |
) |
Other, net |
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
( |
) |
|
|
( |
) |
Effect of exchange rates on cash and cash equivalents |
|
( |
) |
|
|
|
|
Net change in cash and cash equivalents |
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
|
||
Cash and cash equivalents, end of period |
$ |
|
|
$ |
|
||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
||
Income taxes paid, net |
$ |
|
|
$ |
|
||
Interest paid |
|
|
|
|
|
||
Non-cash investing and financing activities: |
|
|
|
|
|
||
Accrued purchases of property, plant and equipment |
$ |
|
|
$ |
|
||
Acquisition measurement period adjustment |
|
|
|
|
|
||
See notes to unaudited consolidated financial statements.
6
DNOW INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(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 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Common stock repurchased |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of stock options |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Shares withheld for taxes |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
March 31, 2025 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Common stock repurchased |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of stock options |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
June 30, 2025 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2025 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Net loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Common stock repurchased |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Vesting of restricted stock |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Shares withheld for taxes |
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
March 31, 2026 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Net loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Common stock repurchased |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
June 30, 2026 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
See notes to unaudited consolidated financial statements.
7
DNOW INC.
Notes to Unaudited Consolidated Financial Statements
1. Organization and Basis of Presentation
Nature of Operations
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 and acquired brands operating in local, regional or international markets. DNOW is a leading distributor of pipe, valves, fittings (“PVF”), gas products, pumps and fabricated process and production equipment through its approximately
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 products to customers to build and maintain essential infrastructure and operating equipment across the upstream, gas utilities, downstream and industrial and midstream markets as well as supply chain solutions, technical product expertise and a digital platform to customers globally through our leading position across diversified end-markets including the following sectors:
Basis of Presentation
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 and six months ended June 30, 2026, are not necessarily indicative of the results to be expected for the full year.
Change in Accounting Principle
In 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 and six months ended June 30, 2025, this change resulted in an increase of $
Long-lived Assets, Excluding Goodwill and Indefinite-lived Intangible Assets
Long-lived assets, other than goodwill and indefinite-lived intangibles, include property, plant and equipment, operating right-of-use (“ROU”) assets and identified intangible assets with finite lives. The Company evaluates the recoverability of long-lived assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable.
8
In the second quarter of 2026, the Company recorded a $
Use of Estimates
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 periods. Actual results may differ from those estimates.
Recently Issued Accounting Standards
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 on 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 on its consolidated financial statements and its disclosures.
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.
2. Revenue
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 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 for orders in advance of the customer obtaining control are deferred and revenue is not recognized until 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 June 30, 2026 and 2025, rental revenue totaled $
9
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of orders for which work has not been performed on contracts 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
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 June 30, 2026 and December 31, 2025, the allowance for credit losses totaled $
Contract Balances
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 June 30, 2026 and December 31, 2025, contract assets were $
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 June 30, 2026 and December 31, 2025, contract liabilities were $
Disaggregated Revenue
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.
10
The following table presents our revenue disaggregated by revenue source (in millions):
|
|
United States |
|
|
Canada |
|
|
International |
|
|
Total |
|
||||
Three months ended June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Upstream |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Gas Utilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Downstream and Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Midstream |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Six months ended June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Upstream |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Gas Utilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Downstream and Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Midstream |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Three months ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Upstream |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Gas Utilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Downstream and Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Midstream |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Six months ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Upstream |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Gas Utilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Downstream and Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Midstream |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
3. Inventories, net
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). An actual valuation of inventory under the LIFO method is performed 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):
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
U.S. inventory at average cost |
|
$ |
|
|
$ |
|
||
Outside U.S. inventory at average cost |
|
|
|
|
|
|
||
Total inventories |
|
|
|
|
|
|
||
Less: Excess of average cost over LIFO cost (LIFO reserve) |
|
|
( |
) |
|
|
( |
) |
Less: Other inventory reserves |
|
|
( |
) |
|
|
( |
) |
Inventories, net |
|
$ |
|
|
$ |
|
||
11
4. Accrued Liabilities
Accrued liabilities consist of (in millions):
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Compensation and other related expenses |
|
$ |
|
|
$ |
|
||
Contract liabilities |
|
|
|
|
|
|
||
Taxes (non-income) |
|
|
|
|
|
|
||
Current portion of operating lease liabilities |
|
|
|
|
|
|
||
Accrued selling, general and administrative expenses |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Accrued liabilities |
|
$ |
|
|
$ |
|
||
5. Debt
On
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.
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 $
The Company issued $
6. Stockholders’ Equity
Preferred Stock
The Company has authorized
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.
12
Share Repurchase Program
On January 24, 2025, the Company’s Board of Directors authorized a share repurchase program to purchase up to $
Information regarding the shares repurchased is as follows:
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Total cost of shares repurchased (1) (in millions) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Average price per share (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Number of shares repurchased |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consolidated Variable Interest Entities (“VIE”)
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 and six months ended June 30, 2026, net loss attributable to noncontrolling interests was less than $
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 June 30, 2026 and December 31, 2025, the VIEs’ assets were primarily current assets of $
7. Accumulated Other Comprehensive Income (Loss) (“AOCI”)
The components of AOCI are as follows (in millions):
|
|
Foreign Currency Translation Adjustments |
|
|||||
|
|
Six months ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Beginning balance |
|
$ |
( |
) |
|
$ |
( |
) |
Net current-period other comprehensive (loss) income, net of tax |
|
|
( |
) |
|
|
|
|
Ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
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.”
8. Business Segments
The Company has
13
The following table presents results of operations of the Company’s reportable segments (in millions):
|
|
United States |
|
|
Canada |
|
|
International |
|
|
Total |
|
||||
Three months ended June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross Profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment and other charges |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating (loss) profit |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
|
|
|||
Other expense |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Six months ended June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross Profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment and other charges |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating (loss) profit |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
|
( |
) |
||
Other expense |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Three months ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross Profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating profit |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Six months ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross Profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating profit |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
The following table presents depreciation and amortization of the Company’s reportable segments (in millions):
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Canada |
|
|
|
|
|
|
|
|
|
|
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
14
The following table presents property, plant and equipment, net and total assets of the Company’s reportable segments (in millions):
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Property, plant and equipment, net |
|
|
|
|
|
|
||
United States |
|
$ |
|
|
$ |
|
||
Canada |
|
|
|
|
|
|
||
International |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Total assets |
|
|
|
|
|
|
||
United States |
|
$ |
|
|
$ |
|
||
Canada |
|
|
|
|
|
|
||
International |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
9. Income Taxes
The effective tax rates for the three and six months ended June 30, 2026 was (
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 and in limited circumstances earlier years due to ongoing examinations by taxing authorities.
10. Earnings Per Share
Unvested restricted stock awards, unvested restricted units, unvested performance stock awards and unexercised stock options are excluded from the computation of diluted earnings per share when the Company recognizes a net loss for the applicable period or due to their anti-dilutive effect. For the three and six months ended June 30, 2026, approximately
Basic and diluted earnings per share are as follows (in millions, except share and per share data):
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income attributable to DNOW Inc. |
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Less: net income (loss) attributable to participating securities |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net (loss) income attributable to DNOW Inc. stockholders |
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average basic common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average diluted common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) earnings per share attributable to DNOW Inc. stockholders: |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Diluted |
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
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.
15
11. Stock-based Compensation and Outstanding Awards
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 six months ended June 30, 2026, the Company granted
Stock-based compensation expense for the three and six months ended June 30, 2026 totaled $
12. Commitments and Contingencies
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.
Legal Claims and Matters
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 June 30, 2026, the Company is a named defendant in approximately
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:
16
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 this 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.
Customer Contracts
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.
Purchase Commitments
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.
Warranty Claims
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.
Letters of Credit
The Company maintains credit arrangements with several banks providing standby letters of credit, including bid and performance bonds, and other bonding requirements. As of June 30, 2026, the Company was contingently liable for approximately $
13. Acquisitions
2026 Acquisition
For the six months ended June 30, 2026, the Company completed an acquisition of Edge Controls (“Edge”) for a purchase price consideration of approximately $
17
The Company completed its preliminary valuations as of the acquisition date of the acquired net assets and recognized goodwill of $
For the six months ended June 30, 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 $
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 $
The Company completed its preliminary valuations as of the acquisition date of the acquired net assets and recognized goodwill of $
18
The following table summarizes the purchase price allocation detail as of the acquisition date and measurement period adjustments related to conditions that existed as of the acquisition date recognized during the six months ended June 30, 2026 (in millions):
|
|
As initially |
|
Measurement period |
|
June 30, 2026 |
|
|||
Equity consideration for the conversion of MRC Global common stock outstanding |
|
$ |
|
$ |
|
$ |
|
|||
Fair value of replacement MRC Global RSUs and MRC Global PSUs attributable to the purchase price |
|
|
|
|
|
|
|
|||
Repayment of certain existing indebtedness of MRC Global |
|
|
|
|
|
|
|
|||
Purchase price consideration |
|
$ |
|
$ |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|||
Fair value of net assets acquired: |
|
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
$ |
|
$ |
|
$ |
|
|||
Receivables, net |
|
|
|
|
( |
) |
|
|
||
Inventories, net |
|
|
|
|
( |
) |
|
|
||
Prepaid and other current assets |
|
|
|
|
|
|
|
|||
Property, plant and equipment, net |
|
|
|
|
|
|
|
|||
Operating right-of-use assets |
|
|
|
|
|
|
|
|||
Other assets |
|
|
|
|
|
|
|
|||
Trade names (1) |
|
|
|
|
|
|
|
|||
Customer relationships (2) |
|
|
|
|
|
|
|
|||
Accounts payable |
|
|
( |
) |
|
( |
) |
|
( |
) |
Accrued liabilities |
|
|
( |
) |
|
|
|
( |
) |
|
Other current liabilities |
|
|
( |
) |
|
|
|
( |
) |
|
Long-term operating lease liabilities |
|
|
( |
) |
|
|
|
( |
) |
|
Deferred income tax liabilities |
|
|
( |
) |
|
|
|
( |
) |
|
Other long-term liabilities |
|
|
( |
) |
|
|
|
( |
) |
|
Noncontrolling interests |
|
|
( |
) |
|
|
|
( |
) |
|
Accumulated other comprehensive loss |
|
|
|
|
|
|
|
|||
Total fair value of net assets acquired |
|
|
|
|
( |
) |
|
|
||
Goodwill (3) |
|
$ |
|
$ |
|
$ |
|
|||
Singapore Acquisition. The Company completed its valuations as of the acquisition date of the acquired net assets and recognized goodwill of $
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
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.
Company Overview
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 and acquired brands operating in local, regional or international markets.
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 leading distributor 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:
Our comprehensive products and solutions offerings includes an extensive array of PVF, gas products, pumps, fabricated equipment, valve automation, valve modification, gaskets, fasteners, electrical components, measurement, instrumentation, artificial lift, pumping systems, process and production equipment, production measurement technology, MRO consumables and other general and specialty products. Our team of approximately 5,100 employees support our customers through approximately 300 strategic locations including regional distribution centers, super centers, branches and corporate offices.
20
Key Drivers of Our Business
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:
Recent Trends and Outlook
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. The majority of our publicly traded oil and gas producer customers 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.
21
The U.S. Supreme Court has invalidated the use of the International Emergency Economic Powers Act (“IEEPA”) to impose tariffs. The overall impact on IEEPA tariffs had been limited, as the administration quickly enacted or announced other statutory authorities to maintain or adjust tariffs. Besides the Section 232 tariffs on steel and aluminum noted above, Section 122 and 301 tariffs, along with pointed anti-dumping and countervailing duties, have been imposed to varying degrees.
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.
Upstream
The Upstream sector of our business includes the traditional exploration, production and extraction of oil and gas, as well as the use, transfer and disposal of produced water, and is the most cyclical of our markets. In the six months ended June 30, 2026, this sector represented 39% of our total Company revenue. The Upstream sector revenue increased 17% in the six months ended June 30, 2026 compared to the corresponding period of 2025. During the six months ended June 30, 2026, West Texas Intermediate (“WTI”) oil prices averaged $83.87 per barrel, up 22.9% 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 majority of our publicly traded oil and gas producer 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, Trojan and Edge Controls 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.
Gas Utilities
The Gas Utilities sector contributed 23% of our total Company revenue in the six months ended June 30, 2026, and we expect revenue from this sector to increase in future periods 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
Downstream and Industrial sector generated 18% of our total Company revenue in the six months ended June 30, 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, sequestration and storage and hydrogen. However, as U.S. government support is waning for these projects
22
even while European government support continues, we are monitoring our customers' plans for, and the pace of development of, these projects.
Midstream
DNOW’s Midstream sector is primarily U.S. based and driven by the increased demand for pipelines and gathering systems. In the six months ended June 30, 2026, this sector represented 20% of our total Company revenue. The Midstream sector revenue increased 71% in the six months ended June 30, 2026 compared to the corresponding period of 2025 primarily as a result of the acquisition of MRC Global in November 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. According to a 2025 Interstate Natural Gas Association of American ("INGAA") Foundation report, to meet energy demand through 2052, North America will require more than $1 trillion in capital investment across natural gas, oil, natural gas liquids, hydrogen and CO2 infrastructure, averaging $40 billion to $48 billion annually, varying by investment. This market driver is anticipated to positively impact our Midstream sector, contributing to opportunities for 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.
Supply Chain
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.
Operating Environment Overview
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 second quarter of 2026 and 2025 and the first quarter of 2026 include the following:
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|||||
|
|
|
|
|
|
|
|
2Q26 v |
|
|
|
|
|
2Q26 v |
|
|||||
|
|
2Q26* |
|
|
2Q25* |
|
|
2Q25 |
|
|
1Q26* |
|
|
1Q26 |
|
|||||
Active Rigs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. |
|
|
554 |
|
|
|
571 |
|
|
|
(3.0 |
%) |
|
|
548 |
|
|
|
1.1 |
% |
Canada |
|
|
150 |
|
|
|
129 |
|
|
|
16.3 |
% |
|
|
201 |
|
|
|
(25.4 |
%) |
International |
|
|
1,056 |
|
|
|
1,078 |
|
|
|
(2.0 |
%) |
|
|
1,083 |
|
|
|
(2.5 |
%) |
Worldwide |
|
|
1,760 |
|
|
|
1,778 |
|
|
|
(1.0 |
%) |
|
|
1,832 |
|
|
|
(3.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
WTI ($/bbl) |
|
$ |
95.75 |
|
|
$ |
64.63 |
|
|
|
48.2 |
% |
|
$ |
71.98 |
|
|
|
33.0 |
% |
Natural Gas Prices ($/MMBtu) |
|
$ |
2.95 |
|
|
$ |
3.19 |
|
|
|
(7.5 |
%) |
|
$ |
4.79 |
|
|
|
(38.4 |
%) |
Hot-Rolled Coil Prices (steel) ($/short ton) |
|
$ |
1,045.84 |
|
|
$ |
901.50 |
|
|
|
16.0 |
% |
|
$ |
923.51 |
|
|
|
13.2 |
% |
U.S. Wells Completed |
|
|
3,018 |
|
|
|
3,066 |
|
|
|
(1.6 |
%) |
|
|
2,943 |
|
|
|
2.5 |
% |
* Monthly averages for the quarters indicated, except for U.S. Wells Completed. See sources on following page.
23
The following table details the U.S., Canadian and international rig activity and West Texas Intermediate oil prices for the past nine quarters ended June 30, 2026. In 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 declined 3.9% (from 1,832 rigs to 1,760 rigs) and the U.S. increased 1.1% (from 548 to 554 rigs) in the second quarter of 2026 compared to the first quarter of 2026. The average price per barrel of WTI Crude increased 33.0% (from $71.98 per barrel to $95.75 per barrel), and average natural gas prices declined 38.4% (from $4.79 per MMBtu to $2.95 per MMBtu) in the second quarter of 2026 compared to the first quarter of 2026. The average price per short ton of Hot-Rolled Coil increased 13.2% (from $923.51 per short ton to $1,045.84 per short ton) in the second quarter of 2026 compared to the first quarter of 2026. U.S. Wells Completed increased 2.5% (from 2,943 completion count to 3,018 completion count) in the second quarter of 2026 compared to the first quarter of 2026.
Longer Term Outlook
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 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
24
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. According to a 2025 INGAA Foundation report, to meet energy demand through 2052, North America will require more than $1 trillion in capital investment across natural gas, oil, natural gas liquids, hydrogen and CO2 infrastructure, averaging $40 billion to $48 billion annually, varying by investment. 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.
Results of Operations
The results of operations are presented before consideration of the noncontrolling interests. Our results of operations are as follows (in millions):
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
$ |
1,109 |
|
|
$ |
528 |
|
|
$ |
2,094 |
|
|
$ |
1,002 |
|
Canada |
|
47 |
|
|
|
48 |
|
|
|
98 |
|
|
|
110 |
|
International |
|
151 |
|
|
|
52 |
|
|
|
298 |
|
|
|
115 |
|
Total revenue |
$ |
1,307 |
|
|
$ |
628 |
|
|
$ |
2,490 |
|
|
$ |
1,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating (loss) profit: |
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
$ |
(8 |
) |
|
$ |
15 |
|
|
$ |
(62 |
) |
|
$ |
36 |
|
Canada |
|
1 |
|
|
|
— |
|
|
|
2 |
|
|
|
4 |
|
International |
|
8 |
|
|
|
2 |
|
|
|
11 |
|
|
|
6 |
|
Total operating profit (loss) |
$ |
1 |
|
|
$ |
17 |
|
|
$ |
(49 |
) |
|
$ |
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other (expense) income, net |
|
(10 |
) |
|
|
— |
|
|
|
(20 |
) |
|
|
— |
|
(Loss) income before income taxes |
|
(9 |
) |
|
|
17 |
|
|
|
(69 |
) |
|
|
46 |
|
Income tax provision (benefit) |
|
12 |
|
|
|
3 |
|
|
|
(4 |
) |
|
|
10 |
|
Net (loss) income |
|
(21 |
) |
|
|
14 |
|
|
|
(65 |
) |
|
|
36 |
|
Net income attributable to noncontrolling interests |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Net (loss) income attributable to DNOW Inc. |
$ |
(21 |
) |
|
$ |
14 |
|
|
$ |
(65 |
) |
|
$ |
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross Profit |
$ |
243 |
|
|
$ |
129 |
|
|
$ |
436 |
|
|
$ |
267 |
|
Adjusted Gross Profit (1) |
$ |
272 |
|
|
$ |
146 |
|
|
$ |
528 |
|
|
$ |
287 |
|
Adjusted EBITDA (1) |
$ |
60 |
|
|
$ |
51 |
|
|
$ |
99 |
|
|
$ |
97 |
|
Revenue. Our revenue was $1,307 million and $2,490 million for the three and six months ended June 30, 2026 as compared to $628 million and $1,227 million for the corresponding periods of 2025, an increase of $679 million, or 108.1%, and an increase of $1,263 million, or 102.9%, respectively.
U.S. Segment—Revenue was $1,109 million and $2,094 million for the three and six months ended June 30, 2026, an increase of $581 million and an increase of $1,092 million compared to the corresponding periods of 2025. The increase for the three and six months ended June 30, 2026 was primarily driven by incremental revenue from the MRC Global acquisition completed in the fourth quarter of 2025.
25
Canada Segment—Revenue was $47 million and $98 million for the three and six months ended June 30, 2026, a decrease of $1 million, or 2.1% and a decrease of $12 million, or 10.9%, compared to the corresponding periods of 2025. For the six months ended June 30, 2026, the decrease was primarily due to lower project-related activity.
Our Canadian revenue was approximately 4% of total revenue for both the three and six months ended June 30, 2026, compared to 8% and 9% for the three and six months ended June 30, 2025, respectively. 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. For the three and six months ended June 30, 2026, our Canadian segment revenue was unfavorably impacted by less than $1 million and favorably impacted by approximately $2 million, respectively, due to changes in foreign currency exchange rates.
International Segment—Revenue was $151 million and $298 million for the three and six months ended June 30, 2026, an increase of $99 million and an increase of $183 million compared to the corresponding periods of 2025. The increase was primarily due to the acquisition of MRC Global in the fourth quarter of 2025.
Our international revenue was approximately 11% and 12% of total revenue for the three and six months ended June 30, 2026, compared to 8% and 9% for the three and six months ended June 30, 2025, respectively. 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. For the three and six months ended June 30, 2026, our international segment revenue was favorably impacted by approximately $1 million and $4 million, respectively, due to changes in foreign currency exchange rates.
Gross Profit. Our gross profit was $243 million (18.6% of revenue) and $436 million (17.5% of revenue) for the three and six months ended June 30, 2026, respectively, as compared to $129 million (20.5% of revenue) and $267 million (21.8% of revenue) for the three and six months ended June 30, 2025, respectively. The increase was primarily attributable to incremental 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 $19 million and $35 million for the three and six months ended June 30, 2026, respectively, as compared to a $15 million and $16 million increase in cost of products for the three and six months ended June 30, 2025, respectively.
Adjusted Gross Profit. Adjusted Gross Profit increased to $272 million (20.8% of revenue) and $528 million (21.2% of revenue) for the three and six months ended June 30, 2026 from $146 million (23.2% of revenue) and $287 million (23.4% of revenue) for the three and six months ended June 30, 2025, an increase of $126 million and $241 million, respectively. For the three and six months ended June 30, 2026, the increase was primarily driven by the U.S. and International segments, partially offset by the Canada segment. The reduced margin percentage is primarily due to changes in product and customer mix resulting from the integration of MRC Global's product portfolio into the Company's expanded offering.
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 June 30, |
|
|
Six months ended June 30, |
|
||||||||||||||||||||||
|
|
2026 |
|
As a % of revenue |
|
|
2025 |
|
As a % of revenue |
|
|
2026 |
|
As a % of revenue |
|
|
2025 |
|
As a % of revenue |
|
||||||||
Gross profit, as reported |
|
$ |
243 |
|
|
18.6 |
% |
|
$ |
129 |
|
|
20.5 |
% |
|
$ |
436 |
|
|
17.5 |
% |
|
$ |
267 |
|
|
21.8 |
% |
Amortization of intangibles |
|
|
7 |
|
|
|
|
|
2 |
|
|
|
|
|
13 |
|
|
|
|
|
4 |
|
|
|
||||
Increase in LIFO reserve |
|
|
19 |
|
|
|
|
|
15 |
|
|
|
|
|
35 |
|
|
|
|
|
16 |
|
|
|
||||
Inventory-related transaction charges |
|
|
3 |
|
|
|
|
|
— |
|
|
|
|
|
44 |
|
|
|
|
|
— |
|
|
|
||||
Adjusted Gross Profit |
|
$ |
272 |
|
|
20.8 |
% |
|
$ |
146 |
|
|
23.2 |
% |
|
$ |
528 |
|
|
21.2 |
% |
|
$ |
287 |
|
|
23.4 |
% |
Selling, general and administrative (“SG&A”) expenses. SG&A expenses were $238 million and $481 million for the three and six months ended June 30, 2026, compared to $112 million and $221 million for the corresponding periods of 2025, an increase of $126 million and $260 million, respectively. 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.
26
Impairment and other charges. Impairment and other charges were $4 million for both the three and six months ended June 30, 2026, compared to nil for the corresponding periods of 2025. These impairment charges were related to the operating right-of-use asset associated with a corporate office lease in Houston, Texas. The impairment resulted from the Company's decision to permanently vacate the leased premises.
Operating profit (loss). Our operating profit (loss) was $1 million and ($49) million for the three and six months ended June 30, 2026, compared to an operating profit of $17 million and $46 million for the corresponding periods of 2025, a decrease of $16 million and $95 million, respectively, 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 $8 million and $62 million for the three and six months ended June 30, 2026, a decrease of $23 million and a decrease of $98 million compared to the corresponding periods 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 and $2 million for the three and six months ended June 30, 2026, an increase of $1 million and a decrease of $2 million compared to the corresponding periods of 2025. Operating profit increased primarily due to a reduction in SG&A expenses for three months ended June 30, 2026. For the six months ended June 30, 2026 the decline in operating profit was driven by the decline in revenue discussed above.
International Segment—Operating profit was $8 million and $11 million for the three and six months ended June 30, 2026, an increase of $6 million and an increase of $5 million compared to the corresponding periods of 2025.
Other (expense) income, net. Other expense was $10 million and $20 million for the three and six months ended June 30, 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 periods of 2025.
Income tax provision (benefit). The effective tax rate for the three and six months ended June 30, 2026, was (133.3%) and 5.8%, respectively, compared to 17.6% and 21.7%, respectively, for the corresponding periods 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 and six months ended June 30, 2026 were impacted by changes in forecasted annual earnings and the geographic mix of those earnings, which resulted in a change in the estimated annual effective tax rate from the estimate used during the first quarter of 2026. The revised estimated annual effective tax rate contributed to income tax expense during the second quarter of 2026 despite a pretax loss for the quarter, resulting in a negative effective tax rate for the three months ended June 30, 2026.
Net (loss) income attributable to DNOW Inc. Our net loss attributable to DNOW Inc. was $21 million and $65 million for the three and six months ended June 30, 2026, compared to net income attributable to DNOW Inc. of $14 million and $35 million for the three and six months ended June 30, 2025, a decrease of $35 million and $100 million, respectively, 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 $60 million (4.6% of revenue) and $99 million (4.0% of revenue) for the three and six months ended June 30, 2026, compared to $51 million (8.1% of revenue) and $97 million (7.9% of revenue) for the three and six months ended June 30, 2025. Our Adjusted EBITDA increased $9 million and $2 million, respectively, over the periods primarily due to increased revenue associated with the MRC Global acquisition partially offset by reduced margins and increased incremental SG&A costs 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, inventory-related charges incremental to normal operations, long-lived asset impairments (including goodwill and intangible assets) 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.
27
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 June 30, |
|
|
Six months ended June 30, |
|
||||||||||||||||||||||
|
|
2026 |
|
As a % of revenue |
|
|
2025 |
|
As a % of revenue |
|
|
2026 |
|
As a % of revenue |
|
|
2025 |
|
As a % of revenue |
|
||||||||
Net (loss) income attributable to DNOW Inc. |
|
$ |
(21 |
) |
|
(1.6 |
)% |
|
$ |
14 |
|
|
2.2 |
% |
|
$ |
(65 |
) |
|
(2.6 |
)% |
|
$ |
35 |
|
|
2.9 |
% |
Net income attributable to noncontrolling interests |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
1 |
|
|
|
||||
Interest expense (income), net |
|
|
9 |
|
|
|
|
|
(1 |
) |
|
|
|
|
17 |
|
|
|
|
|
(2 |
) |
|
|
||||
Income tax provision (benefit) |
|
|
12 |
|
|
|
|
|
3 |
|
|
|
|
|
(4 |
) |
|
|
|
|
10 |
|
|
|
||||
Depreciation and amortization |
|
|
23 |
|
|
|
|
|
10 |
|
|
|
|
|
46 |
|
|
|
|
|
21 |
|
|
|
||||
Stock-based compensation (1) |
|
|
4 |
|
|
|
|
|
4 |
|
|
|
|
|
8 |
|
|
|
|
|
7 |
|
|
|
||||
Increase in LIFO reserve |
|
|
19 |
|
|
|
|
|
15 |
|
|
|
|
|
35 |
|
|
|
|
|
16 |
|
|
|
||||
Transaction-related charges (2) |
|
|
6 |
|
|
|
|
|
5 |
|
|
|
|
|
11 |
|
|
|
|
|
7 |
|
|
|
||||
Inventory-related transaction charges (3) |
|
|
3 |
|
|
|
|
|
— |
|
|
|
|
|
44 |
|
|
|
|
|
— |
|
|
|
||||
Impairment and other charges (4) |
|
|
4 |
|
|
|
|
|
— |
|
|
|
|
|
4 |
|
|
|
|
|
— |
|
|
|
||||
Restructuring and exit costs (2) |
|
|
— |
|
|
|
|
|
1 |
|
|
|
|
|
— |
|
|
|
|
|
2 |
|
|
|
||||
Other (5) |
|
|
1 |
|
|
|
|
|
— |
|
|
|
|
|
3 |
|
|
|
|
|
— |
|
|
|
||||
Adjusted EBITDA |
|
$ |
60 |
|
|
4.6 |
% |
|
$ |
51 |
|
|
8.1 |
% |
|
$ |
99 |
|
|
4.0 |
% |
|
$ |
97 |
|
|
7.9 |
% |
Liquidity and Capital Resources
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 repurchases under our share repurchase program.
As of June 30, 2026 and December 31, 2025, we had cash and cash equivalents of $114 million and $164 million, respectively. As of June 30, 2026, $108 million of our cash and cash equivalents were maintained in the accounts of our various foreign subsidiaries. During the first six months of 2026, we repatriated $41 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, such as 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 June 30, 2026, we had $474 million borrowings against our revolving credit facility and had approximately $358 million in availability (as defined in the Amended Credit Facility). 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 Amended Credit Facility). The credit facility contains usual and customary affirmative and negative covenants for credit facilities of this type including financial covenants. As of June 30, 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.
28
Cash Flows
The following table summarizes our net cash flows provided by (used in) operating activities, investing activities and financing activities for the periods presented (in millions):
|
Six months ended June 30, |
|
|||||
|
2026 |
|
|
2025 |
|
||
Net cash provided by operating activities |
$ |
38 |
|
|
$ |
29 |
|
Net cash used in investing activities |
|
(61 |
) |
|
|
(16 |
) |
Net cash used in financing activities |
|
(24 |
) |
|
|
(40 |
) |
For the six months ended June 30, 2026, net cash provided by operating activities was $38 million compared to $29 million in the corresponding period of 2025. For the six months ended June 30, 2026, net cash provided by operating activities was primarily driven by a net increase of $31 million in working capital, mainly resulting from decreases in accrued liabilities for severance and legal and professional fees associated with the acquisition of MRC Global, as well as an increase in accounts receivable. These impacts were offset by an increase in accounts payable and a decrease in inventory. For the six months ended June 30, 2025, net cash provided by operating activities was primarily driven by a net increase of $70 million in working capital in 2025. The increase reflected a proactive investment of $28 million in inventory to support customer demand, coupled with $45 million increase in accounts receivable due to revenue growth.
For the six months ended June 30, 2026, net cash used in investing activities was $61 million compared to $16 million in the corresponding period of 2025. For the six months ended June 30, 2026, net cash used in investing activities was primarily related to business acquisitions of $46 million and purchases of property, plant and equipment of $17 million. Net cash used in investing activities in the corresponding period of 2025 was primarily related to purchases of property, plant and equipment of $10 million and business acquisitions of $8 million.
For the six months ended June 30, 2026, net cash used in financing activities was $24 million compared to $40 million in the corresponding period of 2025. For the six months ended June 30, 2026, net cash used in financing activities primarily related to share repurchases of $75 million and shares withheld for taxes for employee awards of $5 million, partially offset by net borrowings under the revolving credit facility of $63 million. Net cash used in financing activities in the corresponding period of 2025 was primarily related to share repurchases of $27 million and shares withheld for taxes for employee awards of $8 million.
Capital Spending
We intend to pursue additional acquisition candidates, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted. We continue to expect to fund future cash acquisitions primarily with cash on hand, cash flow from operations and the usage of the available portion of the revolving credit facility. There can be no assurance that additional financing will be available at terms acceptable to us.
Share Repurchase Program
On January 24, 2025, the Company’s Board of Directors authorized a new share repurchase program to purchase up to $160 million of its outstanding common stock. We expect to fund share repurchases primarily with cash on hand, cash flow from operations and the usage of the available portion of the revolving credit facility. The timing and amount of any repurchases will be made at our discretion, taking into account a number of factors, including market conditions. The share repurchase program does not obligate the Company to repurchase shares and may be suspended or discontinued at any time at our discretion. All shares repurchased shall be retired pursuant to the terms of the share repurchase program. For the six months ended June 30, 2026, we repurchased 6,057,772 shares of our common stock for a total of approximately $75 million. As of June 30, 2026, we had approximately $48 million remaining under the program’s authorization.
Critical Accounting Estimates
For a discussion of the critical accounting estimates that we use in the preparation of our consolidated financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2025. Since the filing of our Form 10-K, there have been no material changes in our critical accounting estimates from those disclosed therein. In preparing the financial statements, the Company makes assumptions, estimates and judgments that affect the amounts reported. The Company periodically evaluates its estimates and judgments that are most critical in nature, which are related to allowance for credit losses, inventory reserves, goodwill, purchase price allocation of acquisitions and income taxes. Its estimates are based on historical experience and on its future expectations that the Company believes are reasonable. The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results are likely to differ from our current estimates, and those differences may be material.
29
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to certain market risks that are inherent in our financial instruments and arise from changes in interest rates and foreign currency exchange rates. We may enter into derivative financial instrument transactions to manage or reduce market risk but do not enter into derivative financial instrument transactions for speculative purposes. We do not currently have any material outstanding derivative instruments.
A discussion of our primary market risk exposure in financial instruments is presented below.
Foreign Currency Exchange Rate Risk
We have operations in foreign countries and transact business globally in multiple currencies. Our net assets as well as our revenues and costs and expenses denominated in foreign currencies expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. Because we operate globally and approximately 16% of our net sales for the six months ended June 30, 2026, were outside the U.S., foreign currency exchange rates can impact our financial position, results of operations and competitive position. We are a net receiver of foreign currencies and, therefore, benefit from a weakening of the U.S. dollar and are adversely affected by a strengthening of the U.S. dollar relative to the foreign currency. As of June 30, 2026, our most significant foreign currency exposure was to the Canadian dollar, followed by the Norwegian kroner, the Euro and the British pound.
The financial statements of foreign subsidiaries are translated into their U.S. dollar equivalents at end-of-period exchange rates for assets and liabilities, while revenue, costs and expenses are translated at average monthly exchange rates. Translation gains and losses are components of other comprehensive income (loss) as reported in the consolidated statements of comprehensive income (loss). Upon complete or substantially complete liquidation of a foreign subsidiary, the accumulated translation gains and losses relating to the foreign subsidiary are reclassified into earnings, reflected in impairment and other charges in the consolidated statements of operations. For the six months ended June 30, 2026, we reported a net foreign currency translation loss of $5 million.
Foreign currency exchange rate fluctuations generally do not materially affect our earnings since the functional currency is typically the local currency; however, our operations also have net assets not denominated in their functional currency, which exposes us to changes in foreign currency exchange rates that impact our net (loss) income as foreign currency transaction gains and losses. Foreign currency transaction gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized in the consolidated statements of operations as a component of other (expense) income. For the six months ended June 30, 2026 and 2025, we reported foreign currency transaction losses of $3 million and nil, respectively. Gains and losses are primarily due to exchange rate fluctuations related to monetary asset balances denominated in currencies other than the functional currency and fair value adjustments to economically hedged positions as a result of changes in foreign currency exchange rates.
Some of the revenues for our foreign operations are denominated in U.S. dollars and, therefore, changes in foreign currency exchange rates impact earnings to the extent that costs associated with those U.S. dollar revenues are denominated in the local currency. Similarly, some of our revenues for our foreign operations are denominated in foreign currencies, but have associated U.S. dollar costs, which also give rise to foreign currency exchange rate exposure. In order to mitigate those risks, we may utilize foreign currency forward contracts to better match the currency of the revenues and the associated costs. Although we may utilize foreign currency forward contracts to economically hedge certain foreign currency denominated balances or transactions, we do not currently hedge the net investments in our foreign operations. The counterparties to our forward contracts are major financial institutions. The credit ratings and concentration of risk of these financial institutions are monitored by us on a continuing basis. In the event that the counterparties fail to meet the terms of a foreign currency contract, our exposure is limited to the foreign currency rate differential.
The average foreign exchange rate for the first six months of 2026 compared to the average for the corresponding period of 2025 increased by approximately 8% compared to the U.S. dollar based on the aggregated weighted average revenue of our foreign-currency denominated foreign operations. The Canadian dollar, Norwegian kroner, Euro and British pound each increased in relation to the U.S. dollar by approximately 2%, 12%, 7% and 4%, respectively.
We utilized a sensitivity analysis to measure the potential impact on earnings based on a hypothetical 10% change in foreign currency rates. A 10% change from the levels experienced during the first six months of 2026 of the U.S. dollar relative to foreign currencies that affected the Company would have resulted in approximately $1 million change in net (loss) income for the same period.
Interest Rate Risk
As of June 30, 2026, all borrowings outstanding under our senior secured revolving credit facility bore interest at floating rates. Borrowings under this facility may be made as either base rate loans or non-base rate loans, each of which accrues interest based on a benchmark rate plus an applicable margin. The applicable margin varies based on our Fixed Charge Coverage Ratio, ranging from 0.25% to 0.75% for base rate loans and 1.25% to 1.75% for non-base rate loans.
The revolving credit facility includes rate structures tied to prevailing market indices such as U.S. base rates and non-base rate (e.g., SOFR-based) reference rates. Because interest rates applicable to our borrowings fluctuate with changes in these benchmark rates, our interest expense is sensitive to short-term rate movements.
30
Based on the amounts outstanding under our revolving credit facility as of June 30, 2026, a 1% increase in the underlying benchmark rate would result in an increase in our interest expense for the first six months of 2026 of approximately $2 million, assuming borrowing levels remained constant for an entire period.
Commodity Steel Pricing
Our business is sensitive to steel prices, which can impact our product pricing, with steel tubular prices generally having the highest degree of sensitivity. While we cannot predict steel prices, we mitigate this risk by managing our inventory levels, including maintaining sufficient quantity on hand to meet demand, while limiting the risk of overstocking.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures, and is recorded, processed, summarized and reported within the time period specified in the rules and forms of the Securities and Exchange Commission. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
31
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company has been subject to various claims and involved in legal proceedings incidental to the nature of its businesses. The Company maintains insurance coverage to reduce financial risk associated with certain of these claims and proceedings. It is not possible to predict the outcome of these claims and proceedings. However, in the Company's opinion, there are no pending legal proceedings that are likely to have a material effect on the Company's business, financial condition, results of operations or cash flows, although it is possible that the resolution of certain actual, threatened or anticipated claims or proceedings could have a material adverse effect on the Company's results of operations in the period of resolution.
Also, from time to time, in the ordinary course of the Company's business, its customers may claim that the products that the Company distributes are either 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 these claims. In many cases, state, provincial or foreign law provides protection to distributors for these sorts of claims, shifting the responsibility to the manufacturer. In some cases, the Company could be required to repair or replace the products for the benefit of its customer and seek recovery from the manufacturer for the Company's expense. In the opinion of management, the ultimate disposition of these claims and proceedings is not expected to have a material adverse effect on the Company's financial condition, results of operations or cash flows.
For information regarding asbestos cases in which the Company is a defendant and other claims and proceedings, see Note 12 “Commitments and Contingencies” to the Company's unaudited consolidated financial statements for additional information.
Item 1A. Risk Factors
The Company and its operations are affected by risks specific to the Company as well as factors that affect all businesses operating in a global market. The significant factors known to the Company that could materially adversely affect its business, financial condition or operating results are contained in Part 1, Item 1A “Risk Factors” in our 2025 Annual Report on Form 10-K for the year ended December 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents a summary of share repurchases made during the three months ended June 30, 2026:
Period |
|
Total number of shares purchased (1)(2) |
|
|
Average price paid per share (3) |
|
|
Total number of shares purchased as part of publicly announced program (1) |
|
|
Approximate dollar value of shares that may yet be purchased under the program (1)(3) |
|
||||
April 1 - 30, 2026 |
|
|
140,631 |
|
|
$ |
12.17 |
|
|
|
140,112 |
|
|
$ |
71 |
|
May 1 - 31, 2026 |
|
|
12,021 |
|
|
$ |
13.04 |
|
|
|
10,741 |
|
|
$ |
71 |
|
June 1 - 30, 2026 |
|
|
1,705,013 |
|
|
$ |
13.57 |
|
|
|
1,704,991 |
|
|
$ |
48 |
|
Total |
|
|
1,857,665 |
|
|
$ |
13.46 |
|
|
|
1,855,844 |
|
|
|
|
|
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mining Safety Disclosures
None.
Item 5. Other Information
Insider Trading Arrangements and Policies
During the three months ended June 30, 2026, no director or officer of the Company
32
Item 6. Exhibits
(a) Exhibits
Exhibit No. |
|
Exhibit Description |
|
|
|
2.1 |
|
Agreement and Plan of Merger, dated as of June 26, 2025, by and among DNOW Inc., MRC Global Inc., Buck Merger Sub, Inc. and Stag Merger Sub, LLC (Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on June 26, 2025) |
3.1 |
|
DNOW Inc. Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on January 9, 2024) |
3.2 |
|
DNOW Inc. Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on January 9, 2024) |
10.1 |
|
Form of Employment Agreement for Executive Officers (Incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K filed on May 30, 2014) |
10.2 |
|
NOW Inc. 2014 Incentive Compensation Plan (Incorporated by reference to Exhibit 10.6 to our Amendment No.1 to Form 10, as amended, Registration Statement filed on April 8, 2014) |
10.3 |
|
Form of Nonqualified Stock Option Agreement (Incorporated by reference to Exhibit 10.11 to our Quarterly Report on Form 10-Q filed on May 7, 2015) |
10.4 |
|
Form of Restricted Stock Award Agreement (3 year cliff vest) (Incorporated by reference to Exhibit 10.12 to our Quarterly Report on Form 10-Q filed on May 7, 2015) |
10.5 |
|
Form of Performance Award Agreement (Incorporated by reference to Exhibit 10.13 to our Quarterly Report on Form 10-Q filed on May 7, 2015) |
10.6 |
|
Form of Amendment to Employment Agreement for Executive Officers (Incorporated by reference to Exhibit 10.15 to our Quarterly Report on Form 10-Q filed on November 2, 2016) |
10.7 |
|
Employment Agreement between DNOW Inc. and Chief Accounting Officer Gillian Anderson (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on November 6, 2025) |
10.8 |
|
Employment Agreement between NOW Inc. and Chief Executive Officer David Cherechinsky (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 2, 2020) |
10.9 |
|
Employment Agreement between NOW Inc. and Chief Financial Officer Mark Johnson (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on June 2, 2020) |
10.10 |
|
Amended and Restated Credit Agreement, dated as of November 6, 2025, by and among DNOW Inc., DNOW L.P., MRC Global (US) Inc., Wells Fargo Bank, National Association and the lenders and other parties thereto (Incorporated by reference to Exhibit 10.21 to our Current Report on Form 8-K filed on November 6, 2025) |
10.11 |
|
Second Amendment to US Guaranty and Security Agreement and Joinder Agreement, dated as of November 6, 2025, among DNOW Inc., the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, an issuing lender and swing lender (Incorporated by reference to Exhibit 10.12 to our Annual Report on Form 10-K filed on February 26, 2026) |
10.12 |
|
DNOW Inc. 2024 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.1 to our Form S-8 Registration Statement filed on May 24, 2024) |
10.13 |
|
Form of Restricted Stock Award Agreement under the 2024 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.13 to our Quarterly Report on Form 10-Q on May 7, 2026) |
10.14 |
|
Form of Performance Award Agreement under the 2024 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.14 to our Quarterly Report on Form 10-Q on May 7, 2026) |
31.1* |
|
Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended |
31.2* |
|
Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended |
32.1** |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2** |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS* |
|
Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** Furnished herewith.
33
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Date: August 6, 2026 |
|
|
|
|
|
DNOW INC. |
|
|
|
|
By: |
/s/ Mark B. Johnson |
|
Mark B. Johnson |
|
|
Senior Vice President and Chief Financial Officer |
|
34