DNOW Inc

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

As of March 31, 2025 and December 31, 2024, we had cash and cash equivalents of $219 million and $256 million, respectively. As of March 31, 2025, $112 million of our cash and cash equivalents were maintained in the accounts of our various foreign subsidiaries. During the first three months of 2025, we repatriated $2 million from our foreign subsidiaries. The Company makes a determination each period concerning its intent and ability to indefinitely reinvest the cash held by its foreign subsidiaries. The Company has not recorded deferred income taxes on undistributed foreign earnings that it considers to be indefinitely reinvested. Future changes to our indefinite reinvestment assertion could result in additional taxes (withholding and/or state taxes), offset by any available foreign tax credits.

We maintain a $500 million five-year senior secured revolving credit facility that will mature on December 14, 2026. Availability under the revolving credit facility is determined by a borrowing base comprised of eligible receivables, eligible inventory and certain cash deposits in the U.S. and Canada. As of March 31, 2025, we had no borrowings against our revolving credit facility, and had approximately $434 million in availability (as defined in the Credit Agreement) resulting in the excess availability (as defined in the Credit Agreement) of 99%, subject to certain restrictions. Availability excluding certain cash deposits was approximately $348 million. Borrowings that result in the excess availability dropping below the greater of 10% of the borrowing base or $40 million are conditioned upon compliance with or waiver of a minimum fixed charge ratio (as defined in the Credit Agreement). The credit facility contains usual and customary affirmative and negative covenants for credit facilities of this type including financial covenants. As of March 31, 2025, 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.

We are often party to certain transactions that require off-balance sheet arrangements such as standby letters of credit and performance bonds and guarantees that are not reflected in our consolidated balance sheets. These arrangements are made in our normal course of business and they are not reasonably likely to have a current or future material adverse effect on our financial condition, results of operations, liquidity or cash flows.

In connection with acquisitions in 2024, the Company is committed to total future retention payments of up to $13 million payable in 2026 and 2027. Payments are due to various employees if non-financial post combination service conditions are met pursuant to the terms and conditions of the retention agreements.

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

Operating Activities

For the three months ended March 31, 2025, net cash used in operating activities was $16 million compared to $81 million provided by operating activities in the corresponding period of 2024. For the three months ended March 31, 2025, net cash used in operating activities was primarily related to a net increase of $65 million in working capital. The increase reflected a proactive investment of $32 million in inventory to support customer demand, coupled with $52 million growth in accounts receivable due to revenue growth and timing of collections.

Investing Activities

For the three months ended March 31, 2025, net cash used in investing activities was $5 million compared to $188 million used in investing activities in the corresponding period of 2024. For the three months ended March 31, 2025, net cash used in investing activities was primarily related to purchases of property, plant and equipment of $6 million while net cash used in investing activities in the corresponding period of 2024 was primarily related to business acquisitions of $185 million, net of cash acquired.

Financing Activities

For the three months ended March 31, 2025, net cash used in financing activities was $17 million compared to $4 million used in financing activities in the corresponding period of 2024. For the three months ended March 31, 2025, net cash used in financing activities was primarily related to share repurchases of $8 million and withholding tax payments for employee awards of $7 million.

Other

For the three months ended March 31, 2025, the effect of the change in exchange rates on cash and cash equivalents was $1 million favorable compared to nil for the corresponding period of 2024.