DNOW Inc.

Contract assets primarily consist of retainage amounts held as a form of security by customers until the Company satisfies its remaining performance obligations. As of September 30, 2025 and December 31, 2024, contract assets were$1 million in both periods and were included in receivables, net in the consolidated balance sheets. The Company generally accounts for the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized isone year or less; however, these expenses are not material.

Contract liabilities primarily consist of deferred revenues recorded when customer payments are received or due in advance of satisfying performance obligations, including amounts which are refundable, and other accrued customer liabilities. Revenue recognition is deferred to a future period until the Company completes its obligations contractually agreed with customers. As of September 30, 2025 and December 31, 2024, contract liabilities were$22 million and$31 million, respectively, and were included in accrued liabilities in the consolidated balance sheets. For the nine months ended September 30, 2025, the decrease in contract liabilities was primarily related to recognizing revenue of approximately$24 million that was deferred as of December 31, 2024, partially offset by net current year customer deposits of approximately$15 million.