DNOW Inc.

Contract assets consist of retainage amounts held as a form of security by customers until the Company satisfies its remaining performance obligations as well as amounts recognized in situations where invoicing is delayed until customer-specific documentation requirements are met. Contract assets are considered accounts receivable for which only the passage of time is required before payment is due. As of March 31, 2026 and December 31, 2025, contract assets were$21 million and$55 million, respectively, and were included in receivables, net in the consolidated balance sheets. For the three months ended March 31, 2026, the decrease in contract assets was primarily attributable to a reduction in orders awaiting customer-specific documentation required prior to invoicing in the Company’s U.S. and International segments. The Company generally accounts for the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized 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 the Company satisfying its contractually agreed performance obligations, including refundable amounts and other accrued customer liabilities. Revenue recognition is deferred to a future period until those performance obligations are satisfied. As of March 31, 2026 and December 31, 2025, contract liabilities were$51 million and$50 million, respectively, and were included in accrued liabilities in the consolidated balance sheets. For the three months ended March 31, 2026, the increase in contract liabilities was primarily related to net current year customer deposits of approximately$9 million, partially offset by recognizing revenue of approximately$8 million that was deferred as of December 31, 2025.

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.

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