DNOW Inc.

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

(1)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Other (expense) income. Other expense was $10 million for the three months ended March 31, 2026 and was primarily attributable to interest expense on borrowings associated with the acquisition of MRC Global completed in the fourth quarter of 2025. Other (expense) income was nil for the corresponding period of 2025.

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

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

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

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

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

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

(1)

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

(2)

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

(3)

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

(4)

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