DNOW

New in FY2025

• Risk Factors Summary The following is a summary of the certain risks that we believe apply to our business and the industry in which we operate: Risks Relating to Our Business • Decreased capital and other expenditures in the energy industry, which can result from decreased oil and natural gas prices, among other things, can adversely impact our customers’ demand for our products and our revenue. • Demand for our gas utilities products and services depends on our customers’ capital investment programs, which may be reduced or delayed. • Volatile oil and gas prices affect demand for our products. • General economic and geopolitical conditions may adversely affect our business. • If our product costs became subject to significant future inflationary pressures, then we may not be able to fully offset these higher costs through price increases. • We may be adversely impacted by holding more inventory than can be sold in a commercial time frame. • We may be unable to compete successfully with other companies in our industry. • Demand for our sales of the products we distribute could decrease if the manufacturers of those products were to instead sell a substantial amount of goods directly to our customers in the sectors we serve. • We may need additional capital in the future, and it may not be available on acceptable terms, or at all. • We do not have long-term contracts or agreements with many of our customers.
• The loss of a significant customer may have a material adverse effect on us. • Changes in our customer and product mix, as well as the timing, complexity and cyclical nature of our project-based work, could cause our margins and operating results to fluctuate and adversely affect our competitive position. • Customer credit risks could result in losses. • We may be unable to successfully execute or effectively integrate acquisitions. • We may continue to experience challenges with the stabilization of the U.S.
• ERP system inherited from MRC Global. • We are a holding company and depend upon our subsidiaries for our cash flow. • If we lose any of our key personnel, we may be unable to effectively manage our business or continue our growth. • Interruptions in the proper functioning of our information systems, including as a result of cyber incidents, deficiencies in our cybersecurity or disruptions involving third-party service providers, could compromise data, disrupt operations, impair financial reporting, expose us to liability and regulatory scrutiny, and adversely affect our financial results and the market price of our stock. • The loss of third-party transportation providers upon whom we depend, or conditions negatively affecting the transportation industry, could increase our costs or cause a disruption in our operations. • Adverse weather events or natural disasters could negatively affect local economies and disrupt operations. • Privacy concerns relating to our personal and business information being potentially breached could damage our reputation and deter current and potential users or customers from using our products and services. • We have goodwill recorded on our balance sheet.
• If our goodwill becomes impaired, we may be required to recognize charges that would reduce our income. • Our indebtedness may affect our ability to operate our business, and this could have a material adverse effect on us.
• Risks Relating to the MRC Global Merger • We may not be able to successfully integrate the business of MRC Global into our business or realize the anticipated benefits of the mergers. • MRC Global may initially operate outside our existing control environment, and delays in integrating their systems and processes could expose us to control deficiencies and financial reporting risks. • The failure to successfully combine the businesses of DNOW and MRC Global may adversely affect our business. • The future results of DNOW following the merger will suffer if the combined company does not effectively manage its expanded operations. • The financial forecasts disclosed in connection with the merger are based on various assumptions that may not be realized. • The combined company’s ability to use the existing U.S. federal capital loss carryforwards, net operating loss carryforwards and other tax attributes could be limited.
• Risks Relating to Our Supply Chain and International Trade Policies • We may experience unexpected supply shortages. • We may experience cost increases from suppliers, which we may be unable to pass on to our customers. • We do not have contracts with most of our suppliers.
• Such a loss may have an adverse effect on our product offerings and our business. • Changes in our credit profile may affect our relationship with our suppliers, which could have a material adverse effect on our liquidity. • Price reductions by suppliers of products that we sell could cause the value of our inventory to decline.
• Also, these price reductions could cause our customers to demand lower sales prices for these products, possibly decreasing our margins and profitability on sales to the extent that we purchased our inventory of these products at the higher prices prior to supplier price reductions. • A substantial decrease in the price of steel could significantly lower our product margin or cash flow. • If steel prices rise, we may be unable to pass along the cost increases to our customers. • If existing tariffs and duties on imports of line pipe or certain of the other products that we sell are lifted, the U.S. market could see an increased supply of less expensive products, which could adversely affect our business and results of operations. • Changes in trade policies, including the imposition or elimination of additional tariffs and duties, and risks with governmental instability in certain parts of the world could negatively impact our business, financial condition and results of operations.
• Risks Relating to Legal and Regulatory Matters • We are subject to strict environmental, health and safety laws and regulations that may lead to significant liabilities and have a material adverse effect on our business, financial condition and results of operations. • Existing or future laws, regulations, court orders or other public- or private-sector initiatives to limit greenhouse gas emissions or relating to climate change may reduce demand for our products and services and the physical effects of climate change could damage our assets or facilities, adversely impacting our business, results of operations, and financial condition. • We may not have adequate insurance for potential liabilities, including liabilities arising from litigation. • Due to our position as a distributor, we are subject to personal injury, product liability and environmental claims involving allegedly defective products. • We face risks associated with conducting business in markets outside of the U.S. and Canada. • We are subject to U.S. and other anti-corruption laws, trade controls, economic sanctions, and similar laws and regulations, including those in the jurisdictions where we operate.
• Our failure to comply with these laws and regulations could subject us to civil, criminal and administrative penalties and harm our reputation. • Compliance with and changes in laws and regulations in the countries in which we operate could have a significant financial impact and affect how and where we conduct our operations. • We are a defendant in asbestos-related lawsuits.
• Exposure to these and any future lawsuits could have a material adverse effect on us.
• Risks Relating to Our Common Stock • The market price of our shares may fluctuate widely. • Your percentage ownership in us may be diluted in the future. • We cannot assure you that we will pay dividends on our common stock. • Certain provisions in our corporate documents and Delaware law may prevent or delay an acquisition of our company, even if that change may be considered beneficial by some of our stockholders.
• Demand for our gas utilities products and services depends on our customers’ capital investment programs, which may be reduced or delayed.
• Gas utilities must obtain regulatory approval for many infrastructure and maintenance projects.
• As a result, our revenues depend in part on the timing and magnitude of our customers’ capital expenditure programs.
• Regulatory delays, adverse rate case outcomes, political considerations, or changes in economic conditions may cause utilities to postpone, scale back, or cancel projects.
• Any such reductions or delays could reduce demand for our products and services and materially adversely affect our business.
• U.S. rig count decreased from 589 rigs on January 3, 2025 to 546 rigs on December 30, 2025.
• U.S. rig count averaged 561 rigs in 2025.
• The price for West Texas Intermediate crude was $57.21 per barrel at January 2, 2026, $73.79 per barrel on January 2, 2025 and $70.62 per barrel on January 2, 2024.
• As seen in January 2026 as compared to January 2025, there was a decrease of $16.58, or 22%, indicating the price volatility and this historical volatility has caused oil and natural gas companies to change their strategies and expenditure levels from year to year.
• Fluctuations in foreign currency exchange rates, particularly in countries where we operate or source products, may affect our revenue, costs, margins or cash flows.
• Currency volatility could also affect the valuation of inventory and receivables and complicate working capital management.
• We may be adversely impacted by holding more inventory than can be sold in a commercial time frame.
• A fundamental aspect of our business is to have inventory available for customers when they need it.
• If we over-estimate the amount of inventory that can be sold in a commercial time frame or if market demand for a product drops unexpectedly, we may be forced to sell the product at substantially lower prices, scrap the product or write down its carrying value.
• Changes in our customer and product mix, as well as the timing, complexity and cyclical nature of our project-based work, could cause our margins and operating results to fluctuate and adversely affect our competitive position.
• From time to time, we may experience changes in our customer mix and product mix.
• Changes in our customer mix may result from business acquisitions, geographic expansion, routine selling activities within existing markets and targeted efforts to reach new customer segments.
• Product mix changes may also arise from acquisitions, marketing initiatives and evolving needs communicated by existing and prospective customers.
• If customers increasingly require lower-margin products or if competitive pressures require pricing concessions or less favorable terms, our product margins and overall financial performance could be adversely affected.
• A meaningful portion of our business also depends on project-based activity that can be cyclical and susceptible to delay or cancellation.
• Our results may fluctuate based on the timing of contract awards, project start dates, scope changes, execution schedules and completion timelines.
• Delays in obtaining awards, shifts in project timing, extended development cycles or cancellations can result in significant period-to-period volatility in our revenue, operating results, financial condition and cash flows.
• Many of these projects directly or indirectly involve complex design, engineering, financing, permitting, procurement and construction phases that can occur over extended time periods, sometimes several years.
• We have encountered, and may continue to encounter, project delays, cost increases, supply-chain or labor constraints, and other execution challenges.
• If we are unable to effectively manage these risks, accurately estimate costs, or recover increases through contractual protections or change orders, our margins and competitive position could be negatively impacted.
• In particular, large-scale acquisitions increase the complexity and risk of converting and integrating ERP and other core business systems, which may require extended stabilization periods, incremental costs and management attention and could disrupt critical business processes.
• Even when acquisitions are completed, integration of acquired entities can involve significant difficulties, such as: • failure to achieve cost savings or other financial or operating objectives with respect to an acquisition; • complications and issues resulting from the integration/conversion of ERP systems, including data-migration errors or loss of information, disruption across order-to-cash and procure-to-pay processes (for example, order entry, inventory visibility, shipping and receiving, invoicing and collections and vendor payments), instability of customer and supplier integrations, the need for manual workarounds, increased error rates and delays and the risk that anticipated benefits are delayed or not realized); • strain on the operational and managerial controls and procedures of our business, and the need to modify systems or to add management resources; • difficulties in the integration and retention of customers or personnel and the integration and effective deployment of operations or technologies; • amortization of acquired assets, which would reduce future reported earnings; • possible adverse short-term effects on our cash flows or operating results; • diversion of management’s attention from the ongoing operations of our business; • integrating personnel with different organizational cultures; • coordinating sales and marketing functions; • failure to obtain and retain key personnel of an acquired business; and • assumption of known or unknown material liabilities or regulatory non-compliance issues.
• We may continue to experience challenges with the stabilization of the U.S.

and 112 more.

Gone since FY2024

• U.S. rig count decreased from 621 rigs on January 5, 2024 to 589 rigs on December 27, 2024.
• U.S. rig count averaged 599 rigs in 2024.
• U.S. rig count at January 24, 2025 was 576 rigs.
• The price for West Texas Intermediate crude was $73.79 per barrel at January 2, 2025, $70.62 per barrel on January 2, 2024 and $76.87 per barrel on January 3, 2023.
• Even though the prices as of the beginning of January for the last three years have been relatively stable, prices have historically been very volatile, and this historical volatility has caused oil and natural gas companies to change their strategies and expenditure levels from year to year.
• Changes in our customer and product mix could cause our product margin to fluctuate or affect our competitive position.
• From time to time, we may experience changes in our customer mix or in our product mix.
• Changes in our customer mix may result from business acquisitions, geographic expansion, daily selling activities within current geographic markets and targeted selling activities to new customer segments.
• Changes in our product mix may result from business acquisitions, marketing activities to existing customers and needs communicated to us from existing and prospective customers.
• If customers begin to require more lower-margin products from us, our business, results of operations and financial condition may suffer.
• Even when acquisitions are completed, integration of acquired entities can involve significant difficulties, such as: • failure to achieve cost savings or other financial or operating objectives with respect to an acquisition; • complications and issues resulting from the integration/conversion of ERP systems; • strain on the operational and managerial controls and procedures of our business, and the need to modify systems or to add management resources; • difficulties in the integration and retention of customers or personnel and the integration and effective deployment of operations or technologies; • amortization of acquired assets, which would reduce future reported earnings; • possible adverse short-term effects on our cash flows or operating results; • diversion of management’s attention from the ongoing operations of our business; • integrating personnel with different organizational cultures; • coordinating sales and marketing functions; • failure to obtain and retain key personnel of an acquired business; and • assumption of known or unknown material liabilities or regulatory non-compliance issues.
• Interruptions in the proper functioning of our information systems could disrupt operations and cause increases in costs or decreases in revenues.
• We depend on our information management systems to process orders, track credit risk, manage inventory and monitor accounts receivable collections.
• Our information systems also allow us to efficiently purchase products from our vendors and ship products to our customers on a timely basis, maintain cost-effective operations and provide superior service to our customers.
• However, our information systems could be vulnerable to natural disasters, power losses, telecommunication failures, security breaches and other problems.
• If critical information systems fail or are otherwise unavailable, our ability to procure products to sell, process and ship customer orders, identify business opportunities, maintain proper levels of inventories, collect accounts receivable and pay accounts payable and expenses could be adversely affected.
• Our ability to integrate our systems with our customers’ systems would also be significantly affected.
• If our information systems are damaged or fail to function properly, we may incur substantial costs to repair or replace them, and may experience loss of critical data and interruptions or delays in our ability to manage inventories or process transactions, which could result in lost sales, inability to process purchase orders and/or a potential loss of customer loyalty, which could adversely affect our results of operations.
• We maintain information systems controls designed to protect against, among other things, unauthorized program changes and unauthorized access to data on our information systems.
• If our information systems controls do not function properly, we face increased risks of unexpected errors and unreliable financial data or theft of proprietary Company information.
• The occurrence of cyber incidents, or a deficiency in our cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information or damage to our Company’s image, all of which could negatively impact our financial results.
• A cyber incident is any adverse event that threatens the confidentiality, integrity, or availability of our information resources.
• More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data or steal confidential information.
• As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced.
• In addition, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.
• Our four primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our Company’s image, financial loss and private data exposure.
• We have implemented solutions, processes, and procedures to help mitigate this risk, but these measures, as well as our organization’s increased awareness of our risk of a cyber incident, do not guarantee that our financial results will not be negatively impacted by such an incident.
• Our security measures may be undermined due to the rapid evolution and increased adoption of artificial intelligence and machine learning technologies, actions of outside parties, employee error, internal or external malfeasance, or otherwise, and, as a result, an unauthorized party may obtain access to our data systems and misappropriate business and personal information.
• Our systems are subject to repeated attempts by third parties to access information or to disrupt our systems.
• Such disruptions or misappropriations and the resulting repercussions, including reputational damage and legal claims or proceedings, may adversely affect our results of operations, cash flows and financial condition, and the trading price of our common stock.
• As of December 31, 2024, we had $230 million of goodwill recorded on our balance sheet.
• These reviews could result in an earnings charge for impairment, which would reduce our net income even though there would be no impact on our underlying cash flow.
• Changes in trade policies, including the imposition or elimination of additional tariffs and duties, could negatively impact our business, financial condition and results of operations.
• Given that we procure significant materials that we resell directly or indirectly from outside of the U.S., potential changes in U.S. trade policy could increase the cost or limit the availability of such raw materials, which could hurt our competitive position and adversely impact our business, financial condition and results of operations.
• The implementation of these agreements, including the Paris Agreement, the Europe Climate Law, and other existing or future regulatory mandates, may adversely affect the demand for our products and services, impose taxes on us or our customers, require us or our customers to reduce GHG emissions from our technologies or operations, or accelerate the obsolescence of our products or services.
• Examples of risks inherent in conducting business in markets outside of the U.S. and Canada include: • changes in the political and economic conditions in the countries in which we operate, including civil uprisings and terrorist acts; • unexpected changes in regulatory requirements; • changes in tariffs; • the adoption of foreign or domestic laws limiting exports to or imports from certain foreign countries; • fluctuations in currency exchange rates and the value of the U.S. dollar; • restrictions on repatriation of earnings; • expropriation of property without fair compensation; • governmental actions that result in the deprivation of contract or proprietary rights; and • the acceptance of business practices which are not consistent with or are antithetical to prevailing business practices we are accustomed to in North America including export compliance and anti-bribery practices and governmental sanctions.
• In addition, the United Kingdom Bribery Act (the “Bribery Act”) extends beyond bribery of foreign public officials and also apply to transactions with individuals that a government does not employ.
• Compliance with and changes in laws and regulations in the countries in which we operate could have a significant financial impact and effect how and where we conduct our operations.