Dnow — Financial Results

The MRC Global Acquisition Transformed DNOW's Scale — But at a High One-Time Cost

DNOW completed the acquisition of MRC Global in November 2025, which was the dominant story of the year. The deal drove most of the 18.8% revenue increase, but also triggered $135 million in inventory step-up charges (a one-time accounting cost when acquired inventory is revalued to fair market price) plus $62 million in transaction-related fees, flipping a $109M operating profit into a $93M operating loss. Strip those one-time items out and the underlying business — as measured by Adjusted EBITDA — actually grew 19% to $209 million, holding a steady 7.4% margin.

Revenue Growth Was Real, But Driven Almost Entirely by Acquisitions

The U.S. and International segments grew strongly, but primarily because MRC Global was folded in — organic market conditions were actually softer, with the U.S. rig count falling 6.3% and WTI crude oil prices dropping 14.5% to $65.46 per barrel. Canada declined 15.4% on weaker project activity and lower commodity prices, a reminder of how exposed parts of the business remain to energy cycles.

Midstream and Downstream Were the Standout Organic Performers

Among DNOW's end-market sectors, Midstream revenue jumped 31% and Downstream and Industrial rose 41% in 2025 compared to 2024. Midstream is being driven by surging demand for natural gas pipeline infrastructure tied to LNG export growth and data-center power needs. Downstream growth reflects expanded activity in refinery maintenance and new markets like mining and data centers. Both sectors are expected to continue growing in 2026, offering some diversification away from the more volatile upstream oil business.

The MRC Global Deal Stretched the Balance Sheet — Liquidity Remains Manageable

DNOW spent $574 million (net of cash acquired) on acquisitions in 2025, funded largely by drawing $411 million on its revolving credit facility (a flexible bank loan). Operating cash flow fell to $155 million from $298 million the prior year, partly due to acquisition costs. The company ended the year with $164 million in cash and $424 million still available on its $850 million credit line, and confirmed it was in compliance with all debt covenants. Leverage has clearly increased, but management believes existing cash flow and credit availability are sufficient to run the business.

Tariffs Are a Real but Manageable Headwind

Steel tariffs expanded throughout 2025, and because a large share of DNOW's products contain steel — with some valves and pumps sourced partly from China and India — this raised input costs. The company says it has generally been able to pass tariff costs on to customers through contract provisions. However, the filing acknowledges that in some cases higher costs made downstream customers' projects uneconomical, leading to delays or cancellations in the second half of 2025. The ultimate impact remains uncertain, particularly given ongoing changes in U.S. trade policy.