Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed on contracts with an original expected duration of more than one year. The Company’s contracts are predominantly short-term in nature with a contract term of one year or less. Therefore, the Company has utilized the practical expedient in ASC Topic 606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations when the performance obligation is part of a contract that has an original expected duration of one year or less.

Receivables

Receivables are recorded when the Company has an unconditional right to consideration from the customer.

Contract Balances

Contract assets consist of retainage amounts held as a form of security by customers until the Company satisfies its remaining performance obligations. Contract assets are considered accounts receivable for which only the passage of time is required before payment is due. In certain cases, particularly those involving customer-specific documentation requirements, invoicing is delayed until the Company is able to meet the documentation requirements. In these cases, the Company recognizes a contract asset separate from accounts receivable until those requirements are met, and the Company is able to invoice the customer. As of December 31, 2025 and 2024, contract assets were $55 million and $1 million, respectively, and were included in receivables, net in the consolidated balance sheets. The increase in contract assets for the year ended December 31, 2025 was primarily related to the acquisition of MRC Global. 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 been recognized is one 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 December 31, 2025 and 2024, contract liabilities were $50 million and $31 million, respectively, and were included in accrued liabilities on the consolidated balance sheets. The increase in contract liabilities for the year ended December 31, 2025 was due to net current year customer deposits of approximately $46 million, which includes approximately $20 million related to the acquisition of MRC Global. These increases were partially offset by recognizing revenue of approximately $27 million that was deferred as of December 31, 2024.

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), Midstream (gathering, processing and transmission of oil and gas), Gas Utilities (storage and distribution of natural gas) and Downstream and Industrial (crude oil refining, petrochemical and chemical processing and general industrials) 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.

As disclosed in Note 1 “Organization and Basis of Presentation”, DNOW completed its acquisition of MRC Global on November 6, 2025. Following the transaction, DNOW determined that it has three reportable segments pursuant to FASB ASC Topic 280, Segment Reporting, but has disaggregated its revenues by sector for each reportable segment as the Company believes this best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. Prior year amounts have been reclassified to the current presentation. The following table presents our revenue disaggregated by revenue source (in millions):