18. Stock-based Compensation and Outstanding Awards

Under the terms of the DNOW Inc. Long Term Incentive Plan (the “Plan”), 16 million shares of the Company’s common stock were authorized for grant to employees, non-employee directors and other persons. The Plan provided for the grant of stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), phantom shares and performance stock awards (“PSAs”). The Plan had a ten-year term which expired in May 2024. Since the Plan expired in May 2024, no further awards can be made under the Plan after such expiration date. On May 22, 2024, the Company’s shareholders approved the DNOW Inc. 2024 Omnibus Incentive Plan (the “2024 Plan”). Under the new 2024 Plan, the shares initially available for grant under such plan was the sum of (i) 1,973,000 shares (which was approved by the Company’s shareholders) and (ii) the number of shares that remained available for issuance under the Plan at the time of its expiration, which were rolled over into the new 2024 Plan. The 2024 Plan permits awards to be granted until 2034, including the granting of RSAs, RSUs, PSAs, stock options and stock appreciation rights.

Stock-based compensation expense recognized for the years ended December 31, 2025, 2024 and 2023 totaled $29 million, $13 million and $15 million, respectively. The tax effected benefit for share-based compensation arrangements was $4 million, $2 million and $2 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Each of the stock-based compensation arrangements are discussed below.

Stock Options

Stock option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock option awards generally have a 7-year contractual term and vest over a 3-year period from the grant date on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award were, in substance, multiple awards. Additionally, the Company’s stock options provide for full vesting of unvested outstanding options, in the event of a change of control of the Company and a change in the holder’s responsibilities following a change in control of the Company. The Company did not grant stock option awards in 2025, 2024 and 2023.

The total intrinsic value of options exercised for the years ended December 31, 2025, 2024 and 2023 was $1 million, $3 million and less than $1 million, respectively. Cash received from exercises of stock options was $1 million for the year ended December 31, 2025.

Restricted Stock Awards (“RSAs”)

Restricted stock awards generally cliff vest after one or three years. For employees, vesting generally occurs on the anniversaries of the date specified in the employees’ respective agreements over a three-year period (but no less than one year), subject to accelerated vesting under certain circumstances set forth in the agreements. Vesting for directors generally occurs on the one-year anniversary of the grant date. The grant-date fair value of RSA grants is determined using the closing quoted market price on the grant date. Additionally, the Company’s RSA agreements provide for full vesting of RSAs in the event of a change of control of the Company and a change in the holder’s responsibilities following a change in control of the Company.

The weighted average grant-date fair value was $15.76, $13.64 and $12.52 for RSAs granted for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, unrecognized compensation cost related to RSAs was $13 million, which is expected to be recognized over a weighted average period of 1.2 years. The total vest-date fair value of shares vested for the years ended December 31, 2025, 2024 and 2023 was $27 million, $5 million and $3 million, respectively.

Restricted Stock Units (“RSUs”)

Restricted stock units generally cliff vest after one or three years. For employees, vesting generally occurs on the anniversaries of the date specified in the employees’ respective agreements over a three-year period (but no less than one year), subject to accelerated vesting under certain circumstances set forth in the agreements. The grant-date fair value of RSU grants is determined using the closing quoted market price on the grant date. Additionally, the Company’s RSU agreements provide for full vesting of RSUs in the event of a change of control of the Company and a change in the holder’s responsibilities following a change in control of the Company.

On November 6, 2025, in connection with the closing of the acquisition of MRC Global, outstanding RSUs covering shares of MRC Global held by key employees were converted into 0.9489 RSUs representing the right to receive shares in DNOW (“DNOW RSU”). Additionally, outstanding performance share unit awards covering shares of MRC Global (“MRC Global PSU”) held by key employees which were deemed achieved in accordance with the terms and conditions of the applicable award agreement governing such MRC Global PSUs prior to the acquisition were converted into 0.9489 DNOW RSUs. Such DNOW RSUs will vest and be payable on the same terms and conditions as are set forth in the corresponding award agreement (except that such award will be payable in DNOW common stock).

The weighted average grant-date fair value was $14.59, $13.01 and $13.00 for RSUs granted for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, unrecognized compensation cost related to RSUs was $6 million, which is expected to be recognized over a weighted average period of 1.6 years. The total vest-date fair value of shares vested for the years ended December 31, 2025, 2024 and 2023 was $43 million, less than $1 million and less than $1 million, respectively.

Performance Stock Awards (“PSAs”)

PSAs generally have a 3-year vesting period from the grant date and vest at the end of the vesting period with potential payouts varying from zero for performance below the threshold performance metric to 200% of the target award PSAs for performance above the maximum performance metric. The grant-date fair value of market-condition PSA grants is determined using a Monte Carlo simulation probabilistic model. The grant-date fair value of performance-condition PSA grants is determined using the closing quoted market price on the grant date. Additionally, the Company’s performance award agreements provide for full vesting of PSAs at the target level in the event of a change of control of the Company and a change in the holder’s responsibilities following a change in control of the Company.

The Company granted PSAs to senior management employees whereby the PSAs can be earned based on performance against established metrics over a three-year performance period. The PSAs are divided into three independent parts that are subject to separate performance metrics: (i) one-half of the PSAs have a Total Shareholder Return (“TSR”) metric, (ii) one-quarter of the PSAs have an EBITDA metric and (iii) one-quarter of the PSAs have a Return on Capital Employed (“ROCE”) metric.

Performance against the TSR metric is determined by comparing the performance of the Company’s TSR with the TSR performance of designated peer companies for the three-year performance period. Performance against the EBITDA metric is determined by comparing the performance of the Company’s actual EBITDA average for each of the three-years of the performance period against the EBITDA metrics set by the Company’s Compensation Committee of the Board of Directors. Performance against the ROCE metric is determined by comparing the performance of the Company’s actual ROCE average for each of the three-years of the performance period against the ROCE metrics set by the Company’s Compensation Committee of the Board of Directors.

The weighted average grant-date fair value of PSAs granted for the years ended December 31, 2025, 2024 and 2023 was $16.85, $14.17 and $15.52, respectively. As of December 31, 2025, unrecognized compensation cost related to PSAs was $6 million, which is expected to be recognized over a weighted average period of 1.2 years. The total vest-date fair value of PSAs vested for the years ended December 31, 2025, 2024 and 2023 was $8 million, $7 million and $1 million, respectively.