Good morning. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the DNOW Fourth Quarter and Full Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to withdraw your question, press 1 again. Thank you. Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference.

Thank you, Jeannie, and good morning, and welcome to DNOW's Fourth Quarter and Full Year 2025 earnings conference call. We appreciate you joining us, and thank you for your interest in DNOW. With me today is David Cherechinsky, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer. We operate under the DNOW brand, which is also our New York Stock Exchange ticker symbol. Please note that some of the statements we make during this call, including responses to your questions, may contain forecasts, projections, estimates, including, but not limited to, comments about our outlook for the company's business. These are forward-looking statements within the meaning of the U.S. federal securities laws based on limited information as of today, 02/20/2026, which is subject to change. They are subject to risks and uncertainties, and actual results may differ materially. No one should assume that these forward-looking statements remain valid later in the quarter or later in the year. We do not undertake any obligation to publicly update or revise any forward-looking statements for any reason. In addition, this conference call contains time-sensitive information that reflects management's best judgment at the time of the live call. I refer you to the latest Forms 10-K and 10-Q that DNOW has on file with the U.S. Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business. Further information, as well as supplemental financial and operating information, may be found within our earnings release on our website at ir.dnow.com or in our filings with the SEC. To supplement the information provided to investors under GAAP, we present certain non-GAAP financial measures. We encourage you to review our earnings release and securities filings for further details on our use of these non-GAAP metrics and for reconciliations to the most directly comparable GAAP measures; these documents are also available on our website. Unless we specifically state otherwise, references in this call to EBITDA refer to adjusted EBITDA; earnings per share, or EPS, refer to adjusted diluted EPS; and net income refers to adjusted net income. Please be advised that we have enhanced our reporting across all three geographic reporting segments by disclosing revenues for each of the four reporting sectors: upstream, midstream, gas utilities, and downstream and industrial. Also note that the references for legacy DNOW pertain to the business excluding contributions from MRC Global, while consolidated DNOW figures include contributions from MRC Global during the stub period. As of this morning, the investor relations section of our website contains a presentation covering our results and key takeaways for the fourth quarter and full year of 2025. We expect to file our Form 10-K in the coming week and it will also be available on our website. A replay of today's call will be available on our site for the next 30 days. I will now turn the call over to David Cherechinsky. Thank you, Brad, and good morning, everyone.

I want to begin this morning with what matters to me most—our people—and the strength of the team we are building. On November 6, we completed the merger with MRC Global. Today, we are operating as one company, united by shared values, complementary strengths, and a common ambition to win in the market. I want to extend a warm and enthusiastic welcome to our new fellow team members as we begin this next chapter. Both MRC Global and DNOW have built strong, respected, well-established franchises shaped by years of hard work, resilience, and winning in our respective markets. In some areas, we have spent decades competing, pushing each other to be better. But in 2026, that changes. We are now together, building our strengths, talent, and collective ambitions under one roof. And what we will achieve together will be far greater than anything we have accomplished apart. Without a doubt, we are better together. One thing I noticed right away as I visit with our new team members is the relentless passion our people share serving our customers and winning in the market. I am impressed with the deep technical expertise and integrated solutions MRC Global brings to the market, especially in gas utility, downstream industrial sectors, and the valve powerhouse of its international business. It is clear we start off with a strong cultural alignment immediately around the importance of the people who differentiate us in the market, how we care for, advance, and promote our top talent, and how we singularly organize to delight our customers and win their business. Our new team excels by fanatically focusing on our customers. I am honored to work with the leadership and team members from MRC Global. Their style is growth-oriented, with a strong forward-leaning sales posture. Our new family members…

Thank you, Dave, and good morning, everyone. Revenue for the 2025 was $959,000,000, up 51% or $325,000,000 from the 2025, driven by $388,000,000 of MRC Global contribution from the close date of November 6 through the year-end 2025, referred to as the stub period. On a full-year basis, total 2025 revenue was $2,800,000,000, up $447,000,000, or 19%, from 2024. With and without the contribution from MRC Global, this marks DNOW's fifth consecutive year of growth. Adjusted EBITDA, or EBITDA, for the fourth quarter was $61,000,000, or 6.4% of revenue. On a full-year basis, total 2025 EBITDA was $209,000,000, or 7.4% of revenue. U.S. revenue for the 2025 totaled $765,000,000, with MRC Global contributing $298,000,000 in revenue during the stub period. In the U.S., legacy DNOW fourth quarter revenue was $47,000,000, down approximately 10% sequentially. And when looking at MRC Global U.S. activity in the period, it was down similarly, as all sectors historically contract in the fourth quarter with seasonality. Now moving to Canada. Revenue was $51,000,000 for the fourth quarter, down $2,000,000, or 4%, sequentially. For the full year 2025, Canadian revenue was $200,000,000. Although revenue growth faced challenges from low commodity prices, tariff uncertainties, and customer consolidations, our Canadian operations protected margins by exercising rigorous cost management, as customer budgets recalibrate and measures are made for improved profitability. For consolidated DNOW International, revenue was $143,000,000 in the fourth quarter and $312,000,000 for the full year, with approximately $90,000,000 contributed by MRC Global in the stub period. For the legacy DNOW International segment, fourth quarter revenue was $53,000,000, down $1,000,000 sequentially. For the full year 2025, legacy DNOW International revenue was $222,000,000, down 7.5% on a year-over-year basis, primarily due to a combination of fewer projects and the exit of certain countries in our previously discussed cost restructuring activities…

Thank you, Mark. Before I close, I would like to highlight legacy MRC Global's international business, which has delivered its fourth consecutive year of growth, averaging 10% annual growth over the four years ended 12/31/2025. This group achieved its strongest year since 2018 for revenue, marking the best year ever for profitability. Worth noting, 2025 benefited from strong MRC Global International project execution, contributing approximately $35,000,000 of DNOW revenue in the fourth quarter, not repeating at the same level in 1Q 2026. Longer term, we see strategic benefits from our expanded international platform. The combination of MRC Global's international business strengthened our global footprint and technical capabilities, while the April 2025 acquisition of Natron International in Singapore enhances our exposure to electrical and data center-related opportunities, positioning us well for growth. In closing, I have confidence that our team will overcome the obstacles and resolve U.S. MRC Global ERP system issues in this transition year. Our priorities will center on integration execution, aligning commercial strategies, consolidating systems, optimizing the supply chain, and capturing identified cost synergies while maintaining a strong focus on serving customers to minimize further disruption. Before talking about the rest of the year, I want to close our pre-MRC Global chapter by citing results which represent standalone DNOW figures in all instances. 2025 represents our fifth consecutive year of growth, where our core markets actually contracted in each of the last three years. This is DNOW defying gravity. In 2025, we delivered our most profitable year ever since going public 11 and a half years ago. These last four years, from 2022 to 2025, have been our best years ever in terms of absolute dollar EBITDA performance. 2021 was our business transformation period, coming out of COVID, where we developed and executed on a strategy for growth,…

At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad.

Your first question comes from the line of Adam Farley with Stifel. Please go ahead.

Good morning, everyone. Let me start in first on a little bit more color on MRC's ERP transition. What was the impact in 4Q from the transition? Any color on when we should expect these headwinds to resolve going into 2026? You know, were these issues broad-based across MRC's business in the U.S., or was it specific to certain sectors?

Okay. In terms of the impact, let me give some timing on a quarterly basis. Again, as I mentioned in my prepared remarks, the ERP issues are limited to U.S. MRC only, not the international MRC business. And of course, the ERP impacts do not affect the legacy business for DNOW. In terms of the impact from the second quarter, the system was implemented 08/06/2025. And the revenue decline from the second to third quarter was—was pronounced. And MRC issued a press release when they announced their earnings and talked about that significant sequential decline. They also talked about the notable recovery in revenues in September and October, and they forecasted growth going into the fourth quarter in the mid- to high-single-digit range. I think what we have experienced in reality was, you know, it was a decline in revenues going into the fourth quarter. So there has been revenue loss attributable fully to the ERP implementation, both in the third and fourth quarters, so that impact is notable. In terms of the resolution for the system issues, we have all hands on deck to resolve the core infrastructure issues with Oracle for MRC Global U.S. We are not really sure when the resolution happens, but here is what we are doing to mitigate it in the short term. So we have immediately—we have DNOW systems focused on handling projects, especially bulky projects with a lot of deliveries that are cumbersome to move through the Oracle system at MRC. We are trying to push projects to the DNOW system to eliminate those snags that happened in Oracle. We have stood up—we have added over 200 personnel in the field to maximize customer service, to mitigate customer frustration, and to get products out the door and improve how we service our…

Thank you, Dave. That is really helpful. You know, turning to 2026 growth expectations, I understand the delay in issuing guidance, but can you maybe just help frame how you are thinking about, you know, maybe organic growth for the year, either by sector or for legacy DNOW?

Okay. Well, I will give some kind of some market assessments that we have kind of made, and then I will see if I am answering your question. But in terms of the upstream space, we expect upstream generally to be flat to down, like we have experienced for the last three years. And we have managed our response to that reality very well. We do expect some water management and disposal growth in upstream. That will be a positive, and we are seizing that. We have a real strong FlexFlow Trojan team that is focused on seizing market share there and pursuing growth, and they are primarily focused on upstream, but generally upstream will be flat to down. The midstream space, you know, we focused on midstream for the last three years. The WITCO acquisition from early 2024 really leapfrogged us in that space. Combining with MRC now, you know, we are a real powerhouse in that area. We should see midstream growth, especially in natural—the market itself, and we should be able to take advantage of that as well. I am sorry, natural gas infrastructure, feed gas for data centers, for example, LNG feed gas, et cetera. Gas utilities—our customers will be growing, and we see that as an opportunity, especially as we relieve the issues we are experiencing with Oracle. We have MTech solution meters that we are promoting in the market. We expect to take more wallet share from our customers, and we are pursuing revenue synergies like I talked about on the call for gas utilities. Downstream industrial—we think downstream will have a real strong turnaround a couple of quarters coming up. We expect chemicals to be down a little bit. But in terms of end market opportunities, we see some real strength, except for the midstream space, which represents about 40% to 50% of our business going forward. So that is kind of some end market focus. Again, in the U.S., MRC Global's arena, you know, where we—like prior MRC Global management, and we are saying today—we have lost some revenue momentum there. But I am confident we will get it back, especially as we alleviate the issues we are experiencing today.

Alright. Thank you. And then if we look at the cost synergy target, you know, and some expected acceleration in year one, what are the main drivers driving that improved cost synergy target in 2026? And if we look further out, I mean, do you expect the total cost synergy target to move up over time? Thank you.

Yeah. Let me address the first half of the question in terms of what is driven the improvement in the expected realized savings in the first year. That is primarily due to—this is one of the positive offshoots of having had issues with the ERP implementation in U.S. MRC Global—there is a real urgency to be able to take care of our customers through a system that can accommodate normal activity. So, for the first time in my career, I have seen locations clamoring to get on SAP—for example, the DNOW standard for communicating commerce in the business. So we are going to fast-track—you know, I wanted to take, you know, kind of a longer extended period to migrate movement in the upstream space, but we are going to be able to fast-track that. And with that, we will see cost synergies. We will see the relief of revenue leakage that came from the implementation of the system, and we are seeing real closeness between our leadership in the field, our sales talent, and the folks from both sides, from MRC Global and DNOW. So I think that is the main thing: we are on a faster track; we are seeing some of the realization of those cost savings coming from a fast on bringing those organizations, primarily in upstream, together. In terms of long term, what the opportunities are—you know, we said, you know, over three years, we would get to $70,000,000 in savings. You know, I am not prepared to say we will surpass that. My instinct is there are opportunities to do so. You know, one of the things that—the reason why most of the savings in our original projections would happen in the third year is we need to decide how we are going to manage the business holistically going forward from a systems perspective. You know, it is possible that that gets ironed out earlier than expected. So, you know, I think we will see real strength in the momentum with cost savings. But I have said from the beginning, since our first call in June, that the real promise here is in growth, and focusing on what we bring to our customers—what we bring to our customers as they consolidate; how we become uniquely suited to service our customers as they grow and as they grow from an M&A perspective. So I think that is where we are at on that front, Adam.

Alright. Thank you. I will leave it there.

Okay. Thanks for your questions.

Your next question comes from the line of Alex Rygiel with Texas Capital. Please go ahead.

Thank you, and good morning, gentlemen. Good morning, Alex. David, I appreciate your decision regarding guidance. But maybe I could ask it a different way. Can you maybe talk about, strategically, your longer term vision for sort of revenue growth for the consolidated company and profit margins? And, you know, maybe if you are not yet ready for that, maybe if you could kind of give us some directional guidance on maybe just the DNOW business for 2026 and how you are thinking about revenue growth and margins in just that core business?

Well, let me try this. You know, we kind of gamed out how we would answer a question like this. You know, we are going to give, you know, select guidance on parts of the business. I really do not want to do that. But let me just give you some color on how we saw movement into the new year, whether we have these disruptions or not. Generally, we see our overall business with kind of a flattish revenue. That is how I saw going into 2026—flattish revenue. Very little revenue change organically. We saw the opportunities around cost synergies, integration of the businesses, revenue synergies that come from us working closer together and using each other's inventories and locations where one entity did not have geographic coverage but the other does. So we saw revenue upside to mitigate some of that overall revenue flatness. I gave some color on the end markets. DNOW is a very acquisitive company. We will do deals this year. And that would augment and kind of excite some of the bottom line implications. But that has been deferred a bit, you know, given what we are seeing with the ERP issues. Long term, the real benefits from DNOW and MRC coming together are these things. If you look at—you know, we are a distributor. Our relationships with our customers are almost—I mean, are, you know, rivaling in importance with our suppliers. In many cases, especially with the top manufacturers, DNOW or MRC was the number one or number two distributor in the supply chain. Or sometimes DNOW was number 12 and MRC was number one. We are going to take advantage of that. Our ability to be competitive—and we have numerous competition everywhere we operate, and—but sometimes our competition is very specialized. On a product line, on the manufacturer. We are going to be able to better compete, and with the cost synergies, we will be able to pull up costs and, you know, further improve our competition. So I think the long game is a better situation—better situated with our top—the top manufacturers our customers demand. A lot more volume, exciting suppliers about seeing a DNOW—combined DNOW, MRC Global—as the main source of pushing their products into the market. So better buying, better product availability, standardization, customers clamoring for access to products to grow the end markets. All that is going to conspire to, long term, enable together what we could not have done separately. So I think that is the main plan: volume, better costing, better competitiveness, and then earnings ultimately in that 8% EBITDA range where DNOW has, you know, has enjoyed over the last four years, but bringing the whole organization up over the next several years.

That is helpful. And then in the past, you have discussed the importance of the people at DNOW and the people at MRC, and how important it is to give them a lot of attention. So can you speak with regard on your activities to retain and incentivize these key employees during this time of kind of ERP headwinds?

Yeah. That is a good question. So as you would expect with any merger of equals, there will be some turnover, and then in a situation where there is a disruption like this, there is a heightened sense of concern over that. So we have been very intentional about making sure our top talent is rewarded from a financial perspective and with various forms of tools used to do so, but also from a long-term perspective of making sure we put the top—the best people, the best salespeople, the best sales talent, the best IT talent—in the leadership positions to drive the future. So in terms of incentives, the things that are going to drive—enable us to keep our people is to show them long term we are going to pay bigger bonuses, bigger commissions. We are going to be more important to suppliers. We are going to have better leverage with them. The customers will benefit from how we manage the supply chain, and our personnel will as well. So with a mix of financial remuneration, challenging our folks, rewarding them, making them part of our solutions, including them in our decision making, I think all that long term has got us where we are today and will get us where we are going. We brought on some top leadership, sales and ops talent from MRC Global, and they have the same mentality we do. And we are deploying all the arrows in our quiver to make sure we excite, retain, grow our top talent and win in the market because of that organization.

Press star then the number 1 on your telephone keypad. And your next question comes from the line of Chuck Minervino from Susquehanna. Please go ahead.

Hi. Good morning. Hi, Chuck. If you could touch on the ERP issues a little bit more. Can you tell us, do you feel like you have kind of hit the the worst of it and are working your way past that? Or is the worst of it still in front of you? Just trying to gauge kind of what you know right now. How long this lingers through 2026, at least—

Yeah. You know, I think—and this may not be the best way to answer the question—but I think we are an organization very good at coping. We have hard chargers working overtime, taking care of our customers, to really conceal the imperfections in the system. So how we have coped is through hard work, and that is helping. We—you know, things are better. I have visited several of our locations, several of our U.S. MRC Global locations, talked to a lot of the leadership, a lot of the people in the warehouses. Warehouse activities are hard to push through the system right now. But just sheer force is how we are, you know, working to overcome some of this stuff. In the meantime, in the background, we are working with our external partners to fix some of the snags that slow things down. But we still have issues where it takes—where there are old invoices from earlier in the implementation where it takes 20 minutes to process paying one invoice for a supplier. Those are some older activities that we believe—that stuff has been resolved on a go-forward basis, but there are still some lingering effects that still slow us down. So in terms of when this gets resolved, you know, we will probably have our next earnings call in the next 80 days, Chuck, and I will have a better feel for it. In the meantime, we are doing things to simply bypass the obstacle that this implementation presents. And I talked a little bit about it—handling more transactions through SAP. We are sitting down—we have an MRC Global inside salesperson sitting next to the DNOW salesperson entering orders in SAP to take care of their customers, to reverse the revenue losses we have experienced in the first few quarters after go-live. So we are, you know, coping. We are cleaning up old problems. We are fast-tracking solutions to improve process flow in the system. And we have stood up a help desk to help with, you know, anecdotal one-off kind of problems. So we have triaged the situation. We are working it hard. And I will be able to talk more about it in the next 80 days or so.

And then just, my other question is on free cash flow. Can you talk a little bit about free cash flow in 2026? Maybe if you are not quite ready to talk about numbers there, just some of the puts and takes as well.

Yeah. I think I will say this. We are going to generate cash in the $100,000,000 to $200,000,000 range. Could be better. We have, you know, pent-up inventory, uncollected receivables. Both, to me, I see those as in-the-moment, near-term problems. Near-term problems, but those are opportunities too. We are going to level our inventory as we stabilize the system. We are going to collect those bills. I think from a cash flow perspective, it is going to be a good year for us. So, you know, that is how I answer that question. I think it is going to be a good year for us. And we will try to give more color on our next call if we can. Hoping to, of course.

Thank you for your questions. That concludes the question-and-answer session of today's call. Mr. Brad Wise, I turn the call back over to you for final remarks.

Well, thank you for joining us today and your interest in DNOW. We look forward to discussing our first quarter 2026 results on our next conference call in May.