Now Inc. Earnings Call Balances Growth With ERP Risks

Now Inc ((DNOW)) has held its Q4 earnings call. Read on for the main highlights of the call.

Now Inc.’s latest earnings call carried a cautiously optimistic tone as management balanced solid 2025 performance against real near‑term execution risks. The completed merger with MRC Global has boosted scale, margins remain healthy, and cash generation is strong, yet serious ERP disruptions and integration costs are weighing on visibility and investor confidence.

Merger with MRC Global Expands Scale and Reach

The merger with MRC Global, closed in early November 2025, has significantly expanded Now Inc.’s geographic footprint and end‑market exposure across upstream, midstream, gas utilities, downstream and industrial sectors. Management emphasized the long‑term value potential from greater purchasing power, a larger addressable market and operational efficiencies, reaffirming a three‑year cost‑synergy target of $70 million with accelerated year‑one savings now projected at $23 million.

Revenue Growth Marks Fifth Consecutive Year of Gains

For full‑year 2025, Now Inc. reported revenue of $2.8 billion, an increase of $447 million or 19% from the prior year and marking its fifth straight year of growth. Fourth‑quarter revenue climbed to $959 million, up about 51% year‑over‑year, driven primarily by a $388 million partial‑period contribution from MRC Global.

Adjusted EBITDA Strength and Record Legacy Profitability

The company posted full‑year adjusted EBITDA of $209 million, representing 7.4% of revenue, with fourth‑quarter adjusted EBITDA at $61 million, or 6.4%. Legacy DNOW on a standalone basis delivered record annual EBITDA of $199 million and an 8.2% margin, its best performance since becoming a public company and a key proof point for the underlying earnings power of the core business.

Liquidity Remains Robust with Moderate Leverage

Now Inc. exited 2025 with liquidity of $588 million, including $164 million of cash and $424 million available on its credit facility. Net debt stood at $247 million, translating to a manageable leverage ratio of 1.2 times, while the company’s $850 million revolving credit facility provides runway into November 2028.

Solid Cash Generation and Disciplined Capital Deployment

Operating activities generated $155 million of cash in 2025, with $83 million produced in the fourth quarter alone, underscoring resilient cash flow even amid integration costs. Capital expenditures were contained at $25 million, and the company resumed shareholder returns via a reactivated $160 million buyback program, repurchasing $10 million of stock in the fourth quarter and $37 million cumulatively under its prior authorization.

International Momentum and Data Center Market Entry

Legacy MRC Global International has delivered four straight years of growth averaging about 10% annually through 2025 and just posted its strongest year since 2018, highlighting firm demand outside the U.S. At the same time, DNOW’s move into supplying PVF and pump products to data centers, now serving 11 customers across four markets, introduces a promising new industrial growth avenue.

Early Revenue Synergies and Cross‑Selling Benefits

Management said early commercial synergies from the merger are already visible, with expanded inventory access improving win rates and shortening lead times for customers. The company is also pushing process‑solutions offerings such as pumps, valve actuation and measurement and instrumentation into downstream, midstream and gas utility accounts, signaling a broader wallet‑share strategy across its enlarged customer base.

ERP Breakdown at MRC U.S. Creates Major Headwind

A poorly functioning Oracle ERP rollout at legacy MRC Global U.S., which went live in August 2025, has become the single largest operational risk, causing order processing delays, customer service problems and higher safety stock needs. With MRC U.S. representing roughly 40% of the combined business, the disruptions have driven revenue and profit declines in recent quarters and forced management to postpone issuing formal guidance.

Merger‑Related Charges Push Q4 into Deep Loss

Despite healthy underlying results, Now Inc. reported a fourth‑quarter net loss of $147 million, largely tied to merger‑specific items rather than core operations. These included roughly $50 million in transaction costs, a $12 million currency translation adjustment and a hefty $135 million acquisition‑related inventory step‑up charge, with a further $41 million of step‑up expense expected to flow through in the first quarter.

Weakness in Certain Legacy Segments Weighs on Growth

Not all legacy areas are firing, as legacy DNOW U.S. revenue slipped to $47 million in the fourth quarter, down about 10% sequentially, reflecting softer activity. Legacy DNOW International revenue declined 7.5% for the full year to $222 million, as fewer projects and the strategic exit from some countries under restructuring plans reduced top‑line contribution.

Margins Pressured by MRC Mix and Inventory Accounting

Fourth‑quarter adjusted gross profit reached $217 million, but the margin dipped to 22.6% from 23.2% a year earlier, a move management attributed mainly to the mix effect of the MRC contribution. A switch to LIFO accounting, associated charges of $9 million in the quarter and $27 million for the year, plus ongoing amortization of inventory step‑up, further weighed on reported margins and complicate near‑term comparability.

SG&A Surge Reflects MRC Integration and Deal Costs

Selling, general and administrative expense jumped to $226 million in the fourth quarter, an increase of $114 million from the previous quarter, as the company absorbed MRC’s partial‑period cost base. About $75 million of the rise came from MRC operations and roughly $50 million from transaction‑related costs, partially offset by around $5 million in asset sale gains, underscoring the temporary but significant integration drag.

Working Capital Swells on Inventory and Receivables

Inventory ballooned to $1.19 billion by year‑end, up $833 million from the prior year, largely due to the addition of MRC inventory and higher safety stocks, leaving annualized fourth‑quarter turns at roughly three times. Working capital excluding cash represented 29.7% of annualized fourth‑quarter revenue versus legacy levels near 15%–15.8%, while receivables of $174 million pushed days‑sales‑outstanding to 83 days, well above legacy DNOW’s 63 days.

Guidance Deferred Amid ERP Uncertainty, with Planning Markers

Faced with ongoing ERP turmoil at MRC U.S. and early‑stage integration, management has delayed sequential and full‑year 2026 guidance until operations stabilize and become more predictable, but it outlined several planning metrics to frame expectations. The company is targeting $70 million of total cost synergies with $23 million in savings by year one, expects a 26%–27% tax rate, aims to trim working capital toward 25% of revenue, generate about $100 million–$200 million of cash in 2026 and continue deleveraging from its current net debt of $247 million.

Now Inc.’s earnings call showcased a company with stronger scale, solid cash flow and clear synergy potential, but also one wrestling with self‑inflicted operational setbacks. For investors, the story hinges on how quickly management can fix the MRC U.S. ERP issues and normalize working capital, which will determine whether the merger’s long‑term upside can translate into sustained earnings growth and a re‑rating of the stock.