Dnow Inc. (DNOW) Cash Flow Statement

The OCF/NI ratio turned negative in 2026Q2 (-1.81) and 2025Q4 (-0.56), reflecting that reported net losses are not fully translating into cash outflows, but the volatility suggests accrual distortions. The large working capital swings, particularly a $193M positive change in 2025Q4 followed by a -$115M in 2026Q1, indicate that cash flows are being heavily influenced by timing of receivables and payables, not core profitability. Investors should monitor whether the gap between net income and operating cash flow narrows as acquisition integration stabilizes.

The FCF trajectory is highly erratic, with a positive $76M in 2025Q4 followed by a negative $103M in 2026Q1, indicating that the company's cash generation is not stable. The FCF margin in 2026Q2 was only 1.6%, a sharp decline from the 20.8% in 2024Q4, suggesting that the acquired business is not yet contributing to cash flow. This volatility may indicate that the company is in a transition phase, but the lack of consistent positive FCF raises concerns about its ability to fund operations without external financing.

CapEx as a percentage of revenue has been consistently low, ranging from 0.2% to 1.3%, which suggests that DNOW's asset base is not heavily capital-intensive. The slight uptick in 2026Q2 to 1.3% could indicate incremental investment in the acquired operations, but it remains modest relative to peers. Given the low capital intensity, the company's cash flow is more sensitive to working capital and operating performance than to fixed asset replacement.

The working capital changes are the primary driver of operating cash flow volatility, with a massive positive swing in 2025Q4 followed by a negative swing in 2026Q1. This pattern suggests that the company is experiencing significant timing differences in collections and payments, possibly due to the integration of the acquired business. The negative working capital changes in 2026Q1 and 2026Q2 indicate that cash is being tied up in operations, which may strain liquidity if not managed carefully.

The cash flow statement shows significant outflows for acquisitions, particularly the $566M in 2025Q4, which aligns with the revenue surge and margin dilution noted in the income statement. Buybacks have been consistent but modest, with $75M in 2026Q2, suggesting management is returning capital to shareholders despite negative net income. The lack of dividends indicates a preference for reinvestment and buybacks, but the heavy acquisition spending may strain cash reserves if integration costs persist.

The cumulative operating cash flow of $396M versus a cumulative net loss of $59M suggests that, historically, DNOW has been able to generate cash despite reporting losses, likely due to non-cash charges like D&A and working capital releases. However, the recent quarters show a reversal, with operating cash flow turning negative in 2026Q1, which may indicate that the cash-generating ability is weakening. This divergence warrants close monitoring as the company integrates the acquisition and manages its working capital.