Ferguson Enterprises Inc. /DE/

Previous wording

Management’s discussion and analysis of financial condition and results of operations (“MD&A”)is intended to convey management’s perspective regarding the Company’s operational and financial performance for the three months ended March 31, 2026 and 2025, respectively. This MD&A should be read in conjunction with the unaudited condensed consolidated financial statements and related notes appearing in “Item 1. Financial Statements” of this Quarterly Report (the “Condensed Consolidated Financial Statements”) and the consolidated financial statements and related notes in “Item 8. Financial Statements and Supplementary Data” of the Transition Report.

Current wording

Management’s discussion and analysis of financial condition and results of operations (“MD&A”)is intended to convey management’s perspective regarding the Company’s operational and financial performance for the three and six months ended June 30, 2026 and 2025, respectively. This MD&A should be read in conjunction with the unaudited condensed consolidated financial statements and related notes appearing in “Item 1. Financial Statements” of this Quarterly Report (the “Condensed Consolidated Financial Statements”) and the consolidated financial statements and related notes in “Item 8. Financial Statements and Supplementary Data” of the Transition Report.

Previous wording

The following discussion contains trend information and other forward-looking statements. Actual results could differ materially from those discussed in these forward-looking statements, as well as from our historical performance, due to various factors, including, but not limited to, those referred to in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report.

Current wording

The following discussion contains trend information and other forward-looking statements. Actual results could differ materially from those discussed in these forward-looking statements, as well as from our historical performance, due to various factors, including, but not limited to, those referred to in “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report.

Previous wording

For the first quarter of 2026, net sales increased by 3.6% compared with the first quarter of 2025, primarily due to price inflation and incremental sales from acquisitions, partially offset by lower volume.

Current wording

For the second quarter of 2026, net sales increased by 4.6% compared with the second quarter of 2025, primarily due to price inflation, higher volume and incremental sales from acquisitions.

Previous wording

For the first quarter of 2026, operating profit increased by 20.7% (adjusted operating profit increased 8.4%), compared with the first quarter of 2025. The year-over-year change was driven by higher sales and the associated gross profit, partially offset by higher variable operating costs.

Current wording

For the second quarter of 2026, operating profit increased by 6.1% (adjusted operating profit increased 2.9%), compared with the second quarter of 2025. The year-over-year change was driven by higher sales and the associated gross profit, partially offset by higher variable operating costs.

Previous wording

For the first quarter of 2026, diluted earnings per share was $2.13 (adjusted diluted earnings per share: $2.28), increasing 23.1% (9.1% on an adjusted basis) compared with the first quarter of 2025 due to higher net income and the impact of share repurchases.

Current wording

For the second quarter of 2026, diluted earnings per share was $3.43 (adjusted diluted earnings per share: $3.39), increasing 6.9% (5.3% on an adjusted basis) compared with the second quarter of 2025 due to higher net income and the impact of share repurchases.

Previous wording

Net cash provided by operating activities decreased to $772 million in the first quarter of 2026 compared with $874 million in the first quarter of 2025, primarily reflecting an increased investment in working capital, partially offset by higher net income after adjusting for non-cash items.

Current wording

Net cash provided by operating activities decreased to $716 million in the year-to-date period of 2026 compared with $1,123 million in the same period of 2025, primarily reflecting an increased investment in working capital and the timing of income tax payments due to the transition to a calendar year-end, partially offset by higher net income after adjusting for non-cash items.

Previous wording

For the first quarter of 2026, net sales were $7.5 billion, an increase of $0.3 billion, or 3.6%, compared with the first quarter of 2025. The increase in net sales was primarily driven by mid-single digit price inflation and incremental sales from acquisitions of 0.8%, partially offset by lower sales volume. The Company’s increase in net sales was driven by growth in non-residential markets in its United States segment.

Current wording

For the second quarter of 2026, net sales were $8.8 billion, an increase of $0.4 billion, or 4.6%, compared with the second quarter of 2025. The increase in net sales was primarily driven by low single digit price inflation, higher volume and incremental sales from acquisitions of 1.0%. The Company’s increase in net sales was driven by growth in non-residential markets and, to a lesser extent, residential markets within its United States segment.

Previous wording

Gross profit in the first quarter of 2026 increased $102 million, or 4.6%, compared with the first quarter of 2025, primarily reflecting increased net sales. Gross profit as a percentage of sales was 31.0% in the first quarter of 2026 compared with 30.7% in the first quarter of 2025. The increase of 0.3% primarily reflected solid execution across the business.

Current wording

Gross profit in the second quarter of 2026 increased $99 million, or 3.8%, compared with the second quarter of 2025, primarily reflecting increased net sales. Gross profit as a percentage of sales was 31.0% in the second quarter of 2026. Gross profit as a percent of sales was 31.2% in the second quarter of 2025. The decrease of 0.2% primarily reflects the timing and extent of supplier price increases in the prior year.

Previous wording

SG&A expenses in the first quarter of 2026 increased $42 million, or 2.7%, compared with the first quarter of 2025. SG&A as a percentage of sales was 21.5% in the first quarter of 2026 compared with 21.7% in the first quarter of 2025. The decrease in SG&A as a percentage of sales primarily reflects improved productivity and operating leverage of the Company’s cost base.

Current wording

SG&A expenses in the second quarter of 2026 increased $68 million, or 4.1%, compared with the second quarter of 2025. SG&A as a percentage of sales was 19.6% in the second quarter of 2026 compared with 19.7% in the second quarter of 2025. The decrease in SG&A as a percentage of sales primarily reflects the timing and extent of certain incentive accruals in the prior year.

Previous wording

Income tax expense was $146 million in the first quarter of 2026, an increase of $22 million, or 17.7%, compared with the first quarter of 2025 due to higher income before income taxes. The Company’s effective tax rate of 26.1% in the first quarter of 2026 was generally in-line with 26.4% for the first quarter of 2025.

Current wording

Income tax expense was $180 million in the second quarter of 2026, an increase of $24 million, or 15.4%, compared with the second quarter of 2025. In the year-to-date period of 2026, income tax expense was $326 million, an increase of $46 million, or 16.4%, compared to the same period in 2025. In both year-over-year comparisons, the increases were mainly due to higher income before income taxes.

Previous wording

Net income was $414 million in the first quarter of 2026, an increase of $69 million, or 20.0%, compared with the first quarter of 2025, primarily due to the various elements described in the sections above.

Current wording

Net income for the second quarter and year-to-date periods of 2026 was $666 million and $1,080 million, respectively. These represented increases of $32 million, or 5.0%, and $101 million, or 10.3%, compared with the respective periods in 2025 due to the various elements described in the sections above.

Previous wording

Net sales for the United States segment were $7.1 billion in the first quarter of 2026, an increase of $242 million, or 3.5%, compared with the first quarter of 2025. The increase in net sales was primarily driven by mid-single digit price inflation and incremental sales from acquisitions of 0.6%, partially offset by lower sales volume. Net sales in non-residential markets, representing approximately half of revenue in the United States, increased approximately 8% compared with the first quarter of 2025. This increase was driven by commercial/mechanical, industrial and waterworks, including large capital project activity. Net sales in residential markets decreased approximately 1% compared with the first quarter of 2025 in light of weak new construction activity, along with soft repair, maintenance and improvement (“RMI”) work.

Current wording

Net sales for the United States segment were $8.3 billion in the second quarter of 2026, an increase of $0.4 billion, or 5.0%, compared with the second quarter of 2025. The increase in net sales was primarily driven by low single digit price inflation, along with volume growth and incremental sales from acquisitions of 1.0%. Net sales in non-residential markets, representing approximately half of revenue in the United States, increased approximately 8% compared with the second quarter of 2025. This increase was driven by commercial/mechanical, industrial and waterworks, including large capital project activity. Net sales in residential markets increased approximately 2% compared with the second quarter of 2025 due to growth in HVAC.

Previous wording

Adjusted operating profit for the United States segment was $656 million in the first quarter of 2026, an increase of $45 million, or 7.4%, compared with the first quarter of 2025, primarily reflecting higher sales and the associated gross profit, partially offset by higher variable operating costs.

Current wording

Adjusted operating profit for the United States segment was $925 million in the second quarter of 2026, an increase of $26 million, or 2.9%, compared with the second quarter of 2025, primarily reflecting higher sales and the associated gross profit, partially offset by higher variable operating costs.

Previous wording

Net sales for the Canada segment were $326 million in the first quarter of 2026, an increase of $17 million, or 5.5%, compared with the first quarter of 2025. This increase in net sales was primarily driven by incremental sales from acquisitions of 5.8%, the impact of foreign currency exchange rates of 4.6% and low to mid-single digit price inflation. These increases were partially offset by lower volume and the impact of a non-core business divestments of 4.6%.

Current wording

Net sales were $734 million in the year-to-date period of 2026, an increase of $9 million, or 1.2%, compared with the same period in 2025. The increase was primarily driven by low-single digit price inflation, incremental sales from acquisitions of 2.6% and the impact of foreign currency exchange rates of 1.9%. These increases were partially offset by the impact of non-core business divestments of 4.1%, along with lower sales volume.

Previous wording

Adjusted operating profit for the Canada segment decreased by $1 million in the first quarter of 2026, compared with the first quarter of 2025 due to higher operating costs, partially offset by higher gross profit.

Current wording

Adjusted operating profit for the Canada segment decreased by $1 million in the second quarter of 2026, compared with the second quarter of 2025 due to lower gross margins, partially offset by lower operating costs.

Previous wording

The Company reports its financial results in accordance with U.S. GAAP. However, the Company believes certain non-GAAP financial measures provide users of the Company’s financial information with additional meaningful information to assist in understanding financial results and assessing the Company’s performance from period to period. These non-GAAP financial measures include adjusted operating profit, adjusted net income and adjusted earnings per share (“adjusted EPS”) - diluted. Management believes these measures are important indicators of operations because they exclude items that may not be indicative of our core operating results and provide a better baseline for analyzing trends in our underlying businesses, and they are consistent with how business performance is planned, reported and assessed internally by management and the Company’s Board of Directors. Such non-GAAP adjustments include amortization of acquired intangible assets, discrete tax items, and any other items that are non-recurring. Non-recurring items may include various restructuring charges, gains or losses on the disposals of businesses which by their nature do not reflect primary operations, as well as certain other items deemed non-recurring in nature and/or that are not a result of the Company’s primary operations. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for results reported under U.S. GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of operations that, when viewed with U.S. GAAP results, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review the Company’s financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

Current wording

The Company reports its financial results in accordance with U.S. GAAP. However, the Company believes certain non-GAAP financial measures provide users of the Company’s financial information with additional meaningful information to assist in understanding financial results and assessing the Company’s performance from period to period. These non-GAAP financial measures include adjusted operating profit, adjusted net income and adjusted earnings per share (“adjusted EPS”) - diluted. Management believes these measures are important indicators of operations because they exclude items that may not be indicative of our core operating results and provide a better baseline for analyzing trends in our underlying businesses, and they are consistent with how business performance is planned, reported and assessed internally by management and the Company’s Board of Directors (the “Board”). Such non-GAAP adjustments include amortization of acquired intangible assets, discrete tax items, and any other items that are non-recurring. Non-recurring items may include various restructuring charges, gains or losses on the disposals of businesses which by their nature do not reflect primary operations, as well as certain other items deemed non-recurring in nature and/or that are not a result of the Company’s primary operations. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for results reported under U.S. GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of operations that, when viewed with U.S. GAAP results, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review the Company’s financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

Previous wording

(1)For the three months ended March 31, 2026, corporate restructuring expenses primarily related to incremental costs in connection with transition activities following the establishment of our parent company’s domicile in the United States.

Current wording

(1)For the three and six months ended June 30, 2026 and 2025, corporate restructuring expenses primarily related to incremental costs in connection with transition activities following the establishment of our parent company’s domicile in the United States.

Previous wording

(2)For the three months ended March 31, 2025, business restructuring expenses primarily related to the Company’s implementation of targeted actions to streamline operations, enhancing speed and efficiency to better serve customers and drive further profitable growth.

Current wording

(2)For the three and six months ended June 30, 2025, business restructuring expenses primarily related to the Company’s implementation of targeted actions to streamline operations, enhancing speed and efficiency to better serve customers and drive further profitable growth.

Previous wording

(2)For the three months ended March 31, 2026, corporate restructuring expenses primarily related to incremental costs in connection with transition activities following the establishment of our parent company’s domicile in the United States.

Current wording

(2)For the three and six months ended June 30, 2026 and 2025, corporate restructuring expenses primarily related to incremental costs in connection with transition activities following the establishment of our parent company’s domicile in the United States.

Previous wording

(3)For the three months ended March 31, 2025, business restructuring expenses primarily related to the Company’s implementation of targeted actions to streamline operations, enhancing speed and efficiency to better serve customers and drive further profitable growth.

Current wording

(3)For the three and six months ended June 30, 2025, business restructuring expenses primarily related to the Company’s implementation of targeted actions to streamline operations, enhancing speed and efficiency to better serve customers and drive further profitable growth.

Previous wording

(4)For the three months ended March 31, 2026 and 2025, discrete tax adjustments were mainly related to interest on uncertain tax positions.

Current wording

(4)For the three and six months ended June 30, 2026 and 2025, discrete tax adjustments were mainly related to the release of uncertain tax positions due to the lapsing of statute of limitations, adjustments related to prior year tax positions, as well as tax treatment of certain compensation items that were not individually significant.

Previous wording

(5)For the three months ended March 31, 2026, the tax impact on non-GAAP adjustments primarily related to the amortization of acquired intangibles. For the three months ended March 31, 2025, the tax impact on non-GAAP adjustments related to the restructuring expenses and the amortization of acquired intangibles.

Current wording

(5)For the three and six months ended June 30, 2026, the tax impact on non-GAAP adjustments primarily related to the amortization of acquired intangibles. For the three and six months ended June 30, 2025, the tax impact on non-GAAP adjustments related to the restructuring expenses and the amortization of acquired intangibles.

Previous wording

As of March 31, 2026 and December 31, 2025, the Company had cash and cash equivalents of $820 million and $557 million, respectively. In addition to cash, the Company had $2.4 billion of available liquidity from undrawn debt facilities as of March 31, 2026.

Current wording

As of June 30, 2026 and December 31, 2025, the Company had cash and cash equivalents of $437 million and $557 million, respectively. In addition to cash, the Company had $1.6 billion of available liquidity from undrawn debt facilities as of June 30, 2026.

Previous wording

As of March 31, 2026, the Company’s total debt was $4.1 billion. The Company anticipates that it will be able to meet its debt obligations as they become due.

Current wording

As of June 30, 2026, the Company’s total debt was $4.9 billion. The Company anticipates that it will be able to meet its debt obligations as they become due.

Previous wording

Net cash provided by operating activities was $772 million and $874 million for the three months ended March 31, 2026 and 2025, respectively. The $102 million decrease was mainly due to an increased investment in working capital compared with the prior year, partially offset by higher net income (adjusted for non-cash items) and lower cash tax payments due to timing. The increase in working capital was primarily driven by an increase in receivables due to the timing of collections year-over-year, higher inventory purchases in consideration of customer demand, the timing of vendor payments compared with the prior year and the change in timing of cash incentive payouts in light of the Company’s change to a calendar year-end.

Current wording

Net cash provided by operating activities was $716 million and $1,123 million for the year-to-date periods of 2026 and 2025, respectively. The $407 million decrease was mainly due to an increased investment in working capital and the timing of both income tax payments and cash incentive payouts due to the transition to a calendar year-end, partially offset by higher net income (adjusted for non-cash items). The increase in working capital was primarily driven by an increase in receivables due to increased sales as well as the timing of collections year-over-year and higher inventory purchases in consideration of customer demand, which was partially offset by the timing of vendor payments compared with the prior year.

Previous wording

Capital expenditures totaled $92 million and $73 million for the three months ended March 31, 2026 and 2025, respectively. These investments were primarily for strategic projects to support future growth, such as new market distribution centers, our branch network and new technology. In addition, the Company invested $10 million and $150 million in new acquisitions for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Capital expenditures totaled $234 million and $141 million for the year-to-date periods of 2026 and 2025, respectively. These investments were primarily for strategic projects to support future growth, such as new market distribution centers, our branch network and new technology. In addition, the Company invested $583 million and $226 million in new acquisitions for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Dividends paid to shareholders were $174 million and $166 million for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Dividends paid to shareholders were $347 million and $330 million for the year-to-date periods of 2026 and 2025, respectively.

Previous wording

Share repurchases under the Company’s September 2021 share repurchase program were $236 million and $207 million for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Share repurchases under the Company’s authorized share repurchase programs were $438 million and $428 million for the year-to-date periods of 2026 and 2025, respectively.

Previous wording

The Company maintains a Receivables Securitization Facility with an aggregate total available amount of $900 million (the “Receivables Facility”). The Company has the ability to increase the aggregate total available amount under the Receivables Facility up to a total of $1.5 billion from time to time, subject to lender participation. As of March 31, 2026, no borrowings were outstanding under the Receivables Facility.

Current wording

The Company maintains a Receivables Securitization Facility with an aggregate total available amount of $900 million (the “Receivables Facility”). The Company has the ability to increase the aggregate total available amount under the Receivables Facility up to a total of $1.5 billion from time to time, subject to lender participation. As of June 30, 2026, $525 million borrowings were outstanding under the Receivables Facility.

Previous wording

The Company, pursuant to a revolving credit agreement (the “Revolving Credit Agreement”), maintains a revolving credit facility that has aggregate total available credit commitments of $1.5 billion (the “Revolving Facility”). The Revolving Credit Agreement provides the Company with the ability to increase from time to time the aggregate capacity of the facility by $500 million under certain conditions, including the receipt of additional or increased lender commitments. As of March 31, 2026, no borrowings were outstanding under the Revolving Facility.

Current wording

The Company, pursuant to a revolving credit agreement (the “Revolving Credit Agreement”), maintains a revolving credit facility that has aggregate total available credit commitments of $1.5 billion (the “Revolving Facility”). The Revolving Credit Agreement provides the Company with the ability to increase from time to time the aggregate capacity of the facility by $500 million under certain conditions, including the receipt of additional or increased lender commitments. As of June 30, 2026, $250 million borrowings were outstanding under the Revolving Facility.

Previous wording

See Note 5, Debt to the Condensed Consolidated Financial Statements and the notes to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” of the Transition Report for further details regarding the Company’s debt.

Current wording

See Note 5, Debt to the Condensed Consolidated Financial Statements and the notes to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” of the Transition Report for further details.