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 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.

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 nine months ended September 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

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.

Current wording

For the third quarter of 2026, net sales increased by 9.5% compared with the third quarter of 2025, primarily due to price inflation, higher volume and incremental sales from acquisitions.

Previous 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.

Current wording

For the third quarter of 2026, operating profit increased by 4.9% (adjusted operating profit increased 8.9%), compared with the third 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 and incremental costs in connection with the FloWorks Acquisition.

Previous 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.

Current wording

Net cash provided by operating activities decreased to $1,472 million in the year-to-date period of 2026 compared with $1,884 million in the same period of 2025, primarily reflecting an increased investment in working capital and higher cash tax payments, partially offset by higher net income after adjusting for non-cash items.

Previous 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.

Current wording

For the third quarter of 2026, net sales were $9.0 billion, an increase of $0.8 billion, or 9.5%, compared with the third quarter of 2025. The increase in net sales was primarily driven by low- to mid-single-digit price inflation, higher volume and incremental sales from acquisitions of 2.7%. The Company’s increase in net sales was driven by non-residential growth and, to a lesser extent, residential growth within its United States segment.

Previous 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.

Current wording

Gross profit in the third quarter of 2026 increased $203 million, or 7.9%, compared with the third quarter of 2025, primarily reflecting increased net sales. Gross profit as a percentage of sales was 30.9% in the third quarter of 2026 compared with 31.3% in the third quarter of 2025. The decrease of 0.4% primarily reflects the timing and extent of supplier price increases in the prior year.

Previous wording

Gross profit in the year-to-date period of 2026 increased $201 million, or 4.2%, compared with the same period in 2025. Gross profit as a percentage of sales was flat in the year-over-year comparison.

Current wording

Gross profit in the year-to-date period of 2026 increased $404 million, or 5.5%, compared with the same period in 2025. Gross profit as a percentage of sales was 31.0% in the year-to-date period of 2026 compared with 31.1% in the same period in 2025. The factors impacting the year-to-date comparisons were largely the same as those noted above for the quarter.

Previous 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.

Current wording

SG&A expenses in the third quarter of 2026 increased $143 million, or 8.7%, compared with the third quarter of 2025. SG&A as a percentage of sales was 19.8% in the third quarter of 2026 compared with 19.9% in the third quarter of 2025. The decrease in SG&A as a percentage of sales primarily reflects operating leverage of the Company’s cost base, partially offset by acquisition and integration costs related to the FloWorks Acquisition.

Previous wording

SG&A expenses in the year-to-date period of 2026 increased $110 million, or 3.4%, compared with the same period in 2025. SG&A as a percentage of sales was 20.5% in the year-to-date period of 2026 compared with 20.6% in the same period in 2025. The factors impacting the year-to-date comparisons were largely the same as those noted above for the quarter.

Current wording

SG&A expenses in the year-to-date period of 2026 increased $253 million, or 5.2%, compared with the same period in 2025. SG&A as a percentage of sales was 20.2% in the year-to-date period of 2026 compared with 20.4% in the same period in 2025. The factors impacting the year-to-date comparisons were largely the same as those noted above for the quarter.

Previous wording

The Company’s effective tax rates were 21.3% and 19.7% for the second quarters of 2026 and 2025, respectively. The Company’s effective tax rates were 23.2% and 22.2% for the year-to-date periods of 2026 and 2025, respectively. In both year-over-year comparisons, the higher effective tax rates were primarily driven by adjustments related to prior year tax positions.

Current wording

The Company’s effective tax rates were 25.7% and 19.3% for the third quarters of 2026 and 2025, respectively. The Company’s effective tax rates were 24.1% and 21.1% for the year-to-date periods of 2026 and 2025, respectively. In both year-over-year comparisons, the higher effective tax rates primarily reflected discrete tax adjustments recorded in the respective prior-year periods.

Previous 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.

Current wording

Net sales for the United States segment were $8.6 billion in the third quarter of 2026, an increase of $0.8 billion, or 10.2%, compared with the third quarter of 2025. The increase in net sales was primarily driven by low- to mid-single-digit price inflation, higher volume and incremental sales from acquisitions of 2.8%. Net sales in non-residential markets, representing approximately half of revenue in the United States, increased approximately 15% compared with the third 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 6% compared with the third quarter of 2025, primarily due to growth in HVAC and, to a lesser extent, residential trade plumbing and Ferguson Home.

Previous wording

Net sales were $15.5 billion in the year-to-date period of 2026, an increase of $0.6 billion, or 4.3%, compared with the same period in 2025. The increase in net sales was primarily driven by low to mid-single digit price inflation and incremental sales from acquisitions of 0.8%. Net sales in non-residential markets increased approximately 8% compared with the year-to-date period of 2025. This increase was driven by commercial/mechanical, industrial and waterworks, including large capital project activity. Net sales in residential markets increased 1% compared with the year-to-date period of 2025 due to growth in HVAC, partially offset by weak new construction activity and soft repair, maintenance and improvement (“RMI”) work.

Current wording

Net sales were $24.1 billion in the year-to-date period of 2026, an increase of $1.4 billion, or 6.3%, compared with the same period in 2025. The increase in net sales was primarily driven by low- to mid-single-digit price inflation and incremental sales from acquisitions of 1.5%. Net sales in non-residential markets increased approximately 11% compared with the year-to-date period of 2025. This increase was driven by commercial/mechanical, industrial and waterworks, including large capital project activity. Net sales in residential markets increased 2% compared with the year-to-date period of 2025 due to growth in HVAC.

Previous 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.

Current wording

Adjusted operating profit for the United States segment was $952 million in the third quarter of 2026, an increase of $77 million, or 8.8%, compared with the third quarter of 2025, primarily reflecting higher sales and the associated gross profit, partially offset by higher variable operating costs.

Previous wording

Adjusted operating profit for the United States segment was $1.6 billion in the year-to-date period of 2026, an increase of $0.1 billion, or 4.7%, compared to the same period in 2025. The factors impacting the year-to-date comparison were largely the same as those noted above for the quarter.

Current wording

Adjusted operating profit for the United States segment was $2,533 million in the year-to-date period of 2026, an increase of $148 million, or 6.2%, compared to the same period in 2025. The factors impacting the year-to-date comparison were largely the same as those noted above for the quarter.

Previous wording

Net sales for the Canada segment were $408 million in the second quarter of 2026, a decrease of $8 million, or 1.9%, compared with the second quarter of 2025. This decrease in net sales was primarily driven by the impact of non-core business divestments of 3.6%, along with lower sales volume, partially offset by low-single digit price inflation.

Current wording

Net sales for the Canada segment were $405 million in the third quarter of 2026, a decrease of $19 million, or 4.5%, compared with the third quarter of 2025. This decrease in net sales was primarily driven by the impact of non-core business divestments of 3.2%, the impact of foreign currency exchange rates of 1.9%, along with lower sales volume, partially offset by low-single-digit price inflation.

Previous 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.

Current wording

Net sales were $1,139 million in the year-to-date period of 2026, a decrease of $10 million, or 0.9%, compared with the same period in 2025. The decrease was primarily driven by the impact of non-core business divestments of 3.7%, along with lower sales volume. These decreases were partially offset by low- to mid-single-digit price inflation, incremental sales from acquisitions of 1.6% and the impact of foreign currency exchange rates of 0.6%.

Previous 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.

Current wording

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

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 (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.

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, certain significant acquisition-related transaction and integration costs associated with acquisitions that are outside the Company’s typical acquisition profile 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 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.

Current wording

(1)For the three and nine months ended September 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 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.

Current wording

(2)For the three and nine months ended September 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 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.

Current wording

(2)For the three and nine months ended September 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 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.

Current wording

(3)For the three and nine months ended September 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 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.

Current wording

(6)For the three and nine months ended September 30, 2026 and 2025, discrete tax adjustments primarily related to the release of uncertain tax positions due to lapses in statutes of limitations, the tax treatment of certain compensation items that were not individually significant, and, for the year-to-date periods, adjustments related to prior-year tax positions.

Previous 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.

Current wording

(7)For the three and nine months ended September 30, 2026, the tax impact on non-GAAP adjustments primarily related to the amortization of acquired intangibles, and, to a lesser extent, certain costs related to the FloWorks Acquisition. For the three and nine months ended September 30, 2025, the tax impact on non-GAAP adjustments primarily related to the amortization of acquired intangibles, along with the tax impact of certain restructuring expenses.

Previous 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.

Current wording

As of September 30, 2026 and December 31, 2025, the Company had cash and cash equivalents of $476 million and $557 million, respectively. In addition to cash, the Company had $2.45 billion of available liquidity from undrawn debt facilities as of September 30, 2026.

Previous 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.

Current wording

As of September 30, 2026, the Company’s total debt was $6.2 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 $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.

Current wording

Net cash provided by operating activities was $1,472 million and $1,884 million for the year-to-date periods of 2026 and 2025, respectively. The $412 million decrease was mainly due to an increased investment in working capital, higher cash tax payments and the timing of incentive compensation 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 the timing of collections year-over-year and the timing of vendor payments compared with the prior year.

Previous 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.

Current wording

Capital expenditures totaled $342 million and $247 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 $2,257 million and $276 million in new acquisitions for the nine months ended September 30, 2026 and 2025, respectively, including $1.6 billion in 2026 related to the FloWorks Acquisition.

Previous wording

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

Current wording

Dividends paid to shareholders were $519 million and $493 million for the year-to-date periods of 2026 and 2025, respectively.

Previous 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.

Current wording

Share repurchases under the Company’s authorized share repurchase programs were $438 million and $611 million for the year-to-date periods of 2026 and 2025, respectively. The Company has temporarily paused its share repurchase program in connection with the FloWorks Acquisition. We expect to resume share repurchases once certain leverage targets are achieved, subject to market conditions, capital allocation priorities and other relevant factors.

Previous wording

Net proceeds from debt transactions were $775 million compared with net payments of $225 million for the year-to-date periods of 2026 and 2025, respectively. In the year-to-date period of 2026, the Company had net borrowings of $525 million under the Receivables Facility and $250 million under the Revolving Facility (each, defined below). In the year-to-date period of 2025, the Company had net repayments of $225 million under the Receivables Facility.

Current wording

Net proceeds from debt transactions were $2,044 million compared with net payments of $78 million for the year-to-date periods of 2026 and 2025, respectively. In the year-to-date period of 2026, the Company received $1,194 million in net proceeds from the issuance of the August 2026 Senior Notes (as defined below) and net borrowings of $850 million under the Term Loan Facility (as defined below). In the year-to-date period of 2025, the Company had net repayments of $78 million, including debt repayments of $400 million in connection with the maturity of certain Private Placement Notes and net repayments of $425 million under the Company’s Receivables Facility (each, as defined below), partially offset by $747 million in proceeds from the issuance of certain unsecured senior notes.

Previous wording

In November 2026, $150 million of private placement notes will mature.

Current wording

In November 2026, $150 million of private placement notes will mature. The remaining $150 million of private placement notes will mature in September 2027.

Previous wording

The Company has issued $3.85 billion in various issuances of unsecured senior notes.

Current wording

The Company has issued $5.05 billion in various issuances of unsecured senior notes, including the August 2026 issuance of $700 million aggregate principal amount of unsecured senior notes due August 2029 and $500 million aggregate principal amount of unsecured senior notes due August 2036 (together, the “August 2026 Senior Notes”).

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 June 30, 2026, $525 million 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 September 30, 2026, no 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 June 30, 2026, $250 million 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 September 30, 2026, no borrowings were outstanding under the Revolving Facility.

Previous wording

Ferguson Enterprises Inc. (the “Issuer”) is the issuer of the 4.350% Senior Notes due 2031 and 5.000% Senior Notes due 2034. The obligations under both series of senior notes are unsecured and are fully and unconditionally guaranteed on an unsecured basis by Ferguson UK Holdings Limited (the “Guarantor” and together with the Issuer, the “Obligor Group”).

Current wording

Ferguson Enterprises Inc. (the “Issuer”) is the issuer of the 4.350% Senior Notes due 2031, 5.000% Senior Notes due 2034, 4.800% Senior Notes due 2029 and 5.600% Senior Notes due 2036. The obligations under these series of senior notes are unsecured and are fully and unconditionally guaranteed on an unsecured basis by Ferguson UK Holdings Limited (the “Guarantor” and together with the Issuer, the “Obligor Group”).