FERG 10-K & 10-Q changes, risk factors and insider trading

In addition to the other information contained in this Annual Report, you should carefully consider the following risk factors before investing in our common stock. The risks and uncertainties we describe below are not the only ones we face. Additional risks and uncertainties of which we are not aware or that we currently believe are immaterial may also adversely affect the business, financial condition and results of operations of the Company. If any of the possible events described below were to occur, the business, financial condition and results of operations of the Company could be materially and adversely affected. If that happens, the market price of our common stock could decline, and holders of shares of our common stock could lose all or part of their investment.

Weakness in the economy, market trends, uncertainty and other conditions in the markets in which we operate, particularly in the U.S., have in the past and may in the future adversely affect the profitability and financial stability of some of our customers,customers and couldvendors, and, in turn, negatively impact our salesbusiness, growthfinancial condition and results of operations.

AdverseOur conditionsfinancial in,performance ordepends uncertaintysignificantly about,on industry trends and general economic conditions, including the state of the residential and non-residential markets, as well as changes in gross domestic product in the geographic markets in which we operate, particularly in the globalU.S. orwhere regionalwe economygenerated or95% political climate could also adversely impactof our customersnet andsales theirin confidencefiscal or2025. financialAccordingly, condition,a causing them to decide not to purchase our products or alter the timingnumber of purchasing decisions or construction projects, and could also impact their ability to pay for products purchased from us. Other factors beyond our control, including but not limited to inflation, deflation, slow or stagnant economic growthstagflation or recession, trade restrictions such as tariffs, sanctions and retaliatory countermeasures, the political climate, government spending, unemployment, interest rate and mortgage rate fluctuations, mortgage delinquency and foreclosure rates, inventory loss due to theft, foreign currency fluctuations, labor shortages, including as a result of changes in immigration policy, labor and healthcare costs, the availability of financing, disruption in the financial and credit markets, including as a result of instability in the banking sector and the failure of financial institutions, changes in tax laws affecting the real estate industry,laws, product availability constraints as a result of the ineffectiveness of or disruption to our domestic or international supply chain or fulfillment networks, weather, cybersecurity incidents or network security breaches, adverse weather events or natural disasters, acts of terrorism, acts of war, consumer activism, pandemics or epidemics, international trade tensions, civil unrest and geopolitical conditions, could have a material adverse effect on our business, financial condition and results of operations.

Any of these events could impair the ability of our customers to make full and timely payments for, or reduce the volume of, products these customers purchase from us and could cause increased pressure on our selling prices and terms of sale. Accordingly, a significant or prolonged slowdown in activity in our relevant end markets could negatively impact net sales growth and results of operations. In addition, we have closed and may in the future havechoose to close underperforming branches and/or showrooms from time to time as warranted by general economic conditions and/or weakness in the end markets in which we operate. Such closures could have a material adverse effect on our business, financial condition and results of operations.

We couldhave in the past and may in the future be adversely impacted by declines in the residential and non-residential markets.

In fiscal 2024,2025, residential markets and non-residential markets each accounted for approximately half of our net sales, with net sales within these combined markets balanced between RMI (approximately two-thirds of our net sales) and new construction (approximately one-third of our net sales). Our end markets are dependent, in part, upon certain macroeconomic trends. For example, in the past we have seen a slowdown in our end markets caused by softer demand, inflation, higher interest or mortgage rates, and other issues in the market. WhileIt inis theuncertain U.S. the pricing environment has declined, uncertainty remains as to the timing ofif the Federal Reserve reducingwill raise or lower interest rates.rates Shouldand, if so, to what level and for how long. Further, it is possible that mortgage rates could remain elevated despite any action taken by the Federal ReserveReserve. deferRate increases or the timing and/or magnitudelack of interestanticipated rate reductions, itdecreases could result in weak or no growth in our end markets. Any slowdown or stagnation may cause unanticipated shifts in our end market preferences and purchasing practices and in the business models and strategies of our customers. Such shifts may alter the nature and prices of products demanded by the end consumer and, in turn, our customers and could have a material adverse effect on our business, financial condition and results of operations. For example, rapid changes in demand may heighten the risks described in the risk factor titled “We may not rapidly identify or effectively respond to direct and/or end customers’ wants, expectations or trends, which could adversely affect our relationship with customers, our reputation, the demand for our products and our market share.”

The markets in which we operate are fragmented and highly competitive. We face competition in all markets we serve, including, but not limited to, from other companies of varying size that offer the same or similar products and services, wholesale distributors, supply houses, retail enterprises, online businesses, and manufacturers (including some of our own suppliers) that sell directly to certain segments of the market.

Further, the competitive landscape is dynamic and subject to change. For example, the arrival of newnew, or the expansion of existingexisting, competitors with new technologies or lower-cost non-value added transactional business models or new technologies may aggregate demand away from incumbents. In addition, certain competitors may devote more resources to systems development and automation or respond more quickly to emerging technologies (such as generative AI) and changes in customer preferences than we do. Furthermore, the industries in which we operate may be disrupted by non-traditional competitors through acquisitions of traditional competitors to expand their capabilities and/or targeted customer base. These non-traditional competitors, in some cases, have larger customer bases, greater brand recognition and greater resources than we do. Furthermore, this competitor consolidation could cause the industries in which we operate to become more competitive as greater economies of scale are achieved.

Additionally, we have experienced and may continue to experience competitive pressure from certain of our suppliers whovertically areintegrating nowand selling their products directly to customers. Our suppliers can often sell their products at lower prices and maintain higher gross margins on their product sales than we can.

In response to these competitive pressures, among other initiatives, we are applyingleveraging technology asto an important medium for delivering betterenhance customer serviceservice, alongsidestreamline theproduct supply of our products,delivery and to create dedicateddevelop tools to save customers time and money. However, such initiatives may take longer than expected, we may not realize the anticipated benefits from such initiatives, and the initiatives may not be successful. In addition, failure to effectively execute our strategies, including the development and acquisition of such new business models or technologies, or to successfully identify future market and competitive pressures, could have a material adverse effect on our business, financial condition and results of operations.

Fluctuating product prices have in the past and may in the future adversely affect our business, financial condition and results of operations.

Some of our products are, or contain significant amounts ofof, commodity-priced materials, predominantly plastic, copper and steel, and other components that are subject to price changes based upon fluctuations in the commodities market, which can arise from changes in domestic and international supply and demand, general inflationary and deflationary pressures, labor costs, competition, tariffstrade restrictions, such as tariffs, sanctions and traderetaliatory restrictionscountermeasures and geopolitical conflict, among other factors. To a lesser extent, fluctuations in the price of fuel could affect transportation costs. In addition, shipping capacity constraints and related fluctuations in shipping rates and space availability further impact the product cost. Our ability to adjust prices in a timely manner to account for price fluctuations will often depend on market conditions, our fixed costs, inflation and deflation, and other factors. In the event that circumstances require us to adjust our product prices and operational strategies to reflect fluctuating prices (inflation/deflation), there can be no assurance that such adjustments will be effective. For example, our inability to pass on all or a portion of product price inflation to our customers in a timely manner could reduce our profit margins. Similarly, downward pressure on product prices due to deflation couldhave in the past and may in the future cause profit margins to decline, particularly in the case of sustained price deflation coupled with increasing costs of operations. Our efforts to monitor for signs of moderation or deflation, which would present risks that we may not be able to totally mitigate, may be ineffective. Any failure to appropriately address some or all of these risks could have a material adverse effect on our business, financial condition and results of operations.

Potential regional or global barriers to trade or a global trade war could increase the cost of our products, which could adverselyhave a material adverse impact on the competitiveness of our products and our business, financial results.condition and results of operations.

We had total debt of $3.9$4.2 billion as of July 31, 2024.2025. We may incur substantial additional indebtedness in the future, in particular in connection with future acquisitionsacquisitions, which remain a core part of our strategy, some of which may be secured by some or all of our assets. Our overall level of indebtedness from time to time may have an adverse effect on our strategy, including requiring us to dedicate portions of our cash flow to payments on our debt, thereby reducing funds available for reinvestment in the business; restricting us from securing financing, if necessary, to pursue acquisition opportunities; limiting our flexibility in planning for, or reacting to, changes in our business and industry; limiting our ability to purchase, redeem or retire our common stock; and placing us at a competitive disadvantage compared to our competitors that have lower levels of indebtedness. In addition, our indebtedness exposes us to the risk of increased interest rates because a portion of our borrowings are at variable rates of interest.

We are exposed to foreign currency exchange rate risk with respect to the USD relative to the local currencies of our international subsidiaries, predominantly CAD, arising from transactions in the normalordinary course of business (such as sales and loans to wholly owned subsidiaries, sales to third-party customers, and purchases from suppliers). Our only significant foreign currency exchange exposure from a net sales perspective is CAD. Fluctuations in foreign currency exchange rates could affect our results of operations and impact reported net sales and net income.

If our domestic or international supply chain or our fulfillment network for our products is ineffective or disrupted for any reason, orincluding ifthe theseloss operationsof arekey subject to trade policy changes,suppliers, our business, financial condition and results of operations could be materially adversely affected.

We source, distribute and sell products from domestic and international suppliers, and their ability to reliably and efficiently fulfill our orders is critical to our business success.suppliers. As of July 31, 2024,2025, we had approximately 36,00037,000 suppliers located in various countries around the world.

Our businessability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply from our suppliers. The loss of, or an ongoing substantial decrease in the availability of, products from our suppliers, or the loss of key supplier arrangements, could bematerially negativelyadversely impactedimpact byour afinancial condition, operating results, and cash flows. Any of the following, or additional other factors beyond our control, may cause serious disruption in the movement of products through our supply chainchain, leading to a substantial decrease in the availability of products or by an increase in the cost of such products, including due to any of the following or other factors beyond our controlproducts: financial instability among key suppliers; global or regional political unrest, disputes or war, or labor unrest, in source countries or elsewhere in our supply chain; changes in the total costs in our supply chain (including, but not limited to, changes in fuel and labor costs and currency exchange rates); port or rail labor disputes and security; the outbreak or resurgence of pandemics or epidemics; weather-adverse weather events or climate-related events; natural disasters; foreign competition; work stoppages or strikes; shipping capacity constraints or embargoes; changes in trade policy and any trade restrictions; tariffs or duties; fluctuations in currency exchange rates; or transport availability, capacity and costs. Additionally,These asrisks may be amplified if we addare fulfillmentunable capabilitiesto or pursue strategies with different fulfillment requirements, our fulfillment network becomes increasingly complex and operating it becomes more challenging. If our fulfillment network does not operate properly or ifmaintain a supplier fails to deliver on its commitments, we could experience delays in inventory availability at our distribution facilities and branches, increased delivery costs or lack of availability, any of which could lead to lower net sales and decreased customer confidence, and adversely affect our results of operations. Furthermore, more of our existing suppliers may decide todiverse supply products directly to end users that are our existing or potential customers, which could have a detrimental effect on our ability to keep and procure customers, and maintain and win business, thereby having a material adverse effect on our business, financial condition and results of operations.chain.

The success of our business depends in part on our ability to identify and respond promptly to evolving trends in demographics, as well as customer wants, preferences and expectations, while also managing appropriate inventory levels and maintaining sufficient staffing to deliver an excellent customer experience. It is difficult to successfully predict the products and solutions that customers will require. In addition, the customers in the markets we serve have different needs and expectations, many of which evolve as the demographics in a particular market change. Inventory levels in excess of customer demand due to the difficulty of calibrating demand for such products, the concentration of demand for a limited number of products, difficulties in product sourcing,sourcing or rapid changes in demand may result in extended cash conversion cycles, inventory write-downs,write-downs and the sale of excess inventory at discounted pricesprices, any of which could have ana material adverse effect on our operating results,business, financial conditioncondition, results of operations and cash flows. Conversely, if we underestimate customer demand for our products or if our manufacturers fail to supply products we require at the time we need them, we may experience inventory shortages. Inventory shortages might delay shipments to customers and negatively impact customer relationships. Moreover, as we manage our cost base and resource allocation, our total number of associates may decrease due to natural attrition, decisions not to backfill open positions, or targeted headcount reductions. A failure to serve our customers on their required timeframes, including due to lack of available associates, could have a material adverse effect on our business, financial condition and results of operations.

The cost and potential problems and interruptions associated with these initiatives could disrupt or reduce the efficiency of our online and in-store operations in the near term, lead to product availability issues and negatively affect our relationship with our customers. Furthermore, accomplishing these initiatives will require a substantial investment in additional information technology associates and other specialized associates. We may face significant competition in the market for these resources and may not be successful in our hiring efforts. Failure to choose the right investments and implement them in the right manner and at the right pace could adversely affect our relationship with customers, our reputation, the demand for our products and solutions, and our market share. In addition, our branch and omni-channel initiatives, enhanced supply chain, and new or upgraded information technology systems might not provide the anticipated benefits and could impose substantial capital expenditures. It might take longer than expected to realize the anticipated benefits, cost more than budgeted, or all or part of the initiatives might fail altogether, each of which could adversely impact our competitive position and our business, financial condition, results of operations or cash flows.

Acquisitions, partnerships, joint ventures, dispositionsventures and other business combinations or strategic transactions involve a number of risks, any of which could result in the benefits anticipated not being realized and could have an adverse effect on our business, financial condition and results of operations.

During fiscal 2025, 2024, 2023, and 2022,2023, we completed a total of 9, 10, 8, and 178 acquisitions, respectively. We may not realize any anticipated benefits from such transactions or partnerships, or any future ones, and we have in the past and may in the future be exposed to additional liabilities and risks from any acquired business or joint venture (including but not limited to risks associated with cybersecurity incidents, unknown claims and disputes by third parties against the companies we acquire, and business disruption related to inability to retain associates of the acquired entity). In addition, we may be exposed to litigation in connection with our acquisition and partnership transactions. Our due diligence investigations may fail to identify all of the problems, liabilities or other challenges associated with an acquired businessbusiness, which could result in an increased risk of unanticipated or unknown issues or liabilities, including with respect to environmental, competition and other regulatory matters, and our mitigation strategies for such risks that are identified may not be effective. Furthermore, we may have trouble identifying suitable acquisition targets in the future or the targets we identify and pursue may not result in the realization of the benefits we expect or any benefit at all.

Our ability to deliver the expected benefits from any strategic transactions that we do complete is subject to numerous uncertainties and risks, including our acquisition assumptions; our ability to integrate personnel, labor models, financials, customer relationships, supply chain and logistics, ITinformation technology and other systems successfully; business culture incompatibility; disruption of our ongoing business and distraction of management; hiring additional management and other critical personnel; product quality compliance of new suppliers; and increasing the scope, geographic diversity and complexity of our operations.

Effective internal controls are necessary to provide reliable and accurate financial reports, and the integration of businesses may create complexity in our financial systems and internal controls and make them more difficult to manage. Integration of businesses into our internal control system could cause us to fail to meet our financial reporting obligations. Moreover, any failure to integrate, or delay in integrating, ITinformation technology systems of acquired businesses could create an increased risk of cybersecurity incidents. Additionally, any impairment of goodwill or other assets acquired in a strategic transaction or charges to earnings associated with any strategic transaction, may materially reduce our profitability. Following integration, an acquired business may not produce the expected margins or cash flows. Our shareholders, vendors or customers may react unfavorably to substantial strategic transactions. Furthermore, we may finance these strategic transactions by incurring additional debt or issuing equity, which could increase leverage or impact our ability to access capital in the future.

If we are unable to protect our sensitive data and information systems against data corruption, cybersecurity incidents or network security breaches, or if we are unable to provide adequate security in the electronic transmission of sensitive data, it could materially adversely affect our business, financial condition and results of operations.

We may face global cybersecurity threats, which may range from uncoordinated individual attempts to sophisticated and targeted measures, known as advanced persistent threats, directed at us and our customers, suppliers, and service providers. Cybersecurity incidents and network security breaches have included in the past, and may in the future include, but are not limited to, attempts to access or unauthorized access of information, exploitation of vulnerabilities (including those of third-party software or systems), computer viruses, ransomware, denial of service (“DoS”) and other electronic security breaches. Cyber-attacks from computer hackers and cyber criminals and other malicious internet-based activity continue to increase generally,increase, and our services and systems, including the systems of our outsourced service providers, have been and may in the future continue to be the target of various forms of cybersecurity incidents such as Domain Name System attacks, wireless network attacks, viruses and worms, malicious software, ransomware, application centric attacks, peer-to-peer attacks, business email compromises and phishing attempts, backdoor trojans and distributed DoS attacks. Furthermore, given that new technologies continue to emerge, the methods used by computer hackers and cyber criminals to obtain unauthorized access to data or to sabotage computer systems change frequently and continue to grow in sophistication. Accordingly, we may be unable to anticipate or detect such attacks or promptly and effectively respond to them. For example, the rapid evolution of AI and machine learning technologies and the implementation of pilot programs integrating generative AI into both our internal and external-facing systems may intensify our cybersecurity risks.

While we have instituted safeguards for the protection of our information systems and believe we use reputable third-party service providers, during the normalordinary course of business, we and our service providers have experienced and expect to continue to experience cyber-attacks on our information systems, and we and our service providers may be unable to protect sensitive data and/or the integrity of our information systems. A cybersecurity incident could be caused by malicious third parties using sophisticated methods to circumvent firewalls, encryption and other security defenses. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they have been launched against a target. Accordingly, we may be unable to anticipate these techniques or implement adequate preventative measures.

As a result, we or our service providers could experience errors, interruptions, delays, or cessations of service in key portions of our information technology infrastructure, which could significantly disrupt our operations and be costly, time-consuming and resource-intensive to remedy. As a result, we could forego net sales or profit margins if we are unable to operate. Furthermore, if critical information systems fail or otherwise become unavailable, our ability to process orders, maintain proper levels of inventories, collect accounts receivable and disburse funds could be adversely affected. Any such interruption of our information systems could also subject us to additional costs. Loss of customer, supplier, associate, or other business information or compromise of our information systems could disrupt operations,operations and our key business processes, result in the impairment or loss of critical data, be costly and resource intensive to remedy, damage our reputation, our relationship with customers, suppliers and other stakeholders and expose us to claims from customers, suppliers, financial institutions, regulators, payment card associations, associates,associates and others, any of which could have a material adverse effect on our business, financial condition and results of operations. For further information on our cybersecurity risk management and governance, see Part I, Item 1C of this Annual Report.

Data privacy and data protection laws and regulations are typically intended to protect the privacy of personal information that is collected, processed, transmitted, and stored in or from the governing jurisdiction. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between a company and its subsidiaries, including associate information. While we have invested and continue to invest significant resources to comply with data privacy regulations, many of these regulations are new, complex, and subject to interpretation. To maintain compliance with these laws, we mayhave incurincurred increased costs to continually evaluate and modify our policies and processes and to adapt to new legal and regulatory requirements. Non-compliance with these laws could result in negative publicity, damage to our reputation, penalties, or significant legal liability. Our business and operations could also be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business.

A failure of a key information technology system or process could materially adversely affect the operations of our business.

Technology systems and data are fundamental to the operations, future growth and success of our business. In managing our business, we rely on the integrity and security of, and consistent access to, data from these systems such as sales,sales data, customer data, associate data, demand forecasting, merchandise ordering, inventory replenishmentreplenishment, supply chain management, payment processing and order fulfillment. A major disruption of the information technology systems and their backup mechanisms may cause us to incur significant costs to repair the systems, experience a critical loss of data and/or result in business interruptions.

For these information technology systems and processes to operate effectively, we rely on our service providers to continue to support and maintain them. Furthermore, we must retain and recruit information technology associates and other specialized associates that can operate, maintain and update these systems. In addition, our systems and the third-party systems on which we rely are subject to damage or interruption from a number of causes, including: power outages; infrastructure or network failures; aging of technology assets; computer and telecommunications failures; cybersecurity incidents, including the use of ransomware; catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, or other natural disasters; a pandemic or epidemic outbreak or resurgence; acts of war or terrorism; and design or usage errors by our associates, contractors or service providers. We and our service providers seek to maintain our respective systems effectively and to successfully address the risk of compromise ofto the integrity, security and consistent operations of these systems,systems; utilizing all reasonable and appropriate means available. However,however, such efforts mayare not always successful. As a result, we or our service providers have experienced and are likely to experience in the future errors, interruptions, delays or cessations of service impacting the integrity or availability of our information technology infrastructure. While such incidents have not been material to date, any future incident could significantly disrupt our operations and key business processes, result in the impairment or loss of critical data, be successful.costly and resource-intensive to remedy, harm our reputation and relationship with customers, suppliers and other stakeholders, any of which could have a material adverse effect on our business, financial condition and results of operations.

We accept payments using a variety of methods, includingincluding, but not limited to, cash, checks, credit and debit cards, PayPal and electronic payments, and we may offer new payment options over time. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or costly. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our selling, general and administrative expenses. WeIn relysome oncases, thirdwe partieshave determined to providepass paymentalong processinga services, including the processingportion of creditsuch cards,fees debitto cards,customers. andIn othercertain cases, disputes over such fees may result in a decision not to accept select forms of electronic payment. IfSuch theseactions companiescould becomecause unableus to providelose these services to us,customers or ifnegatively their systems are compromised, it could potentially disruptimpact our business.brand or reputation.

In addition, our operations are working capital intensive, and our inventories, accounts receivable and accounts payable are significant components of our net asset base. We manage our inventories and accounts payable through our purchasing policies and our accounts receivable through our customer credit policies. We perform periodic credit evaluations of our customers’ financial condition, and collateral is generally not required. We evaluate the collectability of accounts receivable based on numerous factors, including past transaction history with customers and their creditworthiness based on reports we receive from independent external credit bureaus, and we provide a reserve for accounts that we believe to be uncollectible. A significant deterioration in the economy, including as a result of any public health crisis or any geopolitical conflicteconomy could have an adverse effect on collectingour ability to collect our accounts receivable, including longer payment cycles, increased collection costs and defaults. In addition, if customers fail to pay within terms of our customer credit policies, we may enforce lien and bond rights, which could lead to customer dissatisfaction and loss. If we fail to adequately manage our product purchasing or customer credit policies, our working capital and financial condition may be adversely affected.

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 and should be read in conjunction with the consolidatedConsolidated financialFinancial statementsStatements and related notes contained in this Annual Report. The discussion in this Annual Report generally focuses on fiscal 20242025 compared to fiscal 2023.2024. A discussion of our results of operations and changes in financial condition for fiscal 20232024 compared to fiscal 20222023 has been excluded from this report, but can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations of theour fiscal 2024 Annual Report on Form 10-K filed by Ferguson plc with the SEC on September 26, 2023 for fiscal 2023.Report.

Ferguson is a value-added distributor serving the water and air specialized professional in the residential and non-residential North American construction market. We help make our customers’ complex projects simple, successful and sustainable by providing expertise and a wide range of products and services from plumbing, HVAC, appliances, and lighting to PVF, water and wastewater solutions, and more. Ferguson is headquartered and managed in Newport News, Virginia with its operations and associates solely focused on North America.Virginia.

For fiscal 2024,2025, operating profit decreased 0.3%1.7% (adjusted operating profit decreasedincreased 3.2%0.6%) compared to fiscal 2023.2024. TheThis year-over-year declinedecrease was primarily due to higher$80 operatingmillion costsin drivennon-recurring byrestructuring inflation,expenses, along with the profit impact of one less sales day in fiscal 2025. These decreases were partially offset by nothigher havinggross theprofit softwarecompared impairment and other charges recorded inwith fiscal 2023.2024. Adjusted operating profit increased due to higher gross profit compared with fiscal 2024.

For fiscal 2024,2025, diluted earnings per share was $8.53$9.32 (adjusted diluted earnings per share: $9.69$9.94), decreasingincreasing 6.5%9.3% compared with the prior year due to lowerhigher net income and the impact of one-time,share repurchases. The higher year-over-year net income was primarily driven by non-recurring, non-cash deferred tax charges of $137 million incurred in fiscal 2024 in connection with theestablishing Merger,a partiallynew offsetcorporate bystructure notto havingdomicile our ultimate parent company in the softwareUnited impairment and other charges recorded in fiscal 2023, as well as the impact of share repurchases.States. Adjusted diluted earnings per share decreasedincreased 1.5%,2.6%, primarily due to the lower adjusted operating profit, partially offset by the impact of the Company’s share repurchases.repurchases, and to a lesser extent, higher adjusted operating profit.

Net cash provided by operating activities decreasedincreased 1.9% to $1.9 billion forin fiscal 2024 compared with $2.7 billion for fiscal 2023, primarily reflecting lower net income after adjusting for non-cash items, as well as higher working capital with inventory levels stabilizing in line with customer demand.2025. During fiscal 2024,2025, the Company invested $260$301 million in acquisitions and $372$305 million in capital expenditures to meet the Company’s strategic objectives.

Net sales were $29.6$30.8 billion in fiscal 2024,2025, aan decreaseincrease of $0.1$1.1 billion, or 0.3%,3.8%, compared with the same period in 2023.2024. The decreaseincrease in net sales was primarily driven by pricehigher sales volume and incremental sales from acquisitions of 1.0%, partially offset by the 0.4% impact of one less sales day in fiscal 2025. Pricing was slightly down year-over-year, primarily during the first half of fiscal 2025, due to deflation of approximately 2%, mainly withinin certain commodity categories, which was partially offset by improvements in finished goods pricing. The Company’s increase in net sales was primarily driven by growth in non-residential markets, and to a lesser extent, lowerin salesresidential volume, as well as the impact of foreign currency exchange rates of 0.1%. These decreases were partially offset by incremental sales from acquisitions of 1.8% and the benefit of an additional sales day of 0.4%markets in the year-over-year comparison. The Company’s decrease in sales was primarily driven by lower year-over-year sales in theits United States residential markets.segment.

Gross profit was $9.1$9.4 billion in fiscal 20242025, andan approximatelyincrease flatof $382 million, or 4.2%, compared with fiscal 2023.2024. Gross profit as a percent of sales was 30.5%30.7% in fiscal 20242025 compared with 30.4%30.5% in the prior yearyear. withThe increase reflected specific management actions to better capture the increasevalue reflectingprovided favorableto productcustomers mix,and the timing and extent of supplier price increases, partially offset by pricethe impact of deflation in net sales within certain commodity categories.categories, primarily during the first half of the year.

SG&A expenses in fiscal 20242025 increased $146$338 million, or 2.5%,5.6%, compared with fiscal 2023.2024. SG&A as a percentage of sales was 20.5%20.7% and 19.9%20.4% in fiscal 20242025 and fiscal 2023,2024, respectively. The increase in SG&A as a percent of sales primarily reflects thehigher impactperformance ofbased wageincentive and infrastructure cost inflation, corporate restructuring costscompensation and the impact of acquisitions.cost inflation on labor, infrastructure and fleet.

Net interest expense was $190 million in fiscal 2025 compared with $179 million in fiscal 2024 compared with $184 million in fiscal 2023.2024. The decreaseincrease in net interest expense was primarily due to lowerhigher average borrowings in fiscal 2024.2025 compared with the prior year.

Income tax expense was $729$567 million for fiscal 2024,2025, ana increasedecrease of $154$162 million compared with fiscal 2023.2024. The Company’s effective tax rate was 23.4% for fiscal 2025 compared with 29.6% for fiscal 2024 compared with 23.3% for fiscal 2023.2024. The increasedecrease in income tax expense and the increasedecrease in the effective tax rate were primarily driven by one-time,non-recurring, non-cash deferred tax charges of $137 million incurred in the prior fiscal year due to the elimination of certain pre-existing U.K. tax attributes of the Company in connection with establishing a new corporate structure to domicile our ultimate parent company in the United States, as partwell as the release of uncertain tax positions following the Merger.lapse of statute of limitations in fiscal 2025.

Net income for fiscal 20242025 was $1.7$1.9 billion, aan decreaseincrease of $154$121 million, or 8.2%,7.0%, compared with fiscal 20232024 due to the elements described in the sections above.

The Company’s reportable segments are the United States and Canada based on how the Company manages its business and allocates resources, which is on a geographical basis. The Company’s measure of segment profit is adjusted operating profit which is defined as profit before tax, excluding central and other costs, restructuring costs, amortization of acquired intangible assets, net interest expenses, as well as other items typically recorded in net other (expense) income such as (loss)/gain on disposal of businesses, pension plan changes/closure costs and amounts recorded in connection with the Company’s interests in investees.profit. For further segment information, see Note 2, RevenueSegment and segmentnet sales information of the Notes to the Consolidated Financial Statements.

Net sales for the United States segment were $28.2$29.3 billion in fiscal 2024,2025, aan decreaseincrease of $0.1$1.1 billion, or 0.3%,3.8%, compared with the prior year. The decreaseincrease in net sales was primarily driven by price deflation of approximately 2%, mainly within certain commodity categories, and to a lesser extent, lowerhigher sales volume.volume, Thesealong decreases were partially offset bywith incremental sales from acquisitions of 1.7%1.0%. andThese increases were partially offset by price deflation of approximately 1%, mainly within certain commodity categories in the benefitfirst half of the fiscal year that was partially offset by improvements in finished goods pricing. In addition, net sales growth was partially offset by the impact of one additionalfewer sales day of 0.4% in the year-over-year comparison. Net sales growth in the non-residential markets was 6.8% due to growth in each of Commercial, Civil/Infrastructure and Industrial. Net sales in the residential markets decreasedincreased by 2.4%,0.9%, drivenwith bygrowth loweracross sales inboth new construction reflecting housing starts and permit activity that were below prior year levels, as well as lower sales in RMI. Net sales growth in the non-residential markets, was 1.9%, with growth in the civil/infrastructure and commercial markets.

Adjusted operating profit in the United States was $2.8 billion, aan decreaseincrease of $0.1 billion, or 2.5%,0.7% compared with the prior year, primarily reflecting thehigher impactgross profit, partially offset by higher operating costs in light of wagesales volume growth and infrastructure cost inflation.

Net sales for the Canada segment were $1,440$1,493 million in fiscal 2024,2025, aan decreaseincrease of $3$53 million, or 0.2%,3.7%, compared with the prior year. This decreaseincrease in net sales was primarily due to lower sales volumes, as well as a 1.3% unfavorable impact from foreign currency exchange rates. These impacts were partially offset by incremental sales from acquisitions of 2.7%,4.7% and price inflation of approximately 1%2%, andpartially offset by the benefitimpacts of foreign currency exchange rates of 2.3%, one additionalfewer sales day in the fiscal year of 0.5%.0.5% and slightly lower sales volume.

Adjusted operating profit for the Canada segment decreasedincreased compared with the prior year, primarily due to higher sales and gross profit, partially offset by higher operating costs compared with the same period of prior year.

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.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.

Net cash used in investing activities wasdecreased $0.69.7% to $0.5 billion in fiscal 2024 compared with $1.1 billion in fiscal 2023.2025.

Net cash used in financing activities wasdecreased 2.1% to $1.3 billion and $1.8 billion in fiscal 2024 and 2023, respectively.2025.

In June 2015 and November 2017, Wolseley Capital, Inc. (“Wolseley Capital”), a wholly-owned subsidiary of the Company, privately placed fixed rate notes in an aggregate principal amount of $800 million and $355 million, respectively (collectively, the “Private Placement Notes”). InAs Septemberof 2022July and31, November2025, 2023, the Company repaid $250$700 million and $55 million, respectively, due to the maturing of certainin Private Placement Notes.Notes Inwere November 2024, an additional $150 million of such notes will mature.outstanding.

FergusonAs Financeof plcJuly (“Ferguson31, Finance”)2025, the Company has issued $2.35a total of $3.1 billion in various issuances of unsecured seniornotes, notescollectively (collectively,referred to as the “Unsecured Senior Notes”).

The Company maintains a Receivables Securitization Facility with an aggregate total available amount of $915 million (as amended from time to time, the “Receivables Facility”) with an aggregate total available amount of $1.1 billion, including a swingline for up to $100 million in same day funding.. 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. The benchmark rate is Term SOFR (as defined in the Receivables Facility) plus a credit spread adjustment of 10 basis points.

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 MarchJune 31,30, 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.

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.

For the firstsecond quarter of 2026, net sales increased by 3.6%4.6% compared with the firstsecond quarter of 2025, primarily due to price inflationinflation, higher volume and incremental sales from acquisitions, partially offset by lower volume.acquisitions.

For the firstsecond quarter of 2026, operating profit increased by 20.7%6.1% (adjusted operating profit increased 8.4%2.9%), compared with the firstsecond 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.

For the firstsecond quarter of 2026, diluted earnings per share was $2.13$3.43 (adjusted diluted earnings per share: $2.28$3.39), increasing 23.1%6.9% (9.1%5.3% on an adjusted basis) compared with the firstsecond quarter of 2025 due to higher net income and the impact of share repurchases.

Net cash provided by operating activities decreased to $772$716 million in the firstyear-to-date quarterperiod of 2026 compared with $874$1,123 million in the firstsame quarterperiod of 2025, primarily reflecting an increased investment in working capital,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.

For the firstsecond quarter of 2026, net sales were $7.5$8.8 billion, an increase of $0.3$0.4 billion, or 3.6%,4.6%, compared with the firstsecond quarter of 2025. The increase in net sales was primarily driven by mid-singlelow single digit price inflationinflation, higher volume and incremental sales from acquisitions of 0.8%, partially offset by lower sales volume.1.0%. The Company’s increase in net sales was driven by growth in non-residential markets inand, to a lesser extent, residential markets within its United States segment.

Gross profit in the firstsecond quarter of 2026 increased $102$99 million, or 4.6%,3.8%, compared with the firstsecond quarter of 2025, primarily reflecting increased net sales. Gross profit as a percentage of sales was 31.0% in the firstsecond quarter of 20262026. comparedGross withprofit 30.7%as a percent of sales was 31.2% in the firstsecond quarter of 2025. The increasedecrease of 0.3%0.2% primarily reflected solid execution acrossreflects the business.timing and extent of supplier price increases in the prior year.

SG&A expenses in the firstsecond quarter of 2026 increased $42$68 million, or 2.7%,4.1%, compared with the firstsecond quarter of 2025. SG&A as a percentage of sales was 21.5%19.6% in the firstsecond quarter of 2026 compared with 21.7%19.7% in the firstsecond quarter of 2025. The decrease in SG&A as a percentage of sales primarily reflects improvedthe productivitytiming and operating leverageextent of certain incentive accruals in the Company’sprior cost base.year.

Net income for the second quarter and year-to-date periods of 2026 was $414$666 million inand the$1,080 firstmillion, quarterrespectively. These represented increases of 2026, an increase of $69$32 million, or 20.0%,5.0%, and $101 million, or 10.3%, compared with the firstrespective quarterperiods ofin 2025, primarily2025 due to the various elements described in the sections above.

Net sales for the United States segment were $7.1$8.3 billion in the firstsecond quarter of 2026, an increase of $242$0.4 million,billion, or 3.5%,5.0%, compared with the firstsecond quarter of 2025. The increase in net sales was primarily driven by mid-singlelow single digit price inflationinflation, along with volume growth and incremental sales from acquisitions of 0.6%, partially offset by lower sales volume.1.0%. Net sales in non-residential markets, representing approximately half of revenue in the United States, increased approximately 8% compared with the firstsecond quarter of 2025. This increase was driven by commercial/mechanical, industrial and waterworks, including large capital project activity. Net sales in residential markets decreasedincreased approximately 1%2% compared with the firstsecond quarter of 2025 due to growth in light of weak new construction activity, along with soft repair, maintenance and improvement (“RMI”) work.HVAC.

Adjusted operating profit for the United States segment was $656$925 million in the firstsecond quarter of 2026, an increase of $45$26 million, or 7.4%,2.9%, compared with the firstsecond quarter of 2025, primarily reflecting higher sales and the associated gross profit, partially offset by higher variable operating costs.

Net sales for the Canada segment were $326$408 million in the firstsecond quarter of 2026, ana increasedecrease of $17$8 million, or 5.5%,1.9%, compared with the firstsecond quarter of 2025. This increasedecrease 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%.3.6%, along with lower sales volume, partially offset by low-single digit price inflation.

Adjusted operating profit for the Canada segment decreased by $1 million in the firstsecond quarter of 2026, compared with the firstsecond quarter of 2025 due to higherlower operatinggross costs,margins, partially offset by higherlower grossoperating profit.costs.

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.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.

(1)For the three and six months ended MarchJune 31,30, 2026,2026 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.

(2)For the three and six months ended MarchJune 31,30, 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.

(2)For the three and six months ended MarchJune 31,30, 2026,2026 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.

(3)For the three and six months ended MarchJune 31,30, 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.

(4)For the three and six months ended MarchJune 31,30, 2026 and 2025, discrete tax adjustments were mainly related to interestthe onrelease of uncertain tax positions.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.

(5)For the three and six months ended MarchJune 31,30, 2026, the tax impact on non-GAAP adjustments primarily related to the amortization of acquired intangibles. For the three and six months ended MarchJune 31,30, 2025, the tax impact on non-GAAP adjustments related to the restructuring expenses and the amortization of acquired intangibles.

As of MarchJune 31,30, 2026 and December 31, 2025, the Company had cash and cash equivalents of $820$437 million and $557 million, respectively. In addition to cash, the Company had $2.4$1.6 billion of available liquidity from undrawn debt facilities as of MarchJune 31,30, 2026.

As of MarchJune 31,30, 2026, the Company’s total debt was $4.1$4.9 billion. The Company anticipates that it will be able to meet its debt obligations as they become due.

Net cash provided by operating activities was $772$716 million and $874$1,123 million for the threeyear-to-date monthsperiods ended March 31,of 2026 and 2025, respectively. The $102$407 million decrease was mainly due to an increased investment in working capital compared withand the priortiming year,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) and lower cash tax payments due to timing.. 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,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 and the change in timing of cash incentive payouts in light of the Company’s change to a calendar year-end.year.

Capital expenditures totaled $92$234 million and $73$141 million for the threeyear-to-date monthsperiods ended March 31,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 $10$583 million and $150$226 million in new acquisitions for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

Dividends paid to shareholders were $174$347 million and $166$330 million for the threeyear-to-date monthsperiods ended March 31,of 2026 and 2025, respectively.

Share repurchases under the Company’s September 2021authorized share repurchase programprograms were $236$438 million and $207$428 million for the threeyear-to-date monthsperiods ended March 31,of 2026 and 2025, respectively.

In June 2015 and November 2017, Wolseley Capital, Inc., a wholly-owned subsidiary of the Company, privately placed fixed rate notes (the “Private Placement Notes”). As of MarchJune 31,30, 2026, $300 million in Private Placement Notes remain outstanding.

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 MarchJune 31,30, 2026, no$525 million borrowings were outstanding under the Receivables Facility.

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 MarchJune 31,30, 2026, no$250 million borrowings were outstanding under the Revolving Facility.

The Company was in compliance with all debt covenants that were in effect as of MarchJune 31,30, 2026.

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.details.

There have been no significant changes to the Company’s policies on accounting for, valuing or managing the risk of financial instruments during the three months ended MarchJune 31,30, 2026.