Ferguson Enterprises Inc. /de
Management Discussion synthesis.

Income tax expense Income tax expense was $567 million for fiscal 2025, a decrease of $162 million compared with fiscal 2024. The Company's effective tax rate was 23.4% for fiscal 2025 compared with 29.6% for fiscal 2024. The decrease in income tax expense and the decrease in the effective tax rate were primarily driven by 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 well as the release of uncertain tax positions following the lapse of statute of limitations in fiscal 2025.

Segment results of operations for fiscal 2024 and fiscal 2023 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. For further segment information, see Note 2, Revenue and segment information of the Notes to the Consolidated Financial Statements.

(In millions)20242023 Short-term debt$150$55 Long-term debt3,7743,711 Total debt$3,924$3,766 Private Placement Notes 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"). In September 2022 and November 2023, the Company repaid $250 million and $55 million, respectively, due to the maturing of certain Private Placement Notes. In November 2024, an additional $150 million of such notes will mature.

As of July 31, 2024, no borrowings were outstanding under the Revolving Facility. Receivables Securitization Facility The Company maintains a Receivables Securitization Facility (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.

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations 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 Consolidated Financial Statements and related notes contained in this Annual Report. The discussion in this Annual Report generally focuses on fiscal 2025 compared to fiscal 2024. A discussion of our results of operations and changes in financial condition for fiscal 2024 compared to fiscal 2023 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 our fiscal 2024 Annual Report. The following discussion contains trend information and 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 discussed in the "Risk Factors" and "Forward-Looking Statements and Risk Factor Summary" sections and elsewhere in this Annual Report.

Overview 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 in Newport News, Virginia.

Selling, general and administrative expenses ("SG&A") SG&A expenses in fiscal 2025 increased $338 million, or 5.6%, compared with fiscal 2024. SG&A as a percentage of sales was 20.7% and 20.4% in fiscal 2025 and fiscal 2024, respectively. The increase in SG&A as a percent of sales primarily reflects higher performance based incentive compensation and the impact of cost inflation on labor, infrastructure and fleet.

Net interest expense Net interest expense was $190 million in fiscal 2025 compared with $179 million in fiscal 2024. The increase in interest expense was due to higher average borrowings in fiscal 2025 compared with the prior year.

Net income Net income for fiscal 2025 was $1.9 billion, an increase of $121 million, or 7.0%, compared with fiscal 2024 due to the elements described in the sections above.

Canada For the years ended July 31, (In millions)20252024 Net sales$1,493 $1,440 Adjusted operating profit 66 60 Net sales for the Canada segment were $1,493 million in fiscal 2025, an increase of $53 million, or 3.7%, compared with the prior year. This increase in net sales was primarily due to incremental sales from acquisitions of 4.7% and price inflation of approximately 2%, partially offset by the impacts of foreign currency exchange rates of 2.3%, one fewer sales day in the fiscal year of 0.5% and slightly lower sales volume. Adjusted operating profit for the Canada segment increased 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. 33

The following table presents highlights of our annual performance: For the years ended July 31, (In millions, except per share amounts)20252024 Net sales$30,762$29,635

(In millions, except per share amounts)20252024 per share(1) per share(1) Net income$1,856 $9.32 $1,735 $8.53 Corporate restructurings(2) 7 0.03 28 0.14

Cash flows As of July 31, 2025 and 2024, the Company had cash and cash equivalents of $674 million and $571 million, respectively. In addition to cash, the Company had $2.0 billion of available liquidity from undrawn debt facilities as of July 31, 2025. As of July 31, 2025, the Company's total debt was $4.2 billion. The Company anticipates that it will be able to meet its debt obligations as they become due.

Operating profit2,6062,652 Net income1,8561,735 Earnings per share - diluted9.328.53 Net cash provided by operating activities1,9081,873 Supplemental non-GAAP financial measures:(1)

Cash flows from investing activities As of July 31, (In millions)20252024 Net cash used in investing activities($543)($601) Net cash used in investing activities decreased 9.7% to $0.5 billion in fiscal 2025. Capital expenditure totaled $305 million and $372 million in fiscal 2025 and fiscal 2024, 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 $301 million and $260 million in new acquisitions in fiscal 2025 and fiscal 2024, respectively.

Reinvestment of unremitted earnings We consider foreign earnings of specific subsidiaries to be indefinitely reinvested. As of July 31, 2025 and 2024, these permanently reinvested earnings of foreign subsidiaries amounted to $800 million and $795 million, respectively. If at some future date, the Company ceases to be permanently reinvested in these specific foreign subsidiaries, the Company may be subject to foreign withholding and other taxes on these undistributed earnings and may need to record a deferred tax liability for any outside basis difference on these specific foreign subsidiaries. In addition, interest payments made between the U.S. and U.K. are anticipated to be exempt from withholding taxes, however, if Ferguson should fail to meet treaty requirements, withholding taxes may apply to these payments.

As of July 31, 2025, $375 million in borrowings were outstanding under the Receivables Facility. Other The Company was in compliance with all debt covenants for all facilities as of July 31, 2025.

Tax obligations At July 31, 2025, the Company had aggregate liabilities for unrecognized tax benefits totaling $126 million, none of which are expected to be paid in the next 12 months. The timing of payment, if any, associated with our long-term unrecognized tax benefit liabilities is unknown. See Note 4, Income Tax to the Consolidated Financial Statements for further discussion of our unrecognized tax benefits.

Inventories Inventory reserves are recorded against slow‐moving, obsolete and damaged inventories for which the net realizable value is estimated to be less than the cost. The reserve is estimated based on the Company's current knowledge and judgment with respect to inventory levels, sales trends and historical experience. 39

Rate assumption:202520242023 Discount rate, benefit obligation5.80%5.00%5.05% The sensitivity analyses below show the (increase)/decrease in the Company's defined benefit plan net asset/liability due to reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

(In millions)ChangeU.K. Discount rate, benefit obligation+0.25 %($33) (0.25)%35 Wage inflation growth rate, benefit obligation+0.25 %29 (0.25)%(28)

Life expectancy+1 year41 Accounting developments and changes Refer to Note 1, Summary of significant accounting policies to the Consolidated Financial Statements for a discussion of new accounting pronouncements. 40

Item 7A.Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to market risks arising from changes in foreign currency exchange rates, interest rates and commodity prices. The Company has well-defined risk management policies, which have been consistently applied during fiscal years 2025, 2024 and 2023. We use derivative and non-derivative instruments to hedge a portion of our risks, none of which are for trading or speculative purposes. There have been no changes since the previous year in the major financial risks faced by the Company.

Foreign currency exchange rates risk We are exposed to risks from foreign currency exchange rate fluctuations on the translation of our foreign operations into U.S. dollars and on the purchase of goods and services by these foreign operations that are not denominated in their local currencies. Our foreign currency related hedging arrangements outstanding at the end of fiscal 2025 and 2024 were not material. A hypothetical 10% change in the relative value of the U.S. dollar would not materially impact the Company's net income for fiscal 2025.