Item 2.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 for the three and six months ended January 31, 2025 and 2024, 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 Annual 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.

Overview

Ferguson is a value-added distributor serving the 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.

The following table presents highlights of the Company's performance for the periods below:

Three months endedSix months ended

January 31,January 31,

(In millions, except per share amounts)2025202420252024

Net sales$6,872$6,673$14,644$14,381

Operating profit4104771,0751,216

Net income276322746841

Earnings per share - diluted1.381.583.724.12

Net cash provided by operating activities685863

Supplemental non-GAAP financial measures:(1)

Adjusted operating profit4495201,1551,293

Adjusted earnings per share - diluted1.521.743.984.40

(1) The Company uses certain non-GAAP measures, which are not defined or specified under U.S. GAAP. See the section titled "Non-GAAP Reconciliations and Supplementary Information."

For the second quarter of fiscal 2025, net sales increased by 3.0% compared to the second quarter of fiscal 2024, primarily due to higher sales volume and incremental revenue from acquisitions, partially offset by price deflation (approximately 2%), mainly within certain commodity categories in the United States.

For the second quarter of fiscal 2025, operating profit decreased by 14.0% (adjusted operating profit decreased 13.7%), compared with the second quarter of fiscal 2024. This decrease was primarily due to higher operating costs driven by sales volume growth and cost inflation.

For the second quarter of fiscal 2025, diluted earnings per share was $1.38 (adjusted diluted earnings per share: $1.52), decreasing 12.7% compared with the second quarter of fiscal 2024 (12.6% on an adjusted basis) due to lower net income, partially offset by the impact of share repurchases.

Net cash provided by operating activities decreased to $0.7 billion in the year-to-date period of fiscal 2025 compared with $0.9 billion in the same period of fiscal 2024, reflecting an increase in working capital to support volume growth period-over-period, along with lower net income after adjusting for non-cash items.

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Results of Operations

Three months endedSix months ended

January 31,January 31,

(In millions)2025202420252024

Net sales$6,872 $6,673 $14,644 $14,381

Cost of sales(4,830)(4,644)(10,262)(10,021)

Gross profit2,042 2,029 4,382 4,360

Selling, general and administrative expenses(1,540)(1,469)(3,125)(2,981)

Depreciation and amortization(92)(83)(182)(163)

Operating profit410 477 1,075 1,216

Interest expense, net(48)(44)(94)(89)

Other income (expense), net8 - 13 (3)

Income before income taxes370 433 994 1,124

Provision for income taxes(94)(111)(248)(283)

Net income$276 $322 $746 $841

Net sales

Net sales were $6.9 billion in the second quarter of fiscal 2025, an increase of $0.2 billion, or 3.0%, compared with the same period in fiscal 2024. The increase in net sales was driven by higher sales volume and incremental sales from acquisitions of 1.2%. These increases were partially offset by price deflation of approximately 2%, mainly within certain commodity categories in the United States. The Company's increase in net sales was driven by growth in both of the residential and non-residential markets in its United States segment.

Net sales were $14.6 billion in the year-to-date period of fiscal 2025, an increase of $0.3 billion, or 1.8%, compared with the same period in fiscal 2024. The factors impacting the year-to-date comparison were largely the same as those noted above for the quarter.

For further discussion on the Company's net sales, see the "Segment results" section below.

Gross profit

Gross profit in the second quarter of fiscal 2025 increased $13 million, or 0.6%, compared with the same period in fiscal 2024, primarily reflecting increased net sales. Gross profit as a percentage of sales was 29.7% and 30.4% in the second quarters of fiscal 2025 and fiscal 2024, respectively. The decrease of 0.7% reflected the impact on margins from subdued end market demand, as well as the impact of price deflation and sales mix.

Gross profit in the year-to-date period of fiscal 2025 increased $22 million, or 0.5%, compared with the same period in fiscal 2024. Gross profit as a percentage of sales was 29.9% and 30.3% in the year-to-date periods of fiscal 2025 and fiscal 2024, respectively. The factors impacting the year-to-date comparisons were largely the same as those noted above for the quarter.

Selling, general and administrative ("SG&A") expenses

SG&A expenses in the second quarter of fiscal 2025 increased $71 million, or 4.8%, compared with the same period in fiscal 2024. SG&A as a percentage of sales was 22.4% and 22.0% in the second quarters of fiscal 2025 and fiscal 2024, respectively. The increase in SG&A as a percent of sales primarily reflects the impact of cost inflation, mainly on infrastructure and fleet.

SG&A expenses in the year-to-date period of fiscal 2025 increased $144 million, or 4.8%, compared with the same period in fiscal 2024. SG&A as a percentage of sales was 21.3% and 20.7% in the year-to-date period of fiscal 2025 and fiscal 2024, respectively. The factors impacting the year-to-date comparisons were largely the same as those noted above for the quarter, as well as the impact of increased labor costs, primarily related to wage inflation, on the year-to-date comparison.

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Income tax

Income tax expense was $94 million for the second quarter of fiscal 2025, a decrease of $17 million, or 15.3%, compared to the same period in fiscal 2024. In the year-to-date period of fiscal 2025, income tax expense was $248 million, a decrease of $35 million, or 12.4%, compared to the same period in fiscal 2024. In each case the decrease was due to lower income before income taxes.

The Company's effective tax rates were 25.4% and 25.6% for the second quarters of fiscal 2025 and 2024, respectively. The Company's effective tax rates were 24.9% and 25.2% for the year-to-date periods of fiscal 2025 and 2024, respectively. For each of the year-over-year comparisons, the decrease in the effective tax rate was primarily due to discrete tax benefits recorded in fiscal 2025.

Net interest expense

Net interest expense was $48 million in the second quarter of fiscal 2025 compared with $44 million in the same period in fiscal 2024. In the year-to-date periods, net interest expense was $94 million in fiscal 2025 compared with $89 million in fiscal 2024. The increase in interest expense was due to higher average borrowings over the respective periods compared with the prior year.

Net income

Net income for the second quarter and year-to-date periods of fiscal 2025 was $276 million and $746 million, respectively. These represented decreases in net income of $46 million, or 14.3%, and $95 million, or 11.3%, compared with the respective periods in fiscal 2024 due to the various elements described in the sections above.

Segment results

United States

Three months endedSix months ended

January 31,January 31,

(In millions)2025202420252024

Net sales$6,553 $6,364 $13,922 $13,693

Adjusted operating profit

455 525 1,152 1,291

Net sales for the United States segment were $6.6 billion in the second quarter of fiscal 2025, an increase of $189 million, or 3.0%, compared to the same period in fiscal 2024. The increase in net sales was primarily driven by higher sales volume and incremental sales from acquisitions of 1.0%, partially offset by price deflation of approximately 2%, mainly within certain commodity categories. Net sales in non-residential markets increased 3.8%, mainly in connection with growth in Commercial and Civil/Infrastructure sales compared with the same period in fiscal 2024. Net sales in residential markets increased 2.2% compared with the same period in fiscal 2024 with growth across both new construction and repairs, maintenance and improvement.

Net sales were $13.9 billion in the year-to-date period of fiscal 2025, an increase of $0.2 billion, or 1.7%, compared with the same period in fiscal 2024. The factors impacting the year-to-date comparison were largely the same as those noted above for the quarter.

Adjusted operating profit for the United States segment was $455 million in the second quarter of fiscal 2025, a decrease of $70 million, or 13.3%, compared to the same period in fiscal 2024, primarily reflecting the impact of higher operating costs driven by sales volume growth and cost inflation.

Adjusted operating profit for the United States segment was $1.2 billion in the year-to-date period of fiscal 2025, a decrease of $0.1 billion, or 10.8%, compared to the same period in fiscal 2024. The factors impacting the year-to-date comparison were largely the same as those noted above for the quarter.

21

Canada

Three months endedSix months ended

January 31,January 31,

(In millions)2025202420252024

Net sales$319 $309 $722 $688

Adjusted operating profit

11 9 34 32

Net sales for the Canada segment were $319 million in the second quarter of fiscal 2025, an increase of $10 million, or 3.2%, compared to the same period in fiscal 2024. This increase in net sales was primarily driven by incremental sales from an acquisition of 5.4%, price inflation of approximately 2% and higher sales volume, partially offset by the impact of foreign currency exchange rates of 5.3%.

Net sales were $722 million in the year-to-date period of fiscal 2025, an increase of $34 million, or 4.9%, compared with the same period in fiscal 2024. The factors impacting the year-to-date comparison were largely the same as those noted above for the quarter.

Adjusted operating profit for the Canada segment in the second quarter and year-to-date periods of fiscal 2025 increased by $2 million compared with the respective periods in fiscal 2024 in connection with higher sales.

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Non-GAAP Reconciliations and Supplementary Information

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

Reconciliation of net income to adjusted operating profit

The following table reconciles net income (U.S. GAAP) to adjusted operating profit (non-GAAP):

Three months endedSix months ended

January 31,January 31,

(In millions)2025202420252024

Net income$276 $322 $746 $841

Provision for income taxes94 111 248 283

Interest expense, net48 44 94 89

Other (income) expense, net(8)- (13)3

Operating profit410 477 1,075 1,216

Corporate restructurings(1)

• 8 3 8

Amortization of acquired intangibles39 35 77 69

Adjusted operating profit$449 $520 $1,155 $1,293

(1)For the six months ended January 31, 2025, corporate restructurings primarily related to incremental costs in connection with transition activities following the establishment of our parent company's domicile in the United States. For the three and six months ended January 31, 2024, corporate restructuring costs related to incremental costs in connection with establishing a new corporate structure to domicile our ultimate parent company in the United States.

23

Reconciliation of net income to adjusted net income and adjusted EPS - diluted

The following table reconciles net income (U.S. GAAP) to adjusted net income and adjusted EPS - diluted (non-GAAP):

Three months ended

January 31,

(In millions, except per share amounts)20252024

per share(1)

per share(1)

Net income$276 $1.38 $322 $1.58

Corporate restructurings(2)

• • 8 0.04

Amortization of acquired intangibles39 0.20 35 0.17

Discrete tax adjustments(3)

(1)(0.01)(2)(0.01)

Tax impact on non-GAAP adjustments(4)

(10)(0.05)(8)(0.04)

Adjusted net income$304 $1.52 $355 $1.74

Diluted weighted average shares outstanding199.8 203.9

Six months ended

January 31,

(In millions, except per share amounts)20252024

per share(1)

per share(1)

Net income$746 $3.72 $841 $4.12

Corporate restructurings(2)

3 0.02 8 0.04

Amortization of acquired intangibles77 0.38 69 0.34

Discrete tax adjustments(3)

(8)(0.04)(2)(0.01)

Tax impact on non-GAAP adjustments(4)

(20)(0.10)(18)(0.09)

Adjusted net income$798 $3.98 $898 $4.40

Diluted weighted average shares outstanding200.5 204.2

(1)Per share on a dilutive basis.

(2)For the six months ended January 31, 2025, corporate restructurings primarily related to incremental costs in connection with transition activities following the establishment of our parent company's domicile in the United States. For the three and six months ended January 31, 2024, corporate restructuring costs related to incremental costs in connection with establishing a new corporate structure to domicile our ultimate parent company in the United States.

(3)For the three and six months ended January 31, 2025 and 2024, discrete tax adjustments mainly related to the tax treatment of certain compensation items that are not material.

(4)For the three and six months ended January 31, 2025 and 2024, the tax impact on non-GAAP adjustments primarily related to the amortization of acquired intangibles.

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Liquidity and Capital Resources

The Company believes its current cash position coupled with cash flow anticipated to be generated from operations and access to capital should be sufficient to meet its operating cash requirements for the next 12 months and will also enable the Company to invest and fund acquisitions, capital expenditures, dividend payments, share repurchases, required debt payments and other contractual obligations through the next several fiscal years. The Company also anticipates that it has the ability to obtain alternative sources of financing, if necessary.

The Company's material cash requirements include contractual and other obligations arising in the normal course of business. These obligations primarily include debt service and related interest payments, operating lease obligations, required pension obligations and other purchase obligations. The nature and composition of such existing cash requirements have not materially changed from those disclosed in the Annual Report other than items updated in this Quarterly Report.

Cash flows

As of January 31, 2025 and July 31, 2024, the Company had cash and cash equivalents of $764 million and $571 million, respectively. In addition to cash, the Company had $1.9 billion of available liquidity from undrawn debt facilities as of January 31, 2025.

As of January 31, 2025, the Company's total debt was $4.3 billion. The Company anticipates that it will be able to meet its debt obligations as they become due.

Cash flows from operating activities

Six months ended

January 31,

(In millions)20252024

Net cash provided by operating activities$685 $863

Net cash provided by operating activities was $685 million and $863 million for the year-to-date periods of fiscal 2025 and 2024, respectively. The $178 million decrease was mainly due to lower net income (adjusted for non-cash items), as well as changes in working capital compared with the prior year. The increase in working capital was primarily driven by the timing of receivables collections year-over-year and an increase in inventory in connection with sales volume growth and consideration of customer demand, partially offset by the timing of vendor payments compared with the prior year.

Cash flows from investing activities

Six months ended

January 31,

(In millions)20252024

Net cash used in investing activities($192)($231)

Net cash used in investing activities was $192 million and $231 million for the year-to-date periods of fiscal 2025 and 2024, respectively.

Capital expenditures totaled $158 million and $192 million for the year-to-date periods of fiscal 2025 and 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 $46 million and $67 million in new acquisitions in the year-to-date period of fiscal 2025 and fiscal 2024, respectively.

25

Cash flows from financing activities

Six months ended

January 31,

(In millions)20252024

Net cash used in financing activities($289)($597)

Net cash used in financing activities was $289 million and $597 million for the year-to-date periods of fiscal 2025 and 2024, respectively.

Dividends paid to shareholders were $158 million and $305 million for the year-to-date periods of fiscal 2025 and 2024, respectively. The Company generally pays dividends in the fiscal quarter following the fiscal quarter in which the dividend was declared. However, the dividends declared in the fourth quarter of fiscal 2024 were also paid in the fourth quarter of fiscal 2024 due to the Merger. As such, no dividends were paid in the first quarter of fiscal 2025.

Share repurchases under the Company's announced share repurchase program were $508 million and $250 million for the year-to-date periods of fiscal 2025 and fiscal 2024, respectively.

Net proceeds from debt transactions were $421 million compared with net payments of $30 million for the year-to-date periods of fiscal 2025 and 2024, respectively. In the year-to-date period of fiscal 2025, the Company received net proceeds of $746 million and $325 million from the issuance of the 2034 Senior Notes and net borrowings under the Receivables Facility, respectively. These proceeds were partially offset by debt repayments of $500 million and $150 million in connection with the Company's Term Loans and the maturity of certain Private Placement Notes, respectively. In the year-to-date period of fiscal 2024, the Company repaid $55 million in connection with the maturity of certain Private Placement Notes, which was partially offset by net proceeds of $25 million borrowed under the Receivables Facility.

Debt facilities

The following section summarizes certain material provisions of our long-term debt facilities and current obligations. The following description is only a summary, does not purport to be complete and is qualified in its entirety by reference to the documents governing such indebtedness.

As of

(In millions)January 31, 2025July 31, 2024

Short-term debt$400 $150

Long-term debt3,949 3,774

Total debt$4,349 $3,924

Private Placement Notes

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 January 31, 2025, $700 million in Private Placement Notes remain outstanding.

In the second quarter of fiscal year 2025, the Company repaid $150 million of Private Placement Notes that matured. In September 2025, an additional $400 million of such notes will mature.

Unsecured Senior Notes

Ferguson Finance plc, a wholly-owned subsidiary of the Company, has issued $2.35 billion in various issuances of unsecured senior notes (collectively, the "Unsecured Senior Notes").

In October 2024, Ferguson Enterprises Inc. issued $750 million aggregate principal amount of unsecured senior notes due October 2034 (the "2034 Senior Notes"). See Note 5, Debt to the Condensed Consolidated Financial Statements for further discussion of the 2034 Senior Notes.

26

The Unsecured Senior Notes and 2034 Senior Notes (together, the "Senior Notes") are fully and unconditionally guaranteed on a direct, unsubordinated and unsecured senior basis and generally carry the same terms and conditions with interest paid semi-annually. The Senior Notes may be redeemed, in whole or in part, (i) at 100% of the principal amount on the notes being redeemed plus a "make-whole" prepayment premium at any time prior to three months before the Senior Notes respective maturity date (the "Notes Par Call Date") or (ii) after the Notes Par Call Date at 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest on the principal being redeemed. The Senior Notes include covenants, subject to certain exceptions, which include limitations on the granting of liens and on mergers and acquisitions.

Term Loan

The Company and Ferguson UK Holdings Limited previously maintained a Credit Agreement, dated October 7, 2022 (as amended from time to time, the "Term Loan Agreement"), providing for term loans (the "Term Loan") in an aggregate principal amount of $500 million. In October 2024, the Term Loan was voluntarily repaid in full using a portion of the proceeds from the issuance of the 2034 Senior Notes and the Term Loan Agreement was terminated in accordance with its terms.

Revolving Credit Facility

The Company maintains a Revolving Facility with aggregate total available credit commitments of $1.35 billion. As of January 31, 2025, no borrowings were outstanding under the Revolving Facility.

Receivables Securitization Facility

The Company maintains a Receivables Facility with an aggregate total available amount of $1.1 billion. 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. In October 2024, the Company extended the termination date of the Receivables Facility and made other changes to the terms and conditions of the Receivables Facility. See Note 5, Debt to the Condensed Consolidated Financial Statements for further details of such changes.

As of January 31, 2025, $575 million in borrowings were outstanding under the Receivables Facility.

Other

The Company was in compliance with all debt covenants that were in effect as of January 31, 2025.

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 Annual Report for further details regarding the Company's debt.

There have been no significant changes to the Company's policies on accounting for, valuing or managing the risk of financial instruments during the second quarter of fiscal 2025.

Guarantor Disclosures

On October 3, 2024, Ferguson Enterprises Inc. (the "Issuer") issued and sold $750 million aggregate principal amount of 2034 Senior Notes. The obligations under the 2034 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").

The Issuer is a holding company that primarily repurchases shares and pays dividends, issues and services third-party debt obligations, and engages in certain corporate and headquarters activities, as well as holds an investment in its direct subsidiary, that primarily holds investments in and borrows from the Guarantor. The Guarantor is a holding company that primarily issues and services third-party debt obligations and holds investments in, borrows from and lends to non-guarantor subsidiary operating companies. These activities are generally funded by non-guarantor subsidiaries. The Guarantor is a private limited company incorporated under the laws of England and Wales and an indirect subsidiary of the Issuer.

27

Summarized Financial Information of Obligor Group

The following tables present the summarized financial information specified in Rule 1-02(bb)(1) of Regulation S-X for the Obligor Group on a combined basis, after elimination of intercompany transactions and balances between the Obligor Group, and excluding the investments in and equity in the earnings of any non-guarantor subsidiaries. The summarized financial information has been prepared in accordance with Rule 13-01 of Regulation S-X. The summarized financial information should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included herein and the audited consolidated financial statements and notes thereto included in the Annual Report.

As of

(In millions)January 31, 2025July 31, 2024

Current assets$203 $69

Non-current assets88 59

Current liabilities195 23

Non-current liabilities752 500

Due from non-guarantor subsidiaries9,884 5,474

Three months ended

January 31,

(In millions)2025

Net sales$-

Gross profit-

Operating loss(5)

Net loss(67)

Other interest income, net to non-guarantor subsidiaries344

Other income, net from non-guarantor subsidiaries(1)

$4,383

(1)Includes income from intercompany transactions with non-guarantor subsidiaries, primarily from non-cash dividend transactions.

Critical accounting policies and estimates

There have been no material changes to our critical accounting policies as disclosed in the Annual Report.