Financial Data and Key Metrics Changes - Sales reached $8.2 billion, a 5% increase year-over-year, driven by organic growth of 4% and acquisition growth of 1% [4][10] - Gross margin improved to 30.7%, up 60 basis points from the previous year [4][11] - Operating profit was $808 million, reflecting a 14% increase compared to last year [4][11] - Diluted earnings per share rose nearly 16% to $2.84 [5][11] - The company maintained a strong balance sheet with a net debt to EBITDA ratio of 1.1 times [6][11] Performance by Business Lines - Residential end markets, accounting for about half of U.S. revenue, saw a 1% decline due to weak housing starts and soft repair activity [7] - Non-residential revenue increased by 12%, driven by large capital projects [7] - Waterworks revenues grew by 14%, supported by strength in large capital projects and public works [7][8] - Ferguson Home experienced a 1% growth despite challenges in the new construction market [8] - Commercial mechanical customer group grew by 21%, benefiting from large capital projects [8] Market Data and Key Metrics Changes - U.S. net sales grew by 5.3%, with organic growth of 4.4% [11] - Canadian net sales increased by 2.2%, with organic growth of 0.7% [12] - Price inflation was approximately 3%, with finished goods pricing showing modest improvement [10][36] Company Strategy and Development Direction - The company aims to leverage multi-year tailwinds in both residential and non-residential markets [6][18] - Continued focus on acquisitions to consolidate fragmented markets, with the recent acquisition of Moore Supply Company enhancing HVAC presence [5][14] - Emphasis on delivering end-to-end solutions and maximizing contractor productivity through a multi-customer group approach [9][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in medium-term market performance despite current challenges [6][18] - The company expects approximately 5% revenue growth for the year and an operating margin range of 9.4%-9.6% [15][16] - Anticipated modest price increases entering 2026, with a more normalized pricing environment expected [36] Other Important Information - The company returned $372 million to shareholders through share repurchases and dividends [5][14] - Continued investment in organic growth through capital expenditures, totaling $118 million for the quarter [13][14] Q&A Session Summary Question: Data center and large capital projects growth - Management estimates large capital projects account for mid to high single digits of total revenue, with data centers making up over 50% of that [20][22] Question: Outlook for November and early 2026 - Current growth for October to early December is about 3%, with expectations for continued pressure in new residential and HVAC markets [25][27] Question: Pricing trends and commodity outlook - Inflation was about 3%, with expectations for modest price increases entering 2026 [36] Question: Impact of investments in trainees and HVAC expansion - The trainee program continues to add 250-300 trainees annually, and HVAC counter conversions have reached 650 [55][56] Question: Gross margin trends for the fourth quarter - Expected gross margin range is between 30% and 31% as the year ends [66]

Financial Data and Key Metrics Changes - Sales for the quarter reached $8.2 billion, representing a 5% increase year-over-year, driven by organic growth of 4% and acquisition growth of 1% [5][10] - Gross margin improved to 30.7%, an increase of 60 basis points compared to the previous year [6][11] - Operating profit grew by 14% to $808 million, with an operating margin of 9.9%, reflecting an 80 basis points expansion [6][11] - Diluted earnings per share rose nearly 16% to $2.84 [6][11] - The company maintained a strong balance sheet with a net debt to EBITDA ratio of 1.1 times [6][11] Performance by Business Lines - Residential end markets, which account for about half of U.S. revenue, faced challenges with a 1% decline in revenue [7] - Non-residential end markets performed better, with revenue increasing by 12% due to strength in large capital projects [7] - Waterworks revenues grew by 14%, driven by large capital projects and public works [8] - Ferguson Home experienced a 1% growth, while residential trade plumbing and HVAC declined by 4% and 6% respectively [9] Market Data and Key Metrics Changes - U.S. net sales increased by 5.3%, with organic growth of 4.4% and a 0.9% contribution from acquisitions [11] - Canadian net sales were up 2.2%, with organic growth of 0.7% and a 4.6% contribution from acquisitions, but faced a 1.6% adverse impact from foreign exchange [12] Company Strategy and Development Direction - The company is focused on leveraging multi-year tailwinds in both residential and non-residential markets, particularly in waterworks and HVAC sectors [6][17] - Ferguson aims to consolidate fragmented markets through acquisitions, with the recent acquisition of Moore Supply Company enhancing its HVAC presence [13][17] - The company is committed to returning surplus capital to shareholders while maintaining flexibility for strategic opportunities [14][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in medium-term market performance despite current challenges, particularly in residential housing starts and HVAC markets [6][17] - The company anticipates approximately 5% revenue growth for the year and an operating margin range of 9.4% to 9.6% [15][17] - Management noted that the early part of 2026 is expected to see similar market conditions as the end of 2025, with growth rates around 3% [25][26] Other Important Information - The company declared a 7% increase in its quarterly dividend to $0.89 per share [6][13] - Capital expenditures for the quarter were $118 million, contributing to a free cash flow of $325 million [13] Q&A Session Summary Question: On data center and large capital projects - Management estimates that large capital projects account for mid- to high-single-digits percentage of total revenue, with data centers making up over 50% of that [20] Question: Outlook for November and early 2026 - Management indicated that Q4 growth rates are expected to be around 3%, consistent with prior expectations [25][26] Question: HVAC market conditions - The HVAC market is currently under pressure, with challenges expected to persist, but management remains optimistic about long-term growth [43] Question: SG&A investments and impacts - The company continues to invest in trainees and HVAC counter expansions, with positive impacts on performance despite a challenging market [46][50]