Financial Data and Key Metrics Changes - For Q4 2025, adjusted net investment income (NII) per share was $0.39, with an adjusted NII return on equity (ROE) of 10.4% [4] - Adjusted net income per share was $0.36, resulting in an adjusted ROE of 9.6% [4] - Cumulative distributions for fiscal year 2025 totaled $1.65 per share, representing 10.9% of end-of-year net asset value per share [4] - The net asset value (NAV) per share at the end of fiscal year 2025 was $14.97, which is 34 cents above the IPO NAV in 2010 [5] Business Line Data and Key Metrics Changes - Approximately 90% of GBDC's investment portfolio remains in the highest-performing internal rating categories [11] - The investment income yield was 10.4%, a sequential decline of 20 basis points [12] - The weighted average rate on new investments was 8.9%, a decline of 30 basis points from the prior quarter [18] - The investment portfolio decreased to just under $8.8 billion at fair value, with $371 million in repayments and exits [13] Market Data and Key Metrics Changes - The private credit direct lending market is facing headwinds, including narrowed spreads and a credit cycle with elevated defaults [6][26] - The default rate in the broadly syndicated market is currently about two and a half times historical average levels [26] - GBDC's effective borrowing costs decreased to 5.6% annualized, which is considered industry-leading [13] Company Strategy and Development Direction - GBDC's investment strategy focuses on providing first-lien senior-secured loans to middle-market companies backed by strong private equity sponsors [3] - The company aims to maintain a stable NAV per share, minimize excise taxes, and adjust its base distribution level infrequently [9] - GBDC plans to revisit its dividend policy early next year based on the outlook for rates and asset spreads [8] Management's Comments on Operating Environment and Future Outlook - The U.S. economy shows resilience, but there are signs of weakness, particularly among lower-end consumers [25] - Elevated credit stress is expected to persist, impacting different BDCs in varying ways [26] - The company believes that the current environment may allow private credit specialists to outperform [10] Other Important Information - GBDC's liquidity position remains strong, ending the quarter with approximately $1.2 billion in liquidity [24] - The company repurchased 368,000 shares during the quarter, totaling 2.9 million shares for the fiscal year [16] Q&A Session Summary Question: Availability of co-invest - GBDC has not seen any meaningful change in the availability or quality of equity co-invest opportunities over the past years [31][32] Question: Themes in the economy - There is optimism regarding capital spending due to tax provisions, but concerns exist about the subprime consumer facing stress [39] Question: Spread compression risks - The compression of spreads is widespread across various debt categories, and a change in investor sentiment would be necessary for spreads to move higher [40][41]

Financial Data and Key Metrics Changes - The company reported record revenue of $1.45 billion for Q3 FY 2026, a 14.1% increase compared to Q3 FY 2025 [4][21] - Adjusted EBITDA reached $219 million, marking a 28.5% increase year-over-year, with an adjusted EBITDA margin of 15.1%, up 169 basis points from the previous year [5][21] - Net income was $106.4 million, resulting in diluted EPS of $3.63, exceeding expectations [22] - The backlog increased to an all-time high of $8.2 billion, with $4.99 billion expected to be completed in the next 12 months [6][22] Business Line Data and Key Metrics Changes - Organic revenue growth was reported at 7.2%, driven by fiber-to-the-home programs, wireless activity, and maintenance services [21] - The company secured over $500 million in verbal awards related to BEAD deployments, which will be reflected in the next quarter's backlog [9][23] Market Data and Key Metrics Changes - The company anticipates a $20 billion addressable market for outside plant data center network construction over the next five years, driven by increasing demand for fiber infrastructure [7][11] - The NTIA approved final BEAD deployment plans for 15 states, with $29.5 billion in total spending expected from states and territories [8][9] Company Strategy and Development Direction - The acquisition of Power Solutions for $1.95 billion is expected to enhance the company's capabilities in the digital infrastructure market and is projected to be immediately accretive to financial performance [12][13] - The company aims to leverage Power Solutions' expertise in electrical infrastructure to capitalize on the growing demand for data centers and digital infrastructure services [12][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for telecommunications infrastructure, particularly in fiber-to-home builds and data center growth [6][19] - The company is positioned to benefit from the ongoing AI-driven demand for infrastructure, with expectations of significant growth in the data center sector [17][19] Other Important Information - The company is implementing a comprehensive ERP system to enhance operational efficiencies, with the first phase completed during Q3 [23] - The acquisition is expected to improve free cash flow and provide a clear path to deleveraging to two times net leverage within 12 to 18 months [28][29] Q&A Session Summary Question: Improvement in DSOs and future expansion of Power Solutions - Management noted that the 14-day improvement in DSOs reflects strong cash management efforts and expressed optimism about future expansion opportunities for Power Solutions in Texas and other areas [34][36] Question: Customer relationships and opportunities with Power Solutions - Management indicated that Power Solutions primarily works with general contractors, but there is significant overlap with hyperscaler end users, providing opportunities for new builds and retrofits [40][42] Question: Fourth quarter guidance and backlog context - The wider revenue range for Q4 is attributed to seasonal factors and the ongoing growth in fiber-to-the-home programs, with confidence in achieving strong backlog performance [57][59] Question: Data center market expansion and new markets - Management emphasized a cautious approach to expanding into new markets, focusing on leveraging existing strengths in the DMV region while exploring M&A opportunities [61][64] Question: Service and maintenance agreements context - The $500 million in service and maintenance agreements reflects the company's scale and ability to meet customer needs, setting up a strong backlog for Q4 [72][75]

Financial Data and Key Metrics Changes - Third quarter sales reached $20.8 billion, with comparable sales increasing by 0.4% year over year, despite a 100 basis point headwind from hurricanes [5][32] - Adjusted diluted earnings per share were $3.06, reflecting a 6% increase compared to the previous year [5][31] - Adjusted operating margin expanded by approximately 10 basis points, resulting in an adjusted operating margin rate of 12.4% [5][33] Business Line Data and Key Metrics Changes - Positive comparable sales were reported in 10 of 14 merchandise divisions, with notable strength in appliances, flooring, paint, and kitchens and bath [17][32] - Online sales grew by 11.4% during the quarter, driven by increased traffic and strong conversion rates [7] - Home services experienced double-digit comparable sales growth, indicating strong performance in this key initiative [27] Market Data and Key Metrics Changes - Monthly comparable sales were up 2.5% in August, 0.9% in September, and down 2.6% in October, reflecting storm-related demand impacts [32] - Inventory at the end of Q3 was $17.2 billion, down approximately $400 million year over year, aided by inventory productivity initiatives [33] Company Strategy and Development Direction - The company is focused on its 2025 Total Home Strategy, which includes enhancing pro offerings, accelerating online sales, and leveraging loyalty programs [6][8] - The acquisition of Foundation Building Materials (FBM) aims to expand product offerings and enhance fulfillment capabilities, particularly in urban markets [12][13] - Investments in AI capabilities are expected to improve customer engagement and operational efficiency [10][11] Management's Comments on Operating Environment and Future Outlook - The management expressed confidence in the long-term health of the home improvement sector, despite current consumer anxiety and economic uncertainty [15][16] - The potential for lower interest rates and strong homeowner equity could spur demand for home improvement projects [15][66] - The company anticipates flat comparable sales for the year, with expectations of approximately $86 billion in total sales, including FBM [37] Other Important Information - The company has been recognized for its AI adoption, achieving a milestone award from OpenAI [11] - The company is committed to supporting veterans through community initiatives, including the Freedom Hill project [29] Q&A Session Summary Question: Thoughts on business trends and performance outlook for 2026 - Management noted positive comp performance to start the quarter and improvements in top-line performance since exiting October, indicating that key elements of the Total Home Strategy are working [41][42] Question: Changes in kitchen and bath performance - Management believes Lowe's is gaining market share in the kitchen and bath space due to improved technology and a better go-to-market strategy [48][49] Question: Improving pro survey sentiment and its implications - Management reported that 75% of pros feel confident in their job prospects, with ongoing investments in loyalty programs and fulfillment driving growth [55][57] Question: Macro environment and housing market outlook - Management acknowledged elevated mortgage rates but highlighted strong homeowner equity as a potential driver for future discretionary spending [65][66] Question: Strategy for medium to larger pro customers - Management emphasized the importance of the Milo's Pro Rewards loyalty platform and the integration of FBM to enhance service offerings for pro customers [70][71]

Financial Data and Key Metrics Changes - Third quarter sales reached $20.8 billion, with comparable sales increasing by 0.4% year-over-year, despite a 100 basis point headwind from hurricanes [5][32] - Adjusted diluted earnings per share were $3.06, reflecting a 6% increase compared to the previous year [5][31] - Adjusted operating margin expanded by approximately 10 basis points, resulting in an adjusted operating margin rate of 12.4% [5][33] - Gross margin improved to 34.2%, up 50 basis points from the prior year [33] Business Line Data and Key Metrics Changes - Positive comparable sales were reported in 10 of 14 merchandise divisions, with notable strength in home decor, appliances, flooring, and paint [17][32] - Online sales grew by 11.4% during the quarter, driven by increased traffic and strong conversion rates [7] - Home services experienced double-digit growth, contributing to the overall positive performance [27] Market Data and Key Metrics Changes - The U.S. homeowner market remains healthy, with strong balance sheets and continued consumer spending, although affordability issues persist [14][15] - Home equity levels are high, averaging around $400,000, which may encourage homeowners to invest in their existing properties rather than moving [15][16] Company Strategy and Development Direction - The company is focused on its 2025 Total Home Strategy, which includes enhancing pro offerings, accelerating online sales, and leveraging loyalty programs [6][8] - The acquisition of Foundation Building Materials (FBM) aims to expand product offerings and enhance fulfillment capabilities, particularly in urban markets [12][13] - Investments in AI are expected to improve customer engagement and operational efficiency, with virtual assistants driving sales and customer satisfaction [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the macro environment, noting that lower interest rates could spur demand in the home improvement sector [15][16] - The company anticipates flat comparable sales for the year, with expectations of approximately $86 billion in total sales, including FBM [37] - Management highlighted the importance of operational discipline and strategic investments in positioning the company for long-term growth [38] Other Important Information - The company is on track to achieve a multi-year goal of reducing in-store SKU count by 15% by the end of 2025 [24] - The marketplace initiative is showing early promise, exceeding expectations in seller onboarding and customer adoption [78][80] Q&A Session Summary Question: How is the company thinking about the trend in the business in light of recent performance? - Management noted positive comp performance to start the quarter and improvements in top-line results since exiting October, indicating that key elements of the Total Home Strategy are working [41][42] Question: What has changed in the kitchen and bath category? - Management believes the company is taking market share in this space, supported by improved technology and a better go-to-market strategy [48][49] Question: Can you elaborate on the improving pro survey sentiment? - Management reported that 75% of small to medium pros feel confident in their job prospects, with ongoing investments in loyalty programs and fulfillment driving growth [55][57] Question: What is the company's strategy for the medium to larger pro market? - The strategy focuses on leveraging the MyLowe's Pro Rewards platform and enhancing product offerings to capture market share in the small to medium pro segment [70][71] Question: What is the initial performance of the marketplace? - Management expressed excitement about the marketplace launch, noting it is exceeding expectations in financial performance and seller quality [77][78]

Financial Data and Key Metrics Changes - System-wide store sales increased by 10% to $3.5 billion, marking the 19th consecutive year of same-store sales growth [4][6] - Adjusted EBITDA grew by double digits, reflecting the impacts of refranchising and technology investments [4][6] - For Q4, net sales reached $454 million, a 4% increase on a reported basis and a 10% increase when adjusted for refranchising [14][15] - Adjusted EPS was $1.59 per share, at the low end of the guidance range [7][14] Business Line Data and Key Metrics Changes - The company added 170 new system-wide stores, bringing the total to 2,180 across the U.S. and Canada [4][10] - Same-store sales growth for the fiscal year was 6.1%, with transaction growth accounting for over one-third of the comp [14][15] - The gross margin rate remained flat at 39.1%, with labor leverage offsetting increased product costs [15][16] Market Data and Key Metrics Changes - The company refranchised three markets: Denver, Las Vegas, and West Texas, leading to a 150% increase in new store additions in these markets compared to the prior year [10][11] - The fleet business continues to grow faster than the consumer business, indicating strong demand for quick and convenient service [12] Company Strategy and Development Direction - The strategic priorities include driving the full potential of the core business, delivering sustainable network growth, and innovating to meet customer needs [7][8] - The company plans to close the Breeze AutoCare acquisition, which will add 162 stores to its network, enhancing its market position [11][18] - The focus remains on leveraging technology and operational efficiencies to improve store-level performance and customer experience [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core business's performance for fiscal 2026, expecting same-store sales growth of 4%-6% [35][36] - The company anticipates continued investment in growth while moderating SG&A growth [16][21] - Management noted that the competitive environment remains fragmented, with significant opportunities for market share capture [39][40] Other Important Information - The company ended fiscal 2025 with a leverage ratio of 3.4 times and plans to increase it to approximately 4.2 times post-acquisition [17][18] - Capital expenditures for the year were $259 million, with 70% allocated to new store additions [17] Q&A Session Summary Question: Revenue and EBITDA contribution from Breeze acquisition - Management indicated that the core business is expected to perform well, but specifics on Breeze's contribution are still being assessed [23][24] Question: Same-store sales guidance and its components - Management confirmed that the same-store sales guidance reflects a balance between transaction and ticket growth, with expectations for consistency across quarters [52][53] Question: Margin outlook for 2026 - Management noted that while new acquisitions typically have lower margins initially, they expect margin improvement as the new stores are integrated [44][46] Question: Impact of higher product costs - Management explained that product costs are influenced by crude oil pricing and supply chain inflation, with expectations for continued headwinds in fiscal 2026 [64][66] Question: Interest expense increase and its impact on EPS - Management acknowledged that higher depreciation and an increased effective tax rate contributed to the lower-than-expected EPS [69][70]

Financial Data and Key Metrics Changes - System-wide store sales increased by 10% to $3.5 billion, marking the 19th consecutive year of same-store sales growth [4][6] - Adjusted EBITDA grew by double digits, reflecting the impacts of refranchising and technology investments [4][6] - For Q4, net sales reached $454 million, a 4% increase on a reported basis and a 10% increase when adjusted for refranchising [14][15] - Adjusted EPS was $1.59 per share, at the low end of the guidance range [7][14] Business Line Data and Key Metrics Changes - The company added 170 new system-wide stores, bringing the total to 2,180 across the U.S. and Canada [4][10] - Same-store sales growth for the fiscal year was 6.1%, with transaction growth accounting for over one-third of the comp [14][15] - The gross margin rate remained flat at 39.1%, with labor leverage contributing to a 120 basis point improvement [15][16] Market Data and Key Metrics Changes - The company refranchised three markets: Denver, Las Vegas, and West Texas, leading to a 150% increase in new store additions in these markets compared to the previous year [10][11] - Fleet growth outpaced consumer business growth, indicating a strong demand for speed and convenience in service [12] Company Strategy and Development Direction - The company aims to drive the full potential of its core business, focusing on transaction and ticket growth through increased store-level efficiency [7][8] - Plans to continue sustainable network growth and innovate to meet evolving customer needs [8][10] - The Breeze AutoCare acquisition is expected to close on December 1, adding 162 stores to the network and enhancing growth opportunities [11][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core business's performance for fiscal 2026, expecting same-store sales growth of 4%-6% [18][35] - The company anticipates continued investments in growth while moderating SG&A growth [16][21] - Management noted that the competitive environment remains fragmented, with significant market share still available for capture [39][40] Other Important Information - The company ended fiscal 2025 with a leverage ratio of 3.4 times and plans to increase it to approximately 4.2 times due to the Breeze acquisition [17][18] - Capital expenditures for the year were $259 million, with 70% allocated to new store additions [17] Q&A Session Summary Question: Revenue and EBITDA contribution from Breeze - Management indicated that the core business is expected to perform well, but specifics on Breeze's contribution are still being assessed [23][24] Question: Same-store sales guidance and its drivers - Management confirmed that the same-store sales guidance reflects a balance between transaction and ticket growth, with expectations for continued performance [32][35] Question: Margin outlook for 2026 - Management noted that while SG&A growth is expected to moderate, the inclusion of the Breeze acquisition may complicate margin analysis [43][44] Question: Impact of higher product costs - Management acknowledged that higher product costs have been a drag, but they expect potential benefits from declining base oil prices in the future [64][66] Question: Interest expense increase and its impact on EPS - Management explained that higher depreciation and an increased effective tax rate contributed to the lower-than-expected EPS [67][69]

Financial Data and Key Metrics Changes - The company reported record revenue of $1.45 billion for Q3 FY 2026, a 14.1% increase compared to Q3 FY 2025 [4][21] - Adjusted EBITDA reached $219 million, marking a 28.5% increase year-over-year, with an adjusted EBITDA margin of 15.1%, up 169 basis points from the previous year [5][22] - The company’s backlog hit an all-time high of $8.2 billion, with $4.99 billion expected to be completed in the next 12 months [6][22] Business Line Data and Key Metrics Changes - Organic revenue growth was reported at 7.2%, driven by fiber-to-the-home programs, wireless activity, and maintenance services [21] - Major customers included AT&T with $361.9 million and Lumen with $170.3 million, each exceeding 10% of total revenues for the quarter [22] Market Data and Key Metrics Changes - The company anticipates a $20 billion addressable market for outside plant data center network construction over the next five years, driven by increasing demand for digital infrastructure [7][11] - The NTIA approved final BEAD deployment plans for 15 states, with $29.5 billion in total spending expected, creating a significant addressable market for fiber and HFC infrastructure [8][9] Company Strategy and Development Direction - The acquisition of Power Solutions is expected to enhance the company’s capabilities in the rapidly growing digital infrastructure market, particularly in the data center sector [12][29] - The company aims to leverage its scale and expertise to capitalize on the growing demand for fiber infrastructure and data center construction [7][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for telecommunications infrastructure, particularly fiber-to-home builds and data center growth [6][19] - The company is optimistic about the future, projecting revenue growth of 13.8% to 15.4% for the full fiscal year, excluding the impact of the pending acquisition [6][24] Other Important Information - The total purchase price for Power Solutions is $1.95 billion, expected to be immediately accretive to adjusted EBITDA margin and diluted EPS [13][29] - The company has secured over $500 million in verbal awards related to BEAD deployments, which will not be reflected in the backlog until the next quarter [9][23] Q&A Session Summary Question: Improvement in DSOs and Power Solutions Expansion - Management noted a 14-day improvement in DSOs, attributing it to strong cash management practices and expressed confidence in maintaining this improvement going forward [35] - Regarding Power Solutions, management highlighted the addition of skilled workforce and the alignment with hyperscaler demands as key growth drivers [36] Question: Customer Relationships and Opportunities - Management indicated that Power Solutions primarily works with general contractors, but there is significant overlap with hyperscaler end users, providing opportunities for diversification [40][42] Question: Fourth Quarter Guidance and Backlog - The wider revenue range for Q4 reflects seasonal factors and the ongoing growth in fiber-to-home programs, with expectations for continued strong performance [57] - Power Solutions has a backlog of over $1 billion, with contracts typically spanning 6 to 12 months, indicating a robust pipeline of work [59] Question: New Market Expansion and Long-Term Strategy - Management emphasized a cautious approach to expanding into new markets, focusing on long-term shareholder returns and leveraging existing strengths in the DMV region [64] Question: Service and Maintenance Agreements - The $500 million in service and maintenance agreements post-quarter reflects the company's ability to secure ongoing work and indicates strong momentum heading into Q4 [72][75]

Financial Data and Key Metrics Changes - Dycom Industries reported record revenue of $1.45 billion for Q3 FY 2026, a 14.1% increase compared to Q3 FY 2025 [4][20] - Adjusted EBITDA reached $219 million, marking a 28.5% increase year-over-year, with an adjusted EBITDA margin of 15.1%, up 169 basis points from the previous year [4][21] - The company’s backlog hit an all-time high of $8.2 billion, with $4.99 billion expected to be completed in the next 12 months [5][21] Business Line Data and Key Metrics Changes - Organic revenue growth was reported at 7.2%, driven by fiber-to-the-home programs, wireless activity, and maintenance services [20] - The service and maintenance business continues to grow, with additional agreements totaling over $500 million executed after the quarter [9][22] Market Data and Key Metrics Changes - The demand for fiber infrastructure to support data center growth is increasing significantly, with a projected $20 billion addressable market for outside plant data center network construction over the next five years [6][7] - The NTIA has approved final BEAD deployment plans for 15 states, with $29.5 billion in total spending expected, of which $26 billion will be used for fiber or HFC infrastructure [8][9] Company Strategy and Development Direction - The acquisition of Power Solutions is expected to enhance Dycom's capabilities in the digital infrastructure market, providing comprehensive services from core networks to data centers [12][13] - The company aims to capitalize on the growing demand for digital infrastructure driven by hyperscalers and technology companies, with a focus on long-term shareholder value [11][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for telecommunications services and the ongoing growth of fiber-to-home builds, projecting continued acceleration in the coming years [5][6] - The company anticipates that the construction of new outside plant data center networks will ramp up significantly in 2026, leading to substantial growth [6][17] Other Important Information - The total purchase price for Power Solutions is $1.95 billion, expected to be immediately accretive to Dycom's adjusted EBITDA margin and diluted EPS [13][24] - The acquisition is anticipated to provide a clear path to deleveraging to two times net leverage within 12 to 18 months [26][28] Q&A Session Summary Question: Improvement in DSOs and future expansion of Power Solutions - Management noted that the 14-day improvement in DSOs reflects strong cash management efforts and expressed optimism about maintaining this improvement going forward [31] - Regarding Power Solutions, the focus will be on leveraging skilled workforce capabilities to meet the growing demands of hyperscalers [32] Question: Customer relationships and growth opportunities with Power Solutions - Power Solutions primarily works with general contractors, but there is significant overlap with hyperscaler end users, providing opportunities for customer diversification [35][36] Question: Fourth quarter guidance and backlog context - The wider revenue range for Q4 is attributed to seasonal factors and the ongoing growth in fiber-to-the-home programs [45] - Power Solutions has a backlog of over $1 billion, with contracts typically spanning 6 to 12 months [47] Question: Future market expansion and M&A opportunities - Management emphasized a strategic approach to growth, focusing on the proven DMV market while also considering future M&A opportunities in other regions [51][52] Question: Data center market concentration and future M&A - The data center contracting space remains fragmented, presenting opportunities for future acquisitions, while Dycom aims to leverage its scale in both telecommunications and data center services [63]

Financial Data and Key Metrics Changes - System-wide store sales increased by 10% to $3.5 billion, marking the 19th consecutive year of same-store sales growth [4][6] - Adjusted EBITDA grew by double digits, reflecting the impacts of refranchising and technology investments [4][6] - For Q4, net sales reached $454 million, a 4% increase on a reported basis and a 10% increase when adjusted for refranchising [13][14] - Fiscal year net sales grew 12% to $1.7 billion when adjusted for refranchising, with same-store sales growing 6.1% [13][14] Business Line Data and Key Metrics Changes - Transaction growth accounted for over one-third of same-store sales growth, with contributions from premiumization, net pricing, and increased NOCR penetration [13][14] - Adjusted EPS for the year was $1.59 per share, at the low end of the guidance range [6][13] - Capital expenditures for the year were $259 million, with 70% allocated to new store additions [17] Market Data and Key Metrics Changes - The company added 170 new system-wide stores, bringing the total to 2,180 across the U.S. and Canada [4][6] - Franchise partners committed to significant development agreements, leading to a 150% increase in new store additions in refranchised markets [10] Company Strategy and Development Direction - The company aims to drive the full potential of its core business, focusing on transaction and ticket growth while enhancing store-level efficiency [6][7] - Plans to continue sustainable network growth and innovate to meet evolving customer needs [7][10] - The acquisition of Breeze AutoCare is expected to close on December 1, adding 162 stores to the network [10][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core business's performance for fiscal 2026, expecting same-store sales growth of 4%-6% and overall network growth of 330-360 new stores [18][19] - The company anticipates adjusted EPS of $1.60-$1.70 per share for fiscal 2026, reflecting a 4% growth over the prior year [19] - Management noted that the competitive environment remains consistent, with no markets avoided due to competition [36] Other Important Information - The company ended fiscal 2025 with a leverage ratio of 3.4 times, with plans to return to the target leverage ratio of 3.0 times within 18 to 24 months [17][18] - The gross margin rate was flat year-over-year at 39.1%, with operating leverage generating a 60-basis-point improvement [15][16] Q&A Session Summary Question: Revenue and EBITDA contribution from Breeze - Management indicated that the core business is expected to perform well, but specifics on Breeze's contribution are not yet available [24][25] Question: Decline in EBITDA margins for fiscal 2026 - Management acknowledged that the inclusion of Breeze will complicate margin analysis, but they expect continued performance from the core business [24][25] Question: Same-store sales guidance and traffic vs. ticket mix - Management confirmed that the same-store sales guidance reflects a balance between transaction and ticket growth, with expectations for consistency across quarters [41][46] Question: Impact of higher product costs - Management noted that product costs have been impacted by crude oil pricing and supply chain inflation, which may continue into fiscal 2026 [59][60] Question: Interest expense increase and EPS impact - Management explained that higher depreciation and an increased effective tax rate contributed to the lower-than-expected EPS, alongside higher interest expenses [62][63]

Financial Data and Key Metrics Changes - Third quarter sales reached $20.8 billion, with comparable sales increasing by 0.4% year over year, despite a 100 basis point headwind from Hurricanes Helene and Milton [4][29] - Adjusted diluted earnings per share were $3.06, reflecting a 6% increase compared to the previous year [4][28] - Gross margin improved to 34.2%, up 50 basis points from the prior year [30] - Adjusted operating margin rate was 12.4%, an increase of 10 basis points year over year [30] - Inventory at the end of Q3 was $17.2 billion, down approximately $400 million compared to the previous year [30] Business Line Data and Key Metrics Changes - Positive comparable sales were reported in 10 of 14 merchandise divisions, with notable strength in appliances, flooring, paint, and kitchens and bath [15][29] - Online sales grew by 11.4% during the quarter, driven by increased traffic and strong conversion rates [5] - Home services experienced double-digit comparable sales growth, indicating strong performance in this key initiative [24] Market Data and Key Metrics Changes - The U.S. homeowner market remains healthy, with strong balance sheets and continued consumer spending, although affordability and economic uncertainty weigh on consumer confidence [12][13] - The average homeowner has record levels of equity, approximately $400,000, which may lead to increased investment in home improvement projects [13] Company Strategy and Development Direction - The company is focused on its 2025 Total Home Strategy, which includes enhancing pro offerings, accelerating online sales, and leveraging loyalty programs [5][6] - The acquisition of Foundation Building Materials (FBM) aims to expand product offerings and enhance fulfillment capabilities, particularly in urban markets [11][12] - Investments in AI are expected to improve customer engagement and operational efficiency, with virtual assistants significantly increasing conversion rates [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the long-term health of the home improvement sector, despite current macroeconomic uncertainties [14] - The company anticipates that lower interest rates could stimulate demand for home improvement projects, particularly through home equity loans [13][64] - The outlook for 2026 remains cautious, with expectations for flat comparable sales for the year [33] Other Important Information - The company is on track to achieve its multi-year goal of reducing in-store SKU count by 15% by the end of 2025 [21] - The marketplace initiative is showing early promise, exceeding expectations in seller onboarding and customer adoption [72][73] Q&A Session Summary Question: How is the business trend looking in light of recent performance? - Management noted positive comp performance to start the quarter, with improvements in top-line performance since exiting October [37][39] Question: What is the outlook for kitchen and bath categories? - Management believes Lowe's is gaining market share in kitchen and bath, supported by improved technology and product offerings [45][46] Question: Can you elaborate on the improving sentiment among pros? - The small to medium pro business remains stable, with 75% of pros feeling confident in their job prospects [52] Question: How does the company view the current housing market? - Management acknowledged elevated mortgage rates but highlighted the strong equity position of homeowners as a potential driver for future home improvement spending [62][64] Question: What are the early margin scenarios for FBM and ADG? - Initial estimates suggest a 50 basis point impact on margins in 2026, with a focus on gross margin improvements [56]