Strategic Performance Drivers

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• Municipal demand remains the core growth engine, driven by the nondiscretionary nature of aging water infrastructure repair and replacement cycles.

• Data center and manufacturing projects are providing a significant offset to traditional commercial softness, requiring complex water infrastructure for cooling and fire protection.

• Residential lot development remains stabilized at lower levels following a pullback in late fiscal 2025, with near-term activity constrained by interest rates and affordability.

• Gross margin expansion of 50 basis points was achieved through structural improvements in private label penetration, sourcing optimization, and disciplined pricing execution.

• The company is successfully transitioning from a product distributor to an integrated solutions provider, particularly in smart utility and treatment plant categories.

• National scale is being leveraged to support local relationship-driven service models, allowing the company to capture larger, multi-phase infrastructure projects.

• Strategic investments in technology and AI-enabled tools are being deployed to enhance customer experience and simplify complex supply chain workflows.

Fiscal 2026 Outlook and Assumptions

• Full-year guidance assumes flat overall end-market volumes, with municipal strength balancing a cautious outlook for private construction sectors.

• Management expects a record 8 to 10 greenfield location openings in fiscal 2026 to deepen penetration in high-growth geographic markets.

• Recent supplier price increases in PVC are expected to provide a modest revenue tailwind in the second half of the year as new bids flow through.

• The M&A pipeline has seen a notable uptick in activity, with several opportunities in late-stage processing across core and specialized product categories.

• Seasonality expectations point to slight growth in the second quarter, followed by low-to-mid single-digit growth in the second half as year-over-year comparisons ease.

Strategic Risks and Structural Items

• Geopolitical uncertainty and macroeconomic factors are identified as potential headwinds that could impact consumer confidence and interest rate trajectories.

• The Infrastructure Investment and Jobs Act (IIJA) funding is still largely at the state level, with less than one-third reaching municipalities, suggesting a long-term tailwind.

• Share repurchase activity has accelerated, with $125 million deployed fiscal year-to-date, representing approximately 80% of the total volume from the prior full year.

• The addition of former American Water CEO Susan Hardwick to the Board is intended to provide deeper regulated utility and customer-centric strategic perspective.