Hello and welcome to Ferguson's Q3 Results Conference Call. My name is Elliot and I will be coordinating your call today. I would now like to turn the call over to Brian Lantz, Vice President of Investor Relations and Communications. The floor is yours. Please go ahead.

Good morning, everyone and welcome to Ferguson's Third Quarter Earnings Conference Call and Webcast. Hopefully, you've had a chance to review the earnings announcement we issued this morning. This is available in the Investors section of our corporate website and on our SEC filings web page. A recording of this call will be made available later today. I want to remind everyone that some of our statements today may be forward-looking and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Additional information is included under the legal disclaimer in our earnings announcement. In addition, on today's call, we will also discuss certain non-GAAP financial measures. Please refer to the appendix of our earnings presentation and the earnings announcement on our website for additional information regarding those non-GAAP measures, including a reconciliation to their most directly comparable GAAP financial measures. With me on the call today are Kevin Murphy, our CEO; and Bill Brundage, our CFO. I will now turn the call over to Kevin.

Thank you, Brian, and welcome, everyone, to Ferguson's Third Quarter Results Conference Call. On today's call, I'll cover several of the highlights of our Q3 results. I'll provide a brief update on capital deployment, including some highlights on recent acquisition activity and our journey to a primary listing on the New York Stock Exchange. And I'll also provide a view of our end markets before turning the call over to Bill for the financials. I'll then come back at the end to set our outlook for the remainder of the fiscal year before Bill and I take your questions. Our teams delivered another exceptional performance in the third quarter. We'd like to express sincere thanks to our associates for their remarkable efforts to serve our customers, helping to make their projects simple, successful, and sustainable. We continue to leverage our consultative approach, our scale, our global supply chain, and our strong balance sheet to support our customers' projects. This drove 23% revenue growth on top of tough prior year comparables. Our pricing discipline and technology-enabled productivity gains enabled us to drive strong operating leverage with adjusted operating profit up 34%. This operating profit performance, coupled with the execution of our share buyback program, drove adjusted diluted earnings per share growth of over 40%. We're proud of these results and are confident in the strength of our business model as we go forward. Our balance sheet is strong and we continue to execute our strategy of investing for organic growth, consolidating our fragmented markets through acquisitions, and returning capital to shareholders. This strong performance allows us to deliver on our capital priorities. We welcomed associates from four bolt-on acquisitions during the quarter and we intend to touch on M&A in a little more detail shortly. We are well underway with our $2 billion share buyback program and are continuing to repurchase shares at pace. From a corporate perspective, we were pleased to transition our primary listing to the New York Stock Exchange on May 12, aligning our listing structure with the geographic location of our operations and our associates. We were also pleased to publish our first stand-alone ESG report last week, highlighting our dedication to minimizing the environmental impact of our operations and fostering a culture that is safe, inclusive, and engaging for our associates. This report showcases how our people, our expertise, and our position within the value chain create positive impacts for our customers, suppliers, and local communities as we help build a better world. Turning last to our end markets. Demand has remained strong across our markets and we continue to outgrow these markets. Residential, which comprises just over half our U.S. revenue, remained robust. Both new construction and RMI demand remained supportive, and our residential revenue grew by approximately 20% in the quarter. Nonresidential end markets remained strong and grew faster than our residential markets. Our nonresidential revenue grew by approximately 29% with a significant contribution from our Waterworks Group. As we've discussed previously, we remain committed to our balance of residential and nonresidential end market exposure with a heavier mix of RMI related work. While we're mindful of broader macroeconomic headwinds, this balanced mix, our agile business model, and our strong balance sheet position us well for the future. Turning back to acquisitions. We continue to see attractive growth opportunities through selective bolt-on geographic and capability acquisitions. During the quarter, we welcomed Lighting Plus and Founders Kitchen & Bath into our residential building and remodel customer group. Additionally, Adirondack and AP Supply broadened our industrial offering in Upstate New York and the Southern U.S., respectively. We continue to maintain a healthy pipeline, completing three additional deals since the end of the quarter. Aaron & Company expands our residential plumbing and HVAC offering in New Jersey. This acquisition is yet another step in expanding our value for the dual trade HVAC and plumbing professional. We're also pleased to have signed a definitive purchase agreement to acquire Minka Lighting, an own brand lighting and fan business. With a strong product portfolio, our customers will benefit from a broader range of choice as they undertake their projects. We anticipate closing this acquisition in the fourth quarter, subject to regulatory approval. All in all, these businesses generate annualized revenues of approximately $450 million as we continue to consolidate our large growing and fragmented markets while bringing in local relationships that fuel future organic growth. Now let me pass you over to Bill, who will take you through our financial numbers in a bit more detail.

Thank you, Kevin and good morning or afternoon, everyone. We've seen a continuation of trends from the second quarter with market share gains contributing to revenue growth of 23.1%. The price inflation moved up a touch from the high teens in Q2 to approximately 20%, with volumes remaining positive on tough prior year comparables. As we previously guided, the strong comparables and changes in business mix led to some year-on-year gross margin compression, resulting in gross margins of 30.3%, tightly controlled costs driving strong operating leverage and improved overall adjusted operating margin by 90 basis points to 10.3%, while investing in our talented associates, supply chain capabilities, and technology programs. Adjusted operating profit of $747 million was up $188 million or 33.6% over the prior year. Diluted adjusted EPS grew by 40.4%, principally driven by the growth in operating profit and to a lesser extent, the impact of our share buyback programs. Our balance sheet remains strong with net debt to adjusted EBITDA of 0.8x. Moving to our segment results. The U.S. business mirrors the overall results with a strong performance. Markets were supportive and we continue to take share with sales growth of 23.9% and organic growth of 23.7%. We had a further 1.8% of revenue growth from acquisitions, offset by 1.6% from one fewer sales day. Headcount and variable costs grew to appropriately support revenue growth and we delivered adjusted operating profit of $736 million in the quarter, an increase of $176 million or 31.4% over the prior year, with adjusted operating margins expanding 60 basis points to 10.6%. We provided a breakout of revenue growth across our largest customer groups in the U.S. Kevin outlined, we saw strength across both the residential and nonresidential end markets with all customer groups performing well. Residential trade and HVAC, where the majority of our business serves the residential end market, grew over 20% with strong demand in both new construction and RMI. Residential Digital Commerce, which serves the project-minded consumer and light decorative pro, continued to grow well on top of a 51% prior year comparable. Waterworks continued to see strong revenue growth on top of a prior year comparable of 26%. This quarter's growth was driven predominantly by inflation, supported by strong public works demand, good residential growth, and growth in nonresidential end markets. Commercial, mechanical, and other nonresidential customer groups saw good growth in the quarter with supportive markets. The Canadian business performed well with organic revenue growth of 11.3% in Q3 as we lapped a 35% prior year comparable. This was offset by one fewer sales day and the adverse impact of foreign exchange rates, resulting in total revenue growth of 8.8%. Residential end markets performed well with good growth across our customer groups. Nonresidential also grew well with particularly strong growth in our Waterworks customer group. Adjusted operating profit growth of 66.7% significantly outpaced revenue growth as we tightly controlled operating costs generating strong operating leverage. As we look at the year-to-date performance, revenues are up 26.9%, 25.2% on an organic basis with a 40 basis point improvement in gross margins. Adjusted operating profit growth significantly outpaced sales, up 50.9% with operating margins expanding 160 basis points to 10.2%. Adjusted diluted EPS grew by nearly 58%. And as Kevin mentioned earlier, we are pleased with the strength of our performance and our confidence in the resilience of our business. Turning to cash flow. We take a disciplined approach to cash generation. It continues to be an important priority and quality of our business model. Adjusted EBITDA year-to-date was $2.3 billion. As we've discussed over the last several quarters, we continued to invest in working capital, both inventory to ensure we have the best levels of availability for our customers during this time of supply chain challenges as well as receivables driven by sales growth. This investment has supported our exceptional growth and generated strong overall returns on capital. Tax increased over the prior year due to higher profit and timing of payments and we continue to invest in organic growth through CapEx, principally invested in our supply chain and technology programs. Consequently, we generated $681 million in operating cash flow and $489 million of free cash flow. Our balance sheet position is strong, with net debt to adjusted EBITDA of 0.8x which we've stepped up from 0.4x a year ago. We continue to target a leverage range of 1 to 2x and we intend to operate towards the low end of that range to ensure we have the capacity to take advantage of growth opportunities. We allocate capital across four clear priorities. First, we're investing in the business to drive above-market organic growth, principally through working capital and CapEx. We are sustainably growing our ordinary dividend and previously raised the interim dividend by 15%, which was paid after the quarter end in May. Acquisitions are an important part of our growth strategy and we completed 10 in the first 9 months, investing $287 million and we've closed a further three post quarter end and we have a healthy future pipeline. And finally, we remain committed to returning surplus capital to shareholders if we're below our target leverage range. We've made good progress on our $2 billion buyback program, returning in excess of $900 million through Q3 and having now completed nearly $1.3 billion of the program through last Friday. We continue to execute the buyback at a good pace. So let me wrap up. We're pleased with the business performance. We've delivered strong results while continuing to invest in the business. The disciplined approach we've taken on the cost base and our strong balance sheet position us well as we close out fiscal year '22 and head into fiscal year '23. Thank you. Now let me hand you back to Kevin for an update on the outlook and his closing remarks.

Thank you, Bill. As we go forward, near-term market demand remains supportive and we have increased our full year expectations for adjusted operating profit to between $2.85 billion and $2.95 billion. While we're mindful of broader macroeconomic headwinds, our balanced business mix, agile business model, and strong balance sheet position us well for the future. So to summarize, the business is performing well. We're continuing to leverage our core strengths, delivering market share gains. We believe we're well-positioned for growth and remain focused on executing our strategy and we're excited about our value creation opportunities. Thank you for your time today. Bill and I are now happy to take your questions. Operator, I'll hand the call back over to you.

My first question today comes from David Manthey from Baird.

On the full year operating income guidance raised to $2.85 billion to $2.95 billion. Could you remind us what was your prior outlook? And then how much of the increase there is due to: one, better-than-expected third quarter results; two, continuation of higher inflation; three, an expectation of better unit growth; and then four acquisitions? And if you just can talk about those qualitatively, it's fine also.

Yes, it's Bill. I'll address that question. We hadn't established specific operating profit dollar guidance before this. The market consensus was just below $2.7 billion, around $2.665 billion. Therefore, the midpoint of our new range of $2.9 billion represents an increase of over $200 million. The increase is primarily due to a combination of the first two items you mentioned. Q3 performed better than we anticipated, mainly due to revenue growth. Inflation rose from the high teens to approximately 20%. As we discussed after Q2, we expected growth rates to be slightly lower, considering significant comparables in Q3 and Q4 last year, but we ended up achieving 23% growth in Q3. We also maintained strict control over our operating costs, which positively impacted the bottom line. Roughly half of the profit increase came from Q3, with the other half coming from our Q4 outlook. We're carrying the momentum from Q3 into Q4. As Kevin pointed out, demand signals for us in both residential and nonresidential sectors remain robust, boosting our confidence in the revised outlook. The range of $2.85 billion to $2.95 billion suggests a fourth-quarter profit between $750 million and $850 million. It's worth noting that very little of this profit increase is attributed to acquisitions, which will benefit us in terms of revenue next fiscal year but are not expected to significantly affect this year's profit outlook.

And Dave, as we indicated, residential remains supportive, both RMI and new construction as we're sat here today. And that balance with nonresidential and there's good strength coming through from a nonresidential perspective in areas like knock-on commercial activity after residential build-out, then also some really large project work that's happening across a variety of different industries that is supportive of both unit growth as well as ongoing inflation, where, as we indicated previously, seeing that growth of inflation inside of finished goods continuing following commodities and that's played into the quarter and into the future.

Our next question comes from Kathryn Thompson from Thompson Research Group.

Just to provide some perspective on outlook questions and revisit the topic of inflation. We discussed the shift from just-in-time to just-in-case shipping. Your distribution model should benefit in the new post-COVID environment. However, we're observing some instances where certain models are accumulating excessive inventory and need to address that. There are two key points to consider. The majority of growth is still driven by pricing or inflation. How much of this growth is due to favorable purchasing, and how long do you expect this trend to continue? Additionally, what are your thoughts on inventory management in light of potentially fluctuating demand in the future?

Yes. So Kathryn, thank you for the question. In terms of just in time to just in case and what it looks like from an inventory perspective, as we indicated in past quarters, this supply chain chaos area has really allowed us to advance what our share gains are versus our historical 300 to 400 basis points. And that gravitational pull, the strength in having inventory when your customers need it and where they need it was hugely important. That continues to serve us well as we are growing at the top end of that, call it, 300 to 400 basis points worth of market outperformance. That said, as supply chain pressures start to ease, which we're seeing and we're not seeing it across the board but it is continuing to improve in spotty areas, product by product, category by category, it's really incumbent upon us. And what we're working on today is making sure that we're communicating extremely well with our customers and with our customers' customer, the owner, the general contractor, the GC, and making sure that we understand what is product availability so that we minimize that pull forward of ordering activity to get back to a much more consistent ordering pattern to serve projects. That's happening today. The majority of our inventory growth that you've seen early on during supply chain pressures was to take care of vendor fill rates that have been compressed. We had talked about sub-30% on time in full of our top 20 DC vendors inbound. And that has now improved to well north of 50. And so that inventory that we're keeping is making sure that we have completed projects for our customers where and when they need it. In fact, our inventory growth for committed inventory of project-based is far in excess of what overall inventory growth is. So from a pricing perspective, yes, that's driving the top line. From a share gain perspective, inventory availability and project is helping us but we really are starting to drive back to a much more normalized ordering pattern.

And Kathryn, maybe just to tack on there from a pricing perspective, to your question and then to Kevin's point, the price inflation in the current quarter of around 20% means that we delivered low single-digit volume growth. But I think it is important to look back at what we did last year in Q3, which was roughly 21% organic growth. The vast majority of that was volume, about 5% was price. So if you look at it on a two-year stack, call it, 44% total growth, roughly 25% of that being priced over that two-year period. So still good two-year stack volume growth, recognizing that we had a large volume increase last year.

Our next question comes from Keith Hughes from Truist.

You talked about what the unit growth in the quarter was in the low single digits. Can you talk about how that varies between residential and nonresidential?

Yes. In terms of that growth, Keith, it was relatively consistent. The inflation dynamics were slightly different between resi and nonresi, with nonresi having higher inflation. If you look at total resi growth in the quarter, roughly 20%; total non-resi growth, roughly 29%. The difference between those two was largely higher inflation. So I'd say volume growth was relatively consistent between the two or across the two.

And just one other question regarding inflation. Do you have an opinion on when the peak of inflation will occur, considering what we know today? It would be helpful to have any estimate you can provide.

Yes. It's obviously a really difficult question to answer. But one of the things that we think about and look at is just simply the base effect or the comparables on inflation that we are coming up against. So if you look back to last year, Q3 was about 5% inflation that then stepped up to 8% in Q4, low teens in Q1, and then high teens in Q2 and now around 20. So as we move over the next several quarters, we would expect inflation will start to compress just simply because of the comparables. Clearly, there's a lot of dynamics that could impact that. But that's how we would think it would progress over the next several quarters.

Our next question comes from Matthew Bouley from Barclays.

This is Ashley Kim on for Matt today. So just my first question with pricing kind of accelerated into 3Q. Can you just talk about if you're seeing any signs of pricing fatigue? And if so, maybe can you call out any specific customers or end markets that may be particularly challenged?

Yes, Ashley, thank you. And in terms of pricing fatigue, obviously, that's something we keep a very keen eye on. We haven't seen any real demand destruction in residential, nonresidential, new construction, RMI up to this point. And in fact, we still see good solid early Waterworks growth inside of residential subdivisions, for example. But we keep a mindful eye on that. There certainly is fatigue, and the ability to pass through that price increase is incredibly challenging, but it's hard work and heavy lifting that we do from a sales team perspective with our customers and our customers' customers. And so to date, we haven't seen demand destruction, but we keep a very keen eye towards that.

Do you have a good amount of visibility into customer backlogs? Are there any signs indicating a potential strong decline in volume in the near term?

Yes. So our visibility to backlog is somewhat limited, call it, through the end of our fiscal year and into the first quarter of our next fiscal year. We have seen a growth in our overall open order volume fairly substantial growth. Again, that is partly good solid demand and partly pulling forward of ordering activity to ensure that customers have the availability of their product for their project where and when they need it. We are talking with customers through bidding activity. And again, we see good solid bidding activity that continues in both residential and nonresidential from our Waterworks business throughout residential trade plumbing, finished plumbing, and the like. So there still is good bidding activity that goes on. We're certainly eyes wide open and mindful about what rates and price and consumer sentiment can mean in the overall macro. But as we sit here today, that market activity and that demand curve still looks reasonably strong.

We now turn to Will Jones from Redburn.

Three questions, if I may. First, regarding your customer segments, HVAC and Waterworks were the strongest performers this quarter. Do you expect this trend to persist over the next few quarters? Additionally, are you satisfied with the gross margins you achieved last quarter, and do you think they will remain stable given the impact on the product mix? Second, I noticed that in Residential Digital Commerce, you experienced a 9% growth, which was higher than I anticipated considering its retail focus and the performance of some competitors. Do you believe you are excelling in this area, or was it primarily driven by market factors? Finally, could you provide some details regarding your headcount changes?

Sure. I'll start with the first part of your question, and I appreciate it. We're very pleased with the performance in both the HVAC and Waterworks sectors. These areas represent solid growth opportunities for us. HVAC saw a 28% increase, building on a 40% performance from the previous year, indicating strong growth in repair, replacement, and new construction. We’re focused on expanding this growth organically through same-store performance and new locations, while also pursuing targeted acquisitions to ensure nationwide coverage. As we have noted, we believe our strong residential plumbing business combined with our HVAC operations positions us well to cater to the large market of professionals skilled in both trades. We're pleased with the ongoing trends and gross margin contributions from this group. Meanwhile, Waterworks has also experienced impressive growth, benefiting from both residential and nonresidential sectors, with good activity in subdivisions and multifamily projects, as well as distribution center developments in the nonresidential field, including public works and water treatment projects. We have yet to see the full impact of the infrastructure package on this segment, but we are aware of its potential effects on gross margins related to business mix, and overall performance remains robust. Lastly, in the Residential Digital Commerce area, we achieved a 9% growth rate against a challenging comparable of 51% from last year. Despite the tough competition, we continue to perform strongly, particularly with project-minded consumers who are less affected compared to those focused on light decorative purchases. Looking ahead, we anticipate double-digit growth in the do-it-for-me segment over the next three years. We have observed solid performance in our operations that cater to professionals and do-it-for-me customers. Now, I will hand it over to Bill to discuss headcount.

Yes. Well, on headcount, we do continue to invest in our associate base as we're taking on and going after the additional revenue growth and volume growth. We've added about 3,000 associates into the business since the start of the fiscal year. So roughly about a 10% increase in our associate base.

And that's including acquisition, is it the 10% there?

That would be including acquisition. Yes, just over 500 of those are from acquisition in the year-to-date.

Our next question comes from Gregor Kuglitsch from UBS.

A few questions. Can you just give us some color on what kind of run rate you're seeing kind of, I suppose, in the quarter to date? Since the quarter end, I guess, where it's sort of been consistent? Second question, coming back to inflation. If you could just sort of help us out on the commodity element? I think some of the commodities are starting to roll like, I guess, it will take a little bit of time. But just give us some color on the exposure there and how you see that feeding through, I guess, over time? I guess the third question is on M&A. So could you just remind us, as we sit here today, what do you think the carryover is into next year? So I think you just did $450 million annualized was some deals before. So just all in, what's the carryover on revenue profit? And maybe if you care to elaborate on what you spent on that 400 million piece that happened post the quarter? And then maybe sort of to wrap it all up, sort of a big picture question. I mean, obviously, you've just seen your earnings go. I'm looking here trading profit, I don't know, let's call it 1.6%, 1.7%. This year, maybe you're saying 2.9%. I mean, very high level, how much of that gain do you think is sustainable?

Thanks, Gregor. I'll address those points as we go along. To begin with, in terms of entry rates, we started Q4 with growth rates similar to our Q3 exit rate, which was 23%. We anticipate that the comparable may increase slightly throughout the quarter. We believe this could evolve as we progress through Q4. Nonetheless, we continue to experience positive near-term demand, and this outlook for revenue growth has allowed us to raise our operating profit range. Regarding commodity inflation, historically, commodities accounted for about 10% of our revenue pre-pandemic, but due to observed inflation, this has risen to over 15% of our revenue currently. We have noticed that commodity prices have mostly stabilized, although this varies by category like copper, steel, or plastics. As we've seen prices holding steady over recent months, the year-over-year inflation impact has decreased. While in Q4, Q1, and Q2 we reported commodity inflation in the 50% range, we are now likely in the low to mid-30% range. We expect this trend to continue as we face tougher comparisons in future quarters. On the M&A front, ironically, the expected impact of completed M&A this year is about $400 million on FY '22 results. The annualized revenue from our Q3 acquisitions, along with those planned to close in Q4, is around $450 million. The carryover into '23 also stands at about $450 million in annualized revenue, which hopefully clarifies your question. Lastly, concerning operating profit, we're pleased with the increase not just in dollar terms over the past two years but also with operating margins. We have improved operating margins from approximately 8% to 9.2% last year, and currently, we're at 10.2% year-to-date, indicating a notable rise. We have yet to share our outlook for FY '23, but we plan to maintain our operating profit as we transition into the next fiscal year. By the end of Q4, we will be in a stronger position to provide our outlook for fiscal '23 when we reconvene in September.

Our next question comes from Arnaud Lehmann from Bank of America.

Just on my side, one question, I guess, on the gross margin. You mentioned that we were expecting some sort of normalization. But at the same time, we were not necessarily expecting as much inflation to continue to come through. I think in your introduction, you mentioned some mix effect impacting the gross margin. So do you mind coming back on that? And maybe give us an outlook is the low 30s the right level to think about into the fiscal year?

Yes, sure. In terms of the mix impact year-over-year, we quantify that in the 10 to 20 basis point range at Q2, that was more like 20 to 30 basis points. And that's really driven by the growth in Waterworks and growth in nonresidential which both tend to have slightly lower gross margin but very similar operating margins. So about a 10 to 20 basis point impact year-over-year as you look at Q3. In terms of the go-forward gross margin, clearly, there are a lot of dynamics that impact gross margins, including inflation and pricing, including business mix. But we've said in the past that we think somewhere between that 30% to 31% is a good normalized gross margin for us to operate from. And we do intend to and believe that we can continue to grow that over time, given our product strategy, given our own brand initiatives, and given how we manage the business. So we're quite pleased with the delivery of 30.3% in Q3 and are expecting a good gross margin in our fourth quarter to wrap up our fiscal year.

Our next question comes from Suhasini Varanasi from Goldman Sachs.

Just one from me, please. Just to follow up on the outlook on operating profit. Given what you're seeing on the top line trends in Q4, 20% plus levels with probable moderation going into the rest of the quarter and given how you've actually beaten estimates on margins in the third quarter to date. Can you talk about what your margin expectations are for Q4, please? It seems as though that's a little bit of caution over there. So is there anything that we should be worried about in terms of inflation or cost that can squeeze margins year-over-year?

Yes. Nothing that I would be wary about. We've got a bit of a range, both from a revenue perspective as well as from an operating margin perspective. Again, given the fact that the comparables do step up in Q4. So if I had to put a number on it, we're expecting the revenue range to be somewhere in the mid, high teens to low 20s and then a solid operating margin to complement that. So that would kind of book in your range or our range rather of that to $850 million to $950 million.

Our next question comes from Madeleine Jobber from Morgan Stanley.

One for me with a couple of parts. Just on your capital allocation policy, how do you view your scope for buybacks going forward sort of above and beyond the $2 billion target you already have in place? And then the second part being, how do you view kind of completing deals in this environment which some would describe maybe close to the top of the cycle? How does this impact your thoughts on strategy and then the multiples you're willing to pay for some of these companies just off the back of the strong M&A you've been doing recently, especially post the quarter end?

Thank you, Madeleine. Regarding buybacks, as Kevin mentioned earlier, we're satisfied with our progress on the $2 billion buyback program, having completed around $900 million in the first three quarters. We've accelerated this to nearly $1.3 billion to date, leaving about $700 million remaining under our authorization. We anticipate utilizing this through the end of the fiscal year and will provide an update with our year-end results. We're committed to following our capital priorities and policy, which states that if we remain within our leverage range of 1x to 2x, we will continue to return cash to our shareholders. On the topic of deals and M&A, we've previously noted a strong pipeline. We're maintaining a disciplined approach to evaluating both the multiples we are willing to pay and the operating profit performance of potential acquisitions. From a valuation standpoint, we find ourselves at the upper end of our typical M&A multiple range, likely closer to 10%. However, we're thoughtful about the operating profits those companies have achieved and see a strong pipeline as we transition from fiscal '22 into fiscal '23. We remain confident in our previous guidance that we can continue to consolidate our fragmented markets and achieve approximately 1% to 3% annual revenue growth through acquisitions.

And the pipeline that we have today continues to be very complementary for strategically what we want to do, both in geographic bolt-ons as well as in capability bolt-ons. You saw Aaron & Company in New Jersey which again gets after that dual trade HVAC and plumbing contractor and providing great value in the marketplace for them. And then Minka, as it relates to our own brand program which we will take across our digital and bricks-and-mortar channels to really help our offering to that project-minded consumer decorative pro, Ferguson Facility supply customer. We continue to see many of those acquisitions as well as geosynthetics inside of our Waterworks business which is clearly, some of the areas that we wanted to go after from an M&A perspective. Yes. Thank you, everyone for your time this morning, this afternoon. Again, just to reiterate, we're really pleased with the overall performance of the business and want to extend a sincere thank you to our associates, who are working extremely hard to make sure that we deliver on our customers' project making them more simple, successful, and sustainable. We delivered strong results. And while we continue to invest in the business, especially from an organic perspective to make sure that our technology agenda, our world-class supply chain continues to deliver for our customers. And the ongoing share gains with a disciplined approach to how we're managing the cost base of the business will allow us and position us well as we close out our fiscal year '22 and move into fiscal year '23. Thank you very much for your time and support and hope to talk to you very soon. Thank you.

That concludes the Ferguson Q3 results. We'd like to thank you for your participation. You may now disconnect your lines.