Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our accompanying unaudited condensed consolidated financial statements and notes thereto, and our audited consolidated financial statements, notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations as of and for the year ended December 31, 2025, included in our Annual Report on Form 10-K for such period as filed with the United States Securities and Exchange Commission (the "Commission"). The results shown herein are not necessarily indicative of the results to be expected in any future periods.

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words "believes", "projects", "expects", "anticipates", "estimates", "intends", "strategy", "plan", "may", "will", "would",

"will be", "will continue", "will likely result", and other similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the PSLRA. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse impact on our operations and future prospects on a consolidated basis include, but are not limited to: general economic conditions, particularly in the commercial, industrial building, and residential construction industries; a sustained interruption in the operation of our information systems; business interruption due to our ERP system upgrade; cyber-attacks; volatility in the prices of industrial commodities; increased funding requirements and expenses related to our pension plan; disruptions in our sources of supply; the inability, or limitations on our ability, to borrow under our existing credit facilities or any replacements thereof; adverse legal proceedings or other claims; compliance with changing governmental regulations; a pandemic, epidemic, or other public health emergency; and the inability, or limitations on our ability, to raise debt or equity capital. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless otherwise required by applicable securities law. Further information concerning our business, including additional factors that could materially impact our financial results, is included herein and in our other filings with the Commission. Actual results and the timing of events could differ materially from the forward-looking statements as a result of certain factors, a number of which are outlined in Item 1A., "Risk Factors", of our Annual Report on Form 10-K for the year ended December 31, 2025.

All dollar amounts, except per share data, are stated in millions in the following discussion and accompanying tables.

Background

Graybar Electric Company, Inc. ("Graybar", "Company", "we", "our", or "us") is a New York corporation, incorporated in 1925. We are engaged in the distribution of electrical, industrial, automation and connectivity products and are a provider of related supply chain management and logistics services. We primarily serve customers in the construction, commercial, institutional and government ("CIG"), and industrial & utility vertical markets, with products and services that support new construction, infrastructure updates, building renovation, facility maintenance, repair and operations ("MRO"), and original equipment manufacturers ("OEM"). In our primary role as third-party wholesale distributor, we neither manufacture nor contract to manufacture the products that we sell. Our business activity is primarily based in the United States ("U.S."). We also have subsidiary operations with distribution facilities in Canada and Puerto Rico.

Our common stock is 100% owned by active and retired employees, and there is no public trading market for our common stock. No holder of our common stock or voting trust interests representing our common stock ("common stock", "common shares", or "shares") may sell, transfer, or otherwise dispose of any shares without first offering us the option to purchase those shares at the price at which they were issued. We also have the option to purchase at the issue price the common shares of any shareholder who ceases to be an employee for any reason other than death or "retirement" (as defined in our amended restated certificate of incorporation), and on the first anniversary of any holder's death. In the past, we have always exercised these purchase options, and we expect to continue to do so in the foreseeable future. However, we can make no assurance that we will continue to exercise our purchase option in the future. All outstanding shares have been issued at $20.00 per share.

Business Overview

Net sales for the first quarter ended March 31, 2026 totaled $3,314.9 million, compared to $2,949.8 million for the first quarter of 2025, an increase of $365.1 million, or 12.4%. Gross margin for the three months ended March 31, 2026 increased $78.5 million, or 13.7%, to $653.5 million, compared to gross margin of $575.0 million for the same three-month period ended March 31, 2025. Our

gross margin rate was 19.7% for the three months ended March 31, 2026, compared to 19.5% for the same three-month period of 2025, increasing primarily due to management's gross margin improvement initiatives.

Selling, general and administrative ("SG&A") expenses increased $19.5 million, or 4.6%, to $441.8 million for the three months ended March 31, 2026 from $422.3 million for the three months ended March 31, 2025, primarily due to higher compensation and employee benefit expenses, rent, and maintenance costs. SG&A expenses as a percentage of net sales decreased to 13.3% for the first quarter of 2026, compared to 14.3% for the same three-month period in 2025.

As a result of the increase in gross margin dollars and rate outpacing increases in SG&A, income from operations increased $55.8 million, or 40.4%, to $194.0 million for the three months ended March 31, 2026, from $138.2 million for the same three-month period last year. Net income attributable to Graybar for the three months ended March 31, 2026 increased by $41.0 million, or 40.6%, to $141.9 million for the first quarter of 2026 compared to $100.9 million for the same three-month period last year.

We continue to see demand for our products and services in 2026, particularly in areas such as data centers, electrification, infrastructure, and industrial automation. As an employee-owned company, we remain focused on serving our customers, managing our business wisely, and making disciplined investments that support our strategy. Among those investments, we believe our ongoing business transformation will deliver advanced capabilities that allow us to scale for growth, enhance the value we bring to our customers, and reinforce our long-term position as an industry leader.

Consolidated Results of Operations

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

The following table sets forth certain information relating to our operations stated in millions of dollars and as a percentage of net sales for the three months ended March 31, 2026 and 2025:

Net sales increased to $3,314.9 million for the three months ended March 31, 2026, compared to $2,949.8 million for the three months ended March 31, 2025, an increase of $365.1 million, or 12.4%. Net sales in our construction, CIG, and industrial & utility vertical markets increased by 13.3%, 5.3%, and 18.3%, respectively, for the three months ended March 31, 2026, compared to the same three-month period of 2025.

Gross margin increased $78.5 million, or 13.7%, to $653.5 million from $575.0 million for the three months ended March 31, 2026, compared to the same period of 2025. Our gross margin as a percentage of net sales was 19.7% for the three months ended March 31, 2026, up from 19.5% for the same three-month period in 2025 primarily due to management's gross margin initiatives.

SG&A expenses increased $19.5 million, or 4.6%, to $441.8 million, for the three months ended March 31, 2026, compared to $422.3 million for the three months ended March 31, 2025, mainly due to higher compensation and employee benefit expenses, rent, and maintenance costs. SG&A expenses as a percentage of net sales were 13.3% for the three months ended March 31, 2026, down from 14.3% for the three months ended March 31, 2025.

Depreciation and amortization for the three months ended March 31, 2026 increased $0.6 million, or 2.8%, to $21.7 million from $21.1 million for the same three-month period in 2025, mainly due to higher depreciation expense related to capital and leasehold improvements. Depreciation as a percentage of net sales was 0.6% for the three months ended March 31, 2026, down from 0.7% for the three months ended March 31, 2025.

Income before provision for income taxes totaled $191.6 million for the three months ended March 31, 2026, an increase of $55.0 million, or 40.3%, from $136.6 million for the three months ended March 31, 2025. The increase was primarily due to our increase in gross margin, partially offset by our increase in SG&A expenses.

Our total provision for income taxes increased $14.0 million, or 39.4%, to $49.5 million for the three months ended March 31, 2026, compared to $35.5 million for the same period in 2025. The increase in our provision for income taxes year over year resulted from increased pretax income. Our year-to-date effective tax rate was 25.8% for the three months ended March 31, 2026 compared to 26.0% for 2025. The effective tax rate for the three months ended March 31, 2026 was higher than the 21.0% U.S. federal statutory rate primarily due to state, local, and foreign income taxes.

Net income attributable to Graybar Electric Company, Inc. for the three-month period ended March 31, 2026 increased $41.0 million, or 40.6%, to $141.9 million from $100.9 million for the three months ended March 31, 2025.

Financial Condition and Liquidity

We manage our liquidity and capital levels so that we have the capability to invest in the growth of our business, meet debt service obligations, fund acquisitions, finance anticipated capital expenditures, finance information technology needs, pay dividends, make benefit payments, and finance other miscellaneous cash outlays. We believe that maintaining a strong company financial condition enables us to competitively access multiple financing channels and invest in strategic long-term growth plans.

We have historically funded our working capital requirements using cash flows generated by the collection of trade receivables and trade accounts payable terms with our suppliers, supplemented by short-term borrowings on our revolving credit facility, if necessary. Acquisitions and capital expenditures have been financed primarily with cash flows from operating activities and short-term borrowings on our revolving credit facility.

Our cash and cash equivalents at March 31, 2026 were $193.5 million, compared to $273.1 million at December 31, 2025, a decrease of $79.6 million, or 29.1%. Cash on hand at March 31, 2026 is reflective of continuing strong cash flows from operating activities as a result of increased net income and effective working capital management, allowing us to fund an acquisition primarily from cash on hand. As a result, we had no short-term borrowings at March 31, 2026 and December 31, 2025. Current assets exceeded current liabilities by $1,275.0 million at March 31, 2026, a decrease of $0.3 million from $1,275.3 million at December 31, 2025.

Operating Activities

Net cash flows provided by operating activities for the three months ended March 31, 2026 was $119.0 million, compared to net cash flows provided by operating activities of $182.7 million for the three months ended March 31, 2025, a decrease of $63.7 million. Net cash provided by operating activities for the three months ended March 31, 2026 was primarily attributable to net income of $142.1 million, adjusted for non-cash depreciation and amortization expenses of $21.7 million and non-cash operating lease expense of $17.5 million, an increase in trade accounts payable of $87.4 million and a decrease in merchandise inventory levels of $45.1 million during the three months ended March 31, 2026, partially offset by an increase in trade receivables of $124.7 million and a decrease in accrued payroll and benefit costs of $66.2 million from December 31, 2025 to March 31, 2026.

The average number of days of sales in trade receivables for the quarter ended March 31, 2026 increased moderately compared to the quarter ended March 31, 2025. The days in inventory increased modestly for the quarter ended March 31, 2026 compared to the quarter ended March 31, 2025.

Investing Activities

Net cash used by investing activities totaled $198.0 million for the three months ended March 31, 2026, compared to net cash used by investing activities of $0.9 million for the same three-month period in 2025, an increase of $197.1 million. Cash used by investing activities for the three months ended March 31, 2026 was primarily the result of amounts attributable to acquisitions of $177.4 million and capital expenditures of $20.8 million. Cash used by investing activities for the three months ended March 31, 2025 was the result of capital expenditures of $14.9 million and amounts attributable to acquisitions of $2.2 million, partially offset by insurance proceeds received from a property claim of $10.4 million and proceeds from the disposal of property of $5.8 million.

Financing Activities

Net cash used by financing activities for the three months ended March 31, 2026 totaled $0.6 million, compared to net cash used by financing activities of $21.7 million for the three months ended March 31, 2025. The decrease in cash used was primarily due to no net payments on short-term borrowings during the three months ended March 31, 2026, compared to net payments on short-term borrowings of $22.0 million during the three months ended March 31, 2025. Cash dividends paid were $9.9 million during the three months ended March 31, 2026, compared to $9.8 million during the three months ended March 31, 2025.

Liquidity

Our cash and cash equivalents at March 31, 2026 were $193.5 million, compared to $273.1 million at December 31, 2025. We also had a $750.0 million unsecured, committed revolving credit facility ("Credit Agreement") with $744.8 million in available capacity at March 31, 2026, compared to available capacity of $744.4 million at December 31, 2025. At March 31, 2026 and December 31, 2025, we also had two uncommitted, unsecured private placement shelf agreements ("Shelf Agreements"). One of the Shelf Agreements is expected to allow us to issue senior promissory notes up to $200.0 million to PGIM, Inc. at fixed rate terms to be agreed upon at the time of any issuance during a three-year issuance period ending in August 2026. Our other Shelf Agreement is expected to allow us to issue senior promissory notes up to $200.0 million to MetLife Investment Management, LLC, and MetLife Investment Management Limited (collectively, "MetLife") and each other MetLife affiliate that becomes party to the agreement at fixed or floating rate economic terms to be agreed upon at the time of any issuance during a three-year issuance period ending in June 2027, and thereafter, for successive three-year periods until either party notifies the other party at least 30 days prior to the then applicable stated period end date of its intent not to extend.

We have not issued any notes under the Shelf Agreements as of March 31, 2026 and December 31, 2025. For further discussion related to our Credit Agreement and our Shelf Agreements, refer to Note 6, "Debt", of the notes to the condensed consolidated financial statements located in Item 1., "Financial Statements", of this Quarterly Report on Form 10-Q.

We had total letters of credit of $10.2 million outstanding at March 31, 2026, of which $5.2 million were issued under the Credit Agreement. We had total letters of credit of $10.6 million at December 31, 2025, of which $5.6 million were issued under the Credit Agreement. The letters of credit are issued primarily to support certain workers' compensation insurance policies and support performance under certain customer contracts.

New Accounting Standards Updates

Our adoption of new accounting standards is discussed in Note 2, "Summary of Significant Accounting Policies", of the notes to the condensed consolidated financial statements located in Item 1., "Financial Statements", of this Quarterly Report on Form 10-Q.