SiteOne Landscape Supply, Inc.

Greetings and welcome to the Site One Landscape Supply first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. John Guthrie, Executive Vice President and Chief Financial Officer for Site One Landscape Supply. Thank you. You may begin.

Thank you and good morning, everyone. We issued our first quarter 2022 earnings press release this morning and posted a slide presentation to the investor relations portion of our website at investors.site1.com. I am joined today by Doug Black, our Chairman and Chief Executive Officer, and Scott Salmon, Executive Vice President, Strategy and Development. Before we begin, I would like to remind everyone that today's press release slide presentation, and the statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission. Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. A reconciliation of these measures can be found in our earnings release and in the slide presentation. I would now like to turn the call over to Doug Black.

Thank you, John. Good morning, and thank you for joining us today. Following an exceptional year in 2021 with record sales growth and profitability, and considering the tremendous first quarter that we had last year with 32% organic daily sales growth, we were very pleased to see our momentum continue as we build on these gains in 2022. With 17% organic daily sales growth 24% overall sales growth, and improved profitability during the first quarter, we're off to another excellent start this year. We are encouraged by the continued healthy underlying demand, and with our strong teams, improved capabilities, and a robust pipeline of potential acquisitions, we are confident that 2022 will be another great year of performance and growth for Site 1. I will start today's call with a brief overview of our unique market position and our strategy for long-term performance and growth, followed by some highlights from the quarter. John Guthrie will then walk you through our first quarter financial results in more detail and provide an update on our balance sheet and liquidity position. Scott Solomon will discuss our acquisition strategy, and then I will come back to address our latest outlook for 2022 before taking your questions. As shown on slide four of the earnings presentation, we've grown our footprint to more than 600 branches and four distribution centers across 45 US states and six Canadian provinces. We are the clear industry leader over five times the size of our nearest competitor, yet we estimate that we only have about a 15% share of the very fragmented $23 billion wholesale landscaping products distribution market. Accordingly, our future growth opportunity is significant. We have a balanced mix of business with 64% focused on maintenance, repair, and upgrade, 21% focused on new residential construction, and 15% on new commercial and recreational construction. As the only national full product line wholesale distributor in the market, we also have an excellent spread across our product lines and geographically. Our strategy to fill in our product lines across the US and Canada, both organically and through acquisition, strengthens and reinforces this balance over time. Overall, our balanced end market mix, broad product portfolio, and good geographic coverage give us multiple avenues to grow and more ways to create value for our customers and suppliers, while providing important resiliency in software markets. Turning to slide five, it is important to understand that since becoming an independent company in 2014, our vision at SiteOne has been to build a true company of excellence, one that creates tremendous value for our five key stakeholders, our associates, customers, suppliers, shareholders, and our communities. We have made tremendous progress so far, but feel that we still have a long way to go in achieving this vision. As we continue our quest for excellence, we take a long-term view, staying very focused on our five key vision objectives, which are to create a great place to work for all our associates, deliver superior value to our customers, causing them to be successful, be the distributor of choice for our suppliers, achieve excellent performance and growth for our shareholders, and be a good neighbor in our communities by helping the less fortunate around us and having a positive impact on our environment. These objectives drive the culture that we are creating at Site 1, a culture of teamwork and excellence, truly being stronger together with our key stakeholders. These objectives also keep us grounded and focused on what is important through the ups and downs of the market and in the world. We are very proud of the tremendous company that we are building, and our progress on these objectives are detailed in our 2021 ESG report, which is available on our website. As shown on slide six, our strategy is to leverage the scale, resources, functional talent, and capabilities that we have as the largest company in our industry, all in support of our talented, experienced, and entrepreneurial local teams to consistently deliver more value than our competitors to our customers and suppliers. We have come a long way in building Site 1 and executing our strategy over the last six years, but we are still in the third or fourth inning of our overall development as a truly world-class company. Accordingly, we remain highly focused on our commercial and operational initiatives to further build our capabilities and improve the value that we deliver to customers and suppliers. These initiatives are complemented by our acquisition strategy, which fills in our product portfolio, moves us into new geographic markets, and adds terrific new talent to Site 1. Taken all together, our strategy creates superior value for our shareholders through organic growth, acquisition growth, and EBDA margin expansion. If you turn to slide 7, you can see that our strategy is working, as we have delivered consistent organic growth, strong acquisition growth, and excellent EBDA margin expansion over the last six years. Note that we have done this while investing heavily in our teams and in new systems and technologies to build the foundation for Site 1. and to create superior capabilities for our customers and suppliers. We remain confident in our ability to gain market share and continue driving all three of our value creation levers going forward. You will also note that we have now completed 67 acquisitions across the irrigation, agronomics, nursery, hardscapes, and landscape supplies product lines during the last eight years. with three completed so far in 2022. We only acquire well-run companies, and so all these acquisitions were already high-performing companies before joining SiteOne. After they join us, we together enjoy the benefits of our combined commercial and operational capability. Acquisitions are also a key source of new talent and ideas, and therefore they enhance our competitive advantage as we grow. Our acquisition pipeline remains very robust, and we have significant potential to continue growing through acquisition for many years to come. Slide 8 shows the long runway that we have ahead in filling in our product portfolio, which we aim to do primarily through acquisition, especially in the nursery, hardscapes, and landscape supplies categories. We are well networked with the best companies in our industry and expect to continue filling in these markets systematically over the next decade. I will now discuss some of our first quarter performance highlights as shown on slide nine. We achieved 24% net sales growth in the first quarter with 17% organic daily sales growth and 7% net sales growth added through acquisition. The organic daily sales growth was driven by 20% price realization, partially offset by a 3% volume decline. We were particularly pleased with the sales growth achieved this quarter as it came against a difficult comparison of 32% organic daily sales growth during the first quarter of 2021, which was primarily volume growth. We were also pleased that the growth was broadly based across product lines, geographic markets, and customer segments, reflecting the healthy underlying end markets. Finally, we believe that we are continuing to gain market share across all product lines. Gross margin improved 240 basis points to 33.4% for the first quarter, as we continue to benefit from proactive inventory management during this high inflation period. As a reminder, we expect the full year gross margin to be lower in 2022 than in 2021. due to the difficult prior year comparisons in the third and fourth quarter. We now believe that inflation might be more persistent in the second half, which could lessen the full year drop in gross margin. We will also continue to execute our initiatives with private label products and small customers to fortify our gross margin performance for 2022. On the SG&A side, our operational initiatives and disciplined cost management offset our increased investments in marketing and digital to yield good operating leverage for the quarter. Accordingly, SG&A as a percent of net sales decreased by 100 basis points to 28.6%. We continue to benefit from the deployment of our new technologies like MobilePro, which allows mobile branch transactions and from our Transportation Management System, or TMS, which helps reduce freight costs while improving delivery timeliness and accuracy. Going forward, we will continue to leverage new technologies to improve the customer experience and increase our operating leverage. The combination of strong organic sales, excellent gross margin improvement, and good contribution from acquisitions allowed us to deliver adjusted EBDA growth of 97% for the quarter, and expand adjusted EBDA margin by 310 basis points to 8.4%, a terrific start to 2022. On the acquisition front, we added three high-performing companies to our family so far this year, all of which provide us with excellent new talent and capability for growth in their respective markets, while adding approximately $50 million in trailing 12-month sales to Site 1. Our development teams remain very active in 2022, and we expect to continue adding strong companies to Site 1 in the coming months. With an experienced and recently expanded team, broad and deep relationships with the best companies, a strong balance sheet, and an exceptional reputation, we remain well positioned to grow consistently through acquisition this year and for many years to come. In summary, we're off to a terrific start and have significant momentum across Site 1 in building our teams, executing our initiatives, delivering value to our customers and suppliers, adding new companies, and achieving excellent performance and growth. With solid underlying markets, we remain confident in our ability to deliver a winning year in 2022. Now, John will walk you through the quarter in more detail. John?