SiteOne Landscape Supply, Inc.

At this time, all participants are in a listen-only mode. A brief 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. It's now my pleasure to introduce your host, John Yetri, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you and good morning, everyone. We issued our first quarter 2023 earnings press release this morning and posted a slide presentation to the investor relations portion of our website at investors.psych1.com. I'm 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 The statements made during the 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 press release and in our violence 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 Lapp.

Doug Lapp Good morning, and thank you for joining us today. Against the headwinds of a very strong prior year period, poor weather in the West and North, and moderating market demand, We executed well in the first quarter, delivering top-line growth and gross margin expansion along with a solid EBITDA outcome in this traditionally low-volume quarter. We were also very pleased to add two new high-performing companies to Site 1 during the first quarter. These companies have talented teams and strong customer relationships, and they expand our product lines and market presence in their respective markets. Through the execution of our commercial and operational initiatives and our acquisition strategy, we continue to build SiteOne as a world-class market leader for the long term, while delivering consistent performance and growth in the near term. As we face softer markets, we remain confident that our well-balanced business, strong balance sheet, exceptional teams, improved capabilities, and robust acquisition pipeline position us well to navigate the current environment and achieve continued success. I'll start today's call with a brief review 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. As shown on slide four of the earnings presentation, we've grown our footprint to more than 640 branches and four distribution centers across 45 U.S. states and six Canadian provinces. We are the clear industry leader over four times the size of our nearest competitor, yet we estimate that we only have about a 16 percent share of the very fragmented $25 billion wholesale landscaping products distribution market. Accordingly, our future growth opportunities remain significant. We have a balanced mix of business with 65% focused on maintenance, repair, and upgrade, 21% focused on new residential construction, and 14% on new commercial and recreational construction. As the only national full product line wholesale distributor in the market, We also have an excellent balance across our product lines as well as 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 offer us multiple avenues to grow and create value for our customers and suppliers while providing important resiliency in softer markets. Turning to slide five, 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 superior value to our customers and suppliers. We've come a long way in building Site 1 and executing our strategy, but we were relatively early in our development as a true world-class company. Accordingly, we remain highly focused on our commercial and operational initiatives to further build our capability to create value for all our stakeholders. 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 six, you can see our strong track record of performance and growth over the last seven years, with consistent organic and acquisition growth and EBDA margin expansion. 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. Still building and investing, and we remain confident in our ability to gain market share and continue driving all three of our value creation levers going forward. We have now completed 82 acquisitions across all key product lines since 2014. We leveraged our expanded development team to increase acquisition activity this past year, and our pipeline of potential deals remains robust. All these companies are high performers, and so they strengthen our company with excellent talent and new ideas for performance and growth. Given the fragmented nature of our industry and our modest market share, we have significant opportunity to continue growing through acquisition for many years to come. Slide 7 shows the long runway that we have ahead in primarily through acquisition, especially in the nursery, partscapes, 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 eight. We achieved 4% net sales growth in the first quarter as the 7% net sales growth added through acquisition was partially offset by an organic daily sales decline of 2%. Note that organic daily sales grew 32% in the first quarter of 2021, largely driven by volume, and grew 17% in the first quarter of 2022, largely driven by price inflation. So in terms of sales, Q1 is our toughest comparable for 2023. Accordingly, we were pleased that the organic daily sales decline was only 2%, driven by 6% price inflation, which was offset by an 8% volume decline. We experienced the most significant volume declines in our western markets that had record rainfall and in our northern markets where spring came later than in 2022. Where the weather was more favorable in the southeast, mid-Atlantic, and Florida, we saw high single-digit to low double-digit organic daily sales growth during the first quarter. We've also seen the spring season kick into gear during April, which has increased our year-to-date organic daily sales growth to approximately 1% through the first four weeks in April. Gross profit increased 7%, and our gross margin increased 90 basis points to a very healthy 34.3%, even as inflation continued to moderate through the quarter. The loss of the extraordinary price realization benefit achieved during the first quarter of 2022 was more than offset by our hardscapes and landscape supplies acquisitions, which carry a higher gross margin, and by lower fuel costs and some price cost benefit. Despite the strong start with gross margin in the quarter, We continue to expect gross margin for the full year to be lower than in 2022, but perhaps stronger than we had thought at the beginning of the year. Our SG&A as a percentage of net sales increased by 620 basis points year over year to 34.8%, which is a 60 basis point increase compared to the fourth quarter of 2022. Acquisitions had the largest effect on SG&A as a percentage of net sales, as the same hardscapes and landscape supplies acquisitions that increased our gross margin also increased our SG&A. Additionally, several of these acquisitions were in the west and north, where poor weather and a late spring caused further deleveraging in the quarter. Lower volume and continued labor inflation were also factors contributing to the higher SG&A as a percent of net sales. Adjusted EBDA for the quarter declined 41% to 39.8 million. And adjusted EBDA margin declined by 360 basis points to 4.8%. That's a combination of lower volume and higher SG&A yielded a more typical first quarter adjusted EBDA outcome. Note that adjusted EBDA during the first quarter of 2022 had increased 97% from the first quarter of 2021. reflecting strong organic sales and elevated gross margin. Overall, adjusted EBDA in the first quarter was in line with our expectations. In terms of initiatives, we are pleased with our progress as we enter the busiest time of our year. We continue to grow with our small and medium customers, drive private label growth, and improve our inbound freight costs through our transportation management system. all helping us to expand and grow smart. We are driving organic growth through our enhanced partners program, our Hispanic marketing initiatives, and as we leverage our recently installed Salesforce CRM to drive stronger sales and better productivity from our team of more than 900 inside and outside sellers. Continued rollout of MobilePro and DispatchTrack allows us to offer better customer service while also increasing the productivity of our branch staff and delivery fleet. We continue to ramp up our digital sales and other customer activities through SiteOne.com, which makes our customers and associates more productive and helps us to gain market share. Finally, our operational excellence teams are systematically spreading best practices in each line of business across SiteOne, to drive value for our customers, suppliers, and company. Taken all together, we have significantly improved our capability to perform through the potential headwinds of 2023. On the acquisition front, we added two high-performing companies to our family so far this year, adding approximately $40 million in trailing 12-month sales to Site 1. Following a record number of acquisitions in 2022, Our expanded development team remains very active and engaged with our pipeline of targets, and we expect to have another robust acquisition year in 2023. With an experienced 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 were off to a good start in navigating the more challenging market conditions in 2023. I'm pleased with our progress and remain confident in our ability to execute our initiatives and deliver increased value to our customers and suppliers while outperforming the market. Now, John will walk you through the quarter in more detail. John?