SiteOne Landscape Supply, Inc.

Greetings and welcome to the SiteOne Landscape Supply Incorporated's first quarter 2025 earnings call. At this time, all participants are in 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 from your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, John Guthrie, Executive Vice President and Chief Financial Officer. Thank you, Mr. Guthrie. You may begin.

Thank you and good morning, everyone. We issued our first quarter 2025 earnings press release this morning and posted a slide presentation to the investor relations portion of our website at investors.site1.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, 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'll 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.

Thanks, John. Good morning, and thank you for joining us today. We are pleased to achieve a solid start to 2025 with 4% net sales growth and 6% growth in adjusted EBITDA during the traditionally slower first quarter. Despite the challenging weather and later spring season than last year, our teams executed well and we benefited from our strong cost control actions in 2024. We also benefited from the continued moderation of price deflation as our overall price decline improved from negative 3% in the fourth quarter of 2024 to negative 1% in the first quarter of this year. Finally, we continued to execute our acquisition strategy by adding two excellent companies to Site 1 year-to-date, strengthening our teams and further expanding our full product line capability. Overall, with strong teams, a winning strategy, and excellent execution of our commercial and operational initiatives, we continue to be in a good position to navigate through the market uncertainties and deliver solid performance and growth in 2025 and over the coming years. I will start today's call with a brief overview of our unique market position and our strategy, 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 and address our latest outlook before taking your questions. As shown on slide four of the earnings presentation, we have a strong footprint of more than 690 branches and four distribution centers across 45 U.S. states and six Canadian provinces. We are the clear industry leader, over three times the size of our nearest competitor, and larger than 2 through 10 combined. Yet we estimate that we only have about an 18% share of the very fragmented $25 billion wholesale landscaping products distribution market. Accordingly, our long-term opportunity to grow and gain market share remains 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 U.S. and Canada, both organically and through acquisition, further strengthens this balance over time. Overall, our end market mix, broad product portfolio, and geographic coverage offer us multiple avenues to grow and create value for our customers and suppliers while providing important resilience 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 have come a long way in building Site 1 and executing our strategy, but we have more work to do as we develop into a truly world-class company. In the current challenging market environment, we are adopting new processes and technologies faster, driving organic growth, improving our productivity, and mastering the unique aspects of each of our product lines. Importantly, we remain highly focused on our commercial and operational initiatives to overcome the near-term headwinds, but more importantly, to build a long-term competitive advantage 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, we believe our strategy creates superior value for our shareholders through organic growth, acquisition growth, and EBITDA margin expansion. On slide six, you can see our strong track record of performance and growth over the last eight years. From an adjusted EBITDA margin perspective, we benefited from extraordinary price realization due to rapid inflation in commodity products during 2021 and 2022. In 2023 and 2024, we experienced significant headwinds as those commodity prices have come down. In 2024, we also experienced further adjusted EBITDA dilution from the acquisition of Pioneer, a large turnaround opportunity with great strategic fit, and from our other focus branches as a result of the post-COVID market headwinds. We are continuing to evaluate the potential impact of recently announced tariffs but now expect pricing to go from a strong headwind in 2024 to a slight tailwind in 2025, driven by price increases from our suppliers. Furthermore, with Pioneer's systems fully integrated and operations restructured under new local management and with progress on our focus branches, we expect to achieve solid performance improvement in 2025 that is not reliant on market growth. We are pleased to have completed our 100th acquisition in March, with over $2 billion in acquired revenue added since the start of 2014. These milestones demonstrate the strength and durability of our acquisition strategy. Our pipeline of potential deals remains robust, and we expect to continue adding more companies in 2025 to support our growth. These companies strengthen Site 1 with excellent talent and new ideas for performance and growth. Given the fragmented nature of our industry and our modest market share, we have a significant opportunity to continue growing through acquisition for many years to come. Slide seven shows the long runway we have ahead in filling in our product portfolio, which we aim to do primarily through acquisition, especially in nursery, hardscapes, and landscape supplies categories. We are well connected with the best companies in our industry, and we expect to continue filling in these markets systematically over the next decade. I will now discuss some of the first quarter highlights as shown on slide eight. We achieved 4% net sales growth in the first quarter, with an organic daily sales decline of 1%, offset by 5% growth due to acquisitions. Organic sales volume was flat during the first quarter, which we see as a good result. given the early spring season and 5% volume growth that we experienced in the first quarter of last year. Weather this year has been challenging, but our volume growth turned positive in March, and that momentum has continued into April. We believe that we are outperforming the market consistently through our commercial initiatives, and our end markets, though softer, have remained resilient. Additionally, as I mentioned, pricing was only down 1% in the first quarter, and we expect this to flatten out and turn positive during the remainder of the year as price declines in PVC pipe and grass seed are more than offset by price increases in our other products. Gross profit increased 3% driven by our acquisitions, while our gross margin decreased by 30 basis points to 33%. due to lower price realization and higher freight cost more than offsetting gains from our gross margin improvement initiatives. Note that the higher freight was partially due to early purchases of inventory into our distribution centers in anticipation of tariff-driven price increases. Our acquisitions, which were primarily nursery and hardscape businesses, operate at a higher gross margin but also operate with higher SG&A. Our SG&A as a percentage of net sales increased 30 basis points to 36.5% due to our acquisitions, which have a larger effect on the traditionally low revenue first quarter. SG&A for the base business was down 3% as we realized the benefits of cost control actions taken in 2024, including those with Pioneer and our focus branches. We expect to achieve solid SG&A leverage on an adjusted basis in 2025, even with modest organic growth. Adjusted EBITDA for the quarter increased 6% to $22.4 million, and adjusted EBITDA margin improved 10 basis points to 2.4%, due to higher net sales and improved SG&A leverage, partially offset by the absence of price realization and the dilutive effect of acquisitions. In terms of initiatives, we are executing specific actions to improve our customer excellence, accelerate organic growth, expand gross margin, and increase SG&A leverage. For gross margin improvement, we continue to increase sales with our small customers faster than our company average, drive growth in our private label brands, and improve inbound freight costs through our transportation management system. These initiatives not only improve our gross margin but also add to our organic growth as we gain market share in the small customer segment as well as across product lines with our competitive private label products like Protrade, Solstice Stone, and Portfolio. Collectively, these three brands grew 30 percent in the first quarter. To further drive organic growth, We continue to increase our percentage of bilingual branches from 63% to 65% during the first quarter and are executing Hispanic marketing programs to create awareness among this important customer segment. We are also making great progress with our Salesforce productivity as we leverage our CRM and establish more disciplined revenue-generating habits and processes among our inside sales associates and over 580 outside sales associates. Our outside sales force is covering approximately 10% more revenue this year than in 2024, with no additional headcount, allowing us to economically achieve higher organic sales growth. Our digital initiative with SiteOne.com is also helping us to drive organic daily sales growth. As customers who are engaged with us digitally, grow significantly faster than those who are not. We grew our digital sales by 140% in the first quarter, on top of the 180% growth achieved in 2024. We continue to cultivate thousands of new regular users of SiteOne.com, helping customers to be more efficient and helping us to increase market share while making our associates more productive. A true win-win-win. Through SiteOne.com and our other digital tools, we are accelerating organic growth and we believe outperforming the market. The benefit of dispatch track, which allows us to more closely manage our customer delivery, we are now able to improve both associate and equipment efficiency in our customer delivery operations. We believe that we can significantly lower our delivery expense while improving the experience for our customers. This is a major initiative and we expect to make significant progress this year and the next two to three years. Last year, we mentioned that we are intensely managing our underperforming branches or focus branches to ensure that they have the right teams, the right support, and are executing our best practices to bring their performance up to or above the Site 1 average. As a part of these aggressive efforts, we consolidated or closed 22 locations in 2024 to strengthen our operations and better serve our customers at a reduced cost. In the first quarter, we achieved good progress with our focus branches, and we expect to gain a meaningful adjusted EBDA margin lift for Site 1 in the coming years as we improve the performance of these branches. Taken all together, we are continuing to improve our capability to drive organic growth, increase gross margin, and achieve operating leverage through our initiatives. On the acquisition front, as I mentioned, we added two excellent companies to our family since the beginning of the year, with 20 million and trailing 12-month sales added to Site 1. We are having conversations with a lot of companies, but many are focused on managing the current market uncertainties, and we are being careful given the unclear economic outlook. Accordingly, 2025 may be a lighter than normal year in terms of acquired revenue, even as we aggressively cultivate key targets for future years. Short-term challenges aside, we remain well-positioned to grow consistently through acquisition for many years with an experienced acquisition team, broad and deep relationships with the best companies in the industry, a strong balance sheet, and an exceptional reputation for being a great long-term home for companies in our industry. In summary, our teams are doing a good job of managing through the near-term market environment, leveraging our many opportunities for improvement, prudently adding new companies to Site 1 through acquisition, and building our company for the long term. Now, John will walk you through the quarter in more detail. John?