SiteOne Landscape Supply, Inc.

Greetings and welcome to the Site One Landscape Supply, Inc. Third Quarter 2025 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 requires 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, John Guthrie. You may begin.

Thank you and good morning, everyone. We issued our third quarter 2025 earnings press release this morning. I 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, Scott Salmon, Executive Vice President, Strategy and Development, and Eric Allema, Vice President, Finance and Corporate Controller. 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.

Thanks, John. Good morning and thank you for joining us today. We were pleased to achieve solid results during the third quarter with 4% net sales growth, including 3% organic daily sales growth and 11% growth in adjusted EBDA compared to the prior year period, despite the continued softness in our end markets. Our teams are executing our initiatives well, yielding excellent SG&A leverage, good gross margin improvement, and meaningful market share gains. We also benefited from a more favorable price-cost environment, yielding a 1% improvement in pricing for the quarter. Finally, we added three excellent companies to Site 1 during the quarter and one more in October, expanding our full product line capability in those local markets. Overall, with strong teams, a winning strategy, and excellent execution of our commercial and operational initiatives, We are delivering solid performance and growth in 2025, despite softer end markets. Heading into 2026, we are confident in our ability to drive continued performance and growth in the coming years. I will start today's call with a brief review of our unique market position and our strategy, followed by some highlights from the quarter. John Guthrie will then walk you through our third quarter financial results in more detail. and provide an update on our balance sheet and liquidity position. Scott Salmon will discuss our acquisition strategy, and then I will come back to address our latest outlook before taking your question. As shown on slide four of the earnings presentation, we have a strong footprint of more than 680 branches and four distribution centers across 45 US states and six Canadian provinces. We are the clear industry leader over three times the size of our nearest competitor and larger than two through 10 combined. Yet we estimate that we only have about an 18% share of the very fragmented 25 billion wholesale landscape 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 US and Canada, both organically and through acquisition, further strengthens this balance over time. Overall, we believe 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, like the markets we are experiencing today. 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 putting the teams and systems in place to fully execute our strategy at a high level across each of our product lines. In the current challenging market environment, We are making good progress in leveraging our capabilities to drive tangible results with consistent market share gains, improved SG&A leverage, and steady gross margin improvement. For our commercial and operational initiatives, we believe that we are delivering industry-leading value for our customers and suppliers, and solid performance improvement and growth for our shareholders this year. Importantly, we are gaining momentum for continued success in the years to come. 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 adjusted EBDA margin expansion. On slide six, you can see our strong track record of performance and growth over the last eight years. From an adjusted EBDA 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 came down. In 2024, we also experienced further adjusted EBDA dilution from the acquisition of Pioneer, a large turnaround opportunity with great strategic fit, and from our other focus branches, which resulted from the post-COVID market headwinds. In 2025, our pricing has transitioned from negative 1% in the first quarter to flat in the second quarter to up 1% in the third quarter as commodity deflation continues to dissipate. We expect to exit 2025 with pricing up 1% to 2%. setting us up for more normal inflation and price realization in 2026. Furthermore, we are achieving excellent progress with Pioneer and our other focus branches in 2025 and expect to continue achieving improvements over the next several years as we bring their performance up to the Site 1 average. In summary, we believe we are positioned to drive strong adjusted EBITDA margin improvement in 2025 and in the coming years as we execute our initiatives and as the market headwinds turn to tailwinds. Since the beginning of 2014, we've completed over 100 acquisitions, adding more than $2 billion in acquired revenue to Site 1, which demonstrates the strength and durability of our acquisition strategy. These companies expand our product line capabilities and strengthen Site 1 with excellent talent and new ideas for performance and growth. Given the fragmented nature of our industry and our current market share, we believe that we have a significant opportunity to continue growing through acquisitions for many years to come. Slide seven 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 connected 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 third quarter highlights as shown on slide eight. We achieved 4% net sales growth in the third quarter with 3% organic daily sales growth and 1% growth due to acquisitions compared to the prior year. Organic sales volume grew 2% during the third quarter, reflecting continued share gains partially offset by end market softness and new residential construction and repair and upgrades. Pricing was up 1% in the third quarter, marking a meaningful improvement versus the prior year period. As expected, the growth in maintenance-related demand remained steady in Q3, and we achieved 3% organic daily sales growth with our agronomic products. The residential new construction end market was down during the quarter, especially in Texas, Florida, Arizona, and California. The repair and upgrade market continued to be soft, but we believe this market is beginning to stabilize versus prior year, while commercial demand also remains stable. Accordingly, with the benefit of market share gains and more favorable weather, we achieved 3% organic daily sales growth with our landscaping products. Overall, we believe that we are consistently outperforming the market through our commercial initiatives, which, in combination with the recovery in pricing, should allow us to achieve positive organic daily sales growth for the remainder of this year, even in a down market. Gross profit increased 6%, and gross margin improved by 70 basis points to 34.7%. due to higher price realization and gains from our initiatives. This outcome was higher than expected as our teams executed well and as the deflation in grass seed and PVC pipe was more than offset by stronger pricing and other products, which had a positive impact on gross margin. Our SG&A as a percentage of net sales decreased 50 basis points to 28.4% compared to the prior year period. For the base business, on an adjusted basis, SG&A as a percent of net sales decreased approximately 60 basis points versus last year, demonstrating our strong cost control and execution of our key initiatives, including continued improvement with our focus branches. We remain highly focused on achieving SG&A leverage through our initiatives, while benefiting from the impact of positive pricing on organic daily sales growth. Adjusted EBDA for the quarter increased 11% to 127.5 million, and adjusted EBDA margin improved 60 basis points to 10.1% due to higher net sales, improved gross margin, and increased SG&A leverage. With pricing continuing to normalize and with our commercial and operational initiatives yielding stronger results, we are pleased to resume adjusted EBDA margin expansion this year and expect to drive continued improvement in the coming years. 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 brands like ProTrade, Solstice Stone, and Portfolio. Collectively, these three brands grew by 50% in the quarter and nearly 40% year to date. To further drive organic growth, we are leveraging our increased percentage of bilingual branches and 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 600 outside sales associates. This year, our outside sales force is covering approximately 10% more revenue than in 2024 with no additional headcount, which has allowed us to achieve higher organic sales growth at lower cost. Our digital initiative with SiteOne.com is also helping us to drive organic daily sales growth as our results have shown that customers who are engaged with us digitally grow significantly faster than those who are not. New to date, we've grown digital sales by over 125% while adding 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 we are outperforming the market. With 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 for delivery while more consistently pricing this service. We believe that we can significantly lower our net delivery expenses while improving the experience for our customers. So far this year, we have reduced our net delivery expense by approximately 30 basis points on delivered sales, which represent approximately one-third of our total sales. This is a major initiative and we expect to make significant progress this year and in 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. Through the third quarter, we improved the adjusted EBDA margin of our focus branches by over 200 basis points. 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. To support further progress in 2026 in the face of potentially soft markets, we are planning to consolidate or close an additional 15 to 20 branches and serve existing customers from nearby branches at a lower cost. We will provide further detail on this later in the call. Taken all together, we are gaining momentum with our commercial and operational initiatives, which are improving our capability to drive organic growth, increase gross margin, and achieve operating leverage. On the acquisition front, as I mentioned, we added four excellent companies to our family during the quarter and in October. and we have added six companies and approximately $40 million in trailing 12-month sales to Site 1 so far in 2025. As we had mentioned earlier in the year, most of our more advanced discussions are with smaller companies this year, and so we expect 2025 will be a lighter-than-normal year in terms of acquired revenue, even as we aggressively cultivate key targets for future years. In our fragmented industry, we still have plenty of high-quality targets, and 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, 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?