SiteOne Landscape Supply, Inc.

Greetings and welcome to the Site One Landscape Supply second quarter 2026 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Eric Alema, Chief Financial Officer. Thank you. You may begin.

Thank you and good morning, everyone. We issued our second quarter 2026 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 in Daniel Laughlin, SVP Strategy and Development. Before we begin, I'd like to remind everyone at 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 Thank you, Eric. Good morning.

and thank you for joining us today. We delivered a solid second quarter performance with 5% growth in net sales and adjusted EBDA, 8% growth in net income and strong cash flow despite softer end markets. Our teams executed well throughout the quarter, driving our commercial and operational initiatives while continuing to manage our SG&A spending tightly. We also took advantage of our strong cash flow and recent share price weakness and returned over $100 million to shareholders through our share repurchase program, while maintaining a strong balance sheet to invest in our business and pursue attractive acquisition opportunities. While market conditions remain challenging, we continue to focus on serving our customers, gaining market share, expanding our EBDA margin, and strengthening the business to drive future performance and growth. Our acquisitions are performing well, and we have an active pipeline of opportunities which we expect will result in more acquisitions during the remainder of the year. Overall, we remain confident in the long-term opportunity ahead of us and believe our strategy, competitive position, and execution capabilities will continue to differentiate Site 1 in the market. I will start today's call with a brief overview of our unique market position and our strategy, followed by highlights from the second quarter. Eric will then walk you through our second quarter financial results in more detail and provide an update on our balance sheet and liquidity position. Daniel will discuss our acquisition strategy, and then I will come back to address our outlook and guidance for 2026 before taking your questions. As shown on slide four of the earnings presentation, we have a strong footprint of more than 680 branches and five distribution centers across 45 U.S. states and five Canadian provinces. We are the clear industry leader, approximately three times the size of our nearest competitor, yet we estimate that we only have about a 13% share of the very fragmented $36 billion wholesale landscaping products distribution market. Note that the $36 billion total addressable market is a significant increase from the previous $25 billion estimate as it includes important adjacent product categories that we have entered over the past five years. Accordingly, our long-term opportunity to grow and gain market share remains significant. We have a balanced mix of business with 66% focused on maintenance, repair, and upgrades. 20% focused on new residential construction and 14% on new commercial and recreational construction. As the only nationwide 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 offers us multiple avenues to grow and create value for our customers and suppliers while providing important resiliency in softer markets like the market we are in today. Turning to slide five, our strategy remains straightforward and unchanged. Leverage the strengths of both a large nationwide organization and our very experienced and highly entrepreneurial local teams. Our goal is to fully utilize our scale, resources and capabilities in support of local execution to deliver superior value to our customers and suppliers in every market that we serve. We do this through our focused commercial and operational initiatives, which not only build a long term competitive advantage for all our stakeholders, will also help us overcome the near-term headwinds. 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 expect our strategy to create superior value for our shareholders through organic growth, acquisition growth, and EBITDA margin expansion. At our investor day in June, We described our strategy and initiatives in detail and outlined our financial targets through 2030. The current challenging end markets, the execution of our strategy we believe allows us to outperform the market organically while leveraging acquisition growth and EPDA margin expansion to deliver solid financial progress. We expect our progress to accelerate as end markets return to normal growth. Accordingly, we remain highly focused on executing our commercial and operational initiatives, strengthening the business, and continuously improving areas that are within our control. On slide six, you can see our strong track record over the last 10 years with consistent organic and acquisition growth. As mentioned, we expect to continue driving organic and acquisition growth while recovering and expanding our EBDA margin significantly over the coming years. Our ability to deliver EBDA margin expansion in both soft and healthy market conditions is expected to yield attractive EBDA growth and improve return on invested capital in the coming years. Finally, with our strong cash flow, we can support our strategy and return capital to shareholders through our share repurchase program. Overall, we are well positioned to create solid value for our shareholders in 2026, and significant value over the longer term. We have completed 108 acquisitions across all product lines since the start of 2014, adding approximately $2.2 billion in trailing 12-month sales to Site 1, which demonstrates the strength and durability of our acquisition strategy. Our pipeline of potential deals remains robust. and we expect to continue adding and integrating more companies in 2026 to support our growth. Given the fragmented nature of our industry and our current market share, we believe that we can add over $2 billion of acquired trailing 12 months revenue to Site 1 over the next 10 years. Slide 7 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 second quarter performance highlights as shown on slide eight. Net sales increased 5% to $1.53 billion during the quarter with 1% organic daily sales growth and 3% sales growth added through acquisitions. We believe that new residential landscaping demand is down high single digits and demand in repair and upgrade is down mid-single digits this year, reflecting the decline in new home completions and ongoing macroeconomic uncertainty. Additionally, we believe that end market demand for maintenance products have been negatively impacted in the short term by the recent significant price increases as customers adjust to meet fixed budgets. Accordingly, even though we believe that we are outperforming the market through our commercial initiatives, we are unable to fully offset end market declines, resulting in a 2% decline in sales volume during the quarter. Pricing increased by 3% year-over-year during the quarter, yielding the 1% organic daily sales growth. Gross profit increased 6% to approximately $565 million, and gross margin improved 50 basis points to 36.9%. The improvement reflects increased price realization along with execution of our commercial initiatives, including continued strong growth in private brands and with small customers, and excellent management of fuel surcharges in response to higher delivery expense. SG&A as a percentage of net sales increased 30 basis points during the quarter as our operational initiatives and tight management of spending were more than offset by higher fuel costs, increased healthcare expenses, and ongoing cost inflation. Given the market weakness, we are taking additional actions during the remainder of the year, which we expect will achieve approximately flat SG&A as a percentage of net sales for the year. Adjusted EBDA increased 5% to $237.2 million, and adjusted EBDA margin was maintained at 15.5%. Year-to-date, we have improved adjusted EBDA margin by 20 basis points, and we expect to continue expanding adjusted EBDA margin in the second half and for the full year, 2026, despite the softer markets. In terms of initiatives, we continue to make solid progress during the quarter despite the lower end market demand, executing specific actions to improve our customer experience, drive organic sales growth, expand gross margin, and manage SG&A. For organic growth and gross margin expansion, we achieved good organic daily sales growth with our small customers and grew our pro-trade Solstice, and Portfolio Private Brand Products collectively by 40% during the quarter. A percentage of branches with bilingual capability is nearly 70%, despite adding 12 Rinders branches without this capability. Continue to execute our Hispanic marketing strategy to drive growth in this important customer segment. We increased our digital sales on SiteOne.com by over 50% year-to-date versus the prior year period, while also increasing our regular active users by approximately 40%. We believe we are gaining market share with the customers who are engaged with us digitally as we achieve strong, positive total sales growth with these customers during the quarter. SiteOne.com helps customers to be more efficient, helps us to increase market share, while making our associates more productive. A true win-win-win. On the SG&A front, we continued to lower our net delivery expense during the second quarter as a result of increased efficiency along with improved pricing. As mentioned, our teams have done a good job of working with our customers to pass through fuel surcharges to mitigate the significant near-term increases in fuel costs. We expect to reduce net delivery expense in 2026 and for the next several years as we execute our local market delivery strategy and best practices. We also continue to achieve improved profitability with our underperforming branches or focus branches during the quarter, though they were also negatively affected by low organic daily sales growth. We expect to drive steady improvement with these branches in 2026