SiteOne(SITE) - 2024 Q4 - Annual Report

Company Overview - The company is the largest national full product line wholesale distributor of landscape supplies in the U.S., with over 690 branch locations across 45 states and six Canadian provinces[20]. - The company is the only national wholesale distributor to carry a full product line of landscape supplies, competing primarily against regional and local distributors[66]. Market Segmentation - Approximately 61% of the company's 2024 Fiscal Year net sales were derived from the residential construction sector, 31% from the commercial construction sector, and 8% from recreational and other sectors[22]. - The addressable market for wholesale distribution of landscape supplies in North America was estimated at approximately $25 billion in revenue for 2024[26]. - The customer base consists of more than 430,000 firms and individuals, with the top 10 customers accounting for less than 4% of the 2024 Fiscal Year Net sales[62]. - Small customers (annual purchases up to$ 25,000) made up 23% of the 2024 Fiscal Year Net sales, while large customers (annual purchases over $150,000) accounted for 46%[62]. Sales and Revenue - Net sales for the fiscal year ending December 29, 2024, reached$ 4,540.6 million, up from $4,301.2 million in the previous year, indicating an increase of about 5.6%[348]. - Gross profit for the same period was$ 1,560.1 million, compared to $1,491.2 million in the prior year, reflecting a growth of approximately 4.6%[348]. - The majority of the company's net sales in the 2024 fiscal year were derived from credit sales, which depend on the economic strength of the geographic areas where customers operate[147]. Product Offerings - Proprietary branded products, including LESCO, SiteOne Green Tech, and Pro-Trade, accounted for approximately 14% of the company's 2024 Fiscal Year net sales[44]. - The company has a balanced mix of sales across product categories, with approximately 35% of net sales from products related to new construction and another 35% from maintenance of existing properties[22]. - The company plans to expand its Pro-Trade product line in the 2025 Fiscal Year, which includes new products such as synthetic turf and garden hoses[45]. Operational Strategy - The Partners Program had approximately 52,000 enrolled customers as of December 29, 2024, contributing to about 60% of the company's net sales for the 2024 Fiscal Year[51]. - The company aims to grow market share in existing markets with limited capital investment by optimizing its network of locations and improving sales force performance[30]. - The company sources products from approximately 5,800 suppliers, ensuring a comprehensive product offering for its customers[21]. Financial Performance - The company reported a net income of$ 124.4 million for the year ending December 29, 2024, down from $173.4 million in the previous year, a decrease of about 28.2%[348]. - Total liabilities increased to$ 1,478.9 million as of December 29, 2024, from $1,342.8 million at the end of 2023, reflecting a rise of about 10.1%[347]. - The company’s cash and cash equivalents increased to$ 107.1 million as of December 29, 2024, compared to $82.5 million at the end of 2023, marking a growth of approximately 29.8%[347]. Challenges and Risks - The company experienced a softening in the residential construction sector during the 2024 Fiscal Year, attributed to home price inflation and higher mortgage rates, which persisted despite a 50-basis point reduction in interest rates in September 2024[96]. - Inflation and increased operating costs have adversely impacted the company’s business, with ongoing inflationary pressures expected to continue affecting financial performance[99]. - The company is subject to various environmental, health, and safety laws, which could result in significant compliance costs and liabilities[90]. - Supply chain disruptions, including delays and product shortages, have negatively impacted revenues and margins, particularly during the COVID-19 pandemic[124]. Human Resources - As of December 29, 2024, the company employed approximately 8,300 associates, with 92% being full-time, year-round employees[70]. - The ability to attract and retain key personnel is critical for the company's success, and losing key executives could adversely affect operations and growth[137]. - The company relies on approximately 8,300 associates, and changes in labor laws or increased competition for workers could significantly impact operating costs and business performance[133]. Acquisitions and Growth Strategy - Future acquisitions are a key element of the company's growth strategy, but challenges include identifying suitable targets and potential integration difficulties[130]. - The company completed various acquisitions during the year, accounting for customer relationship intangible assets valued at$ 34.0 million[342]. Debt and Financing - As of December 29, 2024, the company had $393.3 million in total long-term consolidated indebtedness and$ 130.6 million in finance lease obligations excluding interest[163]. - The company’s ability to engage in acquisitions is limited due to its current indebtedness, which may impair its ability to obtain additional financing[165]. - An increase of one percentage point in interest rates would result in an increase of approximately $4.0 million in projected interest payments for the 2025 Fiscal Year[167]. Environmental and Regulatory Factors - The company has identified short-, medium-, and long-term climate-related risks and opportunities for its business strategy and financial planning[79]. - Compliance with environmental regulations could result in significant costs and liabilities, impacting the company's reputation and financial position[110]. - The company is subject to public perception risks regarding the environmental safety of its products, which could adversely affect demand and lead to increased regulatory scrutiny[116].