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SiteOne(SITE) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved 4% net sales growth and 6% growth in adjusted EBITDA during Q1 2025, despite challenging weather conditions [5][12] - Adjusted EBITDA for the quarter increased 6% to $22.4 million, with an adjusted EBITDA margin improvement of 10 basis points to 2.4% [16][29] - The net loss attributable to the company was $27.3 million for Q1 2025, compared to a loss of $19.3 million in the prior year [28] Business Line Data and Key Metrics Changes - Organic daily sales decreased 1% in Q1 2025, with agronomic products increasing by 7% and landscaping products decreasing by 4% [25][23] - Acquisitions contributed approximately $45 million or 5% to net sales growth [26] - Selling, general and administrative expenses (SG&A) increased 5% to approximately $343 million, with SG&A as a percentage of net sales rising to 36.5% [26][16] Market Data and Key Metrics Changes - Four out of nine regions achieved positive organic daily sales growth in Q1 2025, with weather and tough comparisons being the primary differentiators [25] - The company estimates its market share at approximately 18% in a fragmented $25 billion wholesale landscaping products distribution market [7] Company Strategy and Development Direction - The company aims to leverage its scale and resources to deliver superior value to customers and suppliers while focusing on organic growth and acquisitions [9][10] - The acquisition strategy remains robust, with the company completing its 100th acquisition in March 2025, adding over $2 billion in acquired revenue since 2014 [12][33] - The company plans to fill in its product portfolio primarily through acquisitions, especially in nursery, hardscapes, and landscape supplies categories [13] Management's Comments on Operating Environment and Future Outlook - Management expects commodity price deflation to continue moderating in 2025, with price increases expected to offset declines in certain products [37] - The outlook for new residential single-family completions is flat for 2025, with mixed feedback from builders regarding future demand [38][39] - The company anticipates low single-digit organic daily sales growth for the full year 2025, supported by strong commercial initiatives [41] Other Important Information - The company has increased its working capital to approximately $1 billion, primarily due to acquisitions and early inventory purchases [30] - The effective tax rate for Q1 2025 was 25.5%, down from 33.4% in the prior year, due to a decrease in excess tax benefits from stock-based compensation [28] Q&A Session Summary Question: Can you define and provide recent wins regarding Dispatch Track and focus branch efforts? - Management highlighted significant progress in both areas, with Dispatch Track improving customer service and efficiency in delivery operations [46][48] Question: What efforts are being targeted to gain a larger share of wallet from existing customers? - The company is focusing on increasing product lines for existing customers and targeting small customers, where market share is currently low [50][52] Question: What is the expectation for organic sales growth in the second quarter? - Management expects low single-digit organic growth in Q2, with pricing anticipated to be flat to negative 1% [61][62] Question: Can you provide details on the impact of tariffs on pricing? - The company indicated that 10% to 15% of sales are indirectly affected by tariffs, primarily from suppliers sourcing from Mexico and China [63][64] Question: How is the company managing inventory levels amid inflationary pressures? - The company is selectively purchasing inventory to mitigate risks associated with supply chain disruptions and inflation [76][77] Question: How does the company balance cash for acquisitions versus share repurchases? - Management emphasized a focus on maintaining a strong balance sheet while being selective in capital allocation, including share repurchases when stock performance is favorable [78][79]