SiteOne(US:SITE)2024-05-01 18:38Financial Data and Key Metrics Changes - The company reported a net sales increase of 8% to $905 million for the first quarter, with organic daily sales growth of 1% [10][56] - Adjusted EBITDA decreased 47% to $21.1 million, with an adjusted EBITDA margin decline of 250 basis points to 2.3% [32][53] - Gross profit for the first quarter was $301 million, a 5% increase compared to the prior year, while gross margin decreased by 100 basis points to 33.3% [29][52] - Selling, general and administrative expenses (SG&A) increased 12% to $328 million, with SG&A as a percentage of net sales rising by 140 basis points to 36.2% [30][11] Business Line Data and Key Metrics Changes - Organic daily sales for landscaping products decreased by 2% due to lower prices and unfavorable weather, while agronomic products saw a 10% increase in organic daily sales driven by strong volume growth [28][57] - The company achieved 7% of net sales growth through acquisitions, contributing approximately $62 million [10][58] Market Data and Key Metrics Changes - Five out of nine regions achieved positive organic daily sales growth, with double-digit growth in the Midwest due to solid demand and favorable weather [28] - The company expects repair and upgrade demand to be slightly down in 2024, while new residential construction is anticipated to grow modestly [40][69] Company Strategy and Development Direction - The company aims to expand its product lines and market presence through acquisitions, having completed 93 acquisitions since 2014 [9][35] - The strategy focuses on organic growth, acquisition growth, and EBITDA margin expansion, targeting a long-term adjusted EBITDA margin of 13% to 15% [21][20] - The company is positioned as the largest national full product line wholesale distributor in the landscaping market, with a significant opportunity for growth due to its modest market share [48][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current environment and achieving continued success in 2024, despite challenges from commodity price deflation [17][18] - The company expects gross margin in 2024 to be similar to 2023, with negative effects from price deflation offset by initiatives and acquisitions [42][94] - Management noted that the first quarter was traditionally slower, and they anticipate positive operating leverage as the selling season progresses [45][89] Other Important Information - The company has a robust acquisition pipeline and expects to continue adding and integrating new companies throughout the year [9][35] - Cash used in operations decreased to approximately $99 million, reflecting improved replenishment capabilities [33] Q&A Session Summary Question: Context on first quarter misses relative to expectations - Management indicated that SG&A came in largely in line with expectations, with higher healthcare costs being a notable factor [44][75] Question: Gross margin expectations - Management acknowledged that gross margins were affected more than expected, primarily in January and February, but anticipated improvements in the second quarter [82][100] Question: Impact of competitor acquisition by Home Depot - Management stated that competition dynamics would not significantly change, as they have been competing against the company for years [86] Question: Pricing and deflation expectations - Management expects commodity price deflation to moderate in the second half of 2024, with overall pricing down approximately 2% for the year [71][93] Question: SG&A leverage expectations - Management expressed confidence in achieving SG&A leverage by year-end, despite the impact of acquisitions [119][142]