• Net Sales: Increased 6% to $1.21 billion for the third quarter.
• Organic Daily Sales: Declined 1% due to a 3% price deflation, partially offset by 2% volume growth.
• Gross Margin: Improved 10 basis points to 34%.
• SG&A Expenses: Increased 12% to $349 million, representing 28.9% of net sales.
• Adjusted EBITDA: Decreased 4% to $114.8 million, with a margin decline of 100 basis points to 9.5%.
• Net Income: Decreased $12.9 million to $44.4 million.
• Acquisition Sales Growth: Contributed approximately $77 million or 7% of net sales growth.
• Branch Network: Expanded to more than 700 branches and four distribution centers.
• Working Capital: Increased to approximately $992 million.
• Net Debt: Approximately $449 million, with a leverage ratio of 1.2 times trailing 12-month adjusted EBITDA.
• Available Liquidity: Approximately $647 million.

• Warning! GuruFocus has detected 6 Warning Sign with SITE.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SiteOne Landscape Supply Inc (NYSE:SITE) achieved a 6% net sales growth in the third quarter, driven by acquisitions and a 2% organic sales volume growth.
• The company added 7% sales growth from acquisitions and welcomed one additional company to SiteOne during the quarter.
• SiteOne Landscape Supply Inc (NYSE:SITE) has a robust acquisition pipeline, having completed 96 acquisitions since 2014, which strengthens its market position.
• The company is making significant progress in integrating Pioneer, which is expected to improve performance and contribute positively in 2025.
• SiteOne Landscape Supply Inc (NYSE:SITE) is leveraging digital sales, which have increased by over 170% year-to-date, enhancing customer connectivity and market share.

Negative Points

• SiteOne Landscape Supply Inc (NYSE:SITE) faced significant market headwinds, including commodity price deflation and reduced demand in the repair and upgrade market, impacting sales growth and margins.
• The company experienced a 3% price decline in the third quarter, primarily driven by double-digit declines in PVC pipe and grass seed prices.
• Adjusted EBITDA for the quarter decreased by 4% year-over-year, with a 100 basis point decline in adjusted EBITDA margin to 9.5%.
• SiteOne Landscape Supply Inc (NYSE:SITE) expects continued challenges from market headwinds, including the impact of Hurricane Milton, affecting the full-year financial outcome.
• The integration of Pioneer has been slower and more costly than initially planned, contributing to adjusted EBITDA margin dilution.

Q & A Highlights

Q: Can we view the better-than-expected organic sales as signs of stabilization in the end markets and improved market share gains? A: Yes, it's a bit of both. While the repair and remodel market remains weak, we are consistently gaining market share across our portfolio. Our maintenance and new construction markets are resilient, and our efforts over the years have positioned us to outperform the market.

Q: Could you elaborate on your comment about growth being enhanced going forward? A: The focus is on EBITDA growth. While we peaked during the COVID years due to extraordinary price realization, we are currently facing headwinds like price deflation and dilution from Pioneer. As these factors normalize, we expect to see enhanced EBITDA growth through margin expansion and improved performance.

Q: Can you isolate the impact of price on agronomic products versus landscape products? A: Price impact was negative 8% for agronomic products and negative 2% for landscape products. We expect normalization for grass seed and PVC pipe pricing by mid-next year, with potential modest increases in other products.

Q: Are the branch closures a one-time event, or part of an ongoing strategy? A: While branch consolidations are routine post-acquisition, we are taking a more aggressive approach now to optimize our network. This is a one-time catch-up, but we will continue to look for consolidation opportunities as we acquire more businesses.

Q: How are the branch closures and Pioneer actions expected to impact sales and the bottom line in 2025? A: Most closures are consolidations, so we plan to retain the majority of sales. Pioneer is expected to gain momentum as we finalize integration, allowing us to maximize synergies and improve performance.

Q: Why did you decide to include the one-time restructuring charges in adjusted EBITDA? A: These charges pertain to the base business rather than recent acquisitions, aligning with our guidelines for adjusted items. We wanted to clearly communicate these actions.

Q: Is Pioneer still a negative EBITDA contributor, and how does it impact full-year 2024 results? A: While not providing specifics, Pioneer is a low contributor and dilutive to our overall EBITDA margin. We are focused on turning it around to contribute positively next year.

Q: Have you seen any improvement in R&R bidding activity, and could interest rates impact future demand? A: We haven't seen improvement yet. The higher end of the market is strong, but middle-range projects are delayed due to high interest rates. A decrease in rates could support a rebound in activity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.