SiteOne Landscape Supply, Inc. Q2 FY2025 earnings call

Strategy Overview: SiteOne has a strong footprint with over 680 branches and 4 distribution centers across 45 US states and 6 Canadian provinces, being the industry leader with ~18% market share. Strategy leverages scale, resources, and local teams to deliver value. Adjusted EBITDA margin trends discussed with pricing transitions and progress with Pioneer and focus branches. ### Quarter Highlights: 3% net sales growth, 8% adjusted EBITDA growth. Flat organic daily sales offset by acquisitions. Gross profit increased 4%, gross margin improved 30 basis points to 36.4%. SG&A as % of net sales decreased 40 basis points. ### Initiatives: Digital growth with siteone.com, growing digital sales over 130% in H1 2025. Sales force productivity improvement with CRM use. Focus on underperforming branches, consolidating/closing 22 locations in 2024 and improving their adjusted EBITDA margin by over 200 basis points in H1 2025. Acquisition of 4 companies year-to-date with TTM net sales ~$30 million.

Net sales grew 3% in the second quarter. Adjusted EBITDA grew 8%. The wholesale landscaping products distribution market is $25 billion and fragmented. The business has a balanced mix: 65% focused on maintenance, repair and upgrade, 21% on new residential construction, and 14% on new commercial and recreational construction.

Adjusted EBITDA: Expect full year 2025 adjusted EBITDA to be in the range of $400 million to $430 million. ### Pricing: Expect pricing to transition from negative 1% in Q1 2025 to positive 1% to 2% in Q4 2025, setting up for normal inflation in 2026. ### Organic Growth: Expect low single-digit organic daily sales growth in the remainder of 2025 due to commercial initiatives, despite slightly down end markets overall.

Market Softness: Broader economic uncertainty and softness in end markets pose risks. Potential further deterioration in end market demand could impact organic growth. ### Labor Scarcity: Impact on customers from immigration changes and labor constraints, though customers are agile but market demand remains a key risk.

Q: Could you give an update on the bulk of the Pioneer integration and drivers of SG&A leverage?

A: Pioneer is fully integrated. Focus on underperforming branches (140-150) with SG&A leverage from initiatives like delivery efficiency, sales force productivity, and digital growth.

Q: What's left on the share repurchase authorization and potential for aggressive repurchase?

A: Roughly $250 million in available capacity under existing authorization; share repurchase is a way to provide value to shareholders.

Q: Outlook midpoint and risks for second half?

A: Guidance is a range; main risk is market deterioration further impacting organic growth.

Q: What commercial initiatives are driving market share gains?

A: Digital growth, sales force and customer excellence initiatives, private label, and penetration into adjacent product lines like synthetic turf, erosion control, etc.

Q: Impact of new residential construction softness on maintenance growth?

A: Maintenance is steady and not significantly affected by new residential construction as it follows GDP and SiteOne is gaining share in maintenance.

Q: Buckets of what focus branches are doing better?

A: Changeover of teams, improving customer excellence, and reducing SG&A.

Q: Gross margin expectations and cost of sales across categories?

A: Gross margin expected to be slightly up in remainder of year; pricing moving from headwind to tailwind.

Q: Mitigation actions for tariff impact and competitor pricing?

A: Manufacturers passing through costs, market is competitive with rational pricing; no different tactics seen.

Q: Freight savings opportunities?

A: Efficiency in customer delivery with DispatchTrack, expecting continued improvement in delivery expense.