SiteOne Landscape Supply (SITE) 1 Nov 232023 Q3 Earnings call transcript

Greetings, welcome to the SiteOne Landscape Supply Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

At this time, I would like to hand the call over to John Guthrie, Executive Vice President and Chief Financial Officer. Thank you.

You may begin.

morning, good and you, everyone. Thank at third We this Relations earnings website release XXXX and issued portion posted our Investor our morning the a press to quarter slide investors.siteone.com. of presentation Black, I'm joined and Salmon, Vice Executive Chairman Chief Strategy Development. Executive Scott and our President, today Officer; and Doug by

Reform and materially cause set to to risks and Private our I within of uncertainties the today's call Act with earnings and forward-looking everyone Exchange statements that risks press in Securities Securities Such statements in forth release, are we and actual Commission. begin, could results projections. remind the and during factors Before to slide differ meaning made the of filings release the from uncertainties Litigation would like the the statements These that include presentation and our expectations XXXX. include subject the

of useful turn found in can presentation. I today's over our performance. during we which now the Additionally, believe reconciliation measures Black. Doug we to measures, call call, in to release like and evaluating non-GAAP would our earnings discuss these can be the slide will A in be

remain daily impact quarter, pleased positive all adjusted quarter. Thanks, organic and stronger and than today. were in during were on the fertilizer us thank market growth. and That we gross products to volume seed had in grass commodity which a pipe, margin resilient sales which third select demand negative John. PVC like on EBITDA see you expected, margin sales both for the allowed We us end achieve Good and morning, joining to deflation said,

volume in as gaining X% our executed the the prices contributed price negative fourth commodity sales driving these quarter. growth deflationary by continue current expect effects and managing challenging during quarter, the but the also deflation. share, well through organic sales during Acquisitions moderate net XXXX, positive We growth environment, market teams stabilize. In to

today's quarter. some unique you and taking and represent and operational strong world-class commercial to continue SiteOne our approximately exceptional companies add acquisition quarter. Through long our of term XX-month we before will financial and our near-term performance X growth that $XXX then million John call questions. acquisition strong and for coming a quarter the while balance third outlook update new well-balanced confident the overview very and trailing that market as position and position. years. I start highlights sales well to will our to managing improved initiatives the a market business from high-performing We Guthrie then build in over by followed of during strategy, discuss pipeline results challenges. our the address are I pleased to strategy, market brief capabilities more We back and our Salmon execution our walk remain will in to balance sheet, with on SiteOne through latest our our us teams, position sheet acquisition liquidity achieve robust an the come leader detail strategy, provide will Scott your the through

grown to Canadian X shown states of X distribution XXX footprint we more provinces. As presentation, on Slide U.S. and across centers have earnings the XX than and X branches our

fragmented our a our distribution XX% the Xx about nearest leader, products of landscaping market. Accordingly, billion are size estimate opportunity have share growth significant. remains only over the $XX that We industry of long-term very yet clear we wholesale competitor, we the

focused residential on repair a balanced XX% on We upgrade, on focused and XX% XX% and with and new have commercial construction business new recreational of mix maintenance, construction.

an product market, excellent well national we balance across also the line our full distributor as wholesale the As product as only lines have in geographically.

Overall, time. acquisition, markets. product fill customers in our further organically multiple and through suppliers, mix, us our good Canada, to and offer the for to market and U.S. create both grow product portfolio, balance resiliency and lines providing avenues across strategy softer important value in strengthens our end coverage geographic and over Our broad this while

X. Slide to Turning

to capabilities is company to resources, that our scale, the as entrepreneurial leverage all local the experienced support largest customers talent have and functional suppliers. our and we industry, in value superior talented, and strategy in Our deliver consistently of teams, our to

acquisition company. Accordingly, way do product are strategy, our our and markets We build more which new initiatives further as moves to have a adds our to by we to and fills into true in executing our highly our come a strategy, on These develop SiteOne. stakeholders. operational geographic terrific us initiatives talent focused complemented portfolio, our work we create commercial have world-class long SiteOne capability we but in remain all into to value and for building new

all Taken shareholders expansion. creates and strategy our for value acquisition our organic growth, together, superior margin EBITDA through growth

to X years Slide turn growth and of growth acquisition organic X, you strong expansion. the over last you EBITDA consistent If with our track and performance margin can and see record

done SiteOne, create foundation new and to for We suppliers. build this in capabilities heavily technologies for and our the superior have teams in investing to and and while customers systems our

creation and we We confident continue levers going remain building investing, and in share our driving all of are market X gain our forward. and ability still to value

gross reset received to that XXXX and As the year EBITDA previously a in due we margin XXXX. adjusted and discussed, benefits extraordinary XXXX price is margin for

and significant on price margin. experiencing impact deflation, daily margin now gross organic are which causes a We adjusted negative sales, EBITDA commodity temporary

remain XX% revenue a impact in expand to our subside to margin and in reach our while expanding objectives. our growth this SG&A tailwind toward adjusted expect our performance we We provide XXXX, longer-term business gross as XX%. We to achieving goal EBITDA margin to to leverage look drive will confident which negative strategy long-term of

trailing the lines we million XX XXXX far $XXX our and last in completed revenue acquisitions this have a acquisitions We XX XXXX, now year. acquisitions activity all in acquired in have expanded so We increase months' resulting from a key them record product and completed across development team leverage to since acquisition year XX record XXXX. XX

with growth. remains new potential Our companies These of expect of integrating ideas to pipeline support growth. for companies continue and strengthen and we adding and performance talent deals and excellent our to increased SiteOne number new robust,

nature to Given many a modest market filling in our through the acquisition, hardscapes portfolio, nursery, fragmented X and growing runway for categories. have continue aim landscape product in come. Slide we years and supplies share, do through have we acquisition opportunity to especially significant our the ahead shows of our industry we to primarily the that long in which

third these as X. shown networked a added decade. I sales. of with organic well growth daily decline We X% X% industry, our net systematically performance on over are and filling sales to by X% in the will quarter next achieved with highlights We acquisition, partially Slide offset continue companies discuss some in in our markets the best through expect growth, now

decline, As by mentioned, more price were a have was believe in X% the this more price than and pleased bottom was reached we during than achieve quarter, the the October. September quarter, X% to offset sequentially we deflation expected. Commodity that but slightly volume sales growth which we during increased and

moderate in more well a landscaping deflation products. expect daily despite We and as deflation agronomic pronounced to decline both being price sales to were we the products enter products X% balanced, the with Organic in XXXX. agronomic begin

season. the steep and weak was see fertilizer with margin saw application to and the year agronomic mitigated of fertilizer seed we strong return price that as grass expected, as in levels inventory while seed. In contractors points in quarter, of gross Gross deflation their pipe, opposite, product in normal just seed during to rates more third the sold to by end flat end fertilizer basis gross in reduced purchased maintenance contractors PVC profit last which impacted grass a deflation We were XX.X%. stronger by and Commodity contracted users height increases application the the XXX pleased very volume was very prices the at significant recall we will the during negatively You was reaction lower and very were quarter, in market. volume. margin than to fall

executed and improvement SG&A of very by to daily benefited was did runs our margin match that by foundation. SG&A net as our improvement gross XXX effect X% a third basis percent than commodity with same in we the points remain on Our sales. net decline lower trend for well X% our the challenging gross year-over-year can the continuing a slightly, as acquisitions reacting in not keeping drive of hardscapes but business sales, also in SG&A largest SG&A. at the to by resume its prior XX.X%. for sales, initiatives. course, had from Acquisitions this market base a supplies the once teams that confident quarter, extremely landscape gross organic discipline year solid price prices inventory percent have our very low, We increased environment margin deflation and increased margin

we see leverage daily and focused We with benefits basis XX% to XX.X% initiatives points inflation from our gross and for to million, adjusted are operating productivity highly EBITDA to $XXX by as positive to sales margin as return EBITDA declined the growth. Adjusted XXX quarter on declined approximately organic expect and normalizes, lower margin.

in decrease EBITDA margin to XXXX. foundation year-over-year further fourth the the in in quarter, a adjusted expect We expansion for moderate providing

initiatives, we times costs significantly in us customers. Management growth challenging have gross brands these all we and helping private to for continue margin of our margin members our partners our by gross Transportation XX% small program our are normal decline the inbound higher average, grow our our and new customers small approximately increased freight to driving members. while mitigate to with inflation. Year-to-date, In these membership improving also terms expand label System, Most of than XX,XXX in to midsized

increased marketing and from branches We to are percentage create among segment. Hispanic awareness to have customer to focus important our this continuing XX% this of bilingual year, XX% on

early while made focus year, wide, increase associates. delivery progress market habits great more drive rollout creating service to in activity of sales to teams in customer for increasing our inside our some on transactional allows and suppliers and excellence associates also are staff our increase productivity productivity see practices our continue to are customers, the better and our usage growing DispatchTrack value in while disciplined establish of less seeing MobilePro activity. business value are of digital we and and this we us among across benefit fleet. we sales company operational SiteOne the leverage for are continued now customer offer across each And CRM of our and finally, Both outside on good more deployed these who best The revenue-generating allowing capabilities help line Lastly, benefits and company. We our which sales and and systematically company. we customers the spreading our from progress force share over on of making siteone.com branch as us XXX to

growth, organic through drive all gross achieve in Taken to as increase continuing are our together, XXXX. we to improve even the fight leverage margin we challenges and capability operating

On positioned commodity our sheet product the inflation we deflation, come. In through years well acquisition acquisition challenges strong XXXX. exceptional year, front, in gains and to many far and added margin extraordinary the the number a XX-month we With including gross XXXX facing of and trailing we've approximately for SiteOne. companies, operating with to summary, in balance reputation, cost best year a family grow added markets, in so this XXXX, team, companies and deep sales an are reset to broadened from price experienced consistently softer to $XXX high-performing relationships an remain XX million a with this

while continue as building terrific we of of these have commercial even value organically the market. increased gain deliver And confident teams momentum the remain We both outperforming to initiatives to job in in our strategy and in operational foundation done Our acquisition. ability we our in company, customers through managing a and suppliers and and reset our to our financially, through and challenges. our

you John detail. in Now will the walk more quarter through John?

was prior our begin the year Slide XX sales There prior Organic sales year reported quarter, days billion same third X% prices down some I'll lower and on to fertilizer, which by with were deflation the on year-over-year; growth compared commodity to daily modest We the which results. was demand. Price for Doug. a approximately down commodity was was by to of market partially increase which X period, seed, the was for grass due slightly our price pipe, quarter products XX%; than volume which X%, in is as quarter. selling X% decreased net the which greater from like $X.XX from XX% was down XX%. primarily highlights Thanks, expectations. period. products, offset PVC third quarter the driven deflation The

started that we We price XXXX, a until deflation expect be remainder fully headwind QX into decreases beginning of year the the price year. of to in for the lap last the and of

end Volume to share for the deflation quarter. gains Fortunately, X% growth driven we offset growth demand. price volume and third harshly modest were able was the by with market

grass were impacting sales performance overall third due have achieved includes and markets. negatively not weakest for products, the wet control our greatest prices a some for did for volume positive with the on accessories, quarter equipment, X Northeast and weather for impacted weighted While growth mix fertilizer lighting seed. a decreased heavily X% sales and by The and end weather agronomic the of also as offset sales our decreased which partially sales products. more melt major they nursery, X includes X% sales by landscaping growth products, northern ice a hardscapes, slightly of the products, markets, Southern Midwest impact combination fertilizer, quarter. Organic for markets market and due which sales to had toward in those and to landscape lower increased demand. Geographically, organic Organic lower outdoor regions moderating daily daily out irrigation, prices, daily

partially We performance was X% realization are by the profit our and the was approximately in pleased or primarily costs. and sales the and XXXX, the million basis Gross million, $XXX call. Gross Scott of net third regarding more the prices to later to year, both offset to with reflect growth. quarter. in largely freight the attributable prior impact which in will sales, provide contributed sales absence Acquisition completed in XXXX the prior acquisitions due lower which positive points to compared to of for acquisitions quarter the the realized $XX the strategy margin acquisition third XXX acquisitions price details decreased of benefit lower unchanged year. XX.X%, our

forecast. gross weaker greater was than in mentioned, our and due Doug rapidly As than more to deflation expected, primarily coming product margin commodity

higher rise way lower market prices to as Just created on relative prices costs the down. rapid rapid inventory our the from we in on the our to benefited market way costs relative a headwind temporary in up, the drop inventory

XX.X%. the increased net due to remainder $XXX this net XXX basis managing to and increase impact the SG&A continue of a both of it for third of through are as percentage percentage sales in or SG&A in points sales We headwind, X% increased as expense, SG&A, expect administrative of the SG&A to quarter and a The primarily to general million acquisitions. quarter. we is but the for year. Selling, the

during SG&A for sales. taken the spend base our steps we acquisitions, decreased our quarter as to have X% Excluding business SG&A align lower with our

approximately quarter, the excess in tax year from of $XX third we to $XX The effective of compared million XX.X% of third XXXX For prior prior for to the tax The reported to amount the rate XX.X% period. primarily quarter was the was compared tax the rate million in for income the an in effective period. increase an expense decrease compensation. tax due stock-based benefits year

excluding quarter XX%, the to between $XX We to sales in expense. year, prior benefits. Net increased and the for lower XX% excess margin more third offset income items fiscal XXXX rate and our year our compared million XXXX decreased higher tax for effective expect discrete $XX were gross period as million than be tax by will the the same net as SG&A such

for million Our gross decreased prior XX.X diluted was same the the points the prior reflecting EBITDA XX.X decreased to margin. basis to the compared Adjusted to XX% margin million approximately for period. Adjusted in quarter million the share for count million year $XXX XX.X%, XXX year. $XXX weighted to lower EBITDA compared period average third

compared seasonal Scott as for primarily to our improved inventory million quarter the working our XX% The Net increase quarter progress approximately investments acquisition at to third on started we our sheet an provide net inventory $XX as at expenditures borrowed quarter million cash $X year Slide XXXX. period. approximately flow million quarter $XX including XX. cash million provide million. as Inventory chain same made million compared in to cash accounts turns cash from third in period. investments in our operating in reflects was later receivable $XXX to the in of we The million increase acquisitions additional loan million management ABL of working were increase compared the flow borrowings sales prior flow year and compared for call. Capital $XXX brief end term and $X decreased the for made year to to resulting million primarily approximately additional to we will capital. We statement relocations. the quarter. reduction investment prior in million working an cash to $XXX used compared proceeds XXXX make on period the the improved of balance details our to a to the of on capital initiatives. Operating The is the $XX quarter timing, million levels update in the Year-to-date, prior the acquisitions. growth, earlier in the were $XXX for due approximately increase Now third our like operating end approximately our $XXX and $XXX flat improvements, reflects for I'd July, shown reduce XXXX. our on to In prior flow The year XXXX, attributable $XX during on with of the increased decrease the million on supply continue to including greater reflects facility. branch capital

net debt facility. Net quarter, the and consisted our of million the result, million approximately hand our the $XXX in $XXX quarter EBITDA, $XX of increased approximately at end we X.Xx year under the available prior Leverage approximately at debt end at higher compared million months the which of X.Xx reflects $XXX adjusted the in the the quarter acquisition capacity at cash period. million $XXX was million, ABL was XXXX. trailing of end on of approximately third quarter investments. to The approximately a our XX end third of compared of As had the liquidity to

Xx. X our debt-to-adjusted year-end reminder, leverage is target to net a range As EBITDA

market Our for and in a on priority strength execute growth acquisition turn our funding from the to balance can is our and over our now perspective we Scott financial all update flexibility, strategy so sheet an maintain call to strategy. environments. I'll

Thanks, John.

a sales acquired SiteOne. As companies XXXX, approximately XX shown XX net bringing combined X million quarter to for approximately XX-month net to approximately in acquired year-to-date in $X.X and Slide XX, our companies net on Since companies $XXX trailing total sales trailing we trailing third million, acquired XX-month $XXX sales. billion added in the XX-month with we of have

and landscaping supplies XX, our XX, of market. On X addition England New leading single Southeast. And XX, location lastly, hardscapes. of our hardscapes, Slides XX, Greater states with existing also in in distributor we distributor landscape Timothy's across as acquired you Hickory The Lake distributor offer Regal to us supplies information August products with & U.S. Also supplies the acquired recent location Hill locations. the Pioneer line the of Hickory customers local complements Gardening, X irrigation, we sites strategic X, Arizona. in to Silica, strengthens a of portfolio through supplies to our will Garden, distribution with acquired we August of Delaware products July the we Turning New fastest-growing acquired XX wholesale supplies. business Valley. On Organics, acquired XX presence agronomics high-growth a The allowing across expanding acquisition New expands across of Hill market. leading our significantly a for distributor on location find bulk in area, we we Silica wholesale products provide and products. Landscape professionals addition wholesale of services and This On distributor the single August Jersey acquisition single and location bulk nursery most a Regal in XX the of nursery agronomics area. landscape XX, Center Houston in hardscapes position on and our acquisitions. this of Farm Extending England products landscape Oconee, Connecticut. On August the we nursery Chemical, Centers August Georgia The landscape SiteOne distribution full landscape the in establishes the XX, Colorado and Atlanta of on leading acquired landscape JMJ X the our

talent and major of a goal and we markets. Summarizing choose Doug. and through confident can line are Our sheet join when for us of XX, adding the and new to excellent Slide years. I for am call our outstanding adding customers full in It's will a the toward drive industry's our to entire they more confident passion that business companies and continue significant attract Canadian to SiteOne. across and a the team move continues place services products pipeline making stakeholders. I commitment we back for family SiteOne of continue acquisitions and to all all their be when terrific continues to acquisition add to create ours. balance now lines providing to great able culture our more newly landscape to the this our best our SiteOne and With SiteOne on geographies, to to strategy entrepreneurs, genuinely stronger SiteOne honored welcoming have companies acquisition for robust work we together over joined their turn thank forward coming strong to the to value and all acquired we outstanding family. SiteOne continue teams a value they are I will want that U.S.

Thanks, Scott. on Slide XX. up I'll wrap

organic quarter, outlook quarter similar daily it positive is with offset volume deflation. for than price more third sales by the that fourth Our commodity the sales to will be in

to with continue commercial executing strong teams, market initiatives. operational our and expect expect our and We remain gaining demand to resilient, customer we share

of which our with home for expect the of volume. year construction, the constraining of markets, we sales comprises to terms In be continue to interest end remainder new high soft residential XX% rates

until of not XXXX. see bullish more of housing starts, in benefit become have this we builders the will terms While single-family

well on our our this has fourth which during to our upgrade slightly XX% demand of remained represents which based be to resilient expect market, and in we down flat New also the quarter. in and solid, to sales finish customer backlogs, has market remained commercial expect The current and sales, construction, XXXX. XX% we repair represents of

the contractors users Lastly, levels remain down strong to represents low take backdrop, we end prices the from last of deflation. as expect application maintenance of expect and quarter, fourth driven advantage the sales lower price volume year. our category, we in daily this to of be sales sales, organic XX% which and our rates depressed restore With commodity by single digits in

For we to year organic daily approximately be XXXX, the full flat. expect sales

mentioned, and margin will in decline As the be prior in third the period, quarter fourth EBITDA adjusted gross we to expect than year-over-year be although year quarter. margin the lower than less the

margin to a the We in beyond. expect EBITDA the in demand, expanding seasonality on of fourth dilutive the also these quarter completed adjusted third quarter adjusted we XXXX have resume expect and acquisitions With given the in to reasonable effect EBITDA companies. future

of of Scott of high-quality family pipeline terms as the of some XXXX. in remainder mentioned, companies, In which SiteOne acquisitions, a have we strong the join may

towards and their we top now the we be to end our our and lowering integrate these our I to closing, with service. associates fiscal to me $XXX continue to expect sincerely low EBITDA our are end contribution our amaze guidance factors range to With unannounced $XXX to SiteOne performing adjusted ability acquisitions Our acquisitions. In all million. improve would passion, are who thank in commitment, any of mind, does This like of continue them not company. XXXX all updated of million the our teamwork selfless and into range well, from factor range

all honor team, customers we is like them be the with an stakeholders. questions. their tremendous to increasing and supporting us as thank would be a also I please us for value allowing for strongly, deliver to our for line it and for open partner. Operator, suppliers have joined We to our so our

come from the line first [Operator Baird. of Instructions] David Our with Manthey questions

for slightly First and ADS off, demand, situation. which with is that moderating said square remains mentioned segments, demand like message were it -- here an thoughts ongoing about know supplies as your down of but quarter and those in talking I'm the atoms you could you the Doug, volume splitting demand X% fourth when And sounds you beyond? price here, to sort landscape the you I remarks, what in resilient. lower John, closing me relates

to price. landscaping on daily sales Well, lower for landscaping we regards Price can negative quarter. organic say, negative products, was products, growth was on slightly X% about about the we're were down and on we that X% with volume X% negative

Yes.

see In second the of much terms quarter fourth question, your part third. like David, of we being the the

We continued seeing positive overall. volume are

use it's say see market shaping too And forward. up to start be of I'd positive through impact price think was agronomic volume the call XXXX, We'll fourth in overall, the and As resilient we the going a we least early volume landscaping very -- -- which in kind be be the very solid it of would put mentioned, continue we to you going solid quarter. products, deflation then kind when deflation. but it kind strong, resilient. less all we're to to of we'll together, word balancing in 'XX. And We're deep at fertilizer seed. But -- has from expect we continue to

And were -- second, on Okay. managed then very operating quarter. and that expenses well this

I think quarter your where second this is SG&A quarter lower SG&A dollars. dollars the were quarter public in third history than first

acquisitions taken us for adding still you've in to Could on little the what that allowed future. and context the a detail mentioned of investing that. accomplish You steps are those that, steps that you give

XXXX. the growth obviously, COVID in there's adjustment the think And deflation. from strong XXXX, during I years a Well, more the Right. an and modest high-growth continued to growth in

our And to teams. we've so been able manage

move had weather affected. can fast very and flexible are teams markets Our that been individual We've have in markets.

that siteone.com, Salesforce the going We pleased we to we to gross so third that we in look obviously, more helping objective, what to right? to quarter. continue opportunity to And with to And CRM, we're long-term we've margin get our the And hard. field. And achieve we're margin long-term which XXXX, we're were achieve Salesforce improve and those be the I et productivity EBITDA goal. are our cetera, part seeing. we MobilePro, work the of from as as so excited our as I initiatives, able in our got leverage And about forward. that. And to an continue also think the drive SG&A side expansion also, to And to pulled for more to productive continue we'll think of enter move both plan side to we work

to room come lot for years there. over the improvement of So a

William Our next Merkel questions Blair. come from of the with Ryan line

the that off deflation. and October. to September you had I start thought mentioned comments, Doug, in deflation in you wanted with bottomed your

the us that's Just will the you can X%, quarter, you as about then for that in price fourth deflation unpack case. XQ? confirm And same why think be

Yes.

So a a price we And August, deflation is a as what October. accelerated we back improvement half of kind July, has in slight -- slight through the with -- we've the September. to level seen October, now went half shown saw of of October similar September over first

started year the signs, see quarter. the we fourth prices dropping last So during

starting lap to we're that. so And

to quarter. 'XX, lap or completely we down believe will those we that third. same return the so decreases it And things yielding it's normal. the stairstep up, to back and go the into stairstep similar will obviously, as third we'll price believe during And then amount We about

So you something to to have that? John, did add

Yes.

X% to X% fourth. estimate Fourth. Yes. a good for the think I is probably

XX you level, the higher -- just think purchases, and business. just there's debate your you'd on impacts? comment the next discretionary more M&A and Can Okay. I'm some maybe the where impact to And impact X you months? over about then an see thinking rates interest potential to do high just

because impact that to incentives are would housing in when getting look rates, Well, builders people new you've you of down rates. have I the the be I residential, got largest at buying shortage, new interest But think we residential. and think using used

at the so next least be And year. will builders to that new single-family bullish seem be residential up

that very we're not in remodel market, market. negative so so And affects will been will there forecast about from things, effect big next be it be. There's that seeing optimistic remodel a from work growth forces remodel year. the home We remodel resilient. remodel, that. In we're it and but -- far HRI are are outdoor still to certainly, think continue that in the in strong underlying market It's living

commercial, we start that went to market. that Commercials see. index, the the XX. We'll to being that have would were theories remain commercial below We ABI So resilient. In it strong. see fairly obviously, affect there watched

closely. So don't maintenance And any think then we're the there's effect we really market, there. that watching

have a to the maintenance So with let's our for we'll markets give we us believe are see. growth. that good market say, foundation all take solid, But especially we them together, when

the with line questions next from Our Steve of Jefferies. come Volkmann

that your guess markets think of How much question? mentioned and prepared do share sort -- Doug, sort gain remarks. underlying around question my in think end is address relative guys of I I to share gains, you of grew you that the you to sort

would slightly when flat say Well, that they we positive. were you down, end to that it the guess And we slightly volumes would all together. down markets, take our were

the suppliers. with It's calculate you to but in math touch share our hard do all can of specifically So there. gain, we're

in to share, on consistent product gaining going it's see sense pretty and we're across few lines. good et different that the confident we And a horizons, of what's markets. get We a cetera. do feel have performance, We

we're to to So going continue going forward. that drive

and category? said I of sort customers, the you And right, in adding Okay. medium-sized new think small you are

We growing effort that small larger We've we've marketing, and created in Hispanic we teams. than with calling sales our category that's are. with an We're our with are specifically customers. our that customers, on that inside intentional are faster got

of we're we've going exciting that. on So seeing there, of got lot a and results initiatives the

also a from standpoint both sales margin a us growth standpoint. but from helps that So gross

back just investments think sort that get SG&A, SG&A you've on of to Great. you'll you making? the given been year, And leverage next then finally, do

regards I filter are going with the certainly acquisitions we're really in. that, give how towards working guidance to to early But to think it's that. too

Yes.

certainly, context, X would would long-term the We in the leverage over SG&A Just that to to be case. X the get years. next expect

come Our Karas the with UBS. next line questions Damian of from

heads details and So around just in help look wrap in our expectations? margins gross you based around expecting thanks for you're maybe price could that third the cadence like quarter what XXXX your price the here. on us the Could from

Yes.

a after additional do deflation. XXXX. we we reset an aside, it's the too be little the quarter. calling headwind we're price I fourth We'll are with experiencing experiencing to think, finish again, early -- But that the

which to around be would subside we acquisitions XXXX, gross 'XX with we quantifying in certainly number of would too early a a is or terrific. And as that, for expect year. tailwind We margin, initiatives expect a and so improvement around But provide that our then mentioned, next bit bit putting little and do that a that. to

expecting quarters, if this up the look that are looks you mean, considerably first pretty like you cash X what for year. at I and you're fourth What in flow Understood. quarter? the

up fourth So we that lining should the any are be aware? for there headwinds quarter

quarter. a would strong had probably normal a quarter such would We you saw of -- be some it's this fourth is, really issue. we a QX. No. We timing pulled the this expect What

kind started inventory I of realized pull the out. -- we think the we

between far Q was year the over this So year QX year. -- last recognized QX primarily difference so this and what is in

a very inventory position basis, last well similar So up our year year-to-date on point. we're to is at and this

seasonality fourth expect cash would normal kind we so for quarter. And the of flow in

Mike from of Markets. RBC next come with Capital Our questions Dahl the line

know want a a the component? the Just asked the and XQ maybe into XQ how different specifically, quantify of a get more is follow-up. 'XX side. margins, headwind your on Can gross much way price in I you but deflation details, don't margin to you

comparable XX on points basis QX, from that would going there's would what normally lot margin kind that expect. into there, to basis said, of to I and kind would of talking say of things of kind regards you're XX XX to be -- out probably going you With number of a standpoint. that's kind gross we if

of we would kind a couple in where say about where gone It's have will -- the the -- over of And of of kind price benefit. So about of last many what's at be questions you over QX. that lot talked would of kind I of, years. you asked realization kind -- the we're that's that's if as kind and

is many talked that how benefit about what of So with here we're kind we that a you, was, effect, was in that seeing it was of a onetime gain.

are the of bit if result that. is onetime in going that negative a the will, kind Now -- a what you're And headwind, what normal basis to right more I as estimate we're kind opposite market. is not as would a the of direction, kind you little of a we to seeing of at kind prices of points where XX of what potential a would XX call now headwind relative

the lot when Okay. Yes, get deflation that that that it think assume get half pieces you about given appreciate that that clear of relatedly, second I let's holds, stabilization would there's your that And trying makes out. I you've comps, the sense. the a next just that I then of the headwinds so we seems there, to moving split seen, subside when pricing understand to year.

XQ. and still The in positive comping in you're first particular, half, 'XX from price

do mid-single-digit I want So these you kind the know you to total give off headwinds? still don't we'll with start year think guidance. of Again, price

early it's the to think flows gross line. margin through I how too it on say

be is it it to revenue fair first that think on the side, I a in half. the say, from will still standpoint headwind

have we'll so to And see is. that

this sales a makes know, you QX got -- which -- killed lot On QX. California, as year the up of last flip killed side, in on

go. But of them half, that in, we the as a that will we the a we came lot and in just be headwind. the lap price will positive, -- more bit these -- until that get increases realistically and a So little first we'll a -- into will in be of

products. offset. at some of beginning the will of other be see Some We expect We'll the price that year. increases do of the

little year So a this year into will next that that dynamic also. saw play out bit we

is October, stairstep November, expect The we of other it's up. down to stairstep December, factor kind

you the in, prices -- kicking expect be as the we have second start to of go other deflation, less say, would it or into that the that will in in quarter. terms than, be the So would quarter, we first it third fourth and then

So it -- steep headwind quarter the to not as yes, fourth going last this likely, the will in of X but be the as quarters, a headwind, we're and John, third year.

Our Securities. from the come line Hughes next of with Keith Truist questions

some declines the magnitude so in Could the about of sort feel much you causing us of call. that talked X products are give of we the of the deflation a this price

in talked QX. Well, talked We about. regards I year-over-year down -- was me, that with we're we think, fertilizer of are and seed they're down were about the size XX% but the -- XX%, type and grass front in of is not in XX% talking Pipe about the those in in teens, XX% year-over-year -- that numbers. and

Okay. summer? descent And really that began, is late the what, Or right? about timing

season out came QX in was last year, began this is, pipe would ones most seeds, seed of And mentioned numbers it. those what in first say I with really year. a -- really on item. think grass that XX% for fertilizer agronomic half like seed as of about QX the of XX% stood we was, decent It's in call for really The the And I down. the QX were starts to

Our Joe Ahlersmeyer line next of come the questions Bank. from with Deutsche

market year. well your you commercial finishing discussion, about end In this solid, remaining talked new

are side feel you're anything just just like there's bidding I the one commercial either hearing new cycle be or year. next know end but generally hearing the into this you most risk on would on later maybe Just volume there, if where the is construction in market curious you the construction helpful.

Yes.

as, -- If market, our customer So well in customer But we bidding as front been them. ABI have you that they backlogs look at obviously, year has right? the went look this we don't the pretty of and XX. work the we good do at -- below Index, lag

XX. that have we'll stays So see if to below

this So it's really be to wouldn't year. call mean, point. I at next hard to we tell able

of the trends half unless or -- I the Hard next the next think commercial. is X pretty X because months. develop we likely half over solid tell about lag, to first we second see in year more kind be we to think of

So than information on have better we because will. you commercial any we if probably that don't starts, have the you lag

helpful half. that's about the front Right. No,

or sort so front the of we correctly. make dynamics of also had, the and this your last sure got I impact did the we've rain first front the colder in sure understand question Northeast California we to is in quarter other year, lapping make the half our just half, models weather around the The related to half just of quarter, front first the how

number. big pretty a had He's

almost negative price was think, quarter, -- the the in especially on first of California, daily put was, at look you roughly think X% first I in the in XX% mean, If X% increases. but California I a we I quarter. down that organic

on and like have down now volume negative volumes out. X% were we of labeled in So QX kind of kind

but you would. but don't optimistic get year it the to to and primary weather, specifically if -- there, everything So -- too was things regards primary certainly this the address with driver, the want I was

but to weather. certainly, careful so can can weather quarter first weather got last You be be of -- -- in because favorable bad -- not terms was

And be a the number. Was mix product just there anything aware. Was that's the sales from impact around -- follow-up that. margin maybe just or there because daily Northeast, to a on Right. also

wouldn't business No. out I that mean, call on the I would a overall. driver with what's say, I going as of

questions come next Carter with Stifel. of from Our line the Andrew

the of some Just on commodities. questions kind

inventory categories like Just how make XX%, to for adjust do margin to for you therefore, do rate, positions branches mismatch much often of how commodities? are how exactly, the price-to-gross the commodity your you could sure, at reprice the And be? it long

could it be think a I while.

commodities consider. to all way that it's need is, have the flow think of a just to through. not One things couple the you I there's

X you got So to X over a supplier. to going a months year. inventory Supplier to to is price, make we turns a then -- of have do buy Carry go and it's inventory commodity it. we

And quite actually to it those there. And -- I of last was decreases But pipe this of earlier, think year, cost was on saw bit the so just will, PVC were through actually down if at -- were like would occurring the lead we that resin, year. time and you some look this example, PVC just the prices even be an coming flow if would year. it the way you that as start a

in commodities between lag So is indicators. a there. are There general

XX.X%. Also to just the get then, I know last to was that structural quarter I -- margin, just it guess, gross

was benefits. pricing of normalized that that, for felt You kind

one of margin considered, should $XXX added is, that you getting gross et about kind is guess, business are thinking matching of this at subsequent million what's, to the forward? the structural a higher quarter, margin all M&A. what things we all for be This so prices another, quarter I I'm going kind Is of that annual -- cetera,

year is gross a margin. -- said of We've base this kind -- for

to So strongly the guidance if went the half first the the was our XX.X%. you of in like back pretty year, Things went year. beginning of

end to year. be of we So -- the at up reset going that probably this started high the of range. back the more to as end more low We're the of going we kind range

to the being Yes, range XX.X% XX%.

So...

it. just last question. And Got

kind said was much freight? kind of You minus SG&A. X SG&A How that -- of of driven core by

goods of sold. cost in is freight our of Most

that's it's own more on So the to, do primarily match freight there. We sales volume. on as kind light trucks, for really not to costs Doug primary really is match our staffing The have but thing, last taken, what's the to alluded labor for some costs actions the driving of we've on and the more primary. our

Matthew Barclays. next questions of line the come with Our from Bouley

you do the higher those half if given back end 'XX, comments the of earlier, some in made 'XX, into and would around first of have maybe driving margins some Just the deflation still comment Doug, you on on 'XX flowing to order volumes I flatter Or are, need XXXX? next if what mean, is, margins in grow say, in happen you in question maybe year. the way, said another markets volumes in 'XX? margins higher to would

Yes.

better than impact. leverage terms margin wouldn't in positive is SG&A think is it standpoint, I gross -- of Obviously, significant where have on margin, a an EBITDA volume from flat.

second tailwind first on get than should the bit of the benefit improvement the this focused both. should then margin terms kind abating And from. year, our half said, we've we in a But margin, see deflation some gross in like slightly of And I'd a I in half, there. seen with say, so a of we're lower of level initiatives,

percent So aren't a -- between significantly and obviously, volume. those -- those impacted there's wouldn't aren't be those -- of extremes, highly but couple

Got it.

How to exposure to repair think there's market. seems the interest and clearly curious, home business of Okay. That's your an could helpful which having in and a about part bit of rate impact the about do on upgrade? just of upgrade outsized housing like the end existing there to secondly, I'm mean that what the there, Doug. think leverage more your turnover, do guys market. then and that move you you And how repair

working the there. Well, living trend Outdoor outdoor that's people living And start driving people their backyards, home, invested are their from as I'll are enjoy Yes. growth long-term they is spaces. with there. more in

So business us. that and remodel. for redo that's in. turnover interesting would want been the normally A trend. that moves new a to solid housing backyard of had It's person a driver be They

that their people You've lot sitting got selling are rates a are on low of that home. interest

So is lower. home turnover

because effect was I'm project opposite the got to that was do putting -- to you going I'm here, that going to going since now I stay the off move. I However,

market forward. -- So Long if balanced, takes but to it's be the market be puts is a interesting remodel completely growth how going certainly and sure going those we not solid. to strong X there's is they remodel going there. Overall, think us the term, driver I'm for

number Yes. that's QX No, to that helped little details on of of any kind quickly just terms of true-ups sort in relative And fair. kind the Was incentive of number? in and there accruals, in SG&A SG&A. that the comp anything there QX of

certainly Certainly and this less growth. commissions -- comp year -- will is based our incentive are on be sales say I'd

they year-over-year less than So year, to were going be this last year. they're

you. Thank

the We any floor end have reached I for the turn over closing to Doug comments. to question-and-answer like Black our session. back now of would

interest to SiteOne, your SiteOne our a more you Have for great today. they quarter. speaking associates take do all opportunity appreciate you help forward and in thank day. to Okay. build our I to to our customers. us would certainly again the suppliers terrific Thank like one for look all to after fourth and We joining

participation. Thank today's you. appreciate We This teleconference. your does conclude

your You may rest day. time. disconnect of the your Enjoy lines this at