SiteOne Landscape Supply, Inc. 2026 Q3 Earnings Call

Please go ahead. Thank you, and good morning, everyone.

We issued our third quarter 2026 earnings press release this morning and posted a slide presentation to the investor relations portion of our website at investors.siteone.com. I am joined today by Doug Black, our Chairman and Chief Executive Officer, and Daniel Laughlin, SVP, Strategy and Development. Before we begin, I would like to remind everyone that today's press release, slide presentation, and the statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission.

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

Thanks, Eric. Good morning, and thank you all for joining us today. We delivered a solid third quarter performance with 3% growth in net sales, 8% growth in adjusted EBITDA, and 60 basis points of adjusted EBITDA margin expansion compared to the prior year period, despite continued softness in underlying market demand and a delayed fall season. Our teams made good progress on our commercial and operational initiatives and maintained strong cost discipline in the face of lower sales volume. Our acquisitions continued to perform well, and we were able to add another excellent company to SiteOne through acquisition during the quarter. We also continued to leverage our strong cash flow and balance sheet to take advantage of our recent share price weakness and returned over $62 million to shareholders during the quarter through our share repurchase program.

Our board recently increased our share repurchase authorization by $500 million, and we plan to continue returning capital to shareholders opportunistically in the coming years. While we expect market conditions to be challenging in the near term, we remain focused on the opportunities within our control to gain market share, improve productivity, and strengthen our competitive position. These self-help opportunities, combined with our strong cash flow and acquisition strategy, enable us to drive sustained performance and growth for our shareholders this year and in the years to come. I will start today's call with a brief review of our unique market position and our strategy, followed by highlights from the third quarter. Eric will then walk you through our third quarter financial results in more detail and provide an update on our balance sheet and liquidity position.

Daniel will discuss our acquisition strategy, and then I will come back to address our outlook and guidance for 2026 before taking your questions. As shown on slide 4 of the earnings presentation, we have a strong footprint of more than 690 branches and five distribution centers across 45 U.S. states and five Canadian provinces. We are the clear industry leader, approximately three times the size of our nearest competitor, yet we estimate that we only have about a 13% share of the very fragmented, $36 billion wholesale landscaping products distribution market. Accordingly, our long-term opportunity to grow and gain market share remains significant. We have a balanced mix of business with 66% focused on maintenance, repair, and upgrade, 20% focused on new residential construction, and 14% on new commercial and recreational construction.

As the only nationwide full product line wholesale distributor in the market, we also have an excellent balance across our product lines as well as geographically. Our strategy to fill in our product lines across the U.S. and Canada, both organically and through acquisition, further strengthens this balance over time. Overall, our end market mix, broad product Portfolio, and geographic coverage offers us multiple avenues to grow and create value for our customers and suppliers while providing important resiliency in softer markets like the market we are in today. Turning to slide 5, our strategy remains straightforward and unchanged. We leverage the strengths of both our large nationwide organization and our very experienced and highly entrepreneurial local teams. Our goal is to fully utilize our scale, resources, and capabilities in support of local execution to deliver superior value to our customers and suppliers in every market we serve.

We do this through our focused commercial and operational initiatives, which not only build a long-term competitive advantage for all our stakeholders, but also help us overcome the near-term headwinds. These initiatives are complemented by our acquisition strategy, which fills in our product Portfolio, moves us into new geographic markets, and adds terrific new talent to SiteOne. Taken all together, we expect our strategy to create superior value for our shareholders through organic growth, acquisition growth, and EBITDA margin expansion. At our Investor Day in June, we described our strategy and initiatives in detail and outlined our financial targets through 2030. With the current challenging end markets, we believe the execution of our strategy allows us to outperform the market organically while leveraging acquisition growth and EBITDA margin expansion to deliver solid financial progress. We expect our progress to accelerate as end markets return to normal growth.

Accordingly, we remain highly focused on executing our commercial and operational initiatives, strengthening the business, and continuously improving areas that are within our control. On slide six, you can see our strong track record over the last 10 years with consistent organic and acquisition growth. As mentioned, we expect to continue driving organic and acquisition growth while recovering and expanding our EBITDA margin significantly over the coming years. As you can see from the slide, we expanded our adjusted EBITDA margin last year and expect to make further progress this year despite soft markets and significant headwinds. Our ability to deliver EBITDA margin expansion in both soft and healthy market conditions is expected to yield attractive EBITDA growth and improve return on invested capital in the coming years. Finally, with our strong cash flow, we can support our strategy and return capital to shareholders through our share repurchase program.

Overall, we believe that we are well-positioned to create solid value for our shareholders in 2026 and significant value over the longer term. We have completed 109 acquisitions across all product lines since the start of 2014, adding approximately $2.2 billion in trailing 12 months sales to SiteOne, which demonstrates the strength and durability of our acquisition strategy. Our pipeline of potential deals remains robust, and we expect to continue adding and integrating more companies in 2026 to support our growth. Given the fragmented nature of our industry and our current modest market share, we believe that we can add over $2 billion of acquired trailing 12 months revenue to SiteOne over the next 10 years. Slide seven shows the long runway that we have ahead in filling in our product Portfolio, which we aim to do primarily through acquisition, especially in the nursery and hardscapes lines of business.

We are well connected with the best companies in our industry and expect to continue filling in these markets systematically over the next decade. I will now discuss some of our third quarter performance highlights, as shown on slide eight. Net sales increased 3% to $1.29 billion compared to the prior year period, while organic daily sales decreased 1%. Higher price contribution was more than offset by lower sales volume amid continued softness in underlying market demand, while acquisitions continued to contribute to growth. Note that we experienced hot and dry weather in key markets during August and September, which pushed some of the fall season into October. We are encouraged to see those sales come through this month with organic daily sales growth of approximately 2% so far in October, yielding modest organic daily sales growth of flat to up 1% for the four-month period of July through October.

Gross profit increased 5% to approximately $459 million, and gross margin improved by 80 basis points to 35.5%, reflecting strong price realization and continued execution of our commercial initiatives. SG&A, as a percentage of net sales, increased 20 basis points to 28.6% as lower sales volume and higher fuel and healthcare costs more than offset the benefits of our operational initiatives and strong overall cost control. Note that increased fuel costs added approximately 15 basis points to SG&A as a percentage of sales, while our fuel surcharges added an offsetting 15 basis points to gross margin. Adjusted EBITDA increased 8% to $138.3 million, and adjusted EBITDA margin improved by 60 basis points to 10.7%. Overall, we were pleased to expand adjusted EBITDA margin despite the challenging demand environment and organic daily sales decline.

In terms of initiatives, we continue to make solid progress during the quarter despite the lower end market demand, executing specific actions to improve our customer experience, drive organic sales, expand gross margin, and control SG&A. For organic sales and gross margin expansion, we achieved good organic daily sales growth with our small customers and grew our Pro-Trade, Solstice, and Portfolio private brand products collectively by 23% during the quarter and over 35% year-to-date. Our percentage of branches with bilingual capability is nearly 70%, despite adding 12 Reinders branches earlier this year without this capability. We continue to execute our Hispanic marketing strategy to drive growth in this important customer segment. We increased our digital sales on siteone.com by over 45% year-to-date versus the prior year period, while also increasing our regular active users by approximately 35%.