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01/11 17:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Despite strategic acquisitions and a clear market position, financial performance was weak, with an EPS miss and increased net loss. Organic sales declined, and gross margin fell. While shareholder returns through share repurchases were positive, increased debt and cash outflow were concerns. Q&A revealed cautious organic growth expectations and vague responses on tariff impacts, adding uncertainty. The combination of these factors suggests a negative sentiment, likely leading to a stock price decline of -2% to -8%.
EPS Reported EPS is $-0.61, compared to expectations of $-0.5, indicating a miss on earnings expectations.
Net Sales Growth 4% net sales growth year-over-year, driven by 5% growth from acquisitions, offset by a 1% decline in organic daily sales.
Adjusted EBITDA Adjusted EBITDA increased 6% to $22.4 million, with an adjusted EBITDA margin improvement of 10 basis points to 2.4% due to higher net sales and improved SG&A leverage.
Gross Profit Gross profit increased 3% to approximately $310 million, while gross margin decreased by 30 basis points to 33% due to lower price realization and higher freight costs.
SG&A Expenses SG&A increased 5% to approximately $343 million, with SG&A as a percentage of net sales increasing 30 basis points to 36.5%, primarily due to acquisitions.
Net Loss Net loss attributable to SiteOne was $27.3 million, compared to $19.3 million for the prior year, primarily due to higher SG&A expenses.
Working Capital Working capital at the end of the first quarter was approximately $1 billion, up from $910 million year-over-year, primarily due to acquisitions and increased inventory purchases.
Cash Used in Operating Activities Cash used in operating activities increased approximately $30 million to approximately $130 million, primarily reflecting early inventory purchases.
Net Debt Net debt at the end of the quarter was approximately $580 million, compared to approximately $508 million year-over-year, with leverage increasing to 1.5 times trailing 12-month adjusted EBITDA.
Capital Expenditures Capital expenditures for the quarter were approximately $15 million, up from approximately $9 million for the prior year, due to increased investment in branch equipment and improvements.
Digital Sales Growth: Digital sales grew by 140% in Q1 2025, building on 180% growth in 2024.
Private Label Growth: Private label brands like Pro-Trade and Solstice Stone grew by 30% in Q1 2025.
Market Share: SiteOne holds an 18% share of a $25 billion market, indicating significant growth potential.
Acquisition Impact: Acquisitions contributed approximately $45 million or 5% to net sales growth in Q1 2025.
Cost Control: Strong cost control actions from 2024 contributed to improved operational efficiency.
SG&A Management: SG&A as a percentage of net sales increased to 36.5%, but base business SG&A decreased by 3%.
Acquisition Strategy: Completed 100th acquisition in March 2025, with a robust pipeline for future growth.
Market Positioning: SiteOne is the industry leader, three times the size of the nearest competitor, with plans to expand further.
Earnings Expectations: SiteOne Landscape Supply, Inc. missed earnings expectations with a reported EPS of $-0.61, compared to expectations of $-0.5.
Weather Challenges: The company faced challenging weather conditions and a later spring season, impacting sales and volume growth.
Price Deflation: The company experienced price deflation, particularly in commodity products like PVC pipe and grass seed, which negatively affected gross margins.
Tariff-Related Costs: There is uncertainty regarding the impact of recently announced tariffs, with expectations of cost increases from suppliers.
Economic Uncertainty: Macroeconomic factors such as inflation, interest rates, and consumer confidence are expected to negatively affect demand in end markets.
End Market Performance: The repair and upgrade market is projected to decline due to lower consumer confidence and reduced existing home sales.
Acquisition Strategy Risks: The ongoing macroeconomic uncertainty may dampen acquisition activity, leading to potentially lower acquired revenue in 2025.
SG&A Expenses: Selling, general and administrative expenses increased, primarily due to acquisitions, which could impact profitability.
Market Share: Despite being the industry leader, SiteOne has only an 18% market share in a fragmented $25 billion market, indicating potential competitive pressures.
Acquisition Strategy: SiteOne has executed its acquisition strategy by adding two companies year-to-date, contributing $20 million in trailing 12-month sales. The company has completed 100 acquisitions since 2014, adding over $2 billion in revenue.
Market Position: SiteOne holds an 18% market share in a fragmented $25 billion wholesale landscaping products distribution market, indicating significant long-term growth potential.
Operational Initiatives: The company is focused on improving customer excellence, accelerating organic growth, expanding gross margin, and increasing SG&A leverage through various initiatives.
Digital Growth: SiteOne's digital sales grew by 140% in Q1 2025, indicating a strong push towards digital engagement and efficiency.
Focused Branches: SiteOne is managing underperforming branches to improve their performance, with expectations of a meaningful adjusted EBITDA margin lift in the coming years.
Revenue Expectations: SiteOne expects low-single-digit organic daily sales growth for the full year 2025, supported by current sales volume trends.
Adjusted EBITDA Guidance: The company anticipates full-year adjusted EBITDA for fiscal 2025 to be in the range of $400 million to $430 million, excluding contributions from unannounced acquisitions.
Gross Margin Outlook: Gross margin in 2025 is expected to be similar to 2024, driven by initiatives and contributions from acquisitions.
End Market Outlook: The company expects end markets to be flat to slightly down for the full year 2025, with specific segments showing varied performance.
SG&A Expectations: SiteOne expects to achieve solid SG&A leverage on an adjusted basis in 2025, even with modest organic growth.
Share Repurchase: We repurchased approximately 29,000 shares for $3.4 million in the first quarter. In addition, we purchased an additional 142,000 shares or $16.6 million subsequent to quarter end.
The earnings call reveals mixed signals: stable pricing and organic growth, positive EBITDA margin trends, and sustainable private label growth are offset by weak Q4 guidance, flat commercial construction demand, and lack of detailed future guidance. These factors suggest a balanced outlook, resulting in a neutral stock price prediction.
Despite strategic acquisitions and a clear market position, financial performance was weak, with an EPS miss and increased net loss. Organic sales declined, and gross margin fell. While shareholder returns through share repurchases were positive, increased debt and cash outflow were concerns. Q&A revealed cautious organic growth expectations and vague responses on tariff impacts, adding uncertainty. The combination of these factors suggests a negative sentiment, likely leading to a stock price decline of -2% to -8%.
The earnings call reveals macroeconomic uncertainty affecting acquisitions, low sales growth outlook, and increased net loss due to higher SG&A expenses. Despite a slight EBITDA increase, the financial health is concerning with rising net debt and cash used in operations. Share repurchases are positive, but weak organic growth and unclear management responses on tariffs and margins add to negative sentiment. The Q&A highlights potential risks and uncertainties, further impacting the outlook. Without market cap data, a negative sentiment is prudent.
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