SiteOne Landscape Supply, Inc. (SITE) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook: Gross margins are expected to improve, and a strong M&A pipeline is highlighted, but new residential construction is expected to decline. The Q&A reveals concerns about market dynamics and rising costs, which management is addressing. Despite some positive aspects like digital sales growth and acquisition synergies, the subdued market demand and lack of detailed guidance on volume growth temper the overall sentiment, leading to a neutral prediction for stock movement.
Key Financial Performance
Net Sales $940 million, essentially flat year-over-year with organic daily sales down 1%. The decline was due to a 4% decrease in volume, partially offset by a 3% increase in pricing. Weather-related delays and macroeconomic uncertainty were cited as reasons for the decline.
Gross Profit $319 million, a 3% increase year-over-year. Gross margin improved by 90 basis points to 33.9%, driven by effective price realization, growth in private label products, and increased sales to small customers.
SG&A Expenses $350 million, up from $343 million in the prior year. SG&A as a percentage of net sales increased by 70 basis points to 37.2%, primarily due to the decline in organic daily sales. However, base business SG&A remained flat on an adjusted basis.
Adjusted EBITDA $25.5 million, a 14% increase year-over-year. Adjusted EBITDA margin expanded by 30 basis points to 2.7%, attributed to improved gross margin and disciplined cost management.
Net Loss $26.6 million, compared to $27.3 million in the prior year. The improvement was primarily due to higher gross profit, partially offset by higher SG&A expenses.
Capital Expenditures $23 million, up from $15 million in the prior year. The increase was attributed to investments in branch locations.
Net Debt $585 million, with a net debt to trailing 12-month adjusted EBITDA ratio of 1.4x, down from 1.5x in the prior year. Available liquidity was $502 million.
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Operating Highlights
Private label product sales: Grew by over 40% during the quarter, contributing to strong gross margin expansion.
Digital sales: Increased by over 60% in the first quarter compared to the prior year period, with strong positive total sales growth from digitally engaged customers.
Acquisition of Reinders: Expanded presence in the Midwest and strengthened capabilities in irrigation, agronomics, and lighting products.
Acquisition of Bourget Flagstone Company: Established presence in Santa Monica, California, and expanded hardscapes offering in Southern California.
Gross margin improvement: Improved by 90 basis points to 33.9%, driven by effective price realization and commercial initiatives.
SG&A management: Kept base business SG&A flat versus prior year on an adjusted basis, despite sales decline.
Delivery expense reduction: Lowered net delivery expenses through efficiency gains and improved pricing.
Acquisition strategy: Completed 2 acquisitions in 2026, adding approximately $110 million in trailing 12-month sales, with a robust pipeline for future acquisitions.
Market share growth: Focused on gaining market share through commercial and operational initiatives, including private label sales and digital engagement.
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Risk or Challenges
Macroeconomic Uncertainty: Increased macroeconomic uncertainty and higher interest rates are negatively affecting the new residential construction market and the repair and upgrade market, leading to soft demand.
Weather-Related Challenges: Winter storms delayed the spring selling season, resulting in a 4% decline in organic sales volume for the quarter.
Commodity Price Deflation: Deflation in grass seed and PVC pipe prices (down 10% and 8%, respectively) continues to impact pricing performance, though the magnitude has moderated.
Freight and Distribution Costs: Higher freight and distribution costs are partially offsetting gains in gross margin.
Supply Chain Disruptions: Price increases for products like fertilizer are being driven by supply disruptions resulting from the conflict in the Middle East.
Underperforming Branches: Focus branches, which are underperforming, continue to face challenges despite some improvements in profitability.
Acquisition Integration Risks: The integration of newly acquired companies, such as Reinders and Bourget Flagstone, poses potential risks to operational efficiency and cultural alignment.
Energy Volatility: Recent energy volatility is contributing to increased macroeconomic uncertainty, further impacting market conditions.
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Guidance & Outlook
Organic Daily Sales Growth: The company expects low single-digit growth in organic daily sales for the full year 2026, supported by 2% to 3% growth in pricing.
End Market Demand: End market demand is expected to be down modestly in 2026, with weakness in new residential construction and repair and upgrade markets offsetting growth in maintenance.
Gross Margin: Gross margin in 2026 is expected to be higher than in 2025, driven by price realization and commercial initiatives, partially offset by higher freight and logistics costs.
Adjusted EBITDA Margin: The company expects solid improvement in adjusted EBITDA margin in 2026 due to productivity improvements and addressing focused branches.
Acquisition Strategy: The company plans to continue adding acquisitions throughout 2026, supported by a robust pipeline of high-quality targets.
Fiscal 2026 Adjusted EBITDA: Full-year adjusted EBITDA for fiscal 2026 is expected to be in the range of $425 million to $455 million, excluding contributions from unannounced acquisitions.
Extra Week Impact in 2026: The extra week in fiscal 2026 is expected to reduce adjusted EBITDA by $4 million to $5 million due to its occurrence in a traditionally loss-making period.
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Shareholder Return Plan
Share Repurchase Program: In the first quarter, we repurchased approximately 155,000 shares for approximately $20 million at an average price of $128.90 per share. Post quarter end, we repurchased an additional 6,000 shares for approximately $800,000.
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Key Q&A
Q:What are the long-term margin improvement opportunities for the next 3 to 5 years?
A:Doug Black mentioned that the company is targeting a 13% margin through a combination of commercial initiatives, organic growth, gross margin expansion, and SG&A efficiency. Key drivers include private label growth, penetration with small customers, focused branches, delivery efficiency, and leveraging digital and sales force performance.
Q:What percentage of total sales are private label, and what are the key products driving growth?
A:Private label accounts for approximately 15% of total sales, with a goal to increase by 100 basis points annually. High-growth private label product lines include Pro-Trade (lighting and landscape supplies), Portfolio (nursery private label), and Solstice Stone (hardscapes private label). These grew 40%, while total private label grew 10% in the quarter.
Q:What was the impact of weather and macroeconomic factors on the quarter's performance?
A:Doug Black stated that weather and macroeconomic factors both impacted performance. Maintenance, which is 36% of the business, was deferred due to weather, and volumes improved in April but have not fully caught up. Macroeconomic factors, including low consumer confidence and high gas prices, contributed to a modestly down market outlook.
Q:Why was the price increase not raised more significantly, and what is the expected cadence for price increases?
A:Eric Elema explained that the company expects a 3% price increase in Q2, stepping down to 2% in the second half of the year. The uncertainty in PVC and fertilizer prices contributes to a conservative 2%-3% price increase forecast for the year.
Q:What is the expected breakdown between gross margin and SG&A leverage this year?
A:Eric Elema stated that gross margin is expected to contribute more than SG&A leverage this year. SG&A leverage is anticipated in Q2 and Q3 but not in Q4 due to an extra week. Gross margin is expected to expand in Q2 and possibly in Q3, with SG&A leverage being more challenging due to market dynamics.
Q:Are there any incremental cost-out actions being considered due to subdued market dynamics?
A:Doug Black mentioned that the company is managing labor and other expenses tightly and can take further actions if the market worsens. Rising fuel costs for delivery, which impact SG&A, are being addressed with a fuel surcharge.
Q:Are there concerns about passing price increases to customers in a shaky demand environment?
A:Doug Black stated that the market is efficient in passing through price increases, and the company has been able to do so successfully. Communication with customers and suppliers ensures seamless implementation.
Q:How quickly are price increases from suppliers implemented?
A:Eric Elema explained that price increases are implemented concurrently with supplier notifications, with advance notice provided to customers.
Q:What is the status of grass seed pricing?
A:Grass seed pricing is expected to reset in the third quarter.
Q:How much of the gross margin expansion is due to structural initiatives versus temporary benefits?
A:Doug Black did not provide a specific breakdown but noted that private label and small customers are contributing strongly, along with price realization.
Q:What is the margin profile and integration plan for the Reinders acquisition?
A:Doug Black stated that Reinders has a margin profile similar to the company and offers significant synergies in irrigation, agronomics, lighting, and landscape supplies. Integration will occur next year, with some synergies captured this year.
Q:Could fertilizer shortages or inflation pressures impact maintenance demand?
A:Doug Black stated that the 5% fertilizer price increase is manageable and unlikely to impact demand. The company has a strong supply chain and does not anticipate shortages.
Q:What is the expected decline in new residential construction this year?
A:Doug Black expects new residential construction to decline mid- to high single digits this year, with mixed feedback from builders. Any improvement in starts this year would impact 2027 demand.
Q:Are customers using digital and delivery tools more in a higher freight cost environment?
A:Doug Black confirmed that digital sales are up 60% in the quarter, and customers are increasingly using digital tools and delivery services to reduce costs.
Q:What is the company's approach to capital allocation and M&A pipeline?
A:Eric Elema stated that the company is opportunistic with share repurchases and prioritizes growth and M&A. Doug Black mentioned a healthy M&A pipeline and confidence in closing more deals in 2026.
Q:What is the improvement in volumes seen in April, and how does it affect Q2 growth?
A:Doug Black noted that volumes improved in April but are not yet positive. Q2 may see some catch-up from Q1, but volume growth is better assessed on a half-year basis.
Q:Do customers pull forward purchases ahead of price increases?
A:Doug Black confirmed that customers tend to pull forward purchases, especially for products like fertilizer and pipe, but are limited by storage capacity.
Q:What factors contributed to the decline in inventory costs in Q1?
A:Eric Elema attributed the decline to private label growth, product mix, and being fully stocked for the spring selling season, particularly with fertilizer.
Q:What drove the increase in freight handling and distribution expenses?
A:Eric Elema cited rising diesel costs, international freight for private label products, and the addition of a fifth distribution center as contributors.
Q:What is the impact of urea price increases on fertilizer costs and inventory?
A:Doug Black stated that urea is only one component of fertilizer, and the company adjusts components to minimize customer impact. The 5% price increase reflects cost pass-through, and the company has sufficient inventory for the season.
Q:What is the expected improvement in focus branch profitability this year?
A:Doug Black expressed confidence in improving focus branch profitability, even in a soft market, but acknowledged that tougher market conditions could make it more challenging.
Q:What is the expected contribution of the Reinders acquisition to EBITDA this year?
A:Doug Black expects Reinders to contribute $8 million to $9 million to EBITDA this year, providing additional flexibility within the company's range.
Q:Review of Unclear Management Responses
A:Management avoided providing a specific breakdown of how much of the gross margin expansion is due to structural initiatives versus temporary benefits. Additionally, they did not quantify the improvement in volumes seen in April or provide detailed expectations for volume growth by quarter.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Assistant Secretary
CFO Assistant
Executive VP
Flagstone
Midwest
Reinders generation
Santa Monica
acquisition Reinders
acquisition month
application
customer activity
customer relationship
decline sale
disruption
expertise
fuel
generation family
hardscape product
improvement branch
improvement margin
integration
irrigation agronomics
landscape lighting
market leader
point improvement
presence
role
sale decline
selling season
share margin
share sale
site
spring season
spring selling
start spring
timing
winter storm
SITE Transcript
SiteOne Landscape Supply, Inc. (SITE) Q1 2026 Earnings Call Transcript
Unknown4-29
The earnings call presents a mixed outlook: Gross margins are expected to improve, and a strong M&A pipeline is highlighted, but new residential construction is expected to decline. The Q&A reveals concerns about market dynamics and rising costs, which management is addressing. Despite some positive aspects like digital sales growth and acquisition synergies, the subdued market demand and lack of detailed guidance on volume growth temper the overall sentiment, leading to a neutral prediction for stock movement.
SiteOne Landscape Supply, Inc. (SITE) Q4 2025 Earnings Call Transcript
Unknown2-11
The earnings call presents a mixed outlook. While there are positive aspects like digital sales growth and private label expansion, challenges such as branch closures and soft residential construction remain. The Q&A reveals balanced SG&A and gross margin improvements, but uncertainties in market conditions persist. The company's strategic focus on market share gains and operational efficiencies provides some optimism, yet the overall sentiment is tempered by the mixed financial and market dynamics.
SiteOne Landscape Supply, Inc. (SITE) Q3 2025 Earnings Call Transcript
Unknown10-29
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.
SiteOne Landscape Supply, Inc. (SITE) Q2 2025 Earnings Call Transcript
Neutral7-30
SITE Report
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