SiteOne Landscape Supply, Inc. (NYSE:SITE) is the largest and only national full product line wholesale distributor of landscape supplies in the United States. The company serves primarily residential and commercial landscape professionals who specialize in the design, installation, and maintenance of lawns, gardens, golf courses, and other outdoor spaces. With over 690 branch locations across 45 U.S. states and six Canadian provinces, SiteOne offers a comprehensive selection of approximately 160,000 SKUs, including irrigation supplies, fertilizer and control products, hardscapes, landscape accessories, nursery goods, outdoor lighting, and ice melt products.

Business Overview

SiteOne has a well-balanced business model, with 65% of its sales focused on maintenance, repair, and upgrade, 21% on new residential construction, and 14% on new commercial and recreational construction. This diversification provides the company with multiple avenues for growth and resilience in the face of market fluctuations. The company's strategy is to leverage its scale, resources, and functional talent to support its experienced and entrepreneurial local teams, enabling them to consistently deliver superior value to customers and suppliers.

Financials

In the fiscal year ended December 29, 2023, SiteOne reported annual net sales of $4,301.2 million, a 5.2% increase from the prior year. The company's annual net income was $173.4 million, and it generated $297.5 million in annual operating cash flow and $261.5 million in annual free cash flow. These strong financial results demonstrate SiteOne's ability to execute its strategy and capitalize on the growth opportunities in the landscape supply industry.

During the first quarter of 2024, SiteOne reported net sales of $904.8 million, an 8% increase compared to the same period in the prior year. Organic daily sales growth was 1% for the quarter, as volume growth of 5% more than offset a 4% decline in pricing due to commodity price deflation. Acquisitions contributed an additional 7% to net sales growth. Gross profit for the quarter increased 5% to $301.2 million, but gross margin decreased 100 basis points to 33.3% due to the impact of lower pricing. Selling, general, and administrative (SG&A) expenses increased 12% to $327.7 million, primarily due to the impact of acquisitions, resulting in a net loss of $19.3 million for the quarter.

Outlook

Despite the near-term headwinds from commodity price deflation and higher SG&A, SiteOne remains confident in its ability to navigate the current environment and achieve continued success. The company expects organic daily sales growth to be in the low single digits for the full year 2024, with steady volume growth more than offsetting the 2% expected price decline. SiteOne also anticipates that gross margin will be similar to 2023 levels, as the negative effect of price deflation is offset by the company's initiatives and the impact of acquisitions. Additionally, the company expects to achieve SG&A leverage as it drives productivity improvements in the base business, more than offsetting the negative impact of higher SG&A from acquisitions.

Geographic Performance

Geographically, SiteOne has a strong presence across the United States and Canada, with 5 out of its 9 regions achieving positive organic daily sales growth in the first quarter of 2024. The company saw double-digit organic sales growth in the Midwest, which benefited from solid demand, less rain, and an earlier start to the spring season. Conversely, the Southeast markets experienced organic sales declines due to tough comparisons and less favorable weather.

Product Categories

In terms of product categories, SiteOne's organic daily sales for agronomic products, which include fertilizer, control products, ice melt, and equipment, increased 10% in the first quarter, driven by strong volume growth resulting from lower prices, solid end-market demand, market share gains, more snow events, and an earlier start to spring in many key northern markets. Organic daily sales for landscaping products, which include irrigation, nursery, hardscapes, outdoor lighting, and landscape accessories, decreased 2% due to lower prices for products like PVC pipe and unfavorable weather in many key construction markets.

Recent Developments

SiteOne's acquisition strategy continues to be a key driver of its growth. Since 2014, the company has acquired 93 companies with approximately $1.9 billion in trailing 12-month net sales added to the business. In April 2024, SiteOne acquired Eggemeyer, a wholesale distributor of bulk landscape supplies, and a 75% interest in Devil Mountain Wholesale Nursery, a leading wholesale distributor and grower of nursery products in California. These acquisitions further strengthen SiteOne's product offerings and geographic presence, positioning the company for continued success.

Liquidity

The company's strong balance sheet and ample liquidity provide the financial flexibility to execute its growth strategy. As of the end of the first quarter of 2024, SiteOne had $41.5 million in cash and cash equivalents, $498 million in available capacity under its ABL facility, and a net debt to adjusted EBITDA leverage ratio of 1.3x, well within the company's target range of 1 to 2x.

Conclusion

Looking ahead, SiteOne remains confident in its ability to navigate the current market environment and continue delivering value for its stakeholders. The company expects to achieve low single-digit organic daily sales growth for the full year 2024, with steady volume growth more than offsetting the 2% expected price decline. SiteOne also anticipates maintaining gross margin at levels similar to 2023 and achieving SG&A leverage, which should result in an improvement in the company's full-year adjusted EBITDA margin.

Overall, SiteOne's strong market position, diversified business model, successful acquisition strategy, and solid financial position make it well-positioned to capitalize on the growth opportunities in the landscape supply industry. The company's focus on operational excellence, commercial initiatives, and strategic acquisitions should continue to drive value for its shareholders in the years to come.