Third Quarter 2023 Highlights (Compared to Third Quarter
2022):
- Net sales increased 4% to $1.15 billion
- Organic Daily Sales decreased 2%
- Gross profit of $388.1 million was largely unchanged; gross
margin contracted 130 basis points to 33.9%
- SG&A as a percentage of Net sales increased 100 basis
points to 27.2%
- Net income decreased 22% to $57.3 million
- Adjusted EBITDA decreased 12% to $119.8 million; Adjusted
EBITDA margin was 10.5%
- Operating cash flow decreased $47.4 million to $88.7
million
- Closed six acquisitions: Hickory Hill Farm & Garden, New
England Silica, Timothy’s Center for Gardening, Pioneer Landscape
Centers, Regal Chemical, and JMJ Organics
- Successfully increased term loan by $120 million
SiteOne Landscape Supply, Inc. (the “Company” or “SiteOne”)
(NYSE: SITE) announced earnings for its third quarter ended October
1, 2023 (“Third Quarter 2023”).
“Against the headwinds of softer markets and commodity price
deflation, we were pleased to achieve continued growth in Net sales
during the third quarter with positive sales volume growth and good
contribution from acquisitions,” said Doug Black, SiteOne’s
Chairman and CEO. “These same headwinds negatively affected gross
margin and EBITDA margin. We also added six excellent companies to
SiteOne during the quarter, expanding our position in key markets
and increasing our ability to serve customers and grow. While
certain areas of the economy have slowed, customer demand has
remained resilient, and we continue to build our capabilities to
consistently gain market share. Overall, we remain confident in our
long-term strategy and in our ability to drive performance and
growth.”
Third Quarter 2023 Results
Net sales for the Third Quarter 2023 increased to $1.15 billion,
or 4%, compared to $1.10 billion for the prior-year period. Organic
Daily Sales decreased 2% compared to the prior-year period driven
by a decline in prices for commodity products such as PVC pipe,
grass seed, and fertilizer compared to the prior-year period.
Acquisitions contributed $64.7 million, or 6%, to Net sales growth
for the quarter.
Gross profit was $388.1 million for the Third Quarter 2023 which
was similar to prior-year period gross profit of $388.6 million.
Gross margin contracted 130 basis points to 33.9% for the Third
Quarter 2023 primarily due to lower prices and the absence of the
price realization benefit in the prior year, partially offset by
the positive impact of acquisitions and lower freight costs.
Selling, general and administrative expenses (“SG&A”) for
the Third Quarter 2023 increased to $311.8 million from $289.2
million for the prior-year period. SG&A as a percentage of Net
sales increased 100 basis points to 27.2% due to the impact of
acquisitions and higher operating costs supporting our growth.
Net income for the Third Quarter 2023 was $57.3 million,
compared to Net income of $73.3 million for the prior-year period,
as Net sales growth was more than offset by lower gross margin and
increased SG&A expense.
Adjusted EBITDA decreased 12% to $119.8 million for the Third
Quarter 2023, compared to $135.6 million for the prior-year period.
Adjusted EBITDA margin contracted 180 basis points to 10.5%.
Operating cash flow decreased $47.4 million to $88.7 million for
the Third Quarter 2023 compared to $136.1 million for the
prior-year period. The decrease in operating cash flow primarily
reflects earlier timing on our seasonal inventory drawdown.
Operating cash flow for the nine months ended October 1, 2023
increased $77.4 million to $189.9 million compared to the
prior-year period of $112.5 million reflecting improved working
capital management.
Net debt, calculated as long-term debt (net of issuance costs
and discounts) plus finance leases, net of cash and cash
equivalents on our balance sheet as of October 1, 2023, was $446.0
million compared to $376.6 million as of October 2, 2022. Net debt
to Adjusted EBITDA for the last twelve months was 1.1 times
compared to 0.8 times at the same time last year.
Outlook
We are pleased to be achieving consistent sales volume growth
despite softer end markets. However, we are experiencing slightly
more commodity price deflation than we had previously forecasted,
which is negatively affecting Organic Daily Sales growth and gross
margin. We expect price deflation to moderate in 2024 but continue
to be a headwind for the remainder of the year. Accordingly, we
expect Organic Daily Sales growth to be negative in the fourth
quarter with price deflation more than offsetting positive sales
volume growth. We expect gross margin and Adjusted EBITDA margin in
the fourth quarter to be lower than the prior year, although we
expect the year-over-year variance to improve from the third
quarter of this year. Lastly, we expect the acquisitions we
completed in the third quarter to have a dilutive effect on
Adjusted EBITDA during the fourth quarter given the seasonal nature
of these new companies.
Given these trends, we now expect our Adjusted EBITDA to be in
the range of $400 million to $410 million. Our guidance does not
include any contributions from unannounced acquisitions.
Reconciliation for the forward-looking full-year 2023 Adjusted
EBITDA outlook is not being provided, as the Company does not
currently have sufficient data to accurately estimate the variables
and individual adjustments for such reconciliation.
Conference Call Information
SiteOne management will host a conference call today, November
1, 2023, at 8:00 a.m. Eastern Time, to discuss the Company’s
financial results. The conference call can be accessed by dialing
877-704-4453 (domestic) or 201-389-0920 (international), or by
clicking on this link for instant telephone access to the call. A
telephonic replay will be available approximately two hours after
the call by dialing 844-512-2921, or for international callers,
412-317-6671. The passcode for the live call and the replay is
13741707. The replay will be available until 11:59 p.m. (ET) on
November 15, 2023.
Interested investors and other parties can listen to a webcast
of the live conference call by logging onto the Investor Relations
section of the Company's website at http://investors.siteone.com.
The online replay will be available for 30 days on the same website
immediately following the call. A slide presentation highlighting
the Company’s results and key performance indicators will also be
available on the Investor Relations section of the Company’s
website.
To learn more about SiteOne, please visit the company's website
at http://investors.siteone.com.
About SiteOne Landscape Supply, Inc.
SiteOne Landscape Supply, Inc. is the largest and only national
full product line wholesale distributor of landscape supplies in
the United States and has a growing presence in Canada. Its
customers are primarily residential and commercial landscape
professionals who specialize in the design, installation and
maintenance of lawns, gardens, golf courses and other outdoor
spaces.
Forward-Looking Statements
This release contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may include, but are not limited to,
statements relating to our 2023 Adjusted EBITDA outlook and our
share repurchase program. Some of the forward-looking statements
can be identified by the use of terms such as “may,” “intend,”
“might,” “will,” “should,” “could,” “would,” “expect,” “believe,”
“estimate,” “anticipate,” “predict,” “project,” “potential,” or the
negative of these terms, and similar expressions. You should be
aware that these forward-looking statements are subject to risks
and uncertainties that are beyond our control. Further, any
forward-looking statement speaks only as of the date on which it is
made, and we undertake no obligation to update any forward-looking
statement to reflect events or circumstances after the date on
which it is made or to reflect the occurrence of anticipated or
unanticipated events or circumstances. New factors emerge from time
to time that may cause our business not to develop as we expect,
and it is not possible for us to predict all of them. Factors that
may cause actual results to differ materially from those expressed
or implied by the forward-looking statements include, but are not
limited to, the following: cyclicality in residential and
commercial construction markets; general economic and financial
conditions, including a prolonged economic recession; seasonality
of our business and its impact on demand for our products; weather
and climate conditions; prices for the products we purchase may
fluctuate; market variables, including inflation and elevated
interest rates for prolonged periods; increases in operating costs;
public health emergencies such as the COVID-19 pandemic; public
perceptions that our products and services are not environmentally
friendly or that our practices are not sustainable; competitive
industry pressures, including competition for our talent base;
supply chain disruptions, product or labor shortages, and the loss
of key suppliers; inventory management risks; ability to implement
our business strategies and achieve our growth objectives;
acquisition and integration risks, including increased competition
for acquisitions; risks associated with our large labor force and
our customers’ labor force and labor market disruptions; retention
of key personnel; construction defect and product liability claims;
impairment of goodwill; adverse credit and financial markets events
and conditions; inefficient or ineffective allocation of capital;
credit sale risks; performance of individual branches; climate,
environmental, health and safety laws and regulations; hazardous
materials and related materials; laws and government regulations
applicable to our business that could negatively impact demand for
our products; cybersecurity incidents involving our systems or
third-party systems; failure or malfunctions in our information
technology systems; security of personal information about our
customers; intellectual property and other proprietary rights;
unanticipated changes in our tax provisions; threats from
terrorism, violence, uncertain political conditions, and
geopolitical conflicts such as the ongoing conflict between Russia
and Ukraine as well as the conflict in the Gaza Strip; risks
related to our current indebtedness and our ability to obtain
financing in the future; financial institution disruptions; risks
related to our common stock; and other risks, as described in Item
1A, “Risk Factors”, and elsewhere in our Annual Report on Form 10-K
for the fiscal year ended January 1, 2023, as may be updated by
subsequent filings under the Securities Exchange Act of 1934, as
amended, including Forms 10-Q and 8-K.
Non-GAAP Financial Information
This release includes certain financial information, not
prepared in accordance with U.S. GAAP. Because not all companies
calculate non-GAAP financial information identically (or at all),
the presentations herein may not be comparable to other similarly
titled measures used by other companies. Further, these measures
should not be considered substitutes for the information contained
in the historical financial information of the Company prepared in
accordance with U.S. GAAP that is set forth herein.
We present Adjusted EBITDA in order to evaluate the operating
performance and efficiency of our business. Adjusted EBITDA
represents EBITDA as further adjusted for items permitted under the
covenants of our credit facilities. EBITDA represents our Net
income (loss) plus the sum of income tax (benefit) expense,
interest expense, net of interest income, and depreciation and
amortization. Adjusted EBITDA represents EBITDA as further adjusted
for stock-based compensation expense, (gain) loss on sale of assets
and termination of finance leases not in the ordinary course of
business, financing fees as well as other fees and expenses related
to acquisitions, and other non-recurring (income) loss. Adjusted
EBITDA does not include pre-acquisition acquired Adjusted EBITDA.
Adjusted EBITDA is not a measure of our liquidity or financial
performance under U.S. GAAP and should not be considered as an
alternative to Net income, operating income or any other
performance measures derived in accordance with U.S. GAAP, or as an
alternative to cash flow from operating activities as a measure of
our liquidity. The use of Adjusted EBITDA instead of Net income has
limitations as an analytical tool. Because not all companies use
identical calculations, our presentation of Adjusted EBITDA may not
be comparable to other similarly titled measures of other
companies, limiting its usefulness as a comparative measure. Net
debt is defined as long-term debt (net of issuance costs and
discounts) plus finance leases, net of cash and cash-equivalents on
our balance sheet. Leverage Ratio is defined as Net debt to
trailing twelve months Adjusted EBITDA. Free Cash Flow is defined
as Cash Flow from Operating Activities, less capital expenditures.
We define Organic Daily Sales as Organic Sales divided by the
number of Selling Days in the relevant reporting period. We define
Organic Sales as Net sales, including Net sales from newly-opened
greenfield branches, but excluding Net sales from acquired branches
until they have been under our ownership for at least four full
fiscal quarters at the start of the fiscal year. Selling Days are
the number of business days, excluding Saturdays, Sundays, and
holidays, that SiteOne branches are open during the relevant
reporting period.
SiteOne Landscape Supply,
Inc.
Consolidated Balance Sheets
(Unaudited)
(In millions, except share and
per share data)
Assets
October 1, 2023
January 1, 2023
Current assets:
Cash and cash equivalents
$
74.9
$
29.1
Accounts receivable, net of allowance for
doubtful accounts of $24.2 and $21.7, respectively
540.4
455.5
Inventory, net
852.2
767.7
Income tax receivable
3.7
10.9
Prepaid expenses and other current
assets
102.3
56.1
Total current assets
1,573.5
1,319.3
Property and equipment, net
232.0
188.8
Operating lease right-of-use assets,
net
384.8
321.6
Goodwill
484.4
411.9
Intangible assets, net
304.2
276.0
Deferred tax assets
2.8
3.7
Other assets
7.8
12.6
Total assets
$
2,989.5
$
2,533.9
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
355.3
$
279.7
Current portion of finance leases
20.0
14.8
Current portion of operating leases
81.1
70.1
Accrued compensation
65.9
81.2
Long-term debt, current portion
5.3
4.0
Accrued liabilities
127.1
110.0
Total current liabilities
654.7
559.8
Other long-term liabilities
15.2
12.8
Finance leases, less current portion
62.0
43.9
Operating leases, less current portion
313.5
260.1
Deferred tax liabilities
15.0
7.8
Long-term debt, less current portion
433.6
346.6
Total liabilities
1,494.0
1,231.0
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01;
1,000,000,000 shares authorized; 45,341,602 and 45,148,312 shares
issued, and 45,109,581 and 44,916,291 shares outstanding at October
1, 2023 and January 1, 2023, respectively
0.5
0.5
Additional paid-in capital
594.9
577.1
Retained earnings
919.7
742.9
Accumulated other comprehensive income
5.7
7.7
Treasury stock, at cost, 232,021 and
232,021 shares at October 1, 2023 and January 1, 2023,
respectively
(25.3)
(25.3)
Total stockholders' equity
1,495.5
1,302.9
Total liabilities and stockholders'
equity
$
2,989.5
$
2,533.9
SiteOne Landscape Supply,
Inc.
Consolidated Statements of
Operations (Unaudited)
(In millions, except share and
per share data)
Three Months Ended
Nine Months Ended
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Net sales
$
1,145.1
$
1,102.6
$
3,336.2
$
3,124.5
Cost of goods sold
757.0
714.0
2,171.6
2,005.6
Gross profit
388.1
388.6
1,164.6
1,118.9
Selling, general and administrative
expenses
311.8
289.2
923.8
792.4
Other income
4.9
2.4
11.4
6.6
Operating income
81.2
101.8
252.2
333.1
Interest and other non-operating expenses,
net
6.4
5.6
20.6
14.5
Income before taxes
74.8
96.2
231.6
318.6
Income tax expense
17.5
22.9
54.8
72.3
Net income
$
57.3
$
73.3
$
176.8
$
246.3
Net income per common share:
Basic
$
1.27
$
1.63
$
3.92
$
5.47
Diluted
$
1.25
$
1.60
$
3.87
$
5.38
Weighted average number of common
shares outstanding:
Basic
45,149,650
45,102,574
45,096,404
45,024,324
Diluted
45,747,398
45,774,367
45,690,285
45,804,041
SiteOne Landscape Supply,
Inc.
Consolidated Statements of
Cash Flows (Unaudited)
(In millions)
Nine Months Ended
October 1, 2023
October 2, 2022
Cash Flows from Operating Activities:
Net income
$
176.8
$
246.3
Adjustments to reconcile Net income to net
cash provided by operating activities:
Amortization of finance lease right-of-use
assets and depreciation
46.1
34.1
Stock-based compensation
20.7
14.0
Amortization of software and intangible
assets
47.0
38.1
Amortization of debt related costs
0.9
0.9
Loss on extinguishment of debt
—
0.6
Gain on sale of equipment
(0.4)
(1.0)
Other
(3.8)
1.0
Changes in operating assets and
liabilities, net of the effects of acquisitions:
Receivables
(68.8)
(96.1)
Inventory
(45.4)
(196.2)
Income tax receivable
7.2
3.3
Prepaid expenses and other assets
(37.2)
(7.5)
Accounts payable
55.2
75.0
Income tax payable
—
7.0
Accrued expenses and other liabilities
(8.4)
(7.0)
Net Cash Provided By Operating
Activities
$
189.9
$
112.5
Cash Flows from Investing Activities:
Purchases of property and equipment
(24.1)
(20.5)
Purchases of intangible assets
(5.3)
(10.2)
Acquisitions, net of cash acquired
(181.7)
(182.2)
Proceeds from the sale of property and
equipment
1.9
1.9
Net Cash Used In Investing
Activities
$
(209.2)
$
(211.0)
Cash Flows from Financing Activities:
Equity proceeds from common stock
3.0
3.2
Repurchases of common stock
(0.6)
—
Borrowings under term loan
120.0
—
Repayments under term loan
(2.2)
(1.9)
Borrowings on asset-based credit
facility
434.3
593.2
Repayments on asset-based credit
facility
(461.8)
(456.7)
Payments of debt issuance costs
(1.8)
(2.3)
Payments on finance lease obligations
(13.2)
(9.0)
Payments of acquisition related contingent
obligations
(5.6)
(10.0)
Other financing activities
(7.0)
(8.0)
Net Cash Provided By Financing
Activities
$
65.1
$
108.5
Effect of exchange rate on cash
—
(1.0)
Net change in cash
45.8
9.0
Cash and cash equivalents:
Beginning
29.1
53.7
Ending
$
74.9
$
62.7
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for interest
$
19.8
$
11.0
Cash paid during the year for income
taxes
$
46.0
$
63.8
SiteOne Landscape Supply,
Inc.
Adjusted EBITDA to Net Income
Reconciliation (Unaudited)
(In millions)
The following table presents a
reconciliation of Adjusted EBITDA to Net income:
2023
2022
2021
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Reported Net income (loss)
$
57.3
$
124.0
$
(4.5)
$
(0.9)
$
73.3
$
140.7
$
32.3
$
27.5
Income tax (benefit) expense
17.5
40.0
(2.7)
(4.6)
22.9
44.8
4.6
2.7
Interest expense, net
6.4
7.3
6.9
5.5
5.6
4.6
4.3
5.1
Depreciation and amortization
31.3
31.0
30.8
31.6
27.4
23.1
21.7
22.3
EBITDA
112.5
202.3
30.5
31.6
129.2
213.2
62.9
57.6
Stock-based compensation(a)
5.0
7.1
8.6
4.3
4.5
5.8
3.7
3.1
(Gain) loss on sale of assets(b)
(0.2)
0.2
(0.4)
0.2
(0.7)
(0.2)
(0.1)
0.2
Financing fees(c)
0.4
0.1
—
—
0.1
0.2
—
—
Acquisitions and other adjustments(d)
2.1
1.5
1.1
2.8
2.5
3.0
1.3
0.9
Adjusted EBITDA(e)
$
119.8
$
211.2
$
39.8
$
38.9
$
135.6
$
222.0
$
67.8
$
61.8
_____________________________________
(a)
Represents stock-based compensation
expense recorded during the period.
(b)
Represents any gain or loss associated
with the sale of assets and termination of finance leases not in
the ordinary course of business.
(c)
Represents fees associated with our debt
refinancing and debt amendments.
(d)
Represents professional fees, retention
and severance payments, and performance bonuses related to
historical acquisitions. Although we have incurred professional
fees, retention and severance payments, and performance bonuses
related to acquisitions in several historical periods and expect to
incur such fees and payments for any future acquisitions, we cannot
predict the timing or amount of any such fees or payments.
(e)
Adjusted EBITDA excludes any earnings or
loss of acquisitions prior to their respective acquisition dates
for all periods presented.
SiteOne Landscape Supply,
Inc.
Organic Daily Sales to Net
Sales Reconciliation (Unaudited)
(In millions, except Selling
Days)
The following table presents a
reconciliation of Organic Daily Sales to Net sales:
2023
2022
Qtr 3
Qtr 2
Qtr 1
Qtr 3
Qtr 2
Qtr 1
Reported Net sales
$
1,145.1
$
1,353.7
$
837.4
$
1,102.6
$
1,216.6
$
805.3
Organic Sales(a)
1,046.7
1,252.4
777.6
1,068.9
1,201.4
802.0
Acquisition contribution(b)
98.4
101.3
59.8
33.7
15.2
3.3
Selling Days
63
64
64
63
64
65
Organic Daily Sales
$
16.6
$
19.6
$
12.2
$
17.0
$
18.8
$
12.3
_____________________________________
(a)
Organic Sales equal Net sales less Net
sales from branches acquired in 2023 and 2022.
(b)
Represents Net sales from acquired
branches that have not been under our ownership for at least four
full fiscal quarters at the start of the 2023 Fiscal Year. Includes
Net sales from branches acquired in 2023 and 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101955883/en/
Investor Relations: SiteOne Landscape Supply, Inc.
Investor Relations 470-270-7011 investors@siteone.com
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