SITE - Earnings call transcript Q3 2019 | SiteOne Landscape Supply, Inc.

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Operator

Greetings, and welcome to the SiteOne Landscape Supply, Inc.

Third Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, John Guthrie, Chief Financial Officer. Please go ahead, sir.

John Guthrie

morning, good and you, everyone. Thank third We morning portion press investors.siteone.com. this earnings posted issued of a website, Relations our and Investor slide release the quarter presentation our to Chief Doug President, Vice and Development. our by Salmon, Strategy today joined and Scott am Chairman I and Executive Officer; Executive Black,

Commission. expectations to in of Before I meaning actual risks include Litigation include and call results and forward-looking Securities to to uncertainties within forth projections. the would These Exchange filings that remind earnings the could press Securities differ that cause today’s materially XXXX. Such the we slide made our from presentation and set subject Act during the in the are begin, uncertainties of Reform and risks Private release, and release like the factors everyone the statements with our statements statements and

today’s Additionally, in the can evaluating useful in call, discuss we measures slide which be will A these believe during and non-GAAP in be earnings of release can performance. we our presentation. measures, reconciliation our found

Black. like now Doug over to the call would to turn I

Doug Black

Thanks, John. thank Good us for morning, today. joining and you

customers in As second balanced with weather the third quarter, the quarter, to year. we very and able challenging full providing of good expected, a their to the deliver allowing track workdays on deliver backlog weather daily in with daily our them some a increased growth the jobs. which Accordingly, for puts us to sales mid-single-digit of we’re strong complete growth, X% organic sales organic

performed teams continued and our flow expansion strong cash our the good as to during quarter initiatives margin achieved as execute EBITDA plan. and we our acquisitions Further, to free

and both of family was market, growth excellent the to healthy execution our and demonstrate companies terrific the With performance the one the the more quarter Overall, it a two added year. quarter. we achieve fourth continued objectives at from acquisition, expect our and underlying strength to results and business and contribution by a SiteOne our the the team strong execution another solid we of model. Finally, for start a

Scott call for the our the Guthrie more detail, will results and trends in through and long-term At cover of overview some then and today’s from quarter. quarter our acquisition John Salmon performance discuss markets walk market the our start our I will are to third with you in position, the brief of of deliver we and end I balance the year. strategy. our that our outlook growth will some the address will strategy a call, highlights of seeing unique financial

Slide share market distributor as X began the and three larger we two landscaping As wholesale shown grown distribution only footprint of have products major are on XX% with and our in landscaping of of national through and States largest wholesale Xx Canada. than more XXX approximately and presentation, with combined. year the United centers products competitor larger and than XX earnings branches distribution than the the We the nearest our

X,XXX landscape contractors. product the approximately commercial SKUs. suppliers benefit approximately the As is of a and fact market robust fragmented a to wholesale over with XXX,XXX reach that landscaping trying we quite the serve from with residential XXX,XXX offering distributor, market We

balanced agility profitable for new construction mix customer-focused in and markets scale, upgrade provide range maintenance, avenues Our multiple size growth. and across us and broad culture, market entrepreneurial the product the and landscaping and and business repair end of give

which commercial provide product significant our our value to line operational competitive build We and customers and give we and advantage. the capabilities, continue increase and suppliers MSAs expand offerings us across to full our

Turning to Slide X.

leading our passion, customers and deliver order the local value large company teams superior resources with and acquiring scale, entrepreneurialism to the and local the of by portfolio, U.S. capabilities Our in drive fill a and further our across our world-class add expand strategy to to companies and teams network our strategy to Canada. excellent of our branch regional We product deep talent in knowledge and combines this suppliers.

this our talent far and so product combination of all businesses increased share eight us those strategy, believe have our of efforts operational to profitability. gain we the to commercial and expanded and will year, lines which capabilities and have We accelerate order fully market markets. of acquired and capabilities. allow both inorganically these organically We’ve growth the must our realize in To best-in-class improve in our benefits

this, we these performance marketing and Supply early initiatives, still middle and initiatives. force advanced. excellence innings. X are and operational are category most sales in and do the e-commerce are are in Of To chain the innings, focused management the on pricing and

operational to commercial deliver our initiatives growth that improve expand and customers accelerate expect our our cycle. to and help we organic the margins value the and We throughout suppliers,

strategy Slide our from X history shows SiteOne’s far. the so results and

we category, infrastructure, We IT our operational are our investing and years, chain, as have e-commerce. proud in as of over in including our of track marketing, acquisition several heavily the even record growth systems excellence underlying finance, and been past as teams performance well supply

margin term. these from expect continue our in invest see as the over are yield Overall, to results seeing initiatives benefit to next even several we We investments XXXX, we for towards the years and long in initiatives, of adjusted well our still middle so progress our stages mid-term of many to remain of make positioned steady and are the goal EBITDA stated XX%. we we early and

Slide that our to Turning every full market. in large opportunity X. capability focused we U.S. fill and the to on major in Canadian remain have line product We

only our branches. the to approximately the graph due major nursery XXX full shows, product primarily markets, of and/or As have hardscape of lack today the we targeted capability line XX in

position to new by penetrating the markets and improving continue market fill while agronomic in our through also and of irrigation these will well-run acquisition acquisition We distributors.

as from and a some from X% in X. discuss third shown now X% the third performance, acquisitions. of we organic on sales growth daily by nice will I sales net growth quarter Slide Overall, quarter highlights grew our XX% with balance

our saw inflation. good we due Furthermore, growth September volume strongest organic quarter, sales growth month. X% Our daily the with X% through organic at strengthened throughout with come to being the remaining price

tends weather the full the from around to volume quarter-to-quarter, during but We before moves out have that year. average mentioned

The On growth. year good a this. second are at this daily sales we now third quarters year-to-date basis, are a and organic example of X% of

is acquisitions. margin of gross improvement was points Our XX% flat in quarter expectation, at XX a gross third with our given the which quarter outcome XXXX. solid with gross on stated the base our strong in line benefit from and basis year-over-year in the basis, very significant Year-to-date, business margin up was margin

our which supply benefit initiatives, We from include management and see continue gross margin to pricing, chain. category

On XX second to strong the third in business margin SG&A base acquisition bar due increased in in new growth, row, our leverage system. by pleased on adjusted as basis, good we and basis was adjusted good transportation quarter our percentage sales. reported only of X% leverage achieved EBITDA I an management net siteone.com, basis that a expanded SG&A coding ongoing by SG&A a points the quarter XX our performance. our basis, points EBITDA for investments very organic a We despite and of

improving the organic our expected to inventory flow our a Going believe September quarter and DCs robust and improve SG&A further and inventory we excellence, with to sales growth achieve excellent our reasonable Even leveraging free SG&A growth. all can the operational season, fall support continue by We forward, achieved siteone.com, levels with higher sales coding we with efficiency. in productivity. leverage bar that in strong cash to

we cash point, to this full net the exceed expect At for year. free flow income

out with With online we our customers We good in the successfully the piloted across are also during pay improved of quarter. made capability initiatives siteone.com, progress the country. process on this our and rolling

further of data the We the we year. by on and made also of images end our which progress and siteone.com, Spanish the complete to plan on version

coding, roll customer continuing in now have this are XX bar branches. we to For and checkout capability out mobile

and We with are and before improvements starts in to implement next efficiency associates spring checkout branches excellent mobile coding another customers our year. XXX plan aggressively our the season for achieving bar

moved that mode inbound to we about this and we the quarter in our are system with third expect and outbound savings management customer achieve Finally, the system transportation during full into benefits delivery XXXX. excited with the freight new development

that our us while We all sales beyond. increase and drive and organic we these to to and expect expand margin XXXX the helping value EBITDA suppliers in deliver of adjusted to growth initiatives customers

acquisition at the We company with and the execute quarter. very the of strategy continue addition on our X X beginning fourth third quarter to of the companies during

year-to-date outstanding size, have of offering million. average We been excited in our add acquisitions $XX our in are to Note sales bring these in currently companies, talent high-performing $XX The which expand smaller to and $XX million potential our for that is each. revenue companies pipeline and million deal approximately averaging footprint. to aboard SiteOne product

And out would expect so, like average time. we this over to weather, the

belief. this support would deals of backlog current Our

progress summary, result fronts. the are with In pleased on we important strong quarter delivered third many in and our

We strong financial for work investing future. delivering the increase our results and the hard while capabilities and continue in for to to our value suppliers customers

Now the walk in more detail. John? you John quarter will through

John Guthrie

Slide Thanks, the of in net result. a $XXX third sales Doug. increase to with reported income We the on quarter for begin I’ll statement third our million X XX% quarter.

of the daily quarter, to increased selling product in of sales During demand weather quarter nursery part due year-to-date. half had quarter which landscaping accessories XX first favorable and year-to-date. X% was we products, year the sales the Landscaping backlog the includes the the for landscape compared in period. X% strong we which weather work, prior year. X% resulting challenging hardscape, daily the sales from had growing strong, from during Organic and and the Organic irrigation, days, X% benefited unchanged was and from in

geographic the days year-to-date. products, fertilizer, Organic the from for results, sales growing equipment nine X% period a quarter compared of quarter In products, daily same of XXXX. quarter remained of third cost steady, passed been have quarter regions quarter’s the XX to market. X% through XXXX and rain the compared XXXX X% of includes X% as the last in which had control in suppliers and to reversal year-to-date increased agronomic Prices fewer by the ice third increases seed, for the melt in and

a year. quarter, X% increase to pricing year-over-year the expect the resulting X% for X% for We increase full to X% to fourth in

third XX% to regards flat QX year net during margin expectations. tough and pricing to contributed from the and or not mix for the in Gross the quarter, did sales we realized with see million million do tariffs any of remained at X% Product fully of impact pricing, gross growth were to buys quarter. in additional early line first year. of improvement We half faced the in most comparison impact to a expect the the With Gross $XX during which was last $XXX quarter. quarter. rest XX% for to margin year. the in increased the not profit Acquisitions the

basis. SG&A, or million expenses, XX we’ve on increased growth SG&A our management margin only primarily XX.X%. reflecting EBITDA percentage X% decreased business quarter. in third expenses for sales base an increase year-over-year Selling, basis the SG&A general administrative X% The expense gross to operating XX acquisitions to basis of increased leverage. a points $XXX as Year-to-date, to to as points and was attributable good operating was in and XX.X%, adjusted

quarter the due quarter for effective the tax rate of XXXX. $X.X effective of compensation. was the third as from were million benefits third to to quarter rate the the third tax decrease The $X.X XXXX quarter our of was Excess for of amount compared primarily third of recognized in stock-based excess tax benefit XX.X% for a of in For X.X% to XXXX. XXXX, compared increase the million

will items be We excess rate expect discrete benefit. tax and our effective XXXX has XX% XX%, between that tax excluding

$XX.X increased the and growth by sales prior in income approximately year. quarter, primarily increase to compared partially XX% to expense. the attributable million up income offset improved was Net profitability, tax the was The

during EBITDA months. adjusted share year. diluted increase XX.X%, $XX third third for million million XX% to prior a improvement to prior year exercise compared increased average count activity $XX.X margin quarter the last the EBITDA option Our quarter million XX of period to Adjusted prior the weighted reflected point was year. from Our XX for million basis for compared the $XX.X was $XX.X The the

our on statement balance on I’d to and as cash a flow Slide XX. provide sheet Now update like brief shown

quarter we accounting the the are $XX reflected $XXX asset. Total lease were reminder, new operating corresponding net lease and working operating a the liabilities which with during was adopted are for as at million quarter reported lease million third the liabilities the $XXX total in current right-of-use of As Of million liabilities, capital, first the end XXXX. standard quarter. of

working liabilities, the for would additional amount. a year’s Excluding been these our working have XX% increase lease reflected primarily million $XXX $XX million, with capital quarter The increase acquisitions. capital associated over or third the prior quarter

prior million increase $XX made was was operations capital working cash in from over investments reduction change the improved of from investment the the cash due $XX to the attributable to year primarily million management. flow in smaller compared period. third The quarter $XX year our in of The during Cash improvement million acquisition to acquisitions. in the of operations million the for for quarter, quarter, part a prior reflected $X period. an size We

the $XXX compared and XX-month leverage our year-over-year decrease EBITDA, Net million end reflected X.Xx to an debt the which in debt trailing profitability quarter improvement combined last third leverage at adjusted X.Xx. year’s quarter of leverage flat The levels. with was of our increased is was

EBITDA. debt Our Xx to year-end leverage long-term to net adjusted target is Xx

growth our us provide our of that including the continue at to We structure to strategy, leverage half the year-end. to of expect flexibility range summary, acquisitions. in capital execute our to the In funding continues with upper be

now SiteOne’s acquisition update for the will to I over on call an strategy. turn Scott

Scott Salmon

John. Thanks,

Slide As added TTM on the SiteOne represent XX joined SiteOne the XX, approximately basis. sales XXXX. family have and branches in XXX of shown beginning to companies on a $XXX since million They

made far years five approximately year, acquisitions sales. have past $XX and have X in acquisitions this so good TTM over representing million progress our We pace the accelerating of closed

we X, hardscapes Slides the XX with acquired be with Now market. turn expanding Northern East Seattle. Seattle three On a California, Tahoe family. very market supplies Concrete single Design our fit most leading professionals. market. hardscape to on to a able location new a acquisitions. hardscapes as greater products the with find excited in for the to in we on are five with Bay them our SiteOne to XX, On of July great XX, And the is August a fourth in Trendset Reno, location we and and across distributor as greater part Lake Products, XX, of on through a we Materials locations in recent business single Voss is landscape we landscape SiteOne, add distributor quarter, a the acquired you’ll of strong information This distribution focused already in Trendset us, Outdoor, September the hardscape acquired

outstanding a team. acquisitions, product continue presence broaden see to significant our new to through offering we and XX, As Slide move to we us allow expand turn in our into markets, to our opportunity which grow to ones, profitably add talent existing

as we to Our continue pipeline remains very of deep, buyer choice and industry. in reputation build the our the

agreements, with have XX% more the family We than years of development number future. help element are SiteOne dozen year-to-date, believe solid in letters M&A our drive the offers to all a and of entrepreneurs We sellers. join leaders acquisitions a vital of our who attract hand-in-hand this strategy to SiteOne dozens intent momentum. has success and continued be thank to exclusive the who eight position to companies joined with negotiation With our to working great current many deal a us in of our remains of us negotiations year activity active for fragmented has successful SiteOne growing nondisclosure growth across the involved highly industry. and best ambassadors, like what continue to would team the

While fully of of the additional predicted, to expect acquisitions the timing be year. acquisitions cannot the during we close remainder

turn And to outlook. with our back that, like over the Doug discuss to to call I’d

Doug Black

Thanks, Slide wrap Scott. XX. on up I’ll

objectives. our positioned remain quarter third our with well pleased We to are results achieve XXXX and

market build through executing future, talent increase as accelerate Our expand and our our to new and cash share flow that the well for adjusted the systems, company suppliers, to producing through deliver EBITDA teams good customers processes are margins, and are we both our and organically results our gains, value initiatives acquisition. work increase we and our our

supporting the important of We organic continue will workdays and short-term solid labor, underlying steady sales during fourth constrained our in the year, remainder from mid-single-digit of to the in benefit available market remain growth. our growth that an during the number a mind so will remain customers on the Keep be in expect very and factor quarter. market the

sales the growth. mid-single-digit our So far, good, for outlook supporting in weather organic October, been has

with Scott high-quality of building and In an team converting excellent his in field pipeline acquisitions, our have leaders, terms and of job along our done companies.

backlog and currently more to a strong the XXXX. As deals very have and during of he about add companies ability into mentioned, the remainder feel our of we good year

from as growth midpoint. year-over-year represents all we EBITDA a the enter Taken our growth our million XX% million, to $XXX to to $XXX adjusted are for XX% which our at tightening together, million, $XXX $XXX quarter, million maintaining million the the $XXX the year but range to fourth the we midpoint or XX% range of of new guidance at original

In like to SiteOne to and associates value significant closing, all of the suppliers. who customers acknowledge create our I would continue for

a stakeholders. be it We a as all them tremendous honor company build of with we joined excellence to an have team, for and is our of

please questions. Operator, open the line for

Operator

first Instructions] [Operator Baird. question. Please Manthey David proceed the your Your with line you. comes Thank of with question from

David Manthey

Terrific. guys. Thanks,

mix, assume P&L all, ahead. your talk little Could some leverage from so depending in forward. a SG&A couple the point that years? P&L. future expect expectations gross you this little we gross I’m pricing from over flatten most down operating actually of understand the thinking on come I about and of the here, years thoughts you bit or margin? Just First out the dynamic margin, of on your bit next of to go a could on complexion

John Guthrie

think opportunity gross is still margin. We there available on

with think balanced on forward. the certainly if going front regards we another will but there is our our margin future it over regards a more margin has initiatives to forward. gross But and past much opportunity been going gross going primary of driver it. Certainly, still one growth, – is have be to initiative mentioned, history, opportunities. with Private look TMS, Doug label, you there our As of we

Doug Black

Yes.

Specifically, quarter flattish, if finishing strength the the improvement if is half. in of more of you’re out and looking third SG&A first margin we’re our given the But well quarter, this – expansion margin like at we EBITDA leverage. kind year, you into the gross balanced fourth be in the pretty years, to were look there future yes, we ahead expect between probably

David Manthey

Okay.

$X I Design $X this roughly million on that Trendset in and Trendset the acquisition. Okay. million contribution just quickly And assuming then in Am was in million, both $X $X – quarter. then And those acquisitions, revenues. annualized about Outdoor, million, right that

John Guthrie

Yes.

million I $XX think annualized them take it to together, million $XX of revenue. you – was million if $XX

Those can up the upper And so you northwest. do the math. they’re – are in

And so you’re going in to and third fourth in first the of second quarter. their get some contribution much aspects, and not seasonal business quarter, the most

David Manthey

Great. Thanks, guys.

John Guthrie

you. Thank

Operator

next line Merkel Please question. Your from of your comes William Ryan with Blair. question the with proceed

Ryan Merkel

of A Thanks. couple questions.

just want up commentary, on I Doug. off, first So October to the pick

October just given sort is still have weather, good think X% I of is easy. the plus, So you fairly tracking comparison and

color there. little So maybe just a

Doug Black

Yes. October as well mean, we gone I us. mentioned, has for

So to month the be we’re strongest October we stated, the mid-single month of of up was evolved, that hit third digit. would would set think, third quarter. the the as the anticipate probably stronger quarter. we that as quarter We September, September fourth

So the – we strongly confident but out on finish organic we’re year overall, that very can sales.

Ryan Merkel

it. Got

a secondly, number. And growth organic X% Okay. pretty then solid is

Or to by Just trying understand last an from pent-up little to there did extra an Just was maybe better. the strong in this that easy are initiatives mostly kick gains see and quarter? starting this in weather maybe then had X% And year? you bit quarter? last some share is demand we a wondering, bad boosted comparison

Doug Black

that great in No, underlying we’re but mid-single-digit really completely, a is to market. it And we think now the it’s right market Right. bifurcate question. difficult

we’re and a share how the that then last last net there of We market of bit than more mentioned, did year. is that, was of extent year, bit we in And wise, a share the than year it was feel we this evolving quarter a Weather We gaining outperform a as gain. team. is good stronger about catch third the year up. better year. every this weather get to we’re So we there as

We market year we did this gain year. more expect to next than share

underlying we can that weather top market move down. how is on. we that’s mid-single share it. about and going that, And gain dissect or think think some The have digit, more I the on we up around So then numbers, of

Ryan Merkel

Got it. That’s helpful.

sneak to just more one gross me Let margin, clarify. on just in

I think quarter has comparison. fourth easy an

– be expect we should Or margins flat would so color year-over-year? what there margins a there be you’re And Just could there chance is helpful. a Is that still year-over-year? that is up little still saying?

John Guthrie

mean think as would a I to was. they’ll we be think tough little say not regards on it upside QX I we that a there as as be is could QX flat. with comparison that roughly

will minor, we there saw may relative thinking we’re some would if So of that margins the in little to – in but up beginning relative – it you compared – year first this to be is upside, be what to what saw the a it half. especially a be

Ryan Merkel

it pass I’ll on. Great. Thanks.

John Guthrie

Ryan. Thanks,

Operator

of Your Bouley next line Matthew with Barclays. Please question comes from the question. your proceed with

Christina Chiu

of Hi. expecting is on that a $XX acquisitions for Chiu for X% bit Matt. quarter, annual you’re of are Christina question My previous revenue. what comprising year-to-date than fourth is million This in lighter guidance, XX% to roughly the first on noting acquisitions

Doug Black

We see slowing. the as Yes. wouldn’t pace

and close backlog, of we’d the said, XX% sales, We to Historically, acquired very anticipate as X% TTM you low have in expect XXXX. on end still being a more deals and we XXXX. to we’ve strong in

a the expect in and – years However, that XXXX. to that over weather of and would seasonally, lot as we’d balance out the with things

Christina Chiu

are And of have Got investments SG&A you the rollout, stage customers on chain the these tracking then seen And your on and of at for received And the investments? some you. do have effect? long-term leverage, just what supply operationally, marketing? an that given you idea in focus have your branches

Doug Black

No, great question.

now investment, on overall even kind our pace of of an In year-to-year. terms we’re

the year before. constantly the but and investments we We’re building investments made year in last business, making in

those. along tracking And so with we’re

our seeing In the mobile with very terms we’re benefits, have checkout. nice benefits of the barcoding,

makes out us and and in more customers getting that efficient, efficient. We’re makes it more faster our customers

still hey, pilot good. that enough able able to be we’re So kind not that to rollout the – signs X, that’s in phase, of say, we’re early to very – are say, very in what the benefits. specifically. their tell the the phase, adopt in early pilots also seen put that for optimistic for early terms we’re into the of But be we efficiencies Siteone.com, but – in of we’re so every about specific let’s we them is see data achieve early branch those to routine know excited parts we’re as that and so mind in given we’ve going Keep of the still hard customers and us. to and

So early optimistic. stages, still the in quite

We very will company to to terrific that our give market more are basis. help on share tracking an with XXXX, along more and XXXX, side plan, consistent successful of gainer us we types SG&A on organic transform and the XXXX, good a be also in and feel those help us leverage initiatives and that,

Christina Chiu

Thank you.

Operator

the Your question Please proceed comes line with from Damian UBS. with of Karas next question. your

Damian Karas

guys. morning, Good

John Guthrie

Good morning.

Damian Karas

October the remind the X% a pretty past of So the the weather. on regional thinking how much is, And quarter about you be from growth Could daily able give John, would a you that start us solid quarter, concentrated us to country little far, in perhaps bit of you a how looked? walk to October so across organic talked about favorable historically? fourth indeed, off sales

John Guthrie

just question, – gather we the Well, on specific second me the the Yes. data – let first the question. – numbers

last some were September weather, in that south, in partly here will the geographic did across the geographically, So face we of strongest especially I year. because was every – country, up inclement probably regions say region the the

wasn’t So standpoint, any from down any we that quarter. the during that region but pleased problems being there with were

with is amount, October sales typically. XX% And to our good so across we pleased geographic base. about With XX% growth to in the the of were regards

Doug Black

That’s the fourth quarter.

John Guthrie

quarter. fourth The

Damian Karas

And a Great. That’s helpful. on is question really SG&A. follow-up

the about mentioned But kind did guys you’re of quarter, third XX this related basis kind that be you at of longer the of bit how out you’re year would, how that factors points that basis and the looking or fourth Are specific quarter that. expecting in the points term, there is to we a about thinking there comps XX So little leverage last talk otherwise? of SG&A perhaps, about leverage? any should suggest thinking thereabouts, year

John Guthrie

into achieve, December, you volume. I given more Well, in northern difficult November points the going to markets, general, of that sales you guidance. XX the back just our think kind can little be have basis fact from in I a But think is, to number we and a low have, in

So trying a really quarter to down. of uncertainty northern you’re manage that the little we in the when manage market is winter in it and cost really as the begins fourth the

the markets. be guidance It’s the So kind sales the then SG&A that do from where perspective. gives leverage to volume tougher SG&A without of will and in northern

Damian Karas

Understood. Thanks for your time.

John Guthrie

Thank you.

Operator

question next Your your comes with RBC question. proceed line Markets. Capital with Please from the of Dahl Mike

Unidentified Analyst

This is actually Chris calling on Mike. for

upside I and just question, to there? first to some puts that some my backlog. imply would M&A So the guide, performance would your talk of could you takes think XQ given the this and quarter

Doug Black

that you again. Could ask

cutting were out. in and You

Unidentified Analyst

me hear now? you Can Sure.

Doug Black

Yes, better. much

Unidentified Analyst

Okay.

you would puts imply some So the there? I to my backlog. to given the could your think and would performance talk the first M&A question, quarter this takes guide, and of that XQ some upside just

Doug Black

year, at Well, point sales. it’s organic of about this really Yes. the

downsides stronger sales, less be would So would sales. upside be

the our sight of We’ve the on that’s quarter. SG&A any would good our provide line fourth gross in factor pretty that real variance So margin. and got on

In terms move especially lose if could fourth late they’ll months bit. of money, acquisitions acquisitions, in you the in December. in they the when south, contribute add year north, Because right? a in loss-making the into the in they’re There this quarter, they

from they the We’ll kind year will late sales count you’re working and on capital, – contribution contribute terms much of acquisitions. never of So contribution. we but not profits, in any in going get to

Unidentified Analyst

pricing decline That it. next just makes on question, sense. outlook. expecting sequential you’re my like your quarter. then second Got And for It just looks a

of requirements salary So wondering Department for And provide national the then driving what’s exempt recently it if like details I could that? some additional separately, Labor the on employees. was looks you increased

I wondering a that. could, pricing result as seeing if or that? to you was of on So expecting or impact any maybe demand power you’re touch And if

Doug Black

No.

pricing, thinking I In terms we’re X% think, of X%. to

John Guthrie

started is we’ve I we X.X%, the all last price saw year, it X%, between would mean like and comp – major and in we down. with in trend across We’ve to been a and year been general that, at down the and trending regards come I down. that’s think, some that we’re it’s then tougher QX because September. And increases, to of been, to come running driving Yes. X% honestly that’s starting

were, just not was fact largely quarter and that honestly, price. we the this the volume because really So pleased a of X% growth

Doug Black

up, X% And just clarify, not that’s down. to X%

John Guthrie

Yes. Yes.

going X% expectation We’re what not going is is. and down between increase – X% the X% the from X%, but is sequentially,

Unidentified Analyst

it. Got color. Appreciate the

Operator

next [Operator with proceed from of Alex your from Berenberg. Please Instructions] line Your question. question the comes Maroccia

Alex Maroccia

morning, guys. Good

a Just for couple me.

So gross uptick the margins slight you’ve a hardscape in acquisitions. seen typically, get past, these from

However, and year-over-year, anything there QX. some acquisitions that margin down hardscapes in still number the were in pushing quarter? had Was gross you you flat,

John Guthrie

faced our thing from – a were expected contribution did have some we acquisitions I was biggest think negative year. with outlook the from all what we of slight but positive with even mean tougher the the customer a slight a contribution, from and suppliers, our we comp. had I incentives beginning mix

Doug Black

Yes.

second significant in we in add got catch first the we on to the up and half, the to half. had Just XXXX, context, behind in base margin a remember, in business

base against we business. the we’re had So in improvement significant that. This comping a year,

Fourth As easier comp. John quarter. negative bit mentioned, were slightly we third the a in is quarter

be so acquisitions what flat. that caused are And to the

the given and hardscapes mix still gross nursery acquisitions. we our of increase the expect forward, acquisitions to Going margin,

Alex Maroccia

makes over Great. that market, Okay. these some interested see looking country? you other approaching then That I the market And or how are to year of just the do that kind out you your to in-fill a first think it’s be And of here, you’ll – market Tahoe was new around year, in a nearly greenfield it? sense. markets all then more acquire organically

Doug Black

good to with I a Well, Yes, acquisition. prefer market mean, question. always we go new into an

up. when And happy the in of markets got so obviously, today, our within fill do markets quite of existing a we we’re new cover But to markets. come and most we’ve lot

If to did was year, in you if in last I the first move that in and acquisition, earlier remember, was think, Spokane. Auto-Rain it our year Spokane, we

certainly going strategy. those catch ready sell we’re of to we’re markets, and a part year, in new to going couple of when it’s every – So markets hit sellers to our are

In market. organic growth. moving folks terms terrific a our hot to in, that’s a so Lake Tahoe, market and get of help of pretty to Reno, that’s overall Lot into

John Guthrie

– helps and And an just the opportunity tap expand into right? customers to that us location, also those on it’s but it hardscapes expand and agronomics, also irrigation also

Doug Black

I Yes. mean carry the beauty that’s we good all the John. lines. That’s point, product a that

you get you of the synergies with follow and a if can the create others product into one So there. lines, with market

Alex Maroccia

a Okay, lot great. Thanks guys.

John Guthrie

Thank you.

Operator

of Keith line Humphrey. proceed question comes next SunTrust with from Hughes your question. Please Your Robinson with the

Judy Merrick

hardscapes acquisitions? and factor In to This benefits is like locations the of is off of timing a of kind next expand the diverse made work leverage kind higher Hughes. Merrick your pace on SG&A mostly kind Judy with the of they the and Or year? of that more looks these study gross acquisitions, of had XXXX, higher just it for you Would fairly with Keith like were a pace steady SG&A. you margin,

Scott Salmon

Yes.

– and Just dynamic SG&A. a margin higher run – is at so as the and nursery we higher hardscapes companies gross yes,

a acquire of we as is fill-ins lot our nursery hardscapes. those – So and

on of And we into SG&A them types in so mitigated a leverage get be business, leverage higher that acquire you’re base company. we SG&A as When company. because SG&A will those and businesses bringing the the bringing

in gross because improved margin is the improvement bringing margin. So gross margin higher gross our you’re side, on

business, if SG&A amount gross certain amount base take of you’re So certain you getting the and improvement. a leverage, margin of

going and greater. leverage be your hardscapes add improvement and margin look nursery, your is gross to you to going SG&A If is less,

And share more fill that dynamic, we gain couple the and and aggressively year, with would actually, they’re and part next in as the hardscapes. this of years market all the the that’s so as expect profitable. equally are nursery we in we that’s But seeing good dynamic is

basis, a is percentage so EBITDA, basis, And no effect. really on there margin

right In companies are. we’re that where with the fact, are line we in buying

So business. we’re not overall diluting the

We’re there. just nature the changing to of how get

Judy Merrick

what factor in you’re more a maybe said you I ones $XX at just then that. timing the for there pipeline Is comments, of year year of seeing? bigger. around the what’s in bit available around that size? sort your of million just most next roughly this a sales, – you’re of Or it. the that understand looking out Got little is that And just

John Guthrie

to to very everything NDAs sellers of backlog do has of when confident offers with and really we our sell. It and about from negotiation out. We the the timing want feel to number have

any the have that XX% deals of exclusively negotiated. been we don’t Over in in the structure – of working change been again, we’ve slowing XXXX see We’re in pace or any competition our anything. the or

Doug Black

Yes.

I are and this average so it’s the as all we’ve that you’re far That’s about what mentioned in comments, this bought year, earlier million. $XX the so seeing companies so timing. year And unusual,

will it just out. like average weather average the will that out So

backlog So if $XX our be that think at we to to we’re is about going our million today, you million company in acquiring. look the backlog $XX average

$XX million let’s average. So our million, should say, be $XX

net $XX we It to at and If expect stay – we $XX won’t today you a that of handshakes will average average average our – look years let’s LOIs, average over back above XX it, call to would million or of $XX million months. couple the backlog that million. it’s have than average, a the, period or the to

yes, today what’s through year. So this net with balanced which is backlog – out so but logical come far our above is actually average,

Judy Merrick

Thanks That’s helpful. lot. Okay. a

Operator

to reached Mr. have we the remarks. of end the question-and-answer call would gentlemen, to the and back for like Black and session, Doug I closing turn Ladies

Doug Black

interest and take company. excited Thank forward job, much. to our us Okay. our our years. thank are our Well, a about industry suppliers in one potential and very to terrific thank SiteOne much for we look very opportunity for enforced you landscape growth everything more appreciate customers, serving for our very you in many the doing very They’re to would I profitability and today. much and long-term We your growing associates like make be possible. great that joining

Operator

This does conclude today’s conference.

You at participation. disconnect lines Thank you for your your may time. this

SiteOne Landscape Supply (SITE) 1 Nov 192019 Q3 Earnings call transcript