Third Quarter 2022 Highlights (Compared to Third Quarter
2021):
- Net sales increased 18% to $1.1 billion
- Organic Daily Sales increased 12%
- Gross profit increased 14% to $388.6 million; Gross margin was
35.2%
- SG&A as a percentage of Net sales increased 110 basis
points to 26.2%
- Net income decreased 8% to $73.3 million
- Adjusted EBITDA increased 6% to $135.6 million; Adjusted EBITDA
margin was 12.3%
- Closed six acquisitions: River Valley Horticultural, Cape Cod
Stone, Linzel Distributing, Jim Stone, Stone Plus, and Kaknes
Landscape Supply
- Increased size of ABL facility to $600 million from $375
million; extended maturity to July 2027
Post-Quarter Highlights
- Closed the acquisition of Madison Block & Stone
- Issued 2022 Environmental, Social, and Governance (ESG)
Report
- Board of Directors approved $400 million share repurchase
authorization
SiteOne Landscape Supply, Inc. (the “Company” or “SiteOne”)
(NYSE: SITE) announced earnings for its third quarter ended October
2, 2022 (“Third Quarter 2022”).
“Building on our very strong sales and gross margin performance
during the third quarter of last year, I am pleased to report
continued growth in Net sales, Gross profit and Adjusted EBITDA in
the third quarter of 2022, as we remain on pace to deliver another
record year for SiteOne,” said Doug Black, SiteOne’s Chairman and
CEO. “We generated very healthy Organic Daily Sales growth of 12%,
driven by resilient pricing and improving volume trends supported
by our commercial and operational initiatives. Acquisition activity
during the quarter was robust as we welcomed six new companies to
SiteOne, further strengthening our teams, product lines, and market
presence. Our acquisitions continued to perform well, contributing
strongly to our overall Net Sales and Adjusted EBITDA growth for
the quarter. While we face economic headwinds and uncertainties
going into next year, we remain very confident in our tremendous
team, our balanced business, a strong balance sheet, and our
ability to continue building and strengthening SiteOne through our
key initiatives and acquisitions. Accordingly, we expect to
continue delivering exceptional performance and growth in the years
ahead.”
Third Quarter 2022 Results
Net sales for the Third Quarter 2022 increased to $1.1 billion,
or 18%, compared to $936.4 million for the prior-year period.
Organic Daily Sales increased 12% compared to the prior-year period
primarily driven by ongoing price inflation in response to elevated
product costs, partially offset by volume headwinds resulting from
higher prices and softening economic conditions. Acquisitions
contributed $56.6 million, or 6%, to Net sales growth for the
quarter.
Gross profit increased 14% to $388.6 million for the Third
Quarter 2022 compared to $340.5 million for the prior-year period.
Gross margin decreased 120 basis points to 35.2% for the Third
Quarter 2022 as the large price realization benefit achieved in the
third quarter of 2021 was not repeated.
Selling, general and administrative expenses (“SG&A”) for
the Third Quarter 2022 increased to $289.2 million from $235.3
million for the prior-year period. SG&A as a percentage of Net
sales increased 110 basis points to 26.2% due to increased
operating expenses supporting our growth, cost inflation, and the
impact of acquisitions.
Net income for the Third Quarter 2022 decreased 8% to $73.3
million compared to $80.0 million for the prior-year period. Net
income was driven by higher Net sales but offset by lower gross
margin and higher SG&A expense.
Adjusted EBITDA increased 6% to $135.6 million for the Third
Quarter 2022, compared to $128.2 million for the prior-year period.
Adjusted EBITDA margin decreased 140 basis points to 12.3%.
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 2, 2022, was $376.6
million compared to $208.4 million as of October 3, 2021. Net debt
to Adjusted EBITDA for the last twelve months was 0.8 times
compared to 0.5 times at the same time last year.
Share Repurchase Authorization Announcement
On October 20, 2022, SiteOne’s Board of Directors approved a
share repurchase authorization for up to $400 million of the
Company’s common stock. This repurchase authorization does not have
an expiration date and may be amended, suspended, or terminated by
the Board of Directors at any time. Under the repurchase
authorization, the Company intends to purchase shares from time to
time on the open market, through privately negotiated transactions
or otherwise. The number of shares ultimately purchased, and the
timing of purchases are at the discretion of management and subject
to compliance with applicable laws and regulations.
“Given our strong balance sheet, solid cash flow, and our
confidence in the long-term value that we can create at SiteOne, we
are pleased to announce our first share purchase authorization,”
Doug Black continued. “This authorization gives us important
flexibility to prudently return excess capital to shareholders
while also maintaining a strong balance sheet to strategically
build our business both organically and through acquisition during
all market conditions.”
Outlook
“We are currently experiencing low double-digit Organic Daily
Sales growth driven by resilient pricing, reasonable market demand,
and improving volume trends,” Doug Black continued. “We expect
price inflation to moderate in the coming months, while volume will
be supported by our balanced business and our strong teams
executing our commercial and operational initiatives. Taken all
together, we now expect Organic Daily Sales growth to be in the low
double digits for 2022. Accordingly, we are once again raising our
Adjusted EBITDA guidance for the full year.”
For Fiscal 2022, we now expect our Adjusted EBITDA to be in the
range of $455 million to $470 million, which represents 10% to 13%
growth over our exceptional Fiscal 2021 result. This compares to
our prior guidance range of $440 million to $460 million. Our
guidance does not include any contributions from unannounced
acquisitions.
Reconciliation for the forward-looking full-year 2022 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
2, 2022, at 8:00 a.m. Eastern Time, to discuss the Company’s
financial results. The conference call may be accessed by dialing
(877) 704-4453 (domestic) or (201) 389-0920 (international). 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
13733499. The replay will be available until 11:59 p.m. (ET) on
November 16, 2022.
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 2022 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; economic downturn or recession;
general economic and financial conditions; demand for our products;
seasonality of our business; climate change-related events, weather
conditions, seasonality, and availability of water to end-users;
inflation and increased operating costs; increases in interest
rates; the potential negative impact of the COVID-19 pandemic
(which, among other things, may exacerbate each of the
forward-looking statements discussed here); 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; cybersecurity incidents involving our systems or third
party systems, including the July 2020 ransomware attack; prices
for the products we purchase may fluctuate; ability to pass along
product cost increases; 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 (including headwinds due to
COVID-19) and ongoing labor market disruptions; retention of key
personnel; construction defect and product liability claims;
impairment of goodwill; adverse credit and financial markets events
and conditions; 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; 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, public health emergencies, violence,
uncertain political conditions and geopolitical conflicts such as
the ongoing conflict between Russia and Ukraine; risks related to
our current indebtedness and our ability to obtain financing in the
future; 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 2, 2022, as
updated by our 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 is further adjusted for stock-based
compensation expense, (gain) loss on sale of assets, and other
non-cash items, financing fees, 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 2, 2022
January 2, 2022
Current assets:
Cash and cash equivalents
$
62.7
$
53.7
Accounts receivable, net of allowance for
doubtful accounts of $18.4 and $13.5, respectively
502.8
393.8
Inventory, net
853.5
636.6
Income tax receivable
—
3.3
Prepaid expenses and other current
assets
57.3
41.4
Total current assets
1,476.3
1,128.8
Property and equipment, net
172.5
151.5
Operating lease right-of-use assets,
net
313.1
298.5
Goodwill
386.8
311.1
Intangible assets, net
266.6
213.9
Deferred tax assets
2.0
3.2
Other assets
15.1
9.1
Total assets
$
2,632.4
$
2,116.1
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
340.0
$
254.5
Current portion of finance leases
12.9
11.0
Current portion of operating leases
67.1
62.1
Accrued compensation
76.0
99.3
Long-term debt, current portion
4.0
4.0
Income tax payable
7.3
—
Accrued liabilities
99.8
82.0
Total current liabilities
607.1
512.9
Other long-term liabilities
14.1
10.6
Finance leases, less current portion
38.6
34.4
Operating leases, less current portion
254.5
244.2
Deferred tax liabilities
11.0
5.1
Long-term debt, less current portion
383.8
251.2
Total liabilities
1,309.1
1,058.4
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01;
1,000,000,000 shares authorized; 45,103,331 and 44,788,385 shares
issued, and 45,082,420 and 44,767,474 shares outstanding at October
2, 2022 and January 2, 2022, respectively
0.5
0.4
Additional paid-in capital
572.2
562.0
Retained earnings
743.8
497.5
Accumulated other comprehensive income
(loss)
6.8
(2.2
)
Total stockholders' equity
1,323.3
1,057.7
Total liabilities and stockholders'
equity
$
2,632.4
$
2,116.1
SiteOne Landscape Supply, Inc.
Consolidated Statements of Operations (Unaudited) (In
millions, except share and per share data)
Three Months Ended
Nine Months Ended
October 2, 2022
October 3, 2021
October 2, 2022
October 3, 2021
Net sales
$
1,102.6
$
936.4
$
3,124.5
$
2,670.5
Cost of goods sold
714.0
595.9
2,005.6
1,740.3
Gross profit
388.6
340.5
1,118.9
930.2
Selling, general and administrative
expenses
289.2
235.3
792.4
653.4
Other (income) expense, net
(2.4
)
1.8
(6.6
)
(1.6
)
Operating income
101.8
103.4
333.1
278.4
Interest and other non-operating expenses,
net
5.6
4.3
14.5
14.1
Income before taxes
96.2
99.1
318.6
264.3
Income tax expense
22.9
19.1
72.3
53.4
Net income
$
73.3
$
80.0
$
246.3
$
210.9
Net income per common share:
Basic
$
1.63
$
1.79
$
5.47
$
4.74
Diluted
$
1.60
$
1.74
$
5.38
$
4.61
Weighted average number of common
shares outstanding:
Basic
45,102,574
44,645,126
45,024,324
44,511,675
Diluted
45,774,367
45,849,338
45,804,041
45,762,387
SiteOne Landscape Supply, Inc.
Consolidated Statements of Cash Flows (Unaudited) (In
millions)
Nine Months Ended
October 2, 2022
October 3, 2021
Cash Flows from Operating Activities:
Net income
$
246.3
$
210.9
Adjustments to reconcile Net income to net
cash provided by operating activities:
Amortization of finance lease right-of-use
assets and depreciation
34.1
25.8
Stock-based compensation
14.0
11.2
Amortization of software and intangible
assets
38.1
34.9
Amortization of debt related costs
0.9
1.1
Loss on extinguishment of debt
0.6
0.8
Gain on sale of equipment
(1.0
)
(0.3
)
Other
1.0
3.8
Changes in operating assets and
liabilities, net of the effects of acquisitions:
Receivables
(96.1
)
(118.0
)
Inventory
(196.2
)
(159.5
)
Income tax receivable
3.3
3.4
Prepaid expenses and other assets
(7.5
)
(10.7
)
Accounts payable
75.0
117.5
Income tax payable
7.0
—
Accrued expenses and other liabilities
(7.0
)
38.5
Net Cash Provided By Operating
Activities
$
112.5
$
159.4
Cash Flows from Investing Activities:
Purchases of property and equipment
(20.5
)
(24.2
)
Purchases of intangible assets
(10.2
)
(3.7
)
Acquisitions, net of cash acquired
(182.2
)
(71.1
)
Proceeds from the sale of property and
equipment
1.9
1.7
Net Cash Used In Investing
Activities
$
(211.0
)
$
(97.3
)
Cash Flows from Financing Activities:
Equity proceeds from common stock
3.2
7.3
Borrowings under term loan
—
325.0
Repayments under term loan
(1.9
)
(270.6
)
Borrowings on asset-based credit
facility
593.2
161.9
Repayments on asset-based credit
facility
(456.7
)
(161.9
)
Payments of debt issuance costs
(2.3
)
(2.4
)
Payments on finance lease obligations
(9.0
)
(7.7
)
Payments of acquisition related contingent
obligations
(10.0
)
(6.8
)
Other financing activities
(8.0
)
(4.2
)
Net Cash Provided By Financing
Activities
$
108.5
$
40.6
Effect of exchange rate on cash
(1.0
)
0.1
Net change In cash
9.0
102.8
Cash and cash equivalents:
Beginning
53.7
55.2
Ending
$
62.7
$
158.0
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for interest
$
11.0
$
12.2
Cash paid during the year for income
taxes
$
63.8
$
50.3
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:
2022
2021
2020
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Reported Net income
$
73.3
$
140.7
$
32.3
$
27.5
$
80.0
$
123.5
$
7.4
$
11.5
Income tax (benefit) expense
22.9
44.8
4.6
2.7
19.1
36.8
(2.5
)
1.6
Interest expense, net
5.6
4.6
4.3
5.1
4.3
4.3
5.5
9.1
Depreciation and amortization
27.4
23.1
21.7
22.3
21.0
20.3
19.4
18.2
EBITDA
129.2
213.2
62.9
57.6
124.4
184.9
29.8
40.4
Stock-based compensation(a)
4.5
5.8
3.7
3.1
3.5
4.6
3.1
2.7
(Gain) loss on sale of assets(b)
(0.7
)
(0.2
)
(0.1
)
0.2
(0.2
)
(0.2
)
0.1
(0.2
)
Financing fees(c)
0.1
0.2
—
—
—
—
0.7
—
Acquisitions and other adjustments(d)
2.5
3.0
1.3
0.9
0.5
1.3
0.8
1.0
Adjusted EBITDA(e)
$
135.6
$
222.0
$
67.8
$
61.8
$
128.2
$
190.6
$
34.5
$
43.9
_____________________________________
(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:
2022
2021
Qtr 3
Qtr 2
Qtr 1
Qtr 3
Qtr 2
Qtr 1
Reported Net sales
$
1,102.6
$
1,216.6
$
805.3
$
936.4
$
1,083.9
$
650.2
Organic Sales(a)
1,017.8
1,145.5
760.1
908.2
1,057.7
648.4
Acquisition contribution(b)
84.8
71.1
45.2
28.2
26.2
1.8
Selling Days
63
64
65
63
64
65
Organic Daily Sales
$
16.2
$
17.9
$
11.7
$
14.4
$
16.5
$
10.0
_____________________________________
(a) Organic Sales equal Net sales less Net sales from branches
acquired in 2021 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 2022 Fiscal Year. Includes
Net sales from branches acquired in 2021 and 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221102005159/en/
Investor Relations: SiteOne Landscape Supply, Inc.
Investor Relations 470-270-7011 investors@siteone.com
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