Second Quarter 2023 Highlights (Compared to Second Quarter
2022):
- Net sales increased 11% to $1.35 billion
- Organic Daily Sales increased 4%
- Gross profit increased 6% to $489.4 million; gross margin
contracted 170 basis points to 36.2%
- SG&A as a percentage of Net sales increased 130 basis
points to 23.7%
- Net income decreased 12% to $124.0 million
- Adjusted EBITDA decreased 5% to $211.2 million; Adjusted EBITDA
margin was 15.6%
- Operating cash flow increased $159.1 million to $253.8
million
- Closed two acquisitions: Adams Wholesale Supply and Link
Outdoor Lighting
Post-Quarter Highlights
- Closed one acquisition: Hickory Hill Farm & Garden
- Successfully increased term loan by $120 million to $372
million
SiteOne Landscape Supply, Inc. (the “Company” or “SiteOne”)
(NYSE: SITE) announced earnings for its second quarter ended July
2, 2023 (“Second Quarter 2023”).
“Our second quarter results were in line with our expectations
as we delivered solid Organic Daily Sales growth which helped to
mitigate the ongoing normalization of gross margin and EBITDA
margin,” said Doug Black, SiteOne’s Chairman and CEO. “Our teams
have continued to perform well in serving our customers, gaining
market share, and successfully managing through the near-term
commodity price deflation for select products. End market demand
has been resilient which allowed us to achieve positive organic
volume growth and strong growth in operating cash flow during the
quarter. Finally, we completed two acquisitions during the quarter
with one more completed in July. Overall, we are pleased with our
first half performance and feel good about our outlook for the
remainder of 2023. With strong teams, a robust acquisition
pipeline, and a winning strategy to create significant value for
our stakeholders, we are confident in our ability to continue
delivering exceptional performance and growth in the years to
come.”
Second Quarter 2023 Results
Net sales for the Second Quarter 2023 increased to $1.35
billion, or 11%, compared to $1.22 billion for the prior-year
period. Organic Daily Sales increased 4% compared to the prior-year
period primarily due to volume growth on solid end market demand.
Acquisitions contributed $86.1 million, or 7%, to Net sales growth
for the quarter.
Gross profit increased 6% to $489.4 million for the Second
Quarter 2023 compared to $461.1 million for the prior-year period.
Gross margin contracted 170 basis points to 36.2% due to the
absence of the large price realization benefit in the prior year
period, partially offset by lower freight costs and the positive
impact of acquisitions.
Selling, general and administrative expenses (“SG&A”) for
the Second Quarter 2023 increased to $320.6 million from $272.7
million for the prior-year period. SG&A as a percentage of Net
sales increased 130 basis points to 23.7% due to the impact of
acquisitions, continued inflation and higher operating costs
supporting our growth.
Net income for the Second Quarter 2023 was $124.0 million,
compared to net income of $140.7 million for the same period in the
prior year, as higher Net sales were more than offset by lower
gross margin and increased SG&A expense.
Adjusted EBITDA decreased 5% to $211.2 million for the Second
Quarter 2023, compared to $222.0 million for the prior-year period.
Adjusted EBITDA margin decreased 260 basis points to 15.6%.
Operating cash flow increased $159.1 million to $253.8 million
for the Second Quarter 2023 compared to $94.7 million for the
prior-year period. The record operating cash flow reflects our
progress in reducing inventory levels that we increased in prior
periods in response to supply chain uncertainty.
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 July 2, 2023, was $385.4
million compared to $436.3 million as of July 3, 2022. Net debt to
Adjusted EBITDA for the last twelve months was 0.9 times which was
unchanged from the prior year period.
Outlook
“We were pleased to generate positive Organic Daily Sales growth
in the second quarter with continued resilient end market demand
and contributions from our commercial initiatives. We expect
pricing to be down versus prior year in the second half due to
commodity price deflation which will cause pricing for the full
year 2023 to be approximately flat,” Doug Black continued.
“Accordingly, we expect Organic Daily Sales growth in the second
half to be slightly down with negative pricing offsetting volume.
We expect gross margin to be flat and adjusted EBITDA margin to be
slightly lower in the second half of 2023 compared to the second
half of 2022.”
For Fiscal 2023, we now expect our Adjusted EBITDA to be in the
range of $400 million to $425 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, August 2,
2023, at 8:00 a.m. Eastern Time, to discuss the Company’s financial
results. The conference call can be accessed by dialing
844-825-9789 (domestic) or 412-317-5180 (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 is 1823770 and the
replay is 10180700. The replay will be available until 11:59 p.m.
(ET) on August 16, 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 rising
interest rates; 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; financial institution disruptions; 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 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
July 2, 2023
January 1, 2023
Current assets:
Cash and cash equivalents
$
69.6
$
29.1
Accounts receivable, net of allowance for
doubtful accounts of $22.2 and $21.7, respectively
569.6
455.5
Inventory, net
865.4
767.7
Income tax receivable
—
10.9
Prepaid expenses and other current
assets
81.4
56.1
Total current assets
1,586.0
1,319.3
Property and equipment, net
201.8
188.8
Operating lease right-of-use assets,
net
364.0
321.6
Goodwill
433.9
411.9
Intangible assets, net
274.2
276.0
Deferred tax assets
3.8
3.7
Other assets
8.8
12.6
Total assets
$
2,872.5
$
2,533.9
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
382.3
$
279.7
Current portion of finance leases
18.4
14.8
Current portion of operating leases
73.4
70.1
Accrued compensation
57.9
81.2
Long-term debt, current portion
4.1
4.0
Income tax payable
24.8
—
Accrued liabilities
122.0
110.0
Total current liabilities
682.9
559.8
Other long-term liabilities
14.8
12.8
Finance leases, less current portion
56.1
43.9
Operating leases, less current portion
299.7
260.1
Deferred tax liabilities
7.6
7.8
Long-term debt, less current portion
376.4
346.6
Total liabilities
1,437.5
1,231.0
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01;
1,000,000,000 shares authorized; 45,273,918 and 45,148,312 shares
issued, and 45,041,897 and 44,916,291 shares outstanding at July 2,
2023 and January 1, 2023, respectively
0.5
0.5
Additional paid-in capital
589.3
577.1
Retained earnings
862.4
742.9
Accumulated other comprehensive income
8.1
7.7
Treasury stock, at cost, 232,021 and
232,021 shares at July 2, 2023 and January 1, 2023,
respectively
(25.3
)
(25.3
)
Total stockholders' equity
1,435.0
1,302.9
Total liabilities and stockholders'
equity
$
2,872.5
$
2,533.9
SiteOne Landscape Supply,
Inc.
Consolidated Statements of
Operations (Unaudited)
(In millions, except share and
per share data)
Three Months Ended
Six Months Ended
July 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
Net sales
$
1,353.7
$
1,216.6
$
2,191.1
$
2,021.9
Cost of goods sold
864.3
755.5
1,414.6
1,291.6
Gross profit
489.4
461.1
776.5
730.3
Selling, general and administrative
expenses
320.6
272.7
612.0
503.2
Other income
2.5
1.7
6.5
4.2
Operating income
171.3
190.1
171.0
231.3
Interest and other non-operating expenses,
net
7.3
4.6
14.2
8.9
Income before taxes
164.0
185.5
156.8
222.4
Income tax expense
40.0
44.8
37.3
49.4
Net income
$
124.0
$
140.7
$
119.5
$
173.0
Net income per common share:
Basic
$
2.75
$
3.12
$
2.65
$
3.85
Diluted
$
2.71
$
3.07
$
2.62
$
3.78
Weighted average number of common
shares outstanding:
Basic
45,093,712
45,034,633
45,069,781
44,985,199
Diluted
45,682,976
45,779,173
45,661,533
45,814,054
SiteOne Landscape Supply,
Inc.
Consolidated Statements of
Cash Flows (Unaudited)
(In millions)
Six Months Ended
July 2, 2023
July 3, 2022
Cash Flows from Operating Activities:
Net income
$
119.5
$
173.0
Adjustments to reconcile Net income to net
cash provided by (used in) operating activities:
Amortization of finance lease right-of-use
assets and depreciation
31.0
21.1
Stock-based compensation
15.7
9.5
Amortization of software and intangible
assets
30.8
23.7
Amortization of debt related costs
0.5
0.6
Gain on sale of equipment
(0.2
)
(0.3
)
Other
(2.5
)
0.6
Changes in operating assets and
liabilities, net of the effects of acquisitions:
Receivables
(111.2
)
(122.5
)
Inventory
(84.8
)
(215.2
)
Income tax receivable
10.9
3.3
Prepaid expenses and other assets
(16.7
)
(9.1
)
Accounts payable
98.5
80.8
Income tax payable
24.8
34.6
Accrued expenses and other liabilities
(15.1
)
(23.7
)
Net Cash Provided By (Used In)
Operating Activities
$
101.2
$
(23.6
)
Cash Flows from Investing Activities:
Purchases of property and equipment
(16.3
)
(16.6
)
Purchases of intangible assets
(1.1
)
(7.2
)
Acquisitions, net of cash acquired
(58.6
)
(122.0
)
Proceeds from the sale of property and
equipment
1.1
1.1
Net Cash Used In Investing
Activities
$
(74.9
)
$
(144.7
)
Cash Flows from Financing Activities:
Equity proceeds from common stock
2.1
2.3
Repurchases of common stock
(0.6
)
—
Repayments under term loan
(1.3
)
(1.3
)
Borrowings on asset-based credit
facility
302.8
319.8
Repayments on asset-based credit
facility
(271.5
)
(133.8
)
Payments on finance lease obligations
(8.3
)
(5.8
)
Payments of acquisition related contingent
obligations
(2.7
)
(8.9
)
Other financing activities
(6.5
)
(7.4
)
Net Cash Provided By Financing
Activities
$
14.0
$
164.9
Effect of exchange rate on cash
0.2
(0.2
)
Net change in cash
40.5
(3.6
)
Cash and cash equivalents:
Beginning
29.1
53.7
Ending
$
69.6
$
50.1
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for interest
$
13.9
$
6.8
Cash paid during the year for income
taxes
$
2.2
$
13.7
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 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Reported Net income (loss)
$
124.0
$
(4.5
)
$
(0.9
)
$
73.3
$
140.7
$
32.3
$
27.5
$
80.0
Income tax (benefit) expense
40.0
(2.7
)
(4.6
)
22.9
44.8
4.6
2.7
19.1
Interest expense, net
7.3
6.9
5.5
5.6
4.6
4.3
5.1
4.3
Depreciation and amortization
31.0
30.8
31.6
27.4
23.1
21.7
22.3
21.0
EBITDA
202.3
30.5
31.6
129.2
213.2
62.9
57.6
124.4
Stock-based compensation(a)
7.1
8.6
4.3
4.5
5.8
3.7
3.1
3.5
(Gain) loss on sale of assets(b)
0.2
(0.4
)
0.2
(0.7
)
(0.2
)
(0.1
)
0.2
(0.2
)
Financing fees(c)
0.1
—
—
0.1
0.2
—
—
—
Acquisitions and other adjustments(d)
1.5
1.1
2.8
2.5
3.0
1.3
0.9
0.5
Adjusted EBITDA(e)
$
211.2
$
39.8
$
38.9
$
135.6
$
222.0
$
67.8
$
61.8
$
128.2
_____________________________________
(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 2
Qtr 1
Qtr 2
Qtr 1
Reported Net sales
$
1,353.7
$
837.4
$
1,216.6
$
805.3
Organic Sales(a)
1,252.4
777.6
1,201.4
802.0
Acquisition contribution(b)
101.3
59.8
15.2
3.3
Selling Days
64
64
64
65
Organic Daily Sales
$
19.6
$
12.2
$
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/20230802756693/en/
Investor Relations Contact: SiteOne Landscape Supply,
Inc. Investor Relations 470-270-7011 investors@siteone.com
SiteOne Landscape Supply (NYSE:SITE)
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