SiteOne (SITE) Q4 2025 Earnings Call Transcript

Date

Wednesday, Feb. 11, 2026 at 8:00 a.m. ET

Call participants

• Chairman and Chief Executive Officer — Doug Black
• Chief Financial Officer — Eric Elema
• Executive Vice President, Strategy and Development — Scott Salmon

Takeaways

• Net Sales -- $1.05 billion for the quarter (up 3%) and $4.7 billion for the year (up 4%), both on an equal selling-day basis.
• Organic Daily Sales Growth -- 2% in the quarter and 1% for the year, led by market share gains in maintenance despite overall end-market softness.
• Pricing -- Flat overall in 2025 (versus -3% in 2024), with 2% pricing increase in the fourth quarter; company expects 1%-3% pricing increase in 2026.
• Gross Profit -- Fourth quarter gross profit rose 6% to $357 million; full-year gross profit up 5%.
• Gross Margin -- Rose 80 basis points to 34.1% in the quarter; up 40 basis points to 34.8% for the year due to pricing, initiatives, and acquisitions, partly offset by higher freight/logistics costs.
• SG&A as % of Net Sales -- Fell 100 basis points in the fourth quarter to 35%; for the full year, declined 40 basis points to 30.1% despite higher costs from new acquisitions.
• Adjusted EBITDA -- Increased 18% in the quarter to $37.6 million; full-year adjusted EBITDA up 10% to $414.2 million, with margin improved 50 basis points to 8.8%.
• Net Income -- Fourth quarter net loss narrowed to $9 million (from $21.7 million); full year net income rose to $151.8 million (from $123.6 million).
• Working Capital -- Ended the year at $1.01 billion, up from $909 million, reflecting higher cash and inventory investment.
• Share Repurchases -- 817,000 shares repurchased in 2025 for $97.7 million at an average price of $119.62 per share.
• Branch Network Optimization -- 20 branches closed in 2025, with historical 75%-80% sales retention from such actions baked into 2026 guidance.
• Acquisitions -- 8 companies acquired in 2025, adding $55 million in trailing sales; 1 additional company acquired in 2026 YTD; the historical acquisition count now totals 107 since 2014.
• Private Label Penetration -- Grew over 100 basis points to 15% of total sales in 2025; company targets 1 percentage point growth per year.
• Digital Sales -- Surged more than 120% in 2025, with 10,000 regular users and expectation to reach double-digit percent of total sales in 2026.
• Debt and Leverage -- Net debt reduced to $330 million; leverage lowered to 0.8 times trailing adjusted EBITDA; total liquidity of $768 million at year-end.
• Outlook—2026 Adjusted EBITDA -- Full-year guidance of $425 million to $455 million, including a $4 million-$5 million EBITDA drag from a non-productive 53rd week.
• End Market Dynamics -- Maintenance (36% of sales) achieved 7% organic volume growth in 2025; new residential (20% of sales) expected to decline further in 2026; commercial (14% of sales) seen flat; repair and upgrade (30% of sales) believed to have stabilized.
• Supply Chain Investment -- Fifth distribution center launched in Wisconsin in Q4, initially dilutive but expected to lower delivered cost of goods and increase private label support over time.
• Tax Rate Guidance -- 2025 effective tax rate was 22.5%; management expects 25%-26% in 2026, excluding discrete items.

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Risks

• Eric Elema warned, "the additional four days of sales occur at the end of fiscal December when there is little landscaping activity, which we expect will result in a $4 million to $5 million EBITDA headwind for the 2026 fiscal year."
• Management signaled expectations for declines in new residential construction, stating, "In terms of end markets, we expect new residential construction, which comprises 20% of our sales, to be down in 2026. Continued elevated interest rates, lower consumer confidence, and high home values are constraining demand. This market was down in 2025, and with continued weakness in housing starts, we're expecting it to drop further in 2026."
• CFO Elema said, "On the organic daily basis, it's about 100 basis negative drag on organic growth. For the and Eric, that's for the year or for the quarter, it equates to 100 basis points negative drag on on Yeah. That's that's the full year. That number."
• CEO Black noted, "One headwind we do have is a headwind. We mentioned we put in the fifth DC. We put that in the fourth quarter. Also expanding another one of our DCs. When we do that initially, it tends to be dilutive, you know, as a couple million dollars in the fourth quarter. There'll be another $8 million next year as a headwind that will offset some of the gross margin improvement."

Summary

SiteOne Landscape Supply (NYSE:SITE) delivered quarterly and annual net sales growth of 3% and 4%, respectively, alongside improved adjusted EBITDA and net income. Management forecasts low single-digit organic daily sales growth and expects adjusted EBITDA between $425 million and $455 million for the upcoming year, with a $4 million to $5 million drag due to a slow extra week in December. Operational efficiencies included a 40 basis-point annual improvement in SG&A as a percent of sales and over 120% digital sales growth, pushing digital to a double-digit percentage of total sales for the coming period. The company’s network optimization, branch closures, and improved focus branch performance drove stronger margins, while private label penetration continued to increase, targeting 1 percentage point annual gains. Despite expected declines in new residential construction and short-term dilution from new distribution center investments, the pipeline of acquisitions remains robust, and leverage has been reduced to 0.8 times trailing adjusted EBITDA.

• Management confirmed, "we typically retain 75%, 80% of the sale" after branch closures, supporting sales stability expectations despite network consolidation.
• Private label brands in agronomics, landscape supplies, hardscapes, and nursery each contributed to margin accretion, with a long-term potential cited as "25%, 30% private label" share.
• Digital engagement growth was broad-based across geographies and products, with leadership stating 10,000 regular users and accelerating adoption through siteone.com.
• Integration of new and existing acquisitions is prioritized, with management expecting average deal size to return to typical levels in 2026 based on active discussions.
• SG&A improvement initiatives, network optimization, and focus branch enhancements are projected to offset inflationary pressures and achieve further operating leverage in 2026.

Industry glossary

• Adjusted EBITDA: Earnings before interest, tax, depreciation, and amortization, adjusted for one-time items and non-recurring costs; a key measure for operational profitability.
• Organic Daily Sales: Sales growth excluding acquisitions/divestitures, calculated per selling day to normalize for calendar variations.
• Focus Branches: Underperforming branch locations targeted for operational improvement to raise profitability to company averages.
• Private Label: Products sold under the company's exclusive brands rather than third-party brands, typically generating higher margins.

Full Conference Call Transcript

Doug Black: 2026 with stronger teams, a more cost-effective branch network, good momentum with our commercial and operational initiatives, and a robust pipeline of potential acquisitions. Accordingly, we remain confident in our ability to deliver superior value to our customers and suppliers and achieve solid performance and growth for our shareholders in 2026 and in the years to come. I will start today's call with a brief review of our unique market position and our strategy, followed by highlights from 2025. Eric Elema, who was recently appointed Chief Financial Officer, will then walk you through our fourth quarter and full-year financial results in more detail and provide an update on our balance sheet and liquidity position.

Scott Salmon will discuss our acquisition strategy, then I will come back to address our outlook and guidance for 2026 before taking your questions. As shown on Slide four of the earnings presentation, we have a strong footprint of more than 670 branches and five distribution centers across 45 U.S. states and five Canadian provinces. We are the clear industry leader, approximately three times the size of our nearest competitor. Yet we estimate that we only have about a 19% share of the very fragmented $25 billion wholesale landscaping products distribution market. Accordingly, our long-term opportunity to grow and gain market share remains significant.

We have a balanced mix of business: 66% focused on maintenance, repair, and upgrade, 20% focused on new residential construction, and 14% on new commercial and recreational construction. As the only national full product line wholesale distributor in the market, we also have an excellent balance across our product lines as well as geographically. Our strategy to fill in our product lines across the U.S. and Canada, both organically and through acquisition, further strengthens this balance over time. Overall, our end market mix, broad product portfolio, and geographic coverage offer us multiple avenues to grow and create value for our customers and suppliers while providing important resilience in softer markets.

Turning to Slide five, our strategy is to leverage the scale, resources, functional talent, and capabilities that we have as the largest company in our industry, all in support of our talented, experienced, and entrepreneurial local teams. Consistently deliver superior value to our customers and suppliers. We have come a long way in building SiteOne and executing our strategy but have more work to do as we develop into a world-class company. Current challenging market conditions require us to adopt new processes and technologies faster and to be even more intentional in driving organic growth, improving our productivity, and mastering the unique aspects of each of our product lines.

Accordingly, we remain highly focused on our commercial and operational initiatives to overcome near-term headwinds but more importantly, build a long-term competitive advantage for all our stakeholders. These initiatives are complemented by our acquisition strategy, which fills in our product portfolio, moves us into new geographic markets, and adds terrific new talent to SiteOne. Taken altogether, we expect our strategy to create superior value for our shareholders through organic growth, acquisition growth, and EBITDA margin expansion. On slide six, you can see our strong track record of performance and growth over the last ten years with consistent organic and acquisition growth.

From an adjusted EBITDA margin perspective, we benefited from the extraordinary price realization due to rapid inflation in commodity products in 2021 and 2022. In 2023 and 2024, we experienced significant headwinds as commodity prices came down. In 2024, we also experienced further adjusted EBITDA dilution from the acquisition of Pioneer, a large turnaround opportunity with great strategic fit, and from our other focus branches, which resulted from the post-COVID market headwinds. Over the past two years, our pricing transitioned from negative 3% in 2024 to flat in 2025. And we anticipate that pricing will be up 1% to 3% in 2026.

Furthermore, we achieved excellent progress with Pioneer and our other focus branches in 2025, and expect to continue achieving improvements over the next several years as we bring their performance up to the SiteOne average. In summary, we expect to drive continued adjusted EBITDA margin improvement in 2026 and beyond as we execute our initiatives as the market headwinds slowly turn to tailwinds. We have now completed 107 acquisitions across all product lines since the start of 2014, adding approximately $2.1 billion in trailing twelve-month sales to SiteOne, which demonstrates the strength and durability of our acquisition strategy. These companies expand our product line capabilities and strengthen SiteOne with excellent talent and new ideas for performance and growth.

Our pipeline of potential deals remains robust, and we expect to continue adding and integrating more companies in 2026 to support our growth. Given the fragmented nature of our industry and our current market share, we believe that we have a significant opportunity to continue growing through acquisition for many years to come. Slide seven shows the long runway we have ahead in filling in our product portfolio, which we aim to do primarily through acquisition, especially in the nursery, arsenic, and landscape supplies categories. We are well connected with the best companies in our industry and expect to continue filling in these markets systematically over the next decade.

I will now discuss some of our full-year 2025 performance highlights as shown on Slide eight. We achieved 4% net sales growth in 2025, with an organic daily sales increase of 1%. Organic sales volume grew 1% during the year as our teams continued to gain market share, which more than offset the decline in our end markets. As I mentioned, pricing was flat in 2025, which was a significant improvement from the 3% decline we experienced in 2024. Pricing was up 2% in the fourth quarter, and with most of the commodity product deflation behind us, we expect that trend to continue into 2026, supporting stronger organic daily sales growth.

Gross profit in 2025 increased 5%, and gross margin increased 40 basis points to 34.8%. The increase in gross margin was driven by improved price realization, benefits from our commercial initiatives, and a positive contribution from acquisitions, partially offset by higher freight and logistics costs to support our growth, including the establishment of our fifth distribution center during the fourth quarter. SG&A as a percentage of net sales decreased 40 basis points to 30.1%, as our strong actions to reduce SG&A in the base business were partially offset by the addition of acquisitions with higher operating costs. SG&A for the base business decreased 50 basis points compared to 2024 on an adjusted EBITDA basis.

As we continue to optimize our branch network, reduce our net customer delivery expense, and closely manage labor and expenses in relation to sales volume. We reduced the cost of our branch network further in the fourth quarter and expect to continue achieving SG&A leverage in 2026. Adjusted EBITDA in 2025 increased 10% year over year to $414.2 million, and adjusted EBITDA margin for the year improved 50 basis points to 8.8%, reflecting positive organic daily sales growth, gross margin improvement, solid operating leverage, and good contributions from acquisitions. Given the challenging markets, we were pleased to achieve solid adjusted EBITDA margin expansion, and expect to continue driving our EBITDA margins toward our longer-term objectives in the coming years.

In terms of initiatives, our teams are executing specific actions to improve our customer experience, accelerate organic growth, expand gross margin, and increase SG&A leverage. For gross margin improvement, we continue to increase sales with our small customers faster than our company average, drive growth in our private label brands, and improve inbound freight costs through our transportation management system. These initiatives not only improve our gross margin but also add to our organic growth as we gain market share in the small customer segment as well as across product lines with our private label brands like LESCO, Pro Trade, Solstice Stone, and Portfolio.

In 2025, we increased our mix of private label products by over 100 basis points from 14% to 15% of total sales. To further drive organic growth, we increased our percentage of bilingual branches from 62% of branches to 67% of branches, while executing Hispanic marketing programs to create awareness among this important customer segment. We are also making great progress with our sales force productivity as we leverage our CRM and establish more disciplined revenue-generating habits and processes among our inside sales associates and our over 600 outside sales associates.

Our digital initiative with siteone.com is also helping us drive organic daily sales growth, as our results have shown that customers who are engaged with us digitally grow significantly faster than those who are not. In 2025, we increased digital sales by over 120%, while adding thousands of new regular users. Siteone.com helps customers be more efficient and helps us increase market share, making our associates more productive. A true win-win-win. Through siteone.com and our other digital tools, we are accelerating organic growth, and we believe we are outperforming the market.

With the benefit of Dispatch Track, which allows us to more closely manage our customer delivery, we improved both associate and equipment efficiency for delivery in 2025, while more consistently pricing this service. As a result, we reduced our net delivery expense by over 40 basis points on delivered sales, which represents approximately one-third of our total sales. This is a major initiative, and we expect to make significant progress again in 2026 and over the next two to three years.

In 2025, we focused intensely on our underperforming branches, or focus branches, to ensure that they have the right teams, the right support, and are executing our best practices to bring their performance up to or above the SiteOne average. We were pleased to achieve an over 200 basis point improvement in the adjusted EBITDA margin of our focus branches in 2025. Going forward, we expect to gain a meaningful adjusted EBITDA margin lift for SiteOne in the coming years as we continue to improve the performance of these branches. Further progress in 2026 in the face of continued soft markets.

We consolidated and closed 20 branches in 2025 and plan to serve existing customers through our remaining branch network at a lower cost. Taken altogether, we executed well in 2025 and are gaining momentum with our commercial and operational initiatives to drive organic growth, increase gross margin, and achieve operating leverage in 2026 and beyond. On the acquisition front, as I mentioned, we added eight companies to our family in 2025, with approximately $55 million in trailing twelve-month sales added to SiteOne. With the market uncertainty and with all our acquisitions being small, 2025 was a lighter year than typical in terms of acquired revenue.

Given our current backlog and discussions, we expect 2026 to be a more typical year in terms of average deal size. With an experienced acquisition team, broad and deep relationships with the best companies, a strong balance sheet, and an exceptional reputation as the acquirer of choice, we remain well-positioned to grow consistently through acquisition for many years in the very fragmented wholesale landscape supply distribution market. In summary, our teams did a good job in 2025 managing through the headwinds, executing our strategy, leveraging our breadth of commercial and operational initiatives, and creating momentum as we move into 2026. After three years with no price benefit, we are pleased to be entering 2026 with positive pricing.

And we are confident in our ability to continue outperforming the market and expanding our adjusted EBITDA margin as we grow. We are excited about our future and we continue to build our company and deliver superior value for our customers, suppliers, and shareholders for the long term. Now Eric will walk you through the quarter and full year in more detail. Eric?

Eric Elema: Thanks, Doug. I'll begin on Slides nine and ten with some highlights of our fourth quarter and full-year results. We reported an increase in net sales of 3% to $1.05 billion for the fourth quarter and an increase of 4% to $4.7 billion for fiscal year 2025. There were sixty-one selling days in the fourth quarter and two hundred fifty-two selling days in fiscal year 2025. Both were the same number of selling days as the prior year periods. In fiscal year 2026, we have an extra week, which will result in an increase to two hundred fifty-six selling days.

Unfortunately, Doug will describe in our outlook, the additional four days of sales occur at the end of fiscal December when there is little landscaping activity, which we expect will result in a $4 million to $5 million EBITDA headwind for the 2026 fiscal year. Organic daily sales increased 2% in the fourth quarter compared to the prior year, driven by improved pricing, our sales initiatives, and solid demand in the maintenance end market, especially for ice melt products. For the full year, organic daily sales increased 1% due to steady growth in the maintenance end market and execution of our sales initiatives, partially offset by softer demand in the new residential construction and repair and upgrade end markets.

Price increases contributed 2% to organic daily sales growth this quarter. Price increases due in part to tariffs have now more than offset price decreases we are experiencing with select commodity products. We have positive pricing in almost all categories, while commodity products like grass seed and PVC pipe, which were down 12% and 10%, respectively, this quarter, are becoming less of a headwind. For the full year, we estimate the pricing impact on 2025 organic daily sales was negligible compared to the 2024 fiscal year, as deflationary impacts earlier in the year were offset by modest price inflation in the second half. Our current outlook for 2026 is for prices to increase by 1% to 3%.

Organic daily sales for agronomic products, which includes fertilizer, control products, ice melt, and equipment, increased 11% for the fourth quarter and 7% for the full year due to strong volume growth and solid end market demand. In the fourth quarter, the strong agronomic sales growth was driven by the sales of ice melt products, which benefited from an increase in snow events during the quarter compared to a low number of events in the prior year period. While snow events are good for sales of ice melt, they generally have a negative effect on overall organic growth.

Organic daily sales for landscaping products, which includes irrigation, nursery, hardscapes, outdoor lighting, and landscape accessories, decreased 1% for the fourth quarter and 1% for the full year due to softer demand in the new residential construction and repair and upgrade end markets. Geographically, seven of our nine regions achieved positive organic daily sales growth in the fourth quarter. We achieved solid growth in our Midwest markets due to the strong sales of agronomic products but continue to see pressure in markets like Texas and California that have been affected by softness in new construction demand.

Acquisition sales, which reflects sales attributable to acquisitions completed in 2024 and 2025, contributed $12 million or 1% to net sales growth in the fourth quarter. For the 2025 fiscal year, acquisition sales contributed $111 million or 2% to net sales growth. Scott will provide more details regarding our acquisition strategy later in the call. Gross profit for the fourth quarter was $357 million, which was an increase of 6% compared to the prior year period. Gross margin for the fourth quarter increased 80 basis points to 34.1%. For the 2025 fiscal year, gross profit increased 5% and gross margin increased 40 basis points to 34.8%.

The increase in gross margin for the fourth quarter and full year reflects improved price realization, benefits from our commercial initiatives, and a positive contribution from acquisitions, partially offset by higher freight and logistics costs. During the year, we added a fifth distribution center near Milwaukee, Wisconsin. We increased international sourcing to support the growth of private label products. Selling, general, and administrative expenses, or SG&A, increased less than 1% to $366 million for the fourth quarter. SG&A as a percentage of net sales decreased 100 basis points in the quarter to 35%.

As discussed during last quarter's earnings call, we consolidated and closed 20 branch locations in the fourth quarter, which negatively impacted SG&A by $6 million, of which $4.5 million is reflected in adjusted EBITDA. In 2024, we took similar actions to consolidate and close 22 locations, which negatively affected SG&A by $16 million, of which $4.5 million was included in our adjusted EBITDA results. These actions reflect our continued efforts to optimize our branch footprint and lower our cost structure to match the current environment. As a reminder, in most cases with our consolidations and closures, we typically can serve customers from other branches in the same market, and therefore, we expect to retain most of the sales.

For the quarter, base business SG&A as a percentage of net sales was roughly flat, reflecting our ongoing operating cost management actions, which helped offset higher incentive compensation expense. For the full year, SG&A increased 2% to $1.4 billion, and SG&A as a percentage of net sales decreased 40 basis points to 30.1%. Base business SG&A as a percentage of net sales decreased 50 basis points for 2025 compared to the prior year. This improvement reflects our continued efforts to increase productivity and better align our operating costs with the current market demand. Our effective tax rate for fiscal 2025 was 22.5% compared to 22.4% for fiscal 2024.

A small increase in the effective tax rate was due primarily to a decrease in the amount of excess tax benefits from stock-based compensation. Excess tax benefits of $3.8 million were recognized for the 2025 fiscal year as compared to $3.3 million for the prior year. We expect the effective tax rate for fiscal 2026 will be between 25% and 26%, excluding discrete items such as excess tax benefits. Net loss attributable to SiteOne was $9 million for the fourth quarter compared to a net loss of $21.7 million for the prior year period. Net income attributable to SiteOne for fiscal 2025 increased to $151.8 million compared to $123.6 million for fiscal 2024.

The improvement in both the fourth quarter and full year was primarily due to higher net sales, improved gross margin, and the achievement of SG&A leverage. Our weighted average diluted share count was 45.1 million for the 2025 fiscal year compared to 45.6 million for the 2024 fiscal year. We repurchased 322,000 shares for $40 million in the fourth quarter and 817,000 shares for $97.7 million at an average price of $119.62 per share for the full year. Adjusted EBITDA increased 18% to $37.6 million for the fourth quarter compared to $31.8 million for the prior year period. Adjusted EBITDA margin expanded 50 basis points to 3.6%.

For the full year, adjusted EBITDA increased approximately 10% to $414.2 million compared to $378.2 million for the 2024 fiscal year. Adjusted EBITDA margin improved 50 basis points to 8.8% for the 2025 fiscal year. Adjusted EBITDA includes adjusted EBITDA attributable to non-controlling interest of $1.1 million and $4.2 million for the fourth quarter and full year, respectively. Now I'd like to provide a brief update on our balance sheet and cash flow statement as shown on Slide 11. Working capital at the end of the 2025 fiscal year was $1.01 billion compared to $909 million at the end of the prior year.

The increase in working capital is primarily due to higher cash on hand and strategic purchases of inventory to support our growth. Cash provided by operating activities increased $165 million for the fourth quarter compared to $119 million for the prior year period. The increase in cash flows from operating activities for the fourth quarter reflects higher net income and improved working capital management. Cash provided by operating activities for the full year was $301 million compared to $283 million for the prior year. The increase in cash flow from operating activities in the 2025 fiscal year was primarily due to the improvement in net income.

We made cash investments of $30 million for the fourth quarter compared to $37 million for the same period in 2024. We made cash investments of $83 million in the 2025 fiscal year compared to $177 million in the prior year. The decrease in both the fourth quarter and full year is attributable to lower investments and acquisitions. Capital expenditures for the quarter were $15 million compared to $10 million for the prior year period. Capital expenditures for the 2025 fiscal year were $54 million compared to $41 million for the 2024 fiscal year. The increase in capital expenditures for both the fourth quarter and full year reflects increased investments in our branch locations.

Net debt at the end of the 2025 fiscal year was $330 million compared to $412 million at the end of the prior year. Leverage rates decreased to 0.8 times our trailing twelve months adjusted EBITDA compared to 1.1 times at the end of the prior year. We had available liquidity of $768 million, which consisted of $191 million of cash on hand and $578 million in available capacity under our ABL facility at the end of the 2025 fiscal year. On Slide 12, highlight our balanced approach to capital allocation. Our primary goal regarding capital allocation is to invest in our business, including the execution of our acquisition strategy.

We're also committed to maintaining a conservative balance sheet demonstrated by our leverage ratio. To the extent we have excess capital after achieving these objectives, the share repurchase authorization provides us with a mechanism to return capital to our shareholders. In the 2025 fiscal year, we executed our capital allocation strategy, investing $93 million in CapEx and acquisitions, and conservatively maintaining leverage at 0.8 times net debt to adjusted EBITDA, which allowed us to complete share repurchases of approximately $98 million. I will now turn the call over to Scott for an update on our acquisition strategy.

Scott Salmon: Thanks, Eric. As shown on Slide 13, we acquired three companies in the fourth quarter, bringing our total for the year to eight, with combined trailing twelve-month net sales of approximately $55 million in 2025. Additionally, we have acquired one company in 2026. Since 2014, we have acquired 107 companies with approximately $2.1 billion in trailing twelve-month net sales added to SiteOne. Turning to Slides 14 to 17, you will find information on our most recent acquisitions. On October 1, we acquired Red's Home and Garden, a wholesale distributor of nursery and hardscape products in Wilkesboro, North Carolina.

The addition of Red's Home and Garden provides a strategic entry into North Carolina's Appalachian market, allowing us to offer all of our product lines in a new market. On November 13, we acquired CC Landscaping Warehouse, a wholesale distributor of nursery products, bulk materials, and landscape supplies in Bradenton, Florida. The addition of CC Landscape expands SiteOne's product offering in this fast-growing Florida market. On November 20, we acquired French Broad Stoneyard, a two-location wholesale distributor of hardscape products in Arden and Brevard, North Carolina. This acquisition expands our hardscape presence in the North Carolina mountain region.

Finally, on January 13, we completed our first acquisition of 2026, adding Borje Flagstone Company, a division of Borje Brothers Building Materials, a wholesale distributor of hardscape products with one location in Santa Monica, California. Summarizing on Slide 18, our acquisition strategy continued to create significant value for SiteOne, adding excellent talent and moving us forward toward our goal of providing a full line of landscape products and services to our customers in all major U.S. and Canadian markets. As we've discussed, the high-performing companies we acquired in 2025 were smaller than our historical average. As Doug had mentioned, given our active discussions, we would expect the average deal size to be more typical in 2026.

Overall, with our strong balance sheet and a robust pipeline, we remain confident in our ability to continue adding outstanding companies to SiteOne for years to come. I want to thank the entire SiteOne team for their passion and commitment to making SiteOne a great place to work and for welcoming the newly acquired teams when they join the SiteOne family. I will now turn the call back to Doug.

Doug Black: Thanks, Scott. I'll wrap up on Slide 19. As we move into 2026, there continues to be uncertainty with interest rates, consumer confidence, and the overall economy, which could affect our end markets. On the positive side, we are expecting pricing to increase in 2026 for the first time since 2022, which will support higher organic daily sales growth. In terms of end markets, we expect new residential construction, which comprises 20% of our sales, to be down in 2026. Continued elevated interest rates, lower consumer confidence, and high home values are constraining demand. This market was down in 2025, and with continued weakness in housing starts, we're expecting it to drop further in 2026.

New commercial construction, which represents 14% of our sales, was solid in 2025, and we believe it will remain flat in 2026. Meeting activity from our project services teams continues to be slightly positive compared to the prior year, which is a good indicator of continued demand. While the ABI Index is showing weakness, our customer backlogs remain solid, and we believe the commercial market will remain resilient for the full year. We believe the repair and upgrade market, which represents 30% of our sales, was down in 2025 but seemed to have stabilized during 2026.

Lastly, in the maintenance end market, which represents 36% of our sales, we achieved excellent sales volume growth in 2025 as our teams gained profitable market share on top of the steady demand growth. We expect the maintenance end market to continue growing steadily in 2026. In total, we expect end market demand to be flat, with growth in maintenance offsetting a decline in new residential construction. Given this backdrop, and with the benefit of our commercial initiatives, we expect to achieve positive sales volume growth, which when coupled with positive pricing, is expected to yield low single-digit organic daily sales growth for the full year 2026.

We expect gross margin in 2026 to be higher than in 2025, driven by our commercial initiatives and the contribution from acquisitions, partially offset by higher freight and logistics costs supporting our growth. With our continued strong actions to improve our productivity and by continuing to address our focus branches, we expect to achieve operating leverage in 2026, yielding solid improvement in our adjusted EBITDA margin. In terms of acquisitions, as Scott mentioned, we have a good pipeline of high-quality targets, and we expect to add more excellent companies to the SiteOne family throughout 2026. Lastly, as Eric mentioned, we have an extra week in 2026.

Unfortunately, this extra week occurs in fiscal December, during a very slow sales period, which is a traditionally loss-making period for SiteOne. As a result, we expect the extra week will reduce our adjusted EBITDA by $4 million to $5 million. With all these factors in mind, and including the negative effect of the fifty-third week, we expect our full-year adjusted EBITDA for fiscal 2026 to be in the range of $425 million to $455 million. This range does not factor in any contribution from unannounced acquisitions. In closing, I would like to sincerely thank all our SiteOne associates who continue to amaze me with their passion, commitment, teamwork, and selfless service.

We have a tremendous team, and it is an honor to be joined with them as we deliver increasing value for all our stakeholders. I would also like to thank our suppliers for supporting us so strongly and our customers for allowing us to be their partner. Operator, please open the line for questions. Thank you.

Operator: We will now be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. Before pressing the star keys, we ask that analysts limit themselves to one question and a follow-up so that others may do so as well. One moment, while we poll for questions. Our first question comes from David Manthey with Baird. Please proceed with your question.

David Manthey: Thank you. Good morning, guys. First question here, more of a statement. I mean, we're in the shoulder season obviously, but really encouraging results. So that's great to see. But focusing on the year that we just closed up, by my calculations, I think you did over 20% EBITDA contribution margins on just 1% organic growth in 2025. And if I look at the guidance you've given for EBITDA and low single-digit organic growth, I think that implies something in the mid to high teens, maybe even higher than that in 2026 again. So first question is just, is that your intent? And then I have a follow-up.

Doug Black: Yeah. I think those are kind of the basic numbers. And we're able to get that obviously because we're improving our gross margin at the same time, we're getting SG&A leverage. And we have, as you know, we have the focus branches that we're able to improve. And so that gives us more than, say, a typical drop down to the bottom line on pretty modest sales. And we expect that to be the case in 2026 as well as 2025. Eventually, that will play itself out.

But for now, we can get pretty outsized delivery on low sales because of the focused branch improvement and the other initiatives that we've got that kind of combine together to give us that pretty robust profit improvement.

David Manthey: Yeah. Thanks, Doug. You almost answered my follow-up question, but let me just drill in a little bit more on that. So the factors that had depressed margin previously at the trough were weak market demand, negative pricing, we had this Pioneer overhang, structural investments you made in the business and distribution centers and technology, and that was offset by the cost reduction efforts that you mentioned. And maybe as it relates to those specific efforts, clearly, some of those are in the rearview mirror and no longer apply. But as you look at 2026, which are the key levers as we move forward?

And then is there anything else from a cost standpoint that we need to think about that will be an offset in '26, just any sort of investment or anything else we should be watching for?

Doug Black: Yeah. I mean, you pretty much hit the list, and that's why we're excited as we look forward. Pioneers delivered significant improved profitability in 2025. We expect that to continue in 2026. Deflation, which has been hampering us for several years, is largely behind us. And the investments that we've made during those periods, even when things were tougher, are starting to pay off, and we're getting the harvest. So a good outlook, I guess, going forward. One headwind we do have is a headwind. We mentioned we put in the fifth DC. We put that in the fourth quarter. Also expanding another one of our DCs.

When we do that initially, it tends to be dilutive, you know, as a couple million dollars in the fourth quarter. There'll be another $8 million next year as a headwind that will offset some of the gross margin improvement. But we'll still see solid gross margin improvement on top of that. Last year, we had a bonus headwind with very little bonus in 'twenty-four. We paid higher bonuses in 25% on better performance. So it kind of, if you will, replaces that headwind in 2026. But that would be the one thing that's kind of that would still be going against us.

David Manthey: Got it. Thanks, Doug.

Operator: Thank you, David. Our next question comes from Ryan Merkel with William Blair. Please proceed with your question.

Ryan Merkel: Hey, guys. Thanks for the question. Wanted to start with the first quarter outlook, if I could. Are you expecting low single-digit organic growth here in 1Q? And can you comment on how the start of the year has gone?

Doug Black: Yes. I mean, we would expect our growth to be fairly balanced through the year. Pricing will be a bit stronger in the first half, just because of the way the tariff pricing hit kind of in May-ish, April, May. And the way the deflation of the commodity products has come off. We'll probably have stronger pricing in the first half than the second half. But overall, let's call it organic sales volume should be fairly spread out through the year. The start of the year has been very reasonable. We had a good January, February has been somewhat weather affected. But we're not seeing anything that doesn't line up with our guidance or outlook for 2026.

Ryan Merkel: Okay. That's great to hear. And then for my follow-up, guiding '26 organic to low single digits, the flat market price of 2%, so what I noticed is it doesn't include a lot for share gains. So how are you thinking about share gains in 2026? And then maybe speak generally to competition if it's still rational or if you're seeing people get a little more competitive here.

Doug Black: Yes. No, great question. Yes, we're confident that we can continue to gain market share. We're obviously very cautious on the market itself. We're calling it flat. But we do expect to gain market share. And so we probably put some cushion in there if the market ends up holding up, we should do well on a volume basis. We're very pleased with the 1% volume increase that we got last year when the market was down. So that looks optimistic. In terms of competition, it's the same, right? I mean, very competitive market, we have different competitors, some are more competitive than others. They're all kind of behaving the same.

We're very good at battling it out for the large customers. We're taking share kind of with the small, mid customers where the competition is less or tends to be less. And so that's kind of our strategy. But the competitive environment is very similar, but it is a very competitive market.

Ryan Merkel: Very good. Thanks for the thoughts. Best of luck.

Doug Black: Thank you.

Operator: Our next question comes from Jeffrey Stevenson with Loop Capital Markets. Please proceed with your question.

Jeffrey Stevenson: Hi, thanks for taking my questions today. How should we think about the expected operating leverage benefits in 2026 from your internal initiatives focused on improving underperforming branches? And then, could there be additional opportunities to close or consolidate branches in addition to the 20 you did in the fourth quarter?

Doug Black: Yes. Thanks, Jeff. I think focused branches will continue to contribute. We're expecting kind of a similar contribution in 26,000,000 as we delivered in '25. I think closures at this point, we're not expecting to do something that we have done in the last February. We'll continue to assess those opportunities, but it's part of our typical process to close branches and consolidate when leases come up. So we're not planning anything significant at this point. But in terms of other SG&A items, we do expect to drive productivity improvements on top of just the closures, cost management, our delivery programs, multiyear journey, and we expect that to contribute again.

So we do have inflation not only in wages, but we are basing overall across our SG&A. So we do believe that our initiatives will overcome that and will achieve leverage. That's our plans in 2026.

Jeffrey Stevenson: Okay. Great. Well, that's helpful. And private label growth has been a standout this year, increasing to 15% of sales. And it sounds like you have a long runway of opportunities in your core private label brands. Just, you know, is there a long-term target of, you know, what percentage private label sales could grow to over the coming years?

Doug Black: Yes. I mean, I would think that 25%, 30% private label in the long term would be very doable. It will take us time to get there. We kind of have a goal of adding 100 basis points in our total sales mix a year, and we achieved that goal this year. We've got some terrific programs for private label products for '26. So we feel like it will be a steady, very long-term march but quite powerful over that period in terms of margin improvement.

Jeffrey Stevenson: Great. Thank you.

Doug Black: Thank you.

Operator: Our next question comes from Collin Verron with Deutsche Bank. Please proceed with your question.

Collin Verron: Good morning. Thank you for taking my questions. I just wanted to start on maintenance. It's really shown steadiness in this uneven macro backdrop. So I was just curious, can you quantify the organic maintenance sales growth you saw in 2025 and sort of what your expectations are? And in terms of magnitude for 2026? And then I guess just the offsets here on the new resi side, just any sense of order of magnitude for the declines that you're expecting there?

Doug Black: Yes. Our organic growth for the products we sell into maintenance, so agronomics growth for the year was 7%, and that was all volume. Pricing came in flat for the full year. And in the fourth quarter, it was 11% on 9% volume with 2% price. So we feel like we're performing very well, taking share, penetrating adjacent markets, and driving a lot of improvements in our balanced mix of products. We think the base market demand is probably 2% to 3% a year in maintenance. It's 36% of our business, so that's a nice kind of powerful force. New res is 20% of our business. So it does allow us to kind of counterbalance that weakness.

But coming in at 7% volume, we have been gaining market share in maintenance, and we think we can continue. We've been gaining market share there probably for the last two or three years and have great capabilities there.

Collin Verron: Great. That's helpful color. I guess just pivoting to gross margin. I mean, it was a really strong quarter in the fourth quarter, and I think it was better than sort of the expectations coming out of the third quarter. So maybe can you compare sort of what transpired in the fourth quarter to what you were thinking in the third quarter and some of the puts and takes there and maybe how those will continue into 2026? Thanks.

Doug Black: Right. Yes. So if you think about price, we had guided 1% to 2%. We ended up on the high end of that with a 2%. So it was a better contribution on price, price realization. Vendor support, we were conservative there. And things came in a little better. That can move around at the end of a seasonal quarter, not necessarily tied to sales. It's more purchasing volumes related. And then freight, freight impacts, which there's been some partial offsets there that wasn't as bad as we anticipated. And acquisitions contribution came in a little higher on the gross margin side. So overall, it was better than we expected.

We enter the year on the high end of the pricing guide here for '26, we think that will be beneficial for price realization in the '20.

Operator: Please proceed with your question. Our next question comes from Mike Dahl with RBC Capital Markets.

Mike Dahl: Good morning. Thanks for taking my questions. First one on just the organic daily sales outlook. I know that with the branch closures, you typically expect to retain most of the sales, but given you've had at least two larger iterations of this now, I don't know if that may or may not be different than normal, but do you have any kind of stats that are showing you so far, maybe percentage-wise of what percentage of sales you're retaining and how that's influencing your, if at all, daily sales guide? And similarly, if we should think about that extra week in December as negatively impacting your daily sales guide?

Doug Black: Yes. In terms of the closures, we typically retain 75%, 80% of the sale. I mean, that has been our history. And so we would expect something similar. It is baked into our guide. So that's a bit of a headwind that obviously we can overcome with share gains. And then I'll pass it to Eric for the effect of the fifty-third week.

Eric Elema: Yes. The fifty-third week, obviously, it's an extra week of sales, but it's a very slow week. Think after Christmas wrap around New Year. So those four extra selling days, it's seasonally very slow. On the organic daily basis, it's about 100 basis negative drag on organic growth. For the and Eric, that's for the year or for the quarter, it equates to 100 basis points negative drag on Yeah. That's that's the full year. That number.

Mike Dahl: Yeah. That's what makes sense. That makes sense. That's what I kinda figured. Okay. And then just pivoting to the margin side, you're not giving exact guides for SG&A and gross margin per usual, but you expect improvement in both. Can you give us a sense of whether it's more heavily geared towards one versus the other?

Doug Black: It's pretty balanced across the two. As it was in 2025. So we feel like we're driving initiatives on both sides, and it would be pretty balanced, the contribution of each.

Operator: Our next question comes from Matthew Bouley with Barclays. Please proceed with your question.

Elaine Ku: Hi. You have Elaine Ku on for Matt Bouley. Thank you for taking my questions. I wanted to follow-up on private label. So within that, like, what category are you seeing the most opportunity to expand within? And can you walk us through maybe some of the margin differentials there for your business?

Doug Black: I mean, the categories are, you know, we have strong private label in agronomics being with the LESCO brand. With the Pro Trade, that would be lighting and other landscape supplies like synthetic turf, erosion control, and fittings, etcetera. And then we have a strong private label brand, Solstice Stone in hardscapes. So that's high-end veneers and flooring, decking, etcetera. And then finally, Portfolio is our nursery private label, which is growing quite rapidly. So that gives you the full breadth of our private label brands. The differential, I would just say, is significant. It makes a difference.

And when we move the percentage of private label, as a percent of total sales, it makes a material impact on our gross margin.

Elaine Ku: Got it. And can you also touch on what you're seeing in terms of price increase announcements so far into like early 1Q? How has price realization tracked so far? And is there any difference between like finished goods and commodity pricing?

Doug Black: Yeah. So price realization, I would say it's early, but it's tracking how we exited. Price increases so far in the quarter, it's early, largest suppliers guess we had one signal low single digit. So nothing significant so far in the quarter. And commodities? Yeah, commodities. Sorry. Commodities, so we exited the year the two that had been deflationary or have been deflationary, grass seed was down 12% and PVC down 10%. As we enter this first half of the year, grass seed will stay in that range. Kind of 10% to 15% reprices in June. We'll see we believe we're at a bottom there. Down to twenty thirteen pricing levels.

So we don't believe that we're going to go down any further. After the first half of the year. And then PVC is kind of flattish right now in the environment. We're kind of monitoring haven't seen any price increases or any significant decreases at this point. So commodities right now, we believe we're exiting that deflationary impacts on the business. And then across the rest of the cost basket, more 90% positive price territory. And tariff affected products where price increases went in the second quarter in twenty-five. Those have remained in the positive pricing territory.

Elaine Ku: Got it. Thank you.

Operator: Our next question comes from Andrew Carter with Stifel. Please proceed with your question.

Andrew Carter: Hey, thank you. Good morning. Regarding the digital growth that you cited, where is digital penetration today across the platform? And is it significantly different by markets to where there's a test case to show where this can be? Or is it pretty even at this point?

Doug Black: It's pretty broad stretch, Brad, across products now and across geographics. We're very pleased. We're up 120% over 120% versus last year. We expect that to be double-digit penetration for total sales this year. We've got our regular users of siteone.com are up 60% or about 10,000 regular users in 2025. So, yes, we're very pleased at how digital is ramping up and becoming a very meaningful part of SiteOne.

Andrew Carter: And regarding kind of the end market guidance that you gave, new construction to be down, how much in your guidance is factored in how deep the declines could go that you could manage and still stay within your guidance? And remind us, I think you have you're six months out from new construction. Census is delayed, but so that still gives you till April. So any help and clarity on that key market?

Doug Black: Yes. I mean, it's hard to say, right? There's a lot of uncertainty with new res, but I would kind of we're looking at maintenance as a balance. Maintenance is 36% of our business, new res is 20%. Maintenance demand will be up 2% to 3%. So new res could be down more than that. And obviously, it balances, right? And it's so that gives you the math of how we're thinking about how things will play out. And we stand ready for if the market is worse than that, then we feel like our share gains can also help balance that. We're gaining strength there. But we'll see what we get.

2025 was we feel it down market where new res and repair and remodel were both down. And we were able to kind of drive out a 1% volume growth. So we're still optimistic even though we that the new res market is likely to be soft and down materially.

Andrew Carter: Thanks, Pascal.

Operator: Our next question comes from Charles Perron-Piché with Goldman Sachs. Please proceed with your question.

Charles Perron-Piché: Good morning. First, I'd like to touch on the M&A pipeline. What gives you confidence in the normalization and activity this year? And should activity remain up, how would you consider other capital or allocation priorities given the strength of the balance sheet?

Doug Black: Yes. Thanks, Charles. I would say, obviously, the M&A activity in the year varies significantly. But our long-term average is that the average size is $15 million to $20 million in revenue. And just to show the variability, in 'twenty-three and 'twenty-four, our average revenue was over $25 million per company. And this year, as you saw, it was well under 10. What gives us confidence is that our active discussions this year would lead us to believe that we'd be in a more typical range. So it's just our experience and our ongoing discussions. Then in terms of if it is a light year, we would be we would redeploy capital to return cash to the shareholders. Yes.

We would fill in any space there.

Charles Perron-Piché: Got it. Okay. That's helpful. And then just touching on the fifth distribution center that opened up in Q4, understanding the cost that will come through it in the near term. But can you talk about the expected benefit you're going to be able to generate from this and the improvement to service associated with that?

Doug Black: Right. So, yeah, the fifth DC is in Wisconsin. It fills in the Midwest part of our business. It'll probably support 100 to 150 branches. And obviously, longer term, that will drive down our total delivered cost of goods sold and improve our margins. It is dilutive when we do it initially. But it improves the margins. But it also improves our stocking and our ability to service our customers with tremendous service at lower overall inventory levels. Because we get the inventory efficiency there. So adding the 50 EC will help us continue to lower our overall network cost over time. It will allow us to streamline our inventory turns. And increase our inventory turns.

But in the short term, it's dilutive in the year where you put it in and wrap yourself up.

Eric Elema: And I'd also add that it helps us continue to accelerate our private label strategy. So I think it gives us just another driver there. Achieve our objectives.

Charles Perron-Piché: Alright. Thanks for your time, guys, and good luck for the next quarter.

Doug Black: Thank you. Thank you.

Operator: Our next question comes from Sean Callahan with Bank of America. Please proceed with your question.

Sean Callahan: Hi, guys. Thanks for taking my questions. Just a follow-up on the M&A activity question. Do you have a target for the amount of capital you want to deploy this year or a target for the leverage ratio outside of the long-term number just so we could kind of think about total M&A and share repurchases together since you're below the low end of your target at this point?

Doug Black: Yeah. I think the target is one on leverage. Yes. And so we would maintain that target. And so we'll see how the year develops in terms of M&A. M&A tends to average toward a mean. And so with last year being a lighter year and given the discussions that Scott mentioned, we feel like this is going to be a stronger year. And that's our first priority, right, invest in the business, value-added acquisitions that help us build our company. And then we do have strong cash flows. We expect them to continue to be strong.

If we have capital that we feel is in excess staying within our target, we'll get share repurchase opportunistically through the year as well.

Sean Callahan: Okay, great. And then the macro backdrop for large discretionary spend seems to remain a challenge right now. But you guys are guiding for repair and upgrade to be relatively flat this year. What gives you the confidence that it'll remain stable? And then what are you hearing in terms of backlogs on the repair and upgrade side?

Doug Black: Yeah. It's a great question. I mean, we would say that flat is our best estimate. There certainly is some uncertainty around there. In terms of the market. What we're seeing in the market is that the very high end of remodel continues to be strong. Big backyard projects where folks aren't borrowing the money they can pay with cash, etcetera. So that continues to be strong. What became very weak was that middle-income, some smaller projects. That would have to be funded through either an equity loan or some type of interest rate device. And so that has been weak. As we mentioned, the remodel market was down, we believe, in 2025.

We've seen some stabilization in our own numbers. Our hardscapes products, lighting products that tend to be remodel driven. Would have been less down as the year progressed through. And so we take that as a sign that the market's kind of bottoming out. Certainly, that could be a wrong progression, but that's what we're seeing. The backlog of our customers, they have decent backlogs. They're way smaller than they were in post-COVID and some of the heyday. But it seems like they've got reasonable backlogs to be able to deliver on a flat year. What we're seeing now obviously, there's some uncertainty there.

But it gives us greater confidence that maybe we're hitting the bottom and that this year could be flat.

Sean Callahan: Okay, great. Thank you.

Operator: We have reached the end of our question and answer session now as there are no further questions at this time. I would now like to turn the floor back over to Doug Black for closing comments.

Doug Black: Okay. Well, thank you all for joining us today. We appreciate your interest in SiteOne. And we look forward to speaking to you again at the end of next quarter. Again, a big thank you to all our terrific associates for all they do. Our suppliers and our customers. And we will talk to you next quarter. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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