SiteOne Landscape Supply Announces Third Quarter 2018 Earnings
Third Quarter 2018 Highlights (compared to Third Quarter 2017)
-
Net sales increased by 15% to $578.5 million
-
Organic Daily Sales increased by 5%
-
Gross profit increased by 19% to $191.0 million; gross margin expanded
110 basis points to 33.0%
-
Net income increased by 77% to $29.9 million
-
Adjusted EBITDA increased by 24% to $60.0 million; Adjusted EBITDA
margin expanded by 80 basis points to 10.4%
-
Net cash flow provided by operating activities increased by 310% to
$70.1 million
-
Completed four acquisitions: Landscape Express, Kirkwood, Stone
Center, and CentralPro with approximately $75 million in combined
annualized revenue
Post-Quarter Highlights:
-
Completed the acquisition of C&C Sand & Stone in October
ROSWELL, Ga.--(BUSINESS WIRE)--
SiteOne® Landscape Supply, Inc. (the “Company” or “SiteOne”)
(NYSE:SITE) announced earnings for its third quarter ended September 30,
2018 (“Third Quarter 2018”).
“The SiteOne team delivered double-digit topline growth, expanded our
adjusted EBITDA margin and generated robust cash flow, despite weather
and inflationary headwinds during the quarter,” said Doug Black,
SiteOne’s Chairman and CEO. “The combination of hurricane Florence and
an overall very wet September delayed our fall season and moderated our
organic sales growth to 5% from a higher pace in May and June. In
addition, we continued to experience rising cost inflation in the
quarter and our teams remained focused and disciplined in working with
our customers to pass through these higher costs. Given these
conditions, we are very pleased to have delivered a strong performance.
Further, we continued to execute our acquisition strategy by adding four
outstanding companies during the quarter and one more in October. With
good underlying market demand and a healthy acquisition pipeline, we
remain confident in the opportunities for SiteOne as we continue to
execute our strategies and create a company of excellence.”
Third Quarter 2018 Results
Net sales for the Third Quarter 2018 increased to $578.5 million, or
15%, compared to $502.4 million for the prior-year period. Organic Daily
Sales increased 5% compared to the prior-year period. Momentum from May
and June continued into July, however, market growth decelerated as the
quarter progressed and was impacted by wet weather during September.
Acquired sales growth was approximately $53.9 million, or 11% of the
overall growth for the quarter.
Gross profit increased to $191.0 million, or 19%, compared to $160.3
million for the prior-year period. Gross margin expanded by 110 bps to
33.0% for the Third Quarter 2018. The increase in gross margin was due
to improved pricing and margin contribution from acquisitions, partially
offset by higher material and freight costs.
Selling, general and administrative expenses (“SG&A”) in the Third
Quarter 2018 increased to $151.8 million from $128.1 million in the same
period last year, primarily due to the additional contribution from
acquisitions and continued investment in strategic initiatives,
including e-Commerce.
Net income for the Third Quarter 2018 increased to $29.9 million,
compared to $16.9 million for the same period in the prior year. The
increase in net income for the quarter is attributable to organic sales
growth, contribution from acquisitions and a lower tax rate.
Adjusted EBITDA increased to $60.0 million for the Third Quarter 2018,
compared to Adjusted EBITDA of $48.4 million for the prior-year period.
Outlook
“Our fall season has been impacted by hurricanes and wet weather in
certain key markets which is preventing our customers from making up the
spring shortfall,” Doug Black continued. “Additionally, the short-term
dampening effect of significant cost inflation has impeded our gross
margin improvement for the full year. As a result, we are updating our
2018 Adjusted EBITDA guidance to be in the range of $175 million to $180
million.
“Looking forward, we see solid underlying market conditions supported by
robust customer backlogs and we expect the above average cost inflation
to continue. Accordingly, we expect our base business organic sales
growth to remain steady and the market growth to extend into 2019. We
are well-positioned to improve gross margin while beginning to achieve
operating leverage on SG&A – both of which should support good adjusted
EBITDA expansion in 2019 and beyond.”
Reconciliation for the forward-looking full-year 2018 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, October 31, 2018,
at 8:00 a.m. Eastern Time, to discuss the Company’s financial results.
The conference call may be accessed by dialing (877) 705-6003 (domestic)
or (201) 493-6725 (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 13684033. The replay will be available until 11:59
p.m. (ET) on November 14, 2018.
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
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 Federal Private Securities Litigation Reform Act of 1995.
Forward-looking statements may include, but are not limited to,
statements relating to our 2018 Adjusted EBITDA outlook. 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; weather conditions, seasonality and availability
of water to end-users; laws and government regulations applicable to our
business that could negatively impact demand for our products; public
perceptions that our products and services are not environmentally
friendly; competitive industry pressures; product shortages and the loss
of key suppliers; product price fluctuations; inventory management
risks; ability to implement our business strategies and achieve our
growth objectives; acquisition and integration risks; increased
operating costs; 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 December 31, 2017.
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), depreciation and amortization and interest
expense, net of interest income. 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 GAAP and
should not be considered as an alternative to net income, operating
income or any other performance measures derived in accordance with
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 capital
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 stores, 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 |
| September 30, 2018 |
| December 31, 2017 |
|
Current assets:
| | | | | |
|
Cash and cash equivalents
| |
$
|
23.4
| | |
$
|
16.7
| |
|
Accounts receivable, net of allowance for doubtful accounts of $5.8
and $4.7, respectively
| |
306.3
| | |
219.9
| |
|
Inventory, net
| |
426.5
| | |
338.3
| |
|
Income tax receivable
| |
11.6
| | |
2.7
| |
|
Prepaid expenses and other current assets
| |
45.3
|
| |
24.3
|
|
| Total current assets | |
813.1
| | |
601.9
| |
| | | | |
|
|
Property and equipment, net
| |
86.8
| | |
75.5
| |
|
Goodwill
| |
144.0
| | |
106.5
| |
|
Intangible assets, net
| |
154.3
| | |
112.8
| |
|
Other assets
| |
12.5
|
| |
14.0
|
|
| Total assets | |
$
|
1,210.7
|
| |
$
|
910.7
|
|
| | | | |
|
| Liabilities and Equity | |
|
| |
|
|
Current liabilities:
| | | | | |
|
Accounts payable
| |
$
|
197.4
| | |
$
|
124.1
| |
|
Current portion of capital leases
| |
5.6
| | |
4.9
| |
|
Accrued compensation
| |
38.8
| | |
40.1
| |
|
Long term debt, current portion
| |
4.5
| | |
3.5
| |
|
Accrued liabilities
| |
53.1
|
| |
33.2
|
|
| Total current liabilities | |
299.4
| | |
205.8
| |
| | | | |
|
|
Other long-term liabilities
| |
11.6
| | |
16.8
| |
|
Capital leases, less current portion
| |
9.6
| | |
6.8
| |
|
Deferred tax liabilities
| |
16.3
| | |
8.4
| |
|
Long-term debt, less current portion
| |
569.7
|
| |
460.1
|
|
| Total liabilities | |
906.6
|
| |
697.9
|
|
| | | | |
|
|
Commitments and contingencies
| | | | | |
| | | | |
|
|
Stockholders' equity:
| | | | | |
|
Common stock, par value $0.01; 1,000,000,000 shares authorized;
40,824,246 and 39,977,181 shares issued, and 40,803,335 and
39,956,270 shares outstanding at September 30, 2018 and December 31,
2017, respectively
| |
0.4
| | |
0.4
| |
|
Additional paid-in capital
| |
239.8
| | |
227.8
| |
|
Retained earnings (accumulated deficit)
| |
62.2
| | |
(15.1
|
)
|
|
Accumulated other comprehensive income (loss)
| |
1.7
|
| |
(0.3
|
)
|
| Total equity | |
304.1
|
| |
212.8
|
|
| Total liabilities and equity | |
$
|
1,210.7
|
| |
$
|
910.7
|
|
|
|
SiteOne Landscape Supply, Inc. |
Consolidated Statements of Operations |
(In millions, except share and per share data) |
|
|
|
| Three Months Ended |
| Nine Months Ended |
| | September 30, |
| October 1, | | September 30, |
| October 1, |
|
| | 2018 | | 2017 | | 2018 | | 2017 |
| | | | | | | |
|
|
Net sales
| |
$
|
578.5
| | |
$
|
502.4
| | |
$
|
1,637.7
| | |
$
|
1,446.0
|
|
|
Cost of goods sold
| |
387.5
|
| |
342.1
|
| |
1,108.3
|
| |
982.4
|
|
| Gross profit | |
191.0
| | |
160.3
| | |
529.4
| | |
463.6
| |
| | | | | | | |
|
|
Selling, general and administrative expenses
| |
151.8
| | |
128.1
| | |
428.7
| | |
368.4
| |
|
Other income
| |
2.3
|
| |
1.6
|
| |
6.0
|
| |
3.8
|
|
| Operating income | |
41.5
|
| |
33.8
|
| |
106.7
|
| |
99.0
|
|
| | | | | | | |
|
|
Interest and other non-operating expenses, net
| |
9.2
|
| |
6.2
|
| |
23.8
|
| |
19.0
|
|
| Net income before taxes | |
32.3
| | |
27.6
| | |
82.9
| | |
80.0
| |
|
Income tax expense
| |
2.4
|
| |
10.7
|
| |
6.9
|
| |
29.4
|
|
| Net income | |
29.9
|
| |
16.9
|
| |
76.0
|
| |
50.6
|
|
| | | | | | | |
|
| Net income per common share: | | | | | | | | |
|
Basic
| |
$
|
0.74
| | |
$
|
0.42
| | |
$
|
1.88
| | |
$
|
1.27
| |
|
Diluted
| |
$
|
0.70
| | |
$
|
0.41
| | |
$
|
1.78
| | |
$
|
1.23
| |
| Weighted average number of common shares outstanding: | | | | | | | | |
|
Basic
| |
40,664,488
| | |
39,779,852
| | |
40,360,969
| | |
39,713,486
| |
|
Diluted
| |
42,746,803
| | |
41,373,375
| | |
42,650,088
| | |
41,247,133
| |
|
|
SiteOne Landscape Supply, Inc. |
Consolidated Statements of Cash Flows (Unaudited) |
(In millions) |
|
|
|
| Nine Months Ended |
|
| | September 30, 2018 |
| October 1, 2017 |
|
Cash Flows from Operating Activities:
| | | | |
|
Net income
| |
$
|
76.0
| | |
$
|
50.6
| |
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
| | | | |
|
Depreciation
| |
15.7
| | |
12.9
| |
|
Stock-based compensation
| |
6.1
| | |
4.5
| |
|
Amortization of software and intangible assets
| |
22.6
| | |
18.8
| |
|
Amortization of debt related costs
| |
2.4
| | |
2.2
| |
|
Loss on extinguishment of debt
| |
0.7
| | |
0.1
| |
|
(Gain) loss on sale of equipment
| |
(0.3
|
)
| |
0.2
| |
|
Other
| |
(0.4
|
)
| |
(0.1
|
)
|
|
Changes in operating assets and liabilities, net of the effects of
acquisitions:
| | | | |
|
Receivables
| |
(67.7
|
)
| |
(73.5
|
)
|
|
Inventory
| |
(58.7
|
)
| |
(69.4
|
)
|
|
Income tax receivable
| |
(7.6
|
)
| |
(1.1
|
)
|
|
Prepaid expenses and other assets
| |
(13.3
|
)
| |
(19.0
|
)
|
|
Accounts payable
| |
57.6
| | |
54.6
| |
|
Income tax payable
| |
—
| | |
3.5
| |
|
Accrued expenses and other liabilities
| |
8.6
|
| |
1.1
|
|
| Net Cash Provided by (Used In) Operating Activities | |
$
|
41.7
|
| |
$
|
(14.6
|
)
|
| | | |
|
|
Cash Flows from Investing Activities:
| | | | |
|
Purchases of property and equipment
| |
(11.5
|
)
| |
(10.3
|
)
|
|
Purchases of intangible assets
| |
(4.6
|
)
| |
—
| |
|
Acquisitions, net of cash acquired
| |
(126.3
|
)
| |
(66.9
|
)
|
|
Proceeds from the sale of property and equipment
| |
2.6
|
| |
0.3
|
|
| Net Cash Used In Investing Activities | |
$
|
(139.8
|
)
| |
$
|
(76.9
|
)
|
| | | |
|
|
Cash Flows from Financing Activities:
| | | | |
|
Equity proceeds from common stock
| |
6.2
| | |
1.3
| |
|
Borrowings under term loan
| |
447.4
| | |
299.5
| |
|
Repayments under term loan
| |
(350.3
|
)
| |
(299.4
|
)
|
|
Borrowings on asset-based credit facility
| |
336.6
| | |
319.6
| |
|
Repayments on asset-based credit facility
| |
(323.8
|
)
| |
(216.9
|
)
|
|
Payments of debt issuance costs
| |
(2.4
|
)
| |
(1.0
|
)
|
|
Payments on capital lease obligations
| |
(4.6
|
)
| |
(3.9
|
)
|
|
Payments of acquisition related contingent obligations
| |
(3.8
|
)
| |
—
| |
|
Other financing activities
| |
(0.4
|
)
| |
(0.1
|
)
|
| Net Cash Provided By Financing Activities | |
$
|
104.9
|
| |
$
|
99.1
|
|
| | | |
|
|
Effect of exchange rate on cash
| |
(0.1
|
)
| |
0.2
|
|
| Net Change In Cash | |
6.7
| | |
7.8
| |
| | | |
|
|
Cash and cash equivalents:
| | | | |
|
Beginning
| |
16.7
|
| |
16.3
|
|
|
Ending
| |
$
|
23.4
|
| |
$
|
24.1
|
|
| | | |
|
|
Supplemental Disclosures of Cash Flow Information:
| | | | |
|
Cash paid during the year for interest
| |
19.3
| | |
18.3
| |
|
Cash paid during the year for income taxes
| |
14.5
| | |
27.5
| |
| | | |
|
|
Supplemental Disclosures of Noncash Investing and Financing
Information:
| | | | |
|
Acquisition of property and equipment through capital leases
| |
6.3
| | |
5.7
| |
|
|
SiteOne Landscape Supply, Inc. |
Adjusted EBITDA Reconciliation |
(In millions, unaudited) |
|
|
|
| 2018 |
| 2017 |
| 2016 |
| | Qtr 3 |
| Qtr 2 |
| Qtr 1 | | Qtr 4 |
| Qtr 3 |
| Qtr 2 |
| Qtr 1 | | Qtr 4 |
| Net income (loss) | |
$
|
|
29.9
| | |
$
|
|
63.1
| | |
$
|
|
(17.0
|
)
| |
$
|
|
4.0
| | |
$
|
|
16.9
| | |
$
|
|
44.2
| | |
$
|
|
(10.5
|
)
| |
$
|
|
(5.6
|
)
|
|
Income tax (benefit) expense
| |
2.4
| | |
14.7
| | |
(10.2
|
)
| |
(11.4
|
)
| |
10.7
| | |
26.3
| | |
(7.6
|
)
| |
(4.1
|
)
|
|
Interest expense, net
| |
9.2
| | |
8.0
| | |
6.6
| | |
6.2
| | |
6.2
| | |
6.6
| | |
6.2
| | |
6.7
| |
|
Depreciation and amortization
| |
14.1
|
| |
12.5
|
| |
11.7
|
| |
11.4
|
| |
11.1
|
| |
10.8
|
| |
9.8
|
| |
9.6
|
|
| EBITDA | |
55.6
| | |
98.3
| | |
(8.9
|
)
| |
10.2
| | |
44.9
| | |
87.9
| | |
(2.1
|
)
| |
6.6
| |
|
Stock-based compensation(a) | |
1.9
| | |
2.1
| | |
2.1
| | |
1.4
| | |
1.5
| | |
1.6
| | |
1.4
| | |
1.3
| |
|
(Gain) loss on sale of assets(b) | |
(0.3
|
)
| |
0.1
| | |
(0.1
|
)
| |
0.4
| | |
—
| | |
0.1
| | |
0.1
| | |
0.1
| |
|
Financing fees(c) | |
0.7
| | |
—
| | |
—
| | |
0.2
| | |
0.4
| | |
1.1
| | |
—
| | |
1.1
| |
|
Acquisitions and other adjustments(d) | |
2.1
|
| |
2.5
|
| |
1.8
|
| |
3.1
|
| |
1.6
|
| |
1.6
|
| |
1.8
|
| |
2.1
|
|
| Adjusted EBITDA(e) | |
$
|
|
60.0
|
| |
$
|
|
103.0
|
| |
$
|
|
(5.1
|
)
| |
$
|
|
15.3
|
| |
$
|
|
48.4
|
| |
$
|
|
92.3
|
| |
$
|
|
1.2
|
| |
$
|
|
11.2
|
|
|
____________________________________
|
|
(a)
|
|
Represents stock-based compensation expense recorded during the
period.
|
|
(b)
| |
Represents any gain or loss associated with the sale of assets not
in the ordinary course of business.
|
|
(c)
| |
Represents fees associated with our debt refinancing and debt
amendments, as well as fees incurred in connection with our
secondary offerings.
|
|
(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 |
(In millions, except Selling Days; unaudited) |
|
|
|
| 2018 |
| 2017 |
| | Qtr 3 |
| Qtr 2 |
| Qtr 1 | | Qtr 3 |
| Qtr 2 |
| Qtr 1 |
| Net sales | |
$
|
|
578.5
| | |
$
|
|
687.8
| | |
$
|
|
371.4
| | |
$
|
|
502.4
| | |
$
|
|
608.6
| | |
$
|
|
335.0
|
|
|
Organic Sales
| |
498.2
| | |
609.1
| | |
337.9
| | |
476.0
| | |
578.3
| | |
329.4
| |
|
Acquisition contribution(a) | |
80.3
|
| |
78.7
|
| |
33.5
|
| |
26.4
|
| |
30.3
|
| |
5.6
|
|
| Selling Days | |
63
|
| |
64
|
| |
64
|
| |
63
|
| |
64
|
| |
64
|
|
| Organic Daily Sales | |
$
|
|
7.9
|
| |
$
|
|
9.5
|
| |
$
|
|
5.3
|
| |
$
|
|
7.6
|
| |
$
|
|
9.0
|
| |
$
|
|
5.1
|
|
_____________________________________
(a) 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
2018 fiscal year.
View source version on businesswire.com: https://www.businesswire.com/news/home/20181031005161/en/
Investor Relations:
SiteOne Landscape Supply, Inc.
Pascal
Convers
Executive Vice President, Strategy, Development and
Investor Relations
470-270-7011
[email protected]
Source: SiteOne® Landscape Supply, Inc.
