SiteOne Beats Earnings Despite Flat Pricing, Eyes 2026 Margin Gains

Date of Call: Feb 11, 2026

Financials Results

• Revenue: $1.05B for Q4, up 3% YOY; $4.7B for full year 2025, up 4% YOY
• Gross Margin: 34.1% for Q4, up 80 bps YOY; 34.8% for full year 2025, up 40 bps YOY

Guidance:

• Organic Daily Sales growth expected to be low single-digit for 2026.
• Gross margin expected to be higher than 2025.
• Adjusted EBITDA margin expected to improve solidly due to operating leverage.
• Full year adjusted EBITDA expected in the range of $425M to $455M, which includes an estimated $4M-$5M headwind from the extra 53rd week in December.
• Pricing expected to increase 1% to 3% in 2026.
• Expect to add more acquisitions in 2026, with average deal size returning to more typical levels.

Business Commentary:

Financial Performance and Growth:

• SiteOne Landscape Supply reported a 3% increase in net sales for Q4 2025, with an 18% growth in adjusted EBITDA compared to the prior year period. For the full year, they achieved a 4% net sales growth and a 10% increase in adjusted EBITDA.
• The growth was driven by positive pricing trends, cost reduction actions, and operational initiatives, despite facing flat pricing and lower end market demand in 2025.

Organic Daily Sales and Pricing Strategy:

• The company reported a 2% increase in Organic Daily Sales for Q4 and a 1% increase for the full year of 2025. Pricing was flat in 2025 but improved to 2% in the fourth quarter.
• The increase in Organic Daily Sales was driven by improved pricing, execution of sales initiatives, and strong demand in the maintenance end market, particularly for ice melt products.

Operational and Strategic Initiatives:

• SiteOne achieved a 40 basis points increase in gross margin for the full year 2025, driven by improved price realization, benefits from commercial initiatives, and acquisitions, despite higher freight and logistics costs.
• The company focused on optimizing its branch network, reducing delivery expenses, and improving sales force productivity, contributing to operational efficiency.

Acquisition Strategy and Growth:

• The company completed 8 acquisitions in 2025, adding approximately $55 million in trailing 12-month sales, and made its first acquisition in 2026.
• These acquisitions expanded SiteOne's product portfolio and geographic coverage, supporting long-term growth and market share expansion.

Market Outlook and Challenges:

• For 2026, SiteOne anticipates new residential construction to be down, while the maintenance market is expected to grow steadily. The company expects low single-digit Organic Daily Sales growth for the full year.
• Despite market uncertainties, SiteOne is poised for growth with positive pricing trends, strategic acquisitions, and continued focus on operational improvements.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed confidence in 2026 with statements like 'we remain confident in our ability to deliver superior value' and 'we are pleased to be entering 2026 with positive pricing.' They highlighted strong momentum from cost reductions, positive pricing, and acquisition benefits, despite market uncertainty.

Q&A:

• Question from David Manthey (Robert W. Baird): Asked about EBITDA margin contribution on low organic growth and key margin levers for 2026.
  Response: Management expects outsized profit improvement due to gross margin expansion, SG&A leverage, and focus branch improvements, with headwinds from new distribution center costs and higher bonuses.

• Question from Ryan Merkel (William Blair): Asked about Q1 outlook and share gains expectations.
  Response: Growth expected to be balanced through the year with stronger pricing in H1; confident in gaining market share even if the overall market is flat.

• Question from Jeffrey Stevenson (Loop Capital Markets): Asked about operating leverage benefits and potential for additional branch closures.
  Response: Focus branches to contribute similarly to 2025; no significant additional closures planned, but productivity initiatives will drive SG&A leverage.

• Question from Collin Verron (Deutsche Bank): Asked to quantify maintenance and new residential construction sales growth.
  Response: Maintenance (agronomics) saw 7% volume growth in 2025; expects new residential construction to be down in 2026, offset by maintenance growth.

• Question from Michael Dahl (RBC Capital Markets): Asked about sales retention from branch closures and impact of the 53rd week.
  Response: Expect to retain 75-80% of sales from closures; the 53rd week is a ~100 bps negative drag on organic growth for the year.

• Question from Elaine Ku (Barclays): Asked about private label margin differentials and current price realization.
  Response: Private label brands like LESCO, Solstice Stone, and Portfolio contribute significantly to margin; price realization is tracking as expected with commodity deflation largely behind.

• Question from W. Andrew Carter (Stifel): Asked about digital penetration and new construction guidance sensitivity.
  Response: Digital sales up over 120%; penetration expected to be double-digit. New construction could be down more than balanced by maintenance growth; share gains provide a cushion.

• Question from Charles Perron-Piché (Goldman Sachs): Asked about M&A pipeline confidence and DC benefits.
  Response: Confidence in normalization of deal size based on active discussions; the fifth DC improves service and long-term margins but is initially dilutive.

• Question from Shaun Calnan (BofA Securities): Asked about capital deployment targets and repair/upgrade market confidence.
  Response: Leverage target is 1-2x; M&A is priority, with share repurchases opportunistically if capital allows. Repair/upgrade stabilization seen in product trends supports a flat market call.

Contradiction Point 1

Market Outlook and Organic Growth Guidance

Contradictory signals on the competitive environment and market share gains.

What is the first-quarter organic growth outlook and year-start performance? Does the 2026 guidance, assuming low single-digit growth in a flat market with 2% pricing, include share gains? How is the competitive landscape? - Ryan Merkel (William Blair & Company L.L.C.)

2025Q4: The competitive environment remains very competitive, but SiteOne is taking share, especially with small and mid-customers. - Doug Black(CEO)

What impact does the extra week in December have? - Michael Dahl (RBC Capital Markets)

2025Q3: We are seeing less competitive pressure overall, which is allowing us to maintain our market share and focus on profitable growth. - Eric Elema(CFO)

Contradiction Point 2

Capital Allocation Priorities

Inconsistent messaging on the priority of share repurchases versus acquisitions.

What are the 2026 targets for capital deployment (M&A and share repurchases) and leverage? - Shaun Calnan (BofA Securities)

2025Q4: The priority is value-accretive acquisitions to build the business. Given strong cash flows, any excess capital within the leverage target would be used for opportunistic share repurchases. - Doug Black(CEO)

What factors support confidence in M&A normalization by 2026, and what capital allocation priorities would be considered if activity remains soft? - W. Andrew Carter (Stifel, Nicolaus & Company, Incorporated)

2025Q3: Our primary capital allocation focus is on opportunistic share repurchases and value-accretive M&A, in that order. - Eric Elema(CFO)

Contradiction Point 3

Expected Contribution to EBITDA Margin Improvement

Contradiction on whether SG&A or gross margin will drive more of the near-term margin improvement.

Which is expected to contribute more: SG&A or gross margin? - Michael Dahl (RBC Capital Markets)

2025Q4: The expected margin improvement in 2026 is pretty balanced between gross margin and SG&A leverage, similar to 2025. - Doug Black(CEO)

What are the second-half risks for the adjusted EBITDA outlook and the long-term path to the 13–15% EBITDA margin target? - Ryan Merkel (William Blair)

2025Q2: The path to the 13–15% EBITDA margin target will be driven by both gross margin improvement and SG&A leverage, with SG&A likely contributing more in the near term. - Doug Black(CEO)

Contradiction Point 4

Gross Margin Outlook for the Full Year

Gross margin guidance shifts from flat to a positive trend.

How did Q4 gross margin actuals compare to expectations, and what were the key drivers? - Collin Verron (Deutsche Bank AG)

2025Q4: Q4 gross margin was better than expected... This positive trend is expected to continue into the first half of 2026. - Eric Elema(CFO)

Are tariff-related imports from Mexico compliant with USMCA certification, and how does the gross margin outlook look with stabilizing commodity prices and positive pricing elsewhere? - Damian Karas (UBS)

2025Q1: Full-year outlook is similar to 2024 (relatively flat). - John Guthrie(CFO)