SiteOne Landscape Supply's Q3 2025: Contradictions Emerge on Pricing Strategy, Organic Sales Growth, and Gross Margins

Date of Call: October 29, 2025

Financials Results

• Revenue: Net sales grew 4% YOY, comprising 3% organic daily sales growth and ~1% from acquisitions
• Gross Margin: 34.7%, up 70 basis points YOY

Guidance:

• Expect low single-digit organic daily sales growth for the remainder of 2025, with positive sales volume in Q4.
• Price contribution Q4 expected 1%–2%; full-year pricing flat to up ~1%; exit 2025 pricing up ~1%–2%; 2026 pricing normalized to roughly 1%–3% (midpoint ~2%).
• Full-year 2025 adjusted EBITDA expected $405M–$415M (includes Q4 branch-closure charge of ~$4M–$6M).
• Plan to consolidate/close 15–20 branches in Q4; expect to retain most sales from those branches.
• Acquisition activity lighter in 2025 (~$40M TTM added YTD); pipeline remains active for future years.

Business Commentary:

* Revenue and Sales Growth: - SiteOne Landscape Supply reported 4% net sales growth in Q3 2025, with 3% organic daily sales growth and 1% growth due to acquisitions. - The growth was driven by market share gains and improved pricing, despite softness in end markets like new residential construction and repair and upgrade.

• Profitability and Margin Expansion:
• Adjusted EBITDA increased by 11% to $127.5 million in Q3 2025, with an adjusted EBITDA margin improvement of 60 basis points to 10.1%.

• This improvement was due to higher net sales, improved gross margin, and increased SG&A leverage, indicating effective execution of cost control and commercial initiatives.

• Pricing and Commodity Inflation:

• Pricing was up 1% in Q3 2025 compared to the previous year, marking a significant improvement from prior periods of negative pricing.

• The recovery in pricing was attributed to the normalization of commodity deflation and positive contributions from tariffs.

• Acquisition Strategy:

• SiteOne completed six acquisitions in 2025, adding approximately $40 million in trailing 12-month sales, focusing on expanding its product portfolio and geographical reach.
• The company's fragmented industry provides ample opportunities for growth through acquisitions, supported by strong relationships and a robust pipeline.

Sentiment Analysis:

Overall Tone: Positive

• Management: “we are delivering solid performance and growth in 2025 despite softer end markets.” Adjusted EBITDA rose 11% to $127.5M and adjusted EBITDA margin expanded to 10.1%; management reiterated expectations for continued adjusted EBITDA margin expansion and operating leverage.

Q&A:

• Question from David Manthey (Robert W. Baird & Co.): Why didn't you exclude the branch-closure charge from adjusted EBITDA, and can you break out pricing for agronomics vs. landscape and comment on mix/seasonality into Q4 and 2026?
  Response: Policy-driven: adjusted EBITDA adjustments are limited to acquisition-related items within the first year, so the branch charge remains in guide; pricing this quarter: landscape +1%, agronomics ~flat; Q4 pricing 1%–2%; 2026 expected to normalize to ~1%–3% (midpoint ~2%).

• Question from Ryan Merkel (William Blair): Are you seeing the low-single-digit organic trend in October, and can you expand on the repair & upgrade stabilization and why FY EBITDA guide is a few million below Street?
  Response: October is tracking positive on organic sales (despite tougher comps and weather sensitivity); repair & upgrade appears stabilized based on product volumes and customer conversations; Q4 guide assumes less gross-margin outperformance than Q3 while counting on SG&A leverage as the primary driver.

• Question from Damian Karas (UBS): Any change in competitor behavior given demand softness, and if demand rebounded quickly would your optimized footprint be able to serve the market?
  Response: Competitive dynamics are typical for softer markets (more competition among larger customers), but SiteOne's capabilities (digital, delivery, private label, small-customer focus) support ongoing share gains; yes, the current network has ample capacity and can scale to serve a stronger market.

• Question from Julian Nirmal (Truist Securities): Thoughts on input/commodity inflation outlook and cadence/impact of the planned 15–20 branch consolidations on margins into 2026?
  Response: Commodity/input inflation expectations are embedded in the guide with no major swings anticipated; focused-branch improvements (these branches ~20% of revenue) drove >200 bps EBITDA improvement YTD and consolidations are expected to further lift margins next year independent of market improvement.

• Question from W. Andrew Carter (Stifel): Can you hit double-digit adjusted EBITDA margins in a soft volume environment using internal levers, and how do you see M&A sizing/pipeline for 2026?
  Response: Yes—management believes there are substantial self-help levers (focused-branch remediation, sales-force productivity, delivery efficiency, private-label mix) to expand EBITDA in a soft but stable market; M&A cadence varies year-to-year, pipeline strong, prefer well-run targets and expect 2026 to include more activity vs. the lighter 2025.

• Question from Elizabeth Langan (Barclays): Can you dig into SG&A improvement and whether that cadence continues into Q4/2026, and what are you seeing in commercial end markets and regional bidding?
  Response: SG&A leverage is expected to continue into Q4 (Q4 includes a one-time charge similar to last year); no 2026 SG&A guidance provided yet; commercial remains stable with project-services bidding slightly up, backlogs lower than last year but activity steady across regions.

• Question from Christopher Kalata (RBC Capital Markets): On pricing drivers toward a normalized +2% environment—how should we think about commodity vs. non-commodity trends and potential supplier increases—and can you quantify SG&A leverage outlook for next year?
  Response: Grass-seed deflation will be a near-term H1 overhang but should dissipate; most other commodities are stable and supplier price increases heard so far are low-single-digit (uncertain until early next year); SG&A leverage is a planning priority for next year but management said it is premature to quantify now.

• Question from Charles Perron-Piché (Goldman Sachs): With leverage at the low end of target, would you shift to more buybacks if M&A stays soft, and can you expand on how commercial initiatives aided pricing/gross margin this quarter?
  Response: Yes—if M&A opportunities are limited and leverage is low, greater share repurchases are a likely allocation; margin upside this quarter came from both slightly stronger pricing and mix/gross-margin benefits from private-label and small-customer growth.

• Question from Jeffrey Stevenson (Loop Capital): How sustainable are the outperformance vectors (private label, small customers) and will share gains remain above pre-pandemic levels; and why did pricing beat expectations in Q3?
  Response: Sustainable with long runway—management expects multi-year catch-up in small-customer share (3–5 years) and private-label target rising from ~15% toward 25%–30% long term; pricing beat was due to bids/quotes holding up better than anticipated, resulting in ~+1% vs. an expected flat outcome.

• Question from David Manthey (Robert W. Baird & Co.): (follow-up)/closing: any final comments on share repurchases and capital allocation?
  Response: Priority remains investing in the business (acquisitions) but with leverage at bottom of target range the company is positioned to increase share repurchases as appropriate.

Contradiction Point 1

Pricing Strategy and Expectations

It involves changes in the company's pricing strategy and expectations, which are critical for investors to understand the financial outlook.

What are your 2026 pricing expectations and key drivers? - Christopher Kalata (RBC Capital Markets)

2025Q3: Pricing is expected to normalize next year, with low single-digit cost increases from suppliers impacting first-quarter results. - John Guthrie(CFO)

Have you started passing price increases through on finished goods? - Matthew Bouley (Barclays)

2024Q4: We're now assuming a net price decrease of about 2% for the balance of the year and as we go into next year, we're assuming a net 1% price decrease. - John Guthrie(CFO)

Contradiction Point 2

Organic Sales Growth Expectations

It involves changes in expectations regarding organic sales growth, which are critical indicators of company performance and investor confidence.

Are you seeing positive organic sales growth in October, and is repair and upgrade stabilizing? - Ryan Merkel (William Blair)

2025Q3: We are seeing positive organic sales growth in October. - Doug Black(CEO)

What is the midpoint of the adjusted EBITDA outlook, and what risks could impact the second half? - Ryan Merkel (William Blair)

2025Q2: We expect sales volume to be slightly positive in the second half, supported by commercial initiatives. - Doug Black(CEO)

Contradiction Point 3

Gross Margin Outlook

It involves changes in financial projections, specifically regarding gross margin expectations, which are crucial for investor analysis.

Given the pricing environment, what are your 2026 expectations and the factors impacting pricing? - Christopher Kalata (RBC Capital Markets)

2025Q3: We expect gross margins to be approximately 41.5% to 42% for the full year 2026, with a slight expected improvement in the second half of the year. - John Guthrie(CFO)

What are the current trends and pricing expectations for PVC pipe and grass seed? - Matthew Bouley (Barclays)

2025Q1: Gross margins for Q3 are expected around 75%, with full-year guidance in the mid-70s. - John Guthrie(CFO)

Contradiction Point 4

SG&A Initiatives and Expectations

It involves changes in the company's SG&A initiatives and expectations, which are crucial for understanding operational efficiency and cost management.

Can you outline your SG&A initiatives and projected improvements for 2026? - Elizabeth Langan (Barclays)

2025Q3: We expect to continue current trends in SG&A leverage for the rest of the year and into 2026. - John Guthrie(CFO)

Are the focused branches and Pioneer the most significant cost initiatives planned for 2025? If so, can you quantify the impact of these two initiatives independently? - David Manthey (Baird)

2024Q4: We are focusing on delivering growth in 2025 through our key initiatives: Pioneer and focused branches. These initiatives have been at the forefront in 2024, and we expect to see solid results in 2025. - Doug Black(CEO)

Contradiction Point 5

Repair and Upgrade Demand Stability

It involves differing views on the stability of repair and upgrade demand, which could impact revenue projections.

Is there positive organic sales growth in October, and are repair and upgrade activities stabilizing? - Ryan Merkel (William Blair)

2025Q3: Repair and upgrade has stabilized, with discussions with customers showing that backlogs seem settled, though not at pre-pandemic levels. - Doug Black(CEO)

Can you detail the sequential improvement in repair and upgrade demand? - Jeffrey Stevenson (Loop Capital Markets)

2024Q4: We expect market stabilization with confidence in flat to slightly down demand in 2025. - Doug Black(CEO)