Greetings, and welcome to the SiteOne Landscape Supply First Quarter 2016 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Pascal Convers, Executive Vice President of Strategy and Development. Thank you. You may now begin.

Thank you. Good morning, everyone. We issued an earnings press release this morning and posted a slide presentation to the Investor Relations portion of our website at investors.siteone.com. We will be referencing the slides during this call. I am joined today by Doug Black, our Chief Executive Officer; and John Guthrie, our Chief Financial Officer. Before we begin, I would like to remind everyone that during this call, SiteOne management may make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about future expectations, anticipation, beliefs, estimates, forecasts, plans and prospects. Such statements are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in the company's earnings release posted on the website and providing on our final prospectus as filed with the Securities and Exchange Commission. The company does not undertake any duty to update such forward-looking statements. Additionally, during today's call, the company will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of adjusted EBITDA to net income and net loss calculated under GAAP can be found in our earnings release, which is posted on the website and in our Form 10-Q, which we filed with the SEC today. I would now like to turn the call over to our CEO, Doug Black.

Thank you, Pascal. Good morning, and thank you for taking the time to join us on today's call. We're excited to be hosting our first earnings call as a publicly traded company following the successful completion of our initial public offering in May. This offering was a result of a lot of hard work and dedication, and I would like to take the time to thank all of those involved in the process. We look forward to this next chapter in the story of SiteOne Landscape Supply as we execute our strategy on the behalf of our new shareholders. I would like to start today's call by providing a brief overview of our business and our strategy for any listeners that may be new to the SiteOne story, followed by some highlights of our first quarter results. I'll then pass the call on to John Guthrie, who will walk through our financial results in more detail. Pascal Convers will then provide an update on our corporate development initiatives and then finally, I will come back to provide some comments on our outlook and then make some closing remarks before opening up the line for your questions. Turning to Slide 3. You can see that we are the largest and only national wholesale distributor of landscape supplies in the U.S. We hold an approximate 9% share of the highly fragmented $16 billion landscaping products distribution market. And we are about 4x the size of our closest competitor. The market is expected to grow meaningfully faster than GDP in the coming years, driven by ongoing maintenance of landscapes, which comprises approximately 45% of our sales, as well as robust investment in landscape remodeling and the ongoing commercial and residential new construction recovery. Our customers are professional landscape contractors and maintainers, who are…

Thanks, Doug. Now turning to Slide 8 in our first quarter 2016 results. We are pleased with our performance as we reported strong results for the quarter with net sales of $328.5 million, up 45% compared to the $225.8 million in the prior year. As Doug mentioned, we generated tremendous organic growth of 23%, while acquisitions contributed $51 million or an additional 22% of our growth rate. Underlying growth was driven by the favorable weather conditions, strong demand and good execution of our commercial initiatives. With regards to the weather, certain products like preemergent fertilizers are applied every spring to get your lawn in shape. Ideally, they are applied after the snow is gone, but before the soil temperature is warm enough for weeds to grow. When spring comes early like this year, the products are applied earlier in the season. And correspondingly, the products are purchased earlier. In this case, they were purchased in the first quarter. Additionally, since almost all landscape construction work is done outdoors, warm spring weather is beneficial because it provides landscape contractors with more working days. In Q1, contractors were able to start projects in February and early March, which is quite unusual. This drove strong growth in the sale of construction-related products. The impact of the weather is best seen when you look at some of our geographic regions. Sales in our Great Lakes region grew 48% during the quarter, whereas sales in a warm climate region, like Southern California grew 7%. Gross profit increased 66% to $97 million compared to $58.6 million during the same period last year. Gross margin was 29.5% for the first quarter 2016 compared to 26.0% for the same period in 2015, a 350 basis point expansion. Similar to the drivers in 2015, we benefited from pricing initiatives,…

Thank you, John. As Doug mentioned earlier, acquisitions play a key role within our overall growth strategy. We see a significant opportunity to create superior value for SiteOne through acquisitions, which allow us to move into new markets, expand our presence in existing ones, broaden our products offering, consolidate a fragmented market, and also very importantly, add market-leading talent to our team. We also realize significant synergies given our skill as the industry leader into expertise integrating these companies and add real value capturing best practices that we can implement across all large organization. Slide 10 highlights a recent track record. We closed 4 acquisitions in 2014, adding 18 locations and closed another 4 acquisitions in 2015, which added 50 locations. So far in 2016, we have closed 2 acquisitions, which have added 22 locations to SiteOne. The common theme across these transactions is that they moved SiteOne into the #1 position in certain product categories within each local market. For example, the Shemin acquisition gave us the #1 position in nursery in the Northeast, the Southeast, the Midwest and Texas. The Green Resource acquisition gave us the #1 position in fertilizers and control products in the Carolinas. On Slide 11, we showed the 2 most recent acquisitions: Hydro-Scape products and Blue Max Materials. Hydro-Scape products added 17 locations to our existing footprint of 18 stores in Southern California and makes us #1 in irrigation there. Blue Max Materials added 5 locations to our existing footprint of 26 stores in the Carolinas and makes us #1 in hardscapes there. Both acquisitions further expand on product and customer breadth in these key markets. They also bring significant synergies and very talented local teams to SiteOne. On Slide 12, I'll highlight again that we only have a 9% market share today, and we believe that number has the potential to increase significantly over time similar to the consolidation that has taken place with distributors in other verticals. Our pipeline remains robust and is expanding as we continue to build our reputation as the buyer of choice in the industry. While the timing of acquisition can be lumpy, we feel good about our start of the year and our ability to complete additional deals during the remainder of the year and in the years to come. And with that, I'd like to turn the call back over to Doug to discuss our outlook.

Thanks, Pascal. In terms of our outlook, we are off to a strong start to the year with very favorable first quarter results. The underlying demand trends remained positive, and we anticipate solid full year results. Additionally, our commercial and operational initiatives for 2016 are on track and continue to deliver good growth margin and EBITDA margin improvements. While we benefited from favorable weather trends in the first quarter, which we believe pulled forward some revenue from the second quarter, we have seen unfavorable weather in April and May. In June, we have seen the weather return to normal with the corresponding increase in our organic sales growth. As I mentioned before, the weather tends to balance during the year, and we are certainly seeing that in the first half of 2016. In total, we are forecasting an organic sales growth for the first half of the year of approximately 8% to 9%, which puts us on track to reach our internal target for the full year. As Pascal mentioned, we have several ongoing discussions with acquisition targets. And we feel confident that we will close more deals in the second half of 2016 in order to fuel our growth for 2017 and beyond. For the full fiscal year 2016, we expect adjusted EBITDA to be in the range of $132 million to $140 million, representing a year-over-year growth of 24% to 31%. Before I turn the call over to the operator, I would like to reiterate that I remain very excited about the opportunities ahead for SiteOne as a public company. We have a very attractive industry that is well-balanced and growing and which lends itself to wholesale distribution. We are the clear leader in the industry and the only national industry consolidator with significant competitive advantage. We have a compelling strategy to grow organically, expand our margins and grow through acquisition. And finally, we have a tremendous team in place to execute our plans. In summary, we are well positioned to deliver significant value to all stakeholders in both the short and the long term. In closing, I would like to acknowledge all of SiteOne associates, who have worked tirelessly serving our customers and who have made us successful to this point. And once again, we welcome and appreciate the support of our new shareholders. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Nishu Sood with Deutsche Bank.

Congrats on a good start and the IPO.

Thank you.

So first question I wanted to ask, clearly, there's been a lot of focus on weather. And you gave a lot of good details, so we appreciate that color. You -- I thought you did a good job of describing how -- if the season starts earlier, it leads to some extra sales and also some pull forward. You also discussed in the second quarter so far, there has been some adverse weather conditions. Can you discuss for us a little bit, when it happens a little bit later in the season, bad weather, how does that tend to play through for the rest of the year? You mentioned you're still -- you'll still feel confident with your outlook, your growth prospects [indiscernible]. I was just wondering if you could dig into that in a little more detail, please?

Right, terrific. Good question, Nishu. Yes, it's actually the weather, as we mentioned, it moves demand around. But what we found over the last several years in this business, it really doesn't materially affect the weather for the year. So this first half has been unusual on 2 extremes. You had the unusually favorable weather in the first quarter, which pulled forward some demand. And then you had the wet weather, which tended in April and May, which tended to even things out. The biggest effects -- obviously, that affects all our product lines. But the biggest effect, the most pronounced effect is on our maintenance products. But between the 2, we really do not feel like we've lost any applications or we've lost any business for the year. It really has just been a shell game between quarters. So we feel good about our run rate. We feel good -- the markets kind of normalized when you take the 2 together. And obviously, with the strong overall 8% to 9% at the half year, we're set up to have a very good year. So we do not feel like we lost any win for the full year and feel good about the forecast going forward.

Got it, got it. And you gave the EBITDA guidance for the year. In terms of margins and your cost-savings initiatives, how are those coming in relative to your expectations? Are those coming in, in line with your expectations, better than your expectations? How have those been looking so far this year?

Right. I would call them in line to better. We're very pleased with the progress we see. If you remember, we went to list down pricing in the first quarter that's gone very well, which has given us more flexibility by market and by product. So a category -- initiatives are going quite well. So we feel very good about our initiatives. They're on track. If anything, slightly positive, slightly ahead of where we think we're going to end up. And so we feel good about those overall.

Got it. And one last quick one, on free cash flow, appreciate the color there. I was just wondering if you could give us some sense of -- with the working capital initiatives and with the margin initiatives, what type of free cash flow conversion from your EBITDA guidance can we expect for this year?

Well, we will think about it from a net income standpoint. And we should be exceeding our net income with regards to conversion to free cash flow. So our free cash flow should exceed our net income.

Our next question is from Dave Manthey with Robert W. Baird.

This is actually Luke on for Dave this morning. First question, maybe 1 for John. As we think about the 23% organic growth buildup this quarter, is there anything you can give us there regarding growth in each of the 3 end markets, maintenance, repair and upgrade and new construction, either directionally or on absolute terms to help understand how that builds up? And then within those 3 categories, would you say that the weather benefit was roughly balanced across all 3 of those? I guess that's what it sounded like based on the prepared remarks.

We -- we don't -- aren't disclosing the specific maintenance in that segment. But I think we have disclosed in the 10-Q some of the products that correspond with those. And we're seeing good organic growth across the board. If you looked at, say, our irrigation in those products in the first quarter, we saw organic growth of 26%. And if you look at the growth of the maintenance products, that was like fertilizer, that was like a 21% number. So between the 2 of them, you get the strong overall organic growth. And so the favorable weather basically helped both categories. And what we've seen is that spread that we see between -- if you looked at our historical growth in those categories relative to the historical, we're continuing to see that overall in the first quarter.

And then a follow-up maybe for Pascal. In the slides, you talked about the M&A pipeline being deep in expanding. Just wondering if there's any color you can share relative to areas of focusing your term or maybe ways -- the size -- the number of companies you're looking at or revenues that are very high level? And then connected to that with the associates that you do have out there scouting deals for you, I think you said 60 or so in the slides? Can you maybe talk about what role those folks serve, and how they've helped so far in in-sourcing deals?

Yes, thanks, Luke. So we see the pipeline as being pretty robust. As you know, it's very hard to predict when those deals are going to close at the end of the day. But we've got very good visibility and line of sight on a few acquisitions that we expect to close in the second half of this year, right? And when you look at the product lines, at the end of the day, it's across-the-board. We're looking at irrigation companies, maintenance companies, hardscapes and nursery, right? So we're not really putting a preference over any product lines. When you look at the scouting and the way we tried to source deals, we've got the realized [ph] presence. You've got the dividend presence, you've got the area managers. And we've got all those guys in the field helping us. They're building relationships at the end of day with their peers and their competitors. And then the development team is working with them to make sure that we take those deals to the finish line. So we've got a very wide net that we've cast, thanks to the presence and the footprint that we have in the U.S.

Our next question comes from the line of Samuel Eisner with Goldman Sachs.

So going back to the weather question, I was wondering if you could either put a dollar amount or even a percentage basis on how much weather was a benefit in the first quarter. And maybe secondarily to that, you called out this preemergent fertilizer product. Can you talk about how much revenue that generated in the second quarter of last year? And how much of that may have been pulled into that first quarter of this year?

Right. Well, I think it's a -- the way we think about it is percentage and kind of organic growth. And so if you look at the first quarter of 23% organic growth -- and again, that was across pretty much all products. We're in the 20s, right? So we had a nice even blend of growth across all our product lines. Those will normalize down to their -- what we figure are more reasonable growth rates for the year. And again, if you look at maintenance products in general, they tend to grow at 2% to 3% overall in the GDP level growth. So you can do the math there. And then our construction-related products would be up in the low double digits, which is a blend of high single digits, low double digits, which is a blend of the remodel and the new construction. So as you take those 20% to 25% growth rates and you normalize down, you can do the math and figure out how much that is in dollars for the pull forward.

Got it. How much did the market grow in the first quarter on a kind of geographic neutral basis? I mean obviously, you guys growing 23%. I presume that there are some share gains or outgrowth on -- that's embedded in there. So I'm curious how much of your 23% was driven by outgrowth? How much was just pure market growth?

Right. Well, we think -- of course, it's hard to tell when you get that much growth, what the market's actually doing. But we think the market fundamentally is growing at a blended rate of 5%. And again, that's an average of the maintenance, the repair, remodel and the new construction. And as we look at the market, we still believe that's the case, that the market's growing at a blended 5%, plus or minus. And then our growth, we aim to pick up a couple of percentage points on top of the market as we execute our commercial initiatives and as we gain share and use our advantage in the marketplace. So -- but we do still feel fairly confident in that 5%, plus or minus market growth, underlying both quarters so far this year.

Got it. If I just transition to the profit growth, so profit, gross profits are up nearly $40 million on a year-over-year basis. You called out in your Q that pricing and category management added about 240 bps to the margin. That's roughly $8 million. So if I exclude pricing and category management, you're off 30. I'm just wondering if you can help me bridge from what you reported last year to what you reported this year on gross profit. If I include that $8 million of pricing and category management, what's the remaining $30 million? If you can break out volume, if you can rate acquisition, that will be very helpful for us.

Right. Well, if you take the overall acquisition, growth was 22% on sales, right? And obviously, those acquisitions delivered kind of our normalized gross margin. And then the additional growth on the organic 23%, I would apply our normal gross margin to that as well, right? So the main sources of gross margin outperformance were the improvement in the gross margin percentage, the additional organic sales and then the acquisition added revenue with the -- with let's say, the normalized gross margin.

That's helpful. And then just lastly, if I just think about the second quarter here, you commented about April and May being weaker because of weather. How should we think about your monthly sales? Is it roughly 1/3, 1/3, 1/3 between, I think about just the full quarter between April, May and June? Are you guys heavily weighted to June? Just curious if I'm thinking about the blend, what the mix would be on a month-by-month basis for that second quarter?

Yes. I think if you look at the 3 months, April, May and June, they're all important months. John...

To a certain extent, we have an extra week in April, but if you looked on a daily sales growth basis, they're relatively close, June with April probably being slightly higher than May and June on a daily sales basis. So I mean the difference between 5% higher on a daily sales basis.

So something closer to like 40%, 30%, 30% for the 3 months?

I think that would be correct.

Our next question is from the line of Chris Belfiore with UBS.

Congrats on a solid quarter and the IPO.

Thank you.

Yes. No, problem. So the first question, just kind of going back to the gross margin a little bit. You guys -- you mentioned that mix wasn't a big issue. Was that just because there was -- kind of like you said the organic growth is kind of very similar across all different product categories? I just -- I thought from a margin kind of standpoint, like things like fertilizer might be a little bit more, have a little more richer margin than other products that you would sell in the winter months that you didn't sell this year?

Yes. I mean that's intuitively, that there's some truth to that. I mean something like ice melt is typically a slightly lower margin. But when we looked at actually -- did the math and actually looked at the different components, both with and without acquisitions, the math worked out that it just balanced out exactly to be a very small variance between the 2.

And Chris, I would just add. I think that's a function of 2 things: One is that there is a fairly tight shot group across our major product lines in terms of margin. Within major product lines, things like ice melt would be lower and et cetera. But across the products themselves, it's a fairly tight shot group. The other impact here is that we saw broad strength across all the product lines, right, with the exception of a few smaller ones within product groups. So those 2 factors together, it just didn't meaningfully change the mix or add any benefit or any negative aspects in terms of mix.

Okay. And then just 1 follow-up. Just kind of in terms of weather, I know we had a good weather in the first quarter, you said the weather was kind of a little bit challenging in May and April. What about just like extreme kind of differences in the other direction in terms of heat? Like in the southwest, the weather's been very, very hot. It's only been a couple of weeks, but how does that affect you guys? And if that were to be a trend for a majority of the summer, how would that affect you guys? Is it positive, negative or how does that work?

Yes. And I think that's where -- we have the breath of product line that kind of works in our favor and that is -- it's positive and negative. And I know that sounds like an unclear answer. But the heat will affect nursery in that -- as the planting season -- as the heat kicks in, the planting season for nursery products will pull back. But the heat will benefit irrigation as heat drives out the grass, that spurs our irrigation. It also helps some of our maintenance products, et cetera. So the heat doesn't necessarily -- isn't necessarily a negative or a positive. It's actually both. And part of the benefit of SiteOne being across all the product lines, means that the puts and takes tend to average themselves out, and we end up with a solid overall growth.

Our next question is from the line of Robert Wetenhall with RBC.

This is actually Michael Eisen on for Bob this morning. I just wanted to follow-up a quick question on margin improvement. You guys had meaningful improvement in the first quarter. And it seems like that's expected to continue based on your commentary of being ahead of plan. Can you talk about some of the key initiatives that you guys are -- have at the top of your list and kind of what expectations do you have for margin improvement and the time frame for those top key initiatives?

Yes. So our key initiatives really are in 2 buckets. We have initiatives that are focused on margins; expansion and initiatives that are focused on revenue generation. The initiatives focused on margin expansion are pricing. And that's -- we need to make sure that we're competitive in pricing, but we're also doing everything we can to price smartly in the marketplace. And so we have a lot of initiatives around pricing to maximize our pricing benefit. On the category management side, we're working with our suppliers continuously to align with our preferred suppliers and win together. And so as we push volume to our preferred suppliers, it helps our costs. It benefits our suppliers. And that's a major initiative of ours that we've seen great benefits from and that we're going to continue to see great benefits from. And then finally, in margin expansion, we have our supply chain initiative -- supply chain is something that we've been working on for the last year. We're installing a new replenishment system, a new state-of-the-art JDA replenishment system. And we're moving our logistics to more of a hub-and-spoke logistics network as opposed to a direct to store. And so as we do that, we're going to see good benefit from that, primarily showing up, some in 2016 but that's really a benefit for 2017 and 2018. So if you put those together, as we've stated before, we expect our EBITDA margins to -- we expect to move to 10% plus on the EBITDA basis, adjusted EBITDA basis. And we see a good line of sight of getting there over the next, say, 3 years. And 10% is certainly not a cap, but it's a milestone that we're heading towards. I want to mention the 2 other initiatives: our sales force performance and our marketing initiatives. Those are focused on gaining market share and making sure that we have solid organic revenue growth. We're working with our sales force, both in territory alignment on restructuring the sales force to move to an inside out structure, which will benefit us. And then on the marketing side, we're putting in capabilities to do digital marketing. Even social media, we're doing that this year, which will really benefit us in 2017; and online capability, where our customers can go online and see their pricing, see inventory and even order online. So we're working on some exciting initiatives there that will make sure that we continue the strong organic revenue growth. So those are the 5 initiatives, they are all in good shape. They're on track, ahead of the game slightly. And we feel good about them in the rest of the year and beyond.

Our next question is from the line of Ryan Merkel with William Blair.

My first question, could you just tell us how the irrigation market is performing in California? And then secondly, should the drought concerns lead to more irrigation demand long term in California?

So in terms of irrigation in California, we're having solid results overall. And we have -- obviously, the impact of the drought has impacted us in terms of mix. We're seeing some mix change, say from sprinkler systems to the drip-type irrigation. We are seeing some tariff removal in California, which is a negative for irrigation. But on the other hand, we're seeing a move to more sophisticated smart water systems, which is a positive. So what we've seen so far out of the drought in California is kind of puts and takes, negatives and positives. Together, we've seen kind of solid performance overall in California, not spectacular. I would call it solid in irrigation space.

Got you, okay. And then secondly, I know improving your supply chain is a big initiative. Could you just update us on where you are with that? And what is left to do?

Right. So as I mentioned before, we're installing a new state-of-the-art JDA system that we bought that system in late 2015. We are installing it as we speak. We have data that we're doing trial runs -- and as we speak. And we would see implementing that system fully in quarter 3 and quarter 4 of this year so that we get the benefit of that in 2017. And again, we think that will benefit us, not only on a cost basis, but also in terms of our stock turns, we expect some improvement there as we can better manage our inventory. In terms of the hub-and-spoke logistics network, that's something that you want to do very carefully and very slowly. So we are planning to put in our first distribution center. That will be a third-party operated DC. And so that -- those plans are underway. Those will happen in the fourth quarter of the year. That might spill into the first quarter of 2017. We are experimenting with local market hubs. We have a local market hub now in New Jersey, and we're replenishing our stores and delivering to customers out of that hub. If you remember, we acquired a company, Green Resources in the Carolinas last year. They are a hub-based provider. And so they've given us good market intelligence. And we're taking that concept and we're rolling that out as we speak. Again, we would see ourselves with say, 15 or so local market hubs. So that's something that we'll do incrementally over time over the next 2 to 3 years as we build out our network. So that's the progress report. Things are on track. We feel very, very good about our team and our progress on the supply chain side.

Our next question comes from the line of Judy Merrick with SunTrust.

This is Judy on for Keith Hughes. Just on your acquisition pipeline, is there anything else that you can tell us about any particular geographies that you're looking at?

Yes, thanks. And actually, really not. We're looking like -- for the product lines. We're looking at all geographies. We're not -- we've done more deals on the eastern part of the state so far. But with the Hydro-Scape in the early part of this year, which is Southern California, we'll probably do more deals in the west. So there's no real preference from that standpoint.

I would just add to that, that we look at acquisitions on a local market basis. So we have -- we operate in some 130 metros -- major metros across the U.S. Each one of those metro areas has puzzle pieces that we would like to have to fill in our market. And so we basically use our local relationships and the relationships that we have with Pascal and his team and here at the center to cultivate or nurture targets across all those local markets. And then sellers sell when they're ready to sell and when the timing is right. And so it tends to happen across the country market-by-market with no particular regional focus. And over time, we expect it to balance out both geographically and across product lines.

Thank you. At this time, I'll return the floor back to management for closing remarks.

Okay. Well, thank you. Thank you, everybody, for joining us today. We very much appreciate your questions and appreciate your interest in SiteOne. We're very pleased with the way we've started the year. We're excited about the future. We're excited about the -- not only about 2016, but our longer-term growth and our ability to continue to grow organically, grow through acquisition and expand our profitability going forward. And we look forward to updating you again when we release our second quarter results in August. Thank you very much.

This concludes today's conference. Thank you for your participation. And you may now disconnect your lines at this time.