Elizabeth Langan

Elizabeth Langan asked for more detail on SiteOne Landscape Supply Inc.'s SG&A improvement, including how the company is tracking with its SG&A initiatives and if a similar magnitude of improvement is expected through the end of 2025 and into 2026. She also inquired about trends in the commercial end markets and if any regions were experiencing notably lighter or more outsized demand on the bidding side.

Answer

EVP, CFO, and Assistant Secretary John Guthrie stated that SiteOne expects to continue the SG&A leverage trend for the rest of 2025, noting that it is foundational for future plans, but it's premature to give 2026 guidance. Chairman and CEO Doug Black reported that the commercial end market has remained stable all year, with project services group activity slightly up in terms of bidding, indicating continued work. He added that no specific regions were showing outsized growth, with demand generally flat and stable.

Elizabeth Langan asked about the drivers of SG&A improvement in the quarter, the tracking of SG&A initiatives, and the expected magnitude of improvement through the end of 2025 and into 2026. She also inquired about trends in commercial end markets and any regional variations in bidding demand.

Answer

Doug Black, Chairman and CEO, stated that SiteOne Landscape Supply Inc. expects the SG&A leverage trend to continue for the remainder of the year, noting its foundational role in future plans, though 2026 guidance is not yet available. He described commercial markets as stable, with Project Services group bidding activity slightly up, and no significant regional variations in demand, generally expecting flat and stable conditions.

Elizabeth Langan asked about the specific direct costs that KB Home has successfully lowered and if there are any particular categories showing more success. She also inquired about the dynamics of these cost negotiations, whether the benefits would extend into 2026, and if they are real-time dependent on demand and a potential recovery in starts next year.

Answer

Rob McGibney, President and Chief Operating Officer, stated that cost reductions are broad-based, with lumber being a tailwind. He noted success in working with trade partners due to lower starts, leading to both renegotiated prices and value engineering, with an even split between these factors. McGibney explained that recent lumber reductions would impact deliveries early next year, and while cost focus is continuous, success is market-dependent. He anticipates less success in lowering costs if there's a healthy spring selling season, but this would likely be accompanied by rising house prices.

Elizabeth Langan inquired about the specific direct costs that KB Home has successfully lowered, asking for categories with notable success. She also questioned the dynamics of negotiations with trade partners, whether these benefits would extend into 2026, and how they depend on broader market conditions.

Answer

Rob McGibney, President & COO, stated that cost reductions were broad-based, including lumber and other direct components, driven by renegotiations with trade partners due to reduced starts and value engineering. He noted that recent lumber reductions would impact early 2026 deliveries. He added that while cost focus is continuous, success is market-dependent, with more leverage when starts and volumes are down, but less if a strong spring selling season drives prices up.

Elizabeth Langan asked for details on KB Home's success in lowering direct costs, specifically identifying categories where more progress was made. She also inquired if these direct cost reduction benefits would extend into 2026 or if they are more real-time and dependent on demand and starts recovery.

Answer

Rob McGibney, President and Chief Operating Officer, stated that cost reductions were broad-based, including lower lumber costs and renegotiations with trade partners due to reduced starts. He also mentioned value engineering and product changes. McGibney noted that recent lumber reductions would impact early 2026 deliveries. He explained that while cost focus is continuous, success is somewhat market-dependent; they leverage lower starts and volumes for cost reductions, but less success is expected if there's a healthy spring selling season with rising house prices.

Elizabeth Langan from Barclays asked for commentary on geographic market trends, specifically which areas are showing healthier traction. She also requested details on the sources of the incremental inflationary pressures that new cost-saving initiatives are intended to offset.

Answer

Founder, Chairman & CEO Robert Reffkin noted that overall prices are up 1% YoY, the Northeast has less inventory than the South, and migration patterns have slowed. CFO Kalani Reelitz explained that inflationary pressures are coming from areas like procurement and technology, and the company is leveraging learnings from recent acquisitions to find offsets.

Elizabeth Langan asked for details on how agents are using private exclusives, specifically whether they lead to private offers or if listings typically migrate to public sites. She also inquired about the M&A environment, asking if interesting opportunities are emerging at reasonable prices given market uncertainty.

Answer

CEO Robert Reffkin explained that the goal is a 3-phase strategy, with 94% of listings that start as private exclusives ultimately reaching the MLS. He emphasized that the majority of private exclusive sales are co-broked with other firms, countering the narrative of 'inside deals.' CFO Kalani Reelitz commented on market share, expressing satisfaction with the 6% achieved in Q1 and expecting continued gains from both organic growth and acquisitions as top agents continue to outperform.

Asked about demand trends across retail and Pro channels, regional performance, and requested a quantification of the expected impact from tariffs.

Answer

The company is seeing growth across both Pro and retail channels, with Pro growing slightly faster. Regional performance is strong across the U.S., with some initial weather-related weakness in the Northeast that has since rebounded. The annualized tariff exposure is estimated at $12 million to $15 million, with a fiscal year impact of $4 million to $6 million, which has been offset by modest price increases.

Elizabeth Langan, on for Matt Bouley, asked about current land market dynamics and the expected mix of spec versus to-be-built homes influencing gross margins.

Answer

Erik Heuser, Chief Corporate Operations Officer, described the land market as having less 'froth,' which allows for negotiating more favorable terms rather than seeing outright distress. Curt VanHyfte, CFO, confirmed that the spec mix, which was 58% of closings in Q1, is expected to be higher in Q2, likely in the upper-50s to 60% range, as the company works to sell through finished inventory.

Elizabeth Langan of Wolfe Research inquired about the expected cadence of gross margins for 2025 and the underlying assumptions for material costs, particularly concerning potential tariffs.

Answer

Chief Financial Officer Curt VanHyfte stated that gross margins are expected to moderate throughout the year from the high 23% range guided for Q1, factoring in higher rates and lot cost inflation. He noted that potential tariff impacts of $1,200 to $5,000 per home are already contemplated in the full-year guidance. Chairman and CEO Sheryl Palmer added that the incentive levels on the sales floor at the end of Q4 are a good proxy for 2025 expectations.

Elizabeth Langan, on for Matt Bouley, asked for more detail on the strong demand from the builder/developer channel, including the pace of new builder sign-ups, and inquired about the potential impact of hurricanes on dealer inventory stocking.

Answer

Mark Yost, President and CEO, responded that the rate of new builder capture accelerated slightly from the prior quarter and is expected to be a strong growth channel going forward. He also anticipates that dealers in hurricane-affected regions will increase orders to backfill demand as infrastructure is rebuilt, given the substantial number of homes destroyed.

Asked for more detail on the strong demand from the builder-developer channel, specifically regarding the rate of new builder sign-ups. Also inquired about the potential impact of hurricanes on dealer inventory stocking.

Answer

The company confirmed that new builder sign-ups accelerated this quarter and that the builder-developer channel is expected to remain strong. Regarding inventory, they anticipate dealers will increase orders to meet the substantial post-hurricane housing demand as infrastructure is rebuilt.