Oct 28, 2026 earnings call — Margin expansion and acquisition growth
Adjusted EBITDA grew 8% to $138.3 million and margin expanded to 10.7%.
Revenue $1.3B (est $1.3B) · EPS $1.46 (est $1.46)
Key quotes
"While we expect market conditions to be challenging in the near term, We remain focused on the opportunities within our control to gain market share improve productivity and strengthen our competitive position."
"It is our third acquisition of the year brings our combined trailing 12 months acquired net sales to approximately $125 million year-to-date."
"Our Board recently increased our share repurchase authorization to $500 million and we plan to continue returning capital to shareholders opportunistically in the coming years."
Analyst Q&A 10
cost cuts and 2027 outlook
Q (David Manthey · Baird): Were the actions you announced already planned in your Investor Day self-help items? And does this change your view for 2027 compared with expecting a flat market?
A: Management said they have been monitoring the market and taking actions to reduce SG&A. They did not change their outlook for 2027 and expect next year to be similar to this year. The actions prepare the company for next year and move toward their long-term SG&A target.
"We have seen the markets have kind of weaken as we have gone through this year. And we have been taking actions to reduce SG&A." — Doug Black (CEO·CHAIR)
revenue shift and housing impact
Q (Ryan Merkel · William Blair): How much did the fall applications shift from Q3 to Q4 affect revenue? And have higher interest rates slowed housing or big R&R projects?
A: They quantified the shift as about 70 basis points on the Q3 rate and said you can add that back to the Q3 rate and compare to the October run rate of 2%. They said completions are now expected to be down 10% to 12% and that higher rates and other factors have affected mid-level DIY and middle projects. They noted no step down in activity in the last 2 months but said completions deteriorated through the year.
"Completions are now going to be down 10% to 12%." — Doug Black (CEO·CHAIR)
pricing and SG&A drivers
Q (Michael Dahl · RBC): How does the assumed 4% Q4 pricing break down between non-commodity and commodity, and what does that mean for carryover into next year? Also, how are healthcare and other SG&A costs moving as you exit this year into next year?
A: They said the exit rate is around 3% and disclosed commodity details: grass seed was mid single digit in Q3 and should continue into the first half of next year, PVC is low single digits, and fertilizer has been elevated and volatile through Q3. Finished goods inflation ran higher and they expect next year to be low single digit price increases, perhaps 1% to 2%. On SG&A, healthcare has been elevated recently but they expect it to run a little lower going forward, and they are taking actions to prevent SG&A growth next year; base business SG&A was up 0.5% in Q3.
"On the commodity side, we disclosed grass seed in the third quarter was in the mid single digit range." — Eric Elema (CFO)
fuel cost impact
Q (Michael Dahl · RBC): How is fuel affecting results and margins?
A: They said fuel will continue to be a headwind and noted diesel is up 70% year-over-year. They said they have effectively passed that cost on to keep it net neutral on an EBITDA basis, but fuel has been running about a 15 basis points per quarter deleverage impact with a corresponding benefit in gross margin.
"Well, fuel is going to continue to be a headwind right now." — Doug Black (CEO·CHAIR)
price elasticity and restructuring timing
Q (Charles Perron-Piché · Goldman Sachs): How are you thinking about testing price elasticity in weaker markets, especially for certain end markets like fertilizer? And does the weaker market change timing or size of your branch and delivery initiatives?
A: They said their market is effective at passing on price increases and that elasticity is limited for most products. They said fertilizer is an area where higher prices caused short-term cuts in applications but pricing was passed on. On restructuring, they said actions have accelerated but are being done carefully so they do not degrade the ability to run focused branch improvements, delivery optimization, private label growth, and other initiatives toward their 13% target by 2030.
"Where we do see it is more in fertilizer chemical space where you have maintenance contractors with fixed budgets And when those prices move, significantly, then they tend to cut back on applications in the short term." — Doug Black (CEO·CHAIR)
Q4 sales trend and labor supply
Q (Elaine Ku · Barclays): If October is trending up 2% organic daily sales, what assumptions on volume are you using for Q4 and are you being conservative? Also, have you seen changes in labor supply?
A: They said the 2% growth in October includes the catch up from September, leaving year-to-date results in a flat to 1% range, and they expect that trend to continue through November and December. They noted the 50-third week is dilutive about 80 basis points and that makes full-year guide flat to down. On labor, they said supply has been steady and they can hire the people they need, while labor remains a moderate constraint for some customers.
"The 2% growth for October includes the catch up or recovery of what was pushed out of September." — Eric Elema (CFO)
branch closures and competition
Q (Matthew Johnson · UBS): How many branches will you close in Q4 and how might that affect next year’s sales? Also, how has competition changed across customer sizes?
A: They clarified the charge includes reduction in force and branch closures and that the larger component is the reduction in force. They said branch-closure impact on cost is less than half of what it was a year ago and the number of branches closing is less than in prior years. They said competition intensifies in tougher times, focuses on larger customers, and they are holding their own while continuing to gain share with small and medium customers.
"The impact on a cost basis is less than half of what it was a year ago." — Eric Elema (CFO)
maintenance delays and commercial backlog
Q (Jeffrey Stevenson · Loop): Have fertilizer-driven maintenance delays moderated in the back half? And can you update on commercial bidding and backlogs?
A: They said the trend was consistent through the fall season, with adjustments occurring during September and October, and budgets can be reset in winter for spring. They said commercial (14% of sales) has been stable and backlogs are stable, while bidding is flat to slightly down; they also said maintenance has been strong, they are gaining share, and maintenance is 36% of the business.
"And so, yes, we have seen it be consistent in September and October." — Doug Black (CEO·CHAIR)
PVC pricing and competitor claims
Q (Stifel): Is your PVC pricing tied to manufacturers or are you acting independently? And what do you see from competitors like Heritage and their claim of large outperformance?
A: They said PVC price increases went in during the second quarter and PVC represents about 3% to 4% of overall sales, so it is a small part of the business; price has held since the May increase this year. On competition, they said it is broader than any single competitor, including Heritage, and when markets get competitive the focus is on large customers; they said they feel they are holding their own and will not react to another company's disclosed claims.
"PBC as a percentage of our overall sales is on the 3% to 4% range." — Eric Elema (CFO)
buybacks vs M&A and market mix
Q (Connor Winston · Truist): With increased buyback authorization, will M&A remain the top use of cash or will buybacks get more emphasis? And how does commercial growth compare to residential and how might that evolve into 2027?
A: They said M&A and investing in growth remain number 1 and they outlined a long-term run rate of $200 million to $300 million of acquired annual sales, with share repurchases in a $100 million to $200 million range normally. They said this year repurchases will be over the top end of that range due to the lower stock price, they will stay within a 1 to 2 times leverage range, and they will be opportunistic. On markets, they said commercial has been flat while new residential is down double digits and residential starts are down mid single digits going into next year.
"Yes. So, you have seen an elevated buyback rate this year, but M&A investing in our growth remains number 1." — Eric Elema (CFO)