Good day, and Welcome to The SiteOne Landscape Supply, Inc. Conference Call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to John Guthrie. Please go ahead. Thank you. Good morning, everyone. We issued our second quarter 2023 earnings press release this morning and posted a slide presentation to the investor relations portion of our website at investors.siteone.com. I'm joined today by Doug Black, our Chairman and Chief Executive Officer, and Scott Salmon, Executive Vice President, Strategy and Development. Before we begin, I would like to remind everyone that today's press release, slide presentation, and the statements made during this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission. Additionally, during today's call, we will discuss non-GAAP measures we believe can be useful in evaluating our performance. A reconciliation of these measures can be found in our earnings release and in the slide presentation. I would now like to turn the call over to Doug Black. Thanks, John. Good morning, thank you for joining us today. We're pleased to see End Market demand remain resilient in the second quarter, which allowed us to achieve solid organic daily sales growth and record operating cash flow, despite the continued normalization of our growth margin and EBITDA margin. Our strong teams executed well in gaining market share, driving positive organic sales volume growth, and managing through price deflation in select products. We were also pleased to add three new high-performing companies to SiteOne during the quarter and in July, bringing terrific talent to our team and expanding our customer relationships and our full product line capability in their respective markets. Through the execution of our commercial and operational initiatives and our acquisition strategy, we continue to build SiteOne as a world-class market leader for the long term, while delivering consistent performance and growth in the near term. As we move into the second half of the year, we remain confident that our well-balanced business, strong balance sheet, exceptional teams, improved capabilities, and robust acquisition pipeline position us well to navigate the current environment and achieve continued success. I will start today's call with a brief overview of our unique market position and our strategy for long-term performance and growth, followed by some highlights from the quarter. John Guthrie will walk you through our second quarter financial results in more detail and provide an update on our balance sheet and liquidity position. Scott Salmon will discuss our acquisition strategy, then I will come back to address our current outlook for 2023 before taking your questions. As shown on slide four of the earnings presentation, we have grown our footprint to more than 650 branches and four distribution centers across 45 U.S. states and six Canadian provinces. We are the clear industry leader, over four times the size of our nearest competitor, yet we estimate that we only have about a 16% share of the very fragmented, $25 billion wholesale landscaping products distribution market. Accordingly, our future growth opportunity remains significant. We have a balanced mix of business, with 65% focused on maintenance, repair, and upgrade, 21% focused on new residential construction, and 14% focused on new commercial and recreational construction. As the only national full product line wholesale distributor in the market, we also have an excellent balance across our product lines as well as geographically. Our strategy to fill in our product lines across the U.S. and Canada, both organically and through acquisition, strengthens and reinforces this balance over time. Overall, our balanced End Market mix, broad product portfolio, and good geographic coverage offer us multiple avenues to grow and create value for our customers and suppliers while providing important resiliency in softer markets. Turning to slide five, our strategy is to leverage the scale, resources, functional talent, and capabilities that we have as the largest company in our industry, all in support of our talented, experienced, and entrepreneurial local teams, to consistently deliver superior value to our customers and suppliers. We've come a long way in building SiteOne and executing our strategy, but we are relatively early in our development as a true world-class company. Accordingly, we remain highly focused on our commercial and operational initiatives to further build our capability to create value for all stakeholders. These initiatives are complemented by our acquisition strategy, which fills in our product portfolio, moves us into new geographic markets, and adds terrific new talent to SiteOne. Taken all together, our strategy creates superior value for our shareholders through organic growth, acquisition growth, and EBITDA margin expansion. If you turn to slide six, you can see our strong track record of performance and growth over the last seven years, with consistent organic and acquisition growth and EBITDA margin expansion. We have done this while investing heavily in our teams and in new systems and technologies to build the foundation for SiteOne and create superior capabilities for our customers and suppliers. We are still building and investing, and we remain confident in our ability to gain market share and continue driving all three of our value creation levers going forward. We have now completed 85 acquisitions across all Key Product lines since 2014. We expanded our development team in 2021, and then leveraged them to increase acquisition activity in 2022, resulting in a record 16 acquisitions last year. Our pipeline of potential deals remains robust, and we expect to continue adding and integrating an increased number of new companies to support our growth. All of these companies are high performers, and so they strengthen our company with excellent talent and new ideas for performance and growth. Given the fragmented nature of our industry and our modest market share, we have significant opportunity to continue growing through acquisition for many years to come. Slide seven shows the long runway that we have ahead in filling in our product portfolio, which we aim to do primarily through acquisition, especially in the nursery, hardscapes, and landscape supplies categories. We are well-networked with the best companies in our industry and expect to continue filling in these markets systematically over the next decade. I will now discuss some of our second quarter performance highlights, as shown on slide eight. We achieved 11% net sales growth, 4% organic daily sales growth, and 7% growth added through acquisition. Price inflation continuing to moderate, we were very pleased to achieve 3% organic daily sales volume growth during the second quarter. Furthermore, organic sales growth was more balanced in the second quarter across our product lines and regions than in the first quarter. As expected, price inflation continued to decline and was negative in June, driven by deflation in select products like fertilizer, grass seed, and PVC pipe. Price inflation was 1% during the quarter, compared to 6% in the first quarter and 19% in the second quarter of last year. We expect prices to be down in the second half and inflation for the full year 2023 to be roughly flat. Gross profit increased 6%, while gross margin contracted by 170 basis points to 36.2%, as we expected. The loss of the extraordinary price realization benefit achieved during the second quarter of 2022 was partially offset by our hardscapes and landscape supplies acquisitions, which carry a higher gross margin, and also by lower freight cost. Our teams continued to maintain competitive pricing while managing price vs cost well, despite the challenges of commodity-related deflation. We have now fully lapped the extraordinary price realization achieved during 2021 and 2022. We expect gross margin in the second half of 2023 to be similar to the second half of 2022. SG&A, as a percent of net sales, increased by 130 basis points year-over-year to 23.7%. Acquisitions had the largest effect on SG&A as a percent of net sales, as the same hardscapes and landscape supplies acquisitions that benefited gross margin also increased our SG&A. Inflation across all categories, except for freight, also contributed to the higher SG&A as a% of net sale. We are highly focused on operating leverage and expect to see benefits from our productivity initiatives as inflation normalizes and as we return to positive organic daily sales growth. Adjusted EBITDA for the quarter declined 5% to $211.2 million, and adjusted EBITDA margin declined by 260 basis points to 15.6%, as the normalized price realization benefit, combined with higher SG&A, yielded lower adjusted EBITDA. Adjusted EBITDA and adjusted EBITDA margin are on track with our expectations so far this year, and we expect the decreases in both to moderate significantly in the second half. In terms of initiatives, we continue to grow with our small customers significantly higher than our average, while also driving growth in our private label brands and improving our inbound freight costs through our transportation management system, all helping us to expand gross margin. Year to date, we have increased our Partners Program members by approximately 50% to 36,000 members. Most of the new members are small to mid-sized customers.... We have increased our% of bilingual branches from 56% to 59% this year, and are continuing to focus on Hispanic marketing to create awareness among this important Customer segment. Lastly, we are making great progress in our sales force productivity as we leverage our CRM and establish more disciplined revenue-generating habits among our over 900 inside and outside sales associates. The continued rollout of Mobile Pro and DispatchTrack allow us to offer better customer service, while also increasing the productivity of our branch staff and delivery fleet. Both of these capabilities are now deployed company-wide, and we continue to see usage and benefit increase across the company. We made good progress in growing our digital sales and customer activity on siteone.com during the second quarter, which helps us increase market share while allowing our associates to focus more on creating value for our customers and less on transactional activity. Finally, we are seeing some of the early benefits from our operational excellence teams, who are systematically spreading best practices in each line of business across SiteOne to drive value for our customers, suppliers, and company. As an example, over the past year, we have driven changes in key aspects of our nursery business in terms of staffing, sales, assortment, and procurement. As a result, our nursery product line has outperformed all other lines of business this year in organic growth, profit improvement, and improved inventory turns. Taken all together, we are continuing to improve our capability to drive organic growth and achieve operating leverage, even as we fight through the challenges in 2023. On the acquisition front, we have added 5 high-performing companies to our family so far this year, with approximately $75 million in trailing twelve-month sales added to SiteOne. Following a record number of acquisitions in 2022, our expanded development team remains very active and engaged with a robust pipeline of targets, and we expect to have another good acquisition year in 2023. With an experienced team, broad and deep relationships with the best companies, strong balance sheet, and an exceptional reputation, we remain well positioned to grow consistently through acquisition this year and for many years to come. Summary, we are pleased with our progress at the halfway mark in navigating through the challenging market conditions in 2023. While End Market demand remains resilient, we will continue to be challenged with commodity product deflation, cost inflation, and overall economic uncertainty in the second half. In the face of these headwinds, we have solid momentum with our key commercial and operational initiatives, and remain confident in our ability to deliver increased value to our customers and suppliers while outperforming the market. John will walk you through the quarter in more detail. John? Thanks, Doug. I'll begin on slide nine with some highlights from our second quarter results. We reported a net sales increase of 11% to $1.35 billion for the quarter. There were 64 selling days in the second quarter, which is the same as the prior year period. Organic daily sales increased 4% compared to the prior year period, primarily due to volume growth on solid End Market demand. Price inflation contributed approximately 1% to organic daily sales growth during the period. As Doug mentioned, we are seeing less price inflation as we count the large price increases of the last year, and the cost for products like fertilizer, grass seed, and PVC pipe decrease. We now expect price inflation to be roughly flat for the full year, which implies price deflation in low single digits in the second half of this year. Organic daily sales volume increased 3% for the second quarter, as we experienced solid demand from our End Markets. In addition, in comparison to both the second quarter of 2022 and the first quarter of 2023, weather had a much smaller impact on sales. Organic daily sales for landscaping products, which includes irrigation, nursery, hardscapes, outdoor lighting, and Landscape Accessories, grew 5% for the second quarter, primarily due to price inflation resulting from rising product costs. Organic daily sales for agronomic products, which includes fertilizer, control products, ice melt, and equipment, grew 2% due to volume growth resulting from solid demand and improved weather in key northern markets. The strong volume growth was partially offset by lower prices for products like fertilizer and grass seed. We were pleased with the performance of our acquisitions in the second quarter. Acquisition sales, which reflect sales attributable to acquisitions completed in both 2022 and 2023, contributed approximately $86 million, or 7% to net sales growth. Scott will provide more details regarding our acquisition strategy later in the call. Gross profit increased 6% to $489 million for the second quarter, compared to $461 million for the prior year period. Gross margin decreased 170 basis points to 36.2%, as lower freight costs and contributions from acquisitions with higher gross margin were more than offset by the loss of the price realization benefit realized in the second quarter of 2022. As we have discussed in prior quarters, we are expecting gross margin to normalize in 2023 as we transition to a more traditional pricing environment. Selling, general, and administrative expense, or SG&A, increased 18% to $321 million for the second quarter. The increase in SG&A primarily reflects the impact of acquisitions. SG&A, as a% of net sales, increased 130 basis points in the quarter to 23.7%. The increase in SG&A as a% of net sales, is primarily due to the impact of acquisitions, continued cost inflation, and incremental investments to support our growth. For the second quarter, we recorded an income tax expense of $40 million, compared to $45 million in the prior year period. The effective tax rate was 24.4% for the second quarter of 2023, compared to 24.2% for the prior year period. The increase in the effective tax rate was primarily due to a decrease in the amount of excess tax benefits from stock-based compensation. We expect the 2023 fiscal year effective tax rate will be between 25% and 26%, excluding discrete items such as excess tax benefits. Net income for the second quarter of 2023 decreased 12% to $124 million, compared to $141 million for the same period in the prior year, as higher net sales were more than offset by our lower gross margin and increased SG&A expense. Our weighted average diluted share count was 45.7 million, compared to 45.8 million for the prior year period. Adjusted EBITDA decreased by 5% to $211.2 million for the second quarter, compared to $222 million for the same period in the prior year. Adjusted EBITDA margin, reflecting the lower gross margin, decreased 260 basis points to 15.6%. Now, I would like to provide a brief update on our balance sheet and cash flow statement, as shown on slide 10. Net working capital at the end of the second quarter was $903 million, compared to $885 million at the end of the prior year period. The increase in net working capital is primarily attributable to an increase in accounts receivable resulting from our sales growth. While total inventory was flat compared to the same period last year, inventory turns increased as we reduced our stocking levels with improved product supply. Net cash provided by operating activities increased to $254 million for the second quarter, compared to approximately $95 million for the prior year period. The record operating cash flow reflects our progress in reducing inventory levels that we increased in prior periods in response to supply chain uncertainty. We made cash investments of approximately $35 million for the second quarter, compared to approximately $104 million for the same quarter in 2022. The decrease reflects a decline in acquisition investments made during the quarter. Scott will provide additional details on our acquisition pipeline later in the call. Capital expenditures were $9 million for the quarter, which was flat with prior year period. Net debt at the end of the quarter was approximately $385 million, compared to approximately $436 million at the end of the second quarter of 2022. The lower net debt reflects our strong operating cash flow and lower acquisition investment. Leverage at the end of the second quarter was 0.9x our trailing 12 -month adjusted EBITDA, which is the same as the prior year period. As a reminder, our target year-end net debt to adjusted EBITDA leverage range is 1- 2x. At the end of the quarter, we had liquidity of approximately $524 million, which consisted of approximately $70 million cash on hand and approximately $454 million in available capacity under our ABL facility. On July 12, 2023, we further increased our liquidity by borrowing an additional $120 million on our term loan and using the net proceeds to increase ABL availability. Our priority from a balance sheet and funding perspective is to maintain our financial strength and flexibility, so we can execute our growth strategy in all market environments. I will now turn the call over to Scott for an update on our acquisition strategy. Thanks, John. As shown on slide 11, we acquired two companies in the second quarter and 1 in July, with combined trailing 12-month net sales of approximately $35 million. Since 2014, we have acquired 85 companies with approximately $1.5 billion in trailing 12-month net sales added to SiteOne. Turning to slides 12 through 14, you will find information on our most recent acquisitions. On May 8th, we acquired Adams Wholesale Supply, with three locations focused on providing agronomics and landscape supplies to the San Antonio, Dallas-Fort Worth, and Houston, Texas markets. On May 26th, we acquired Link Outdoor Lighting, with four locations providing Landscape lighting to Landscape contractors in the Orlando and Naples, Florida markets, as well as in Houston, Texas, and Nashville, Tennessee. On July 3rd, we acquired Hickory Hill Farm & Garden, a single location, wholesale distributor of irrigation, nursery, and landscape supplies. The acquisition of Hickory Hill complements our existing business in the Lake Oconee, Georgia, area, allowing us to provide the full line of landscaping products and supplies to Landscape professionals in this high-growth local market. Our acquisitions continue to add terrific talent to SiteOne. Forward toward our goal of providing a full line of Landscape products and services to our customers in all major U.S. and Canadian markets. Summarizing on slide 15, our acquisition strategy continues to create significant value for SiteOne. With a strong balance sheet and a robust pipeline across all lines of business and geographies, we are confident that we will be able to add many more outstanding companies to SiteOne during the year. I want to thank the entire SiteOne team for their passion and commitment to making SiteOne a great place to work and for welcoming the newly acquired teams when they join the SiteOne family. I am confident in our ability to keep adding more outstanding new companies through acquisition as we move through 2023, creating excellent value for all our stakeholders. I will now turn the call back to Doug. Thanks, Scott. I'll wrap up on slide 16. As mentioned, we are pleased to have achieved 2% organic daily sales growth in the first half of 2023. So far, the year is playing out as we had expected, with durable demand and moderating price growth due to commodity price deflation. As we look forward to the second half, as John mentioned, we expect price inflation to be negative, resulting in flat pricing for the year. In terms of volume growth, we remain optimistic that End Market demand will remain durable as we continue to execute our commercial and operational initiatives to grow faster than the market. In terms of End Markets, we expect the decline in new residential construction, which comprises 21% of our sales, to continue during the second half. Note that builders have become more bullish in terms of housing starts in the second half, which could lead to sales growth for landscaping products in the new residential construction market late in the year or in 2024. New commercial construction, which represents 14% of our sales, has remained solid, and based on our current bidding and customer backlogs, we expect continued growth in this market throughout 2023. The Repair and Upgrade market, which represents 29% of our sales, has been mixed so far this year across geographic markets, and we now expect this market to be flat. Lastly, we expect sales volume in the maintenance category, which represents 36% of our sales, to remain steady with modest growth. With this backdrop, we expect our organic daily sales to be down slightly in the second half, driven by declining prices. For the full year 2023, we expect organic daily sales to be approximately flat. We expect gross margin in the second half to be similar to the prior year period and adjusted EBITDA margin to be slightly lower on a year-over-year basis. Given reasonable demand, we would expect to resume expanding adjusted EBITDA margin in 2024 and beyond. In terms of acquisitions, as Scott mentioned, we have a strong pipeline of high-quality companies and look forward to adding more of these to the SiteOne family in the remainder of 2023. Our acquisitions are performing well, and we continue to improve our ability to integrate them into our company. Accordingly, we expect acquisitions to contribute strongly to our performance and growth during the year. With all these factors in mind, we are raising the bottom end of our guidance range slightly and now expect our fiscal 2023 adjusted EBITDA to be in the range of $400 million-$425 million. This range does not factor any contribution from unannounced acquisitions. In closing, I would like to sincerely thank all our SiteOne associates, who continue to amaze me with their passion, commitment, teamwork, and selfless service. We have a tremendous team, and it's an honor to be joined with them as we deliver increasing value for all our stakeholders. I would also like to thank our suppliers for supporting us so strongly and our customers for allowing us to be their partner. Operator, please open the line for questions. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We request that you please limit your questions to one main question and one follow-up question. At this time, we will pause momentarily to assemble our roster. The first question comes from Ryan Merkel with William Blair. Hey, good morning, and thanks for all the, the help and guidance for the year. My first question is on the price deflation that you mentioned, and it, it's a two-parter. I'm curious, what is the source of the deflation? Is it simply just passing through lower costs, or is there also excess supply of some of these items? Then do you think prices are gonna stabilize in the second half, or could it continue to go lower as we look into 2024? Thanks, Ryan. We would, we think, it is primarily just reorienting the prices for a lower cost is what, what's going on, where the, the market prices, if you've seen some of the commodities, like fertilizer, have come down, it's not from a oversupply, and, and increased competition, for, for business. The demand is actually improved this year. We showed good volume growth in agronomics, and agronomics is, is the primary area where we are seeing deflation. I think, I think, you know, our, our crystal ball is, is, isn't great, but I, I think we've seen, we're aware of what's the pricing that's gonna happen in the second half, and we've incorporated that into our guidance right now, from that perspective. There were some price increases, you know, grass, seed and fertilizer that have gone in recently, and feel pretty good about those, holding on to, to the, through the fall selling season. Okay, that's helpful. Then maybe just a question on sales trends. What are you seeing in July? Is that consistent with organic sales down low single digits? You know, what is the feedback from contractors? Are they still quoting and booking new work, or are they sort of bleeding backlog at this point? Right. No, July has been a solid month, you know, in line with our guidance. Our, our customers are, are, I'd say, solid to maybe even a little optimistic. You know, the, the builders have become more optimistic, which has some of our larger customers feeling kind of feeling better about especially the late part of the second half. You know, the commercial market has remained strong, so backlogs have remained. Our bidding is, is still in a growth mode vs prior year. I would, I would call... You know, the backlogs got very long during COVID, and, and those certainly have come down to normal. Contractors are certainly having to work harder to, to find work, but we don't see any kind of panic or, or, you know, customers that, that can't find the work. You know, this, there's simply kind of normal backlogs to pre-pandemic levels, I guess, is how we, we would call it. Very helpful. Thank you. Yeah. Thanks, Ryan. Thank you. The next question comes from David Manthey with Baird. Please go ahead. Yeah, thank you. Good morning, everyone. To build on that last question, last quarter, you were a little slow out of the gate on the year, and then April rebounded for you. Can you talk about the trends that you saw through the quarter? Were they pretty stable? Related to that, this extreme heat situation, is that actually a negative for your business net? You know, we saw volume, as you mentioned, picking up through the quarter. Of course, for, price came down. Those two factors have kind of worked in tandem, and so I'd say it's been, it's been pretty kind of consistent through the spring and the second quarter, though the total organic growth would have, you know, kind of dropped sequentially from April to June, though, still, still positive in June. In terms of the weather, you know, we benefited this year from the weather in the northern kind of Great Plains across the, the top end of the U.S., which had very poor weather last year in the spring. You know, had better weather this year, so that was a benefit to us. Obviously, it was wetter in Texas and some of the southern, you know, you know, California, Arizona, Texas, Florida, which kind of worked against us. You know, we would call that maybe a push in the second quarter in terms of weather. When you take the heat, you know, the heat helps us to some degree in terms of, you know, they're gonna have to treat the lawns. You know, irrigation tends to do better in the hotter weather. However, in some of the extreme heat markets, we're seeing, you know, customers, you know, kind of cut their afternoon hours and, and do some things there that, that might clip demand. Overall, I think it would be a, a fairly neutral effect. We haven't seen a large negative effect from the extreme heat, at least, at least to date. You know, the, the summer months in June and August tend to be a bit of a lull, anywhere as people are taking vacations before school, et cetera. We certainly have seen that same trend, but nothing, nothing that's different from prior years. Okay, thanks for that, Doug. Building on this pricing question, it sounds like pricing levels in your commodity products, agronomics, from the start of the year, have declined slightly, but it also, I, I believe, John, you said that there's a price increase. You feel like maybe those are stabilizing? Just correct me if I'm wrong on that. Then second, any commentary on non-commodity products, pricing trends, are they stable? I know there's a wraparound effect from last year, and there's obviously year-over-year comps, but, as you look from the beginning of the year to today, if you could just talk about trends in those two categories. Yeah, I think what we've talked about at the beginning of the year is still holds. You know, I look at our product lines. We're still showing. ... increases in, you know, in, in almost every kind of for the quarter, in almost every of our major product lines other than agronomics. You know, hardscapes, nursery prices have held up very well. Irrigation other than PVC pipe, and drip tubing has held up very well. In general, I think, I think our thesis with regards to pricing has come out, that the 80% kind of our business that's, that's non commodity related, roughly has, has, has maintained pricing, and then the commodities have come down. You know, maybe some of the commodities have come down a little bit faster. We were probably low single digits, now we're roughly flat for the year. I would say that, that trend, but, I think directionally and kind of, kind of the model we have, continues to hold, from what we've talked about in prior calls. Thank you. The next question comes from Damian Karas from UBS. Please go ahead. Hey, good morning, everyone. Morning. Morning. Nice to see you guys getting back to volume growth. Congrats on that. I had a question, kind of specific to the, the maintenance side of your business, because I recall from last year that that was unexpectedly weak, as a lot of your, you know, contractors were rationalizing supply because of inflation. I'm assuming that that was a nice tailwind for you in the second quarter, and just curious what kind of customer behavior you're seeing now in the, in the maintenance side. You know, are, are, are budgets sort of, acclimated to today's pricing, and you're getting back to kind of like normal quantity of, of product being applied? Yes, in general, that's what we're seeing. We're seeing strong volumes in agronomics. You know, the prices are down, obviously, which, which mitigates that. That's played out as we expected. We did, we did expect customers to kind of come back to normal application rates, in terms of, like the golf industry. You know, they've, they've got nice revenues, so, you know, their budgets are, are fairly fixed or increased. You know, prices are coming down, they're able to, to use more product. Yes, we're, we're pleased that that trend in agronomics has played through, we expect that to, to continue to play through into the, into the second half. Great. Would you be able to give us a sense for, you know, how you think you're performing year to date in terms of, you know, share gains or losses? Any perspective on kind of what the industry, performance has been? Right. Yeah, we, we do feel like we're gaining share consistently. You know, each market, you know, has their puts and takes, but across, across the country, we're gaining market share in really all of our, our product lines. We, we feel good about that. We stay... You know, there's not a lot of good industry data, but we stay in close contact with our suppliers, you know, we know what's going on with ourselves relative to our competitors, et cetera. We're very pleased with our, our small customer efforts. As we have stated before, we've got less share with smaller customers than we do with the larger customers. It's just the way that we developed early on in our history, that's a big target for us. We, and we see that small customer growth, you know, that is far ahead of the industry, if you will. We feel like we're making particular progress there with the smaller Customer segments, which is, which is great to round us out as, as a company. We already have, you know, significant share with the larger customers. We've been holding on to that. Obviously, that's a lot of where the fighting is in these types of markets, is for that large customer business. We're, we're holding our own there, but we're picking up, you know, kind of significant share in the small-- medium to small Customer segment, which is part of our strategy. That's great. Thank you very much. I'll pass it along. Thanks, Damian. Thank you. The next question comes from Mike Dahl with RBC Capital Markets. Please go ahead. Morning. Thanks for taking my questions. Just a follow-up, one, one more kind of clarification or quantification on the pricing side. It sounds like pretty stable on non-commodity. Can you just help us understand kind of in terms of quantifying then, how much commodity prices are down? Then when you think about if, if commodity prices are stabilizing here or whatever your market's kind of telling you for the second half, you know, how that would impact the beginning of 2024 as well? I know it's early, but just if commodities continue to track here, what would that mean for net pricing in 2024? I, I don't have exact numbers on, on, on 2024 yet. We'll have to see, see how, how that plays out. I, I think it would be fair to say, at least in Q1, we'd probably face a little bit of a, of a headwind because of commodities, since we did... You know, if we look at the, the quarters, we, we had 6% in Q1, and that, that'll be the tough comp from that standpoint. We'll have to see then, you know, kind of the rest of 80% of the business, if, if that offsets that, that 6% number, from that standpoint. % of commodities. Yeah, I mean, I mean, we have some commodities that are, you know, I would say, kind of, of fertility, which is primarily fertilizer, you know, quantifying that probably we're about at our current run rate, you know, low double digits, you know, in the low teens, at a combined basis, down year-over-year on pricing. I would expect piping would be similar. Those, those are the ones that would call that. Grass seed, and we have a pretty big grass seed season in Q3, would be the three that will probably be down low double digits. That, that blends together, and as we alluded to on the call, you know, we got that, the rest of the business, that, that's out there, in much more modest or, or price increases, and that gives us the low low single-digit headwind on the second half. Okay, that's helpful, John. Then my second question is on margins. Last quarter, you outlined the continued expectation for gross margins to normalize down to 34.5%-35%. If we look at the 2Q upside and then kind of plug in flat year-over-year in the second half, it seems like it gets you a little north of 35%. So I'm wondering just how much of that is still kind of timing related vs, the internal initiatives or M&A, potentially driving kind of some structural uplift to how you're now viewing gross margins? Yeah, I, I think, you know, we talked about 34.5%-35%, as you say, kind of our, our, our guidance, what we talked about, on, on the call, is gonna put us at, at the high end of that, that, that, that, that number. A lot of that will be, as, as, will be, kind of, I think, you know, some, some freight, and, and the acquisitions, will be positive, with regards to that, though. Year-over-year, some of the kind of the larger high gross margin acquisitions, we're starting to comp those also from that standpoint. Rest of the year, we are at the, at the high end, more, more 35%-ish, for that, if, if you do the math. A lot of that's due to kind of as we work through all these kind of, one-time kind of benefits, kind of rolling off, and then, and then, you know, kind of structurally, we, we think this is kind of where we'd start as our baseline for, for future years. Great. Okay, thank you. Thank you. The next question comes from Keith Hughes with Truist. Please go ahead. Thank you. The unit growth in the quarter and, and the projection here is, I mean, a good bit better than most every one of your peers on both the manufacturer and distribution side. I guess my question, is there any one market that's outperformed even your expectations as we, you know, gone through this kind of turbulent period? Well, you know, the, the strength has been in, you know, the South, you know, Florida, the Southeast. You know, it's kind of been, it's been very strong. You know, it's been traditionally strong for us. If, if you wanna, you know, if you're asking what our strongest area would be, that it would be kind of Florida and the Southeast. Obviously, our weakest area would have been, you know, California, and where we had the really, really poor weather. You know, Texas has had poor weather, those have been, you know, markets that are traditionally strong, that have been a little weaker, and it, it all kind of blends out. That, that's been our strength. We've been very pleased with, you know, kind of the Southeast U.S. performance so far this year. From an end user market perspective, is there any one of those that has just, you know, just not gotten hit as much as you would have anticipated? That's not gonna hit as much? That, that has not been so far as, as weak as maybe you would have thought at the beginning of the year. Well, we're, we're a little bit, surprised that the residential market is, is seems to be, more... You know, the, the builders are more bullish for the second half. Now, you know, we kind of haven't seen it yet, but we, we were thinking there would be a, a longer, you know, negative trend in new residential construction, and it, it just seems like the builders are, are, are more optimistic than we would have thought they would have been. Commercial has held up well. You know, we thought commercial was gonna be, solid. It's, it's probably been a, a little better than we thought. The model has been, kind of as expected, and, and maintenance really has, has been as expected. I'd say that the new residential construction, though we haven't seen it, you know, the future looks better there later in the second half and, and in 2024 than we would have thought coming into 2023. Okay, thank you. Thank you, Keith. Thank you. The next question comes from Joe Ahlersmeyer with Deutsche Bank. Please go ahead. Hey, good morning, everybody. just wanted to- Good morning. Follow up on that last point about new residential. Can you clarify if that late second half benefit that you think you may get this year vs next year, is that included even at the high end of your guidance, or are you still sort of pushing that out to next year? We haven't included anything with regards to that into our guidance at all from that standpoint. I mean, that would be kind of more of a 2024 thing is what we, what we, what we think. You know, our guidance is based on conversations and what we're seeing with contractors today in the marketplace. Understood. Okay. Then the comment about returning to margin expansion next year, I assume that's more on the volume leverage and the cost side, and less so from the gross margin if we're stabilizing there. Could you maybe just talk about the sort of expectation of what drives the margin expansion from here, if it is more volume or if it's further productivity on the cost side? Then if I could just sneak another one in, just any plans on how to trend the inventory into next year? I'll take the first one, I'll let John take the second one. No, we, we feel like it'll, it'll still be very balanced, going forward. This is a reset year, you know, when we finish the year, in, in kind of a stable situation, we see reasonable demand going forward. We, we do expect continued gross margin improvement, both, you know, organically through our initiatives with small customers, our, you know, private label brand, initiatives, and then our just, you know, freight and, and, and some of our initiatives there. We also will get mixed benefits, you know, from acquisitions going forward in terms of gross margin. On the SG&A side that you mentioned, we do expect to get operating leverage, and we have a lot of initiatives focused on productivity that we expect to pay off. We see both of those, contributing to our EBITDA margin expansion, you know, as, as we head toward our, our range of 13%-15%, adjusted EBITDA margin. We expect, you know, that improvement to come from both SG&A as a percent of sales and also gross margin. Then, John, you talk to inventory. Yeah, we would, we would expect the inventory turns to continue to improve next year. I mean, I don't know if, you know, Q2 especially was obviously very strong. This would be kind of more of a normal from standpoint. We hope to go into next year with less inventory, and then kind of be more specific on the build in the first quarter. That'll still be there, kind of, I would say, more flattish in the second half, before they kind of trend down at the end of the year. I think, I think kind of this, this quarter, because we, you know, over the really the last 12 months, have been working off some of the excess inventory that we, we brought in to kind of address the supply chain challenges during the COVID period. This was an especially strong quarter for that. I would say we're gonna go back to more historical quarters, but we do expect kind of next year and go forward to continue to improve our inventory turns. You know, we're, we're still not... Even if, if we, where we project at the end of this year, we're still not where we completely were right before COVID, and, and there's still opportunities going forward. Got it. Thanks very much. Thank you. The next question comes from Jeffrey Stevenson with Loop Capital. Please go ahead. Hey, thanks for taking my questions today, and congrats on the nice quarter. I just wanted the first comment on Repair and Upgrade, where you're expecting demand to be flattish this year. Doug, you mentioned that demand is, is mixed by region, and you called out the Southeast as being one of the stronger markets. Could you provide any more color on some of the areas that maybe are a little more challenged than others? Well, we've, we've been a little more challenged in the West in general than the East. You know, part of that's weather. You know, it's kind of hard to tell how much of that is weather and market, but that's, that's where we would have seen, you know, where we think that the market maybe is not as strong as, as, you know, we mentioned the Southeast and the East in general. In terms of what, what's going on in the remodel market, you know, obviously, the, the headwinds would be, you know, the low housing turnover. You know, existing home sales are down, and, you know, existing home sales always drive, you know, good remodel activity, including, you know, kind of professional remodel. We, we have seen, you know, some as the uncertainty in the economy has, has kind of set in, you know, some, I'd call it, not kind of middle range projects that are just a little slower than they, than they were, right? I mean, you know, keep in mind that we were coming off of a kind of a torrid pace before, and so maybe we got spoiled, but, you know, we're, we're certainly seeing those backlogs come down. That being said, we're still, you know, we're still there's good business out there. You know, we're it's still a big market for us. We feel, feel good about it. We just think it's a bit softer than it was. You know, it was in a high growth mode. It went to a, you know, reasonable growth mode. Now, you know, it's call it flat to slightly up. You know, we think we'll see how it goes. You know, the puts and takes of the economy, we, we, we like the fact that we see consumer confidence coming up, because certainly consumer confidence impacts remodel. You know, we think that the, the, the sticker shock and the, and the headwind of existing home sales has kind of already been played in. We, we would look for that to be solid, perhaps improving as we, as we look into 2024 and beyond. Right now, we, you know, we're calling it flat. Understood. No, that's helpful color. In commercial, it seems like you got really good visibility through the remainder of the year. Just on bidding activity, have you seen any impact from whether it be the regional banking crisis or higher interest rates? Just at a high level, kind of how you're thinking of that in market as we kind of head into 2024. Right. Yeah, there was, I guess, a, a, you know, a worry in general that that would have a dampening effect, the banking crisis on commercial. We haven't seen it. You know, the bidding has been, has been solid. It's been consistent. Our customers are busy. You know, it looks like that's not gonna affect that market, given what we see with our customers and the activity that we're seeing. We really have seen no, no slowdown there at all. We're encouraged by that. Great. Thank you. Thank you. The next question comes from Matthew Bouley with Barclays. Please go ahead. Good morning, everyone. Thank you for taking the questions. I'll ask on SG&A. I think you called out, you know, acquisitions and cost inflation and growth investments as impacting that. It looks like on a per-branch basis, SG&A might have been up roughly 15% in the first half of the year, I think the guide is implying it gets a lot closer to flat year-over-year. Just kind of any color on what you're doing to sort of manage down, SG&A here in the second half? Thank you. Well, I, I think two things. One is we... a lot of the increase came in at, at, during the second half of the last year, we are going to comp a higher, higher numbers. In addition, you know, we're, we're looking closely at managing all SG&A expense. We're looking at our staffing models to make sure that they're following along with, with demand from that standpoint, and keeping a close eye on continuing to kind of watch, watch on. Focus spend on the things that are gonna drive volume growth this year and next, also taking a keen eye to the, to the items that, that, you know, won't, won't, won't have that benefit from that standpoint. Just to build on that, you know, we, we respond as the market, as the market plays out. You know, in markets that have had tougher headwinds, either in terms of market or, or weather, you know, we pull back, you know, significantly on labor appropriately, right? To serve the, the lower demand. In other markets, you know, we're, you know, we would be in a growth mode because of a stronger market. One of the, one of the benefits of our-- the way we run our company, in a very decentralized way, is that we're flexible for each market to kind of match what's going on in that market. We're certainly working that hard, this year because demand is, you know, it's different across the country. You know, that's how we're, we're managing. As John mentioned, we're lapping kind of increases from, from last year. We, we feel good that, that we'll as the, as the growth comes back, as we, as we, move into next year, that we've got opportunities to get, good operating leverage across, across the company. Gotcha. Okay. Thanks, guys, for that. Very helpful. Secondly, on the gross margin, obviously, you had the inflation benefit, previously, and now that's rolling off. I think you mentioned earlier that, you know, you're kind of managing price vs cost, in spite of, of this commodity deflation. So my question is, are, are you actually benefiting at all, from that spread, you know, with commodities coming down, or do you sort of have to pass through that deflation immediately? What does deflation actually end up doing to the gross margin? Thank you. We're fortunate that the... in general, the industry, both on the good side and bad side, follows the cost of the supplier. In general, as raw material costs come through, kind of the market will go, will go with it, and we won't be able to, especially for commodity products, where we're bidding on PVC pipe jobs or, or, or on fall fertilizer application. You know, while the% of margin will, will hold, our, our, our kind of, the dollar gross profit dollars will decrease with that. That's kind of the headwind we've talked about with regards to the sales side. The market's relatively rational as far as from that standpoint, and kind of prices up of a margin basis rather than. As we go down, I guess in general, what we're, what we're thinking is we're gonna be able to maintain the margin, but the price will come down with it. Gotcha. All right. Thanks, John. Thanks, Doug. Thank you. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Doug Black for closing remarks. Okay. Thank you all for joining us today. We very much appreciate your interest in SiteOne. We're excited about our company and strategy, and we look forward to speaking to you again on our next earnings call. Big thank you to our terrific associates, also our suppliers and, and customers. Thank you, and have a great day. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.