Simpson Manufacturing (SSD) 6 Feb 232022 Q4 Earnings call transcript

Greetings, and welcome to the Simpson Manufacturing Co. Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

pleasure Relations. your my with Kim now Investor ADDO is to host, introduce Orlando It Kim. you, Thank

You may begin.

XXXX Good to fourth year Simpson ladies Manufacturing conference afternoon, and Company's quarter gentlemen, and and welcome earnings call. full

in to the fact implied and results corporate this risks on as or or and number on website. those the and are information, are or of of Such made any statements may update we are by that statements. which from company's We are the certain subject expressed the new call statements. future estimates to Any forward-looking events on are laws, of extent required future publicly vary may whether and revise company's available forward-looking today, not materially uncertainties. public statements make filings here that Except applicable you risks by statements a forward-looking Actual historical the obligation expectations read to based described SEC's we otherwise. a of no or result securities reports, statements to encourage undertake the

Please Eastern note release Relations webcast Earnings earnings of that company's the available issued Investor page release ir.simpsonmfg.com. page a call website and is will the Relations the of Time. on Investor press available replay the XX:XX on approximately at the today at being company's be was Today's company's PM press is website. also

to the over turn like Mike Simpson's I Now, Officer. to Chief conference President Olosky, would and Executive

Brian today's With afternoon, Thanks, me and joining today everyone, is Officer. our Financial Kim. Magstadt, call. thank for you Chief Good

growth environment. for of and safer, dedication Simpson strong performance of towards our thank our to our structures strategy. year team operational a their for marked to despite stronger commitment on operating a challenging like and executing I'd their mission building XXXX financial

next for time including CEO to tenure the like foundation the Colonias Simpson throughout company, with Karen of to laying as growth. her chapter and also during contributions this her acknowledge for immense her XX-year I'd

am excited Executive of role lead our which unveiled and the to of XXXX, these team we humbled remain I alongside together in the at assumed the worked closely on goals. and the Chief continue of ambitions, start management Simpson's as to committed put we team focus I ambitions. and company we Officer the I achieving the spring year, to Simpson these as

income and the As capital U.S. housing a Almost proxy be to culture; our starts; continue the relative operating margin making strengthen are be quartile are of our operate; invested growth fourth, within third, ambitions first, choice; in return the in, on to: of and our two second, advancements. reminder, top markets our fifth, above-market partner an innovation solid values-based we expanding continue group. years we peer leader

customer our on service, us We business by partner included to in fulfillment of XX% in with choice the dedicated maintaining in focus customers product remain which segments. of our This rate earn helped several market new America a North being XXXX.

that new starts U.S. we commitment North to with volumes rollout line solutions report pleased innovative number products, in the four, many and am grew included above of Our providing the ambition XXXX. housing to I in our American

solutions and engineers, fourth, and foundational with increasing has building business reputation, Simpson XX job and construction exceptional progress our capabilities product strong XX and labs; built committees, practices at of model, our one-stop sites delivery our architects shop in solutions; to which rapid a resulting our customers. for testing very partners service [specify] hours; third, our multiple for across line key fueled possible broad made longstanding contractors; products to improve standards in ambitions commitment five by innovation, our distribution fifth, on builders education and on engagement Our and product (ph) channels relationships to engineering has by delivery and our been state-of-the-art typically been extensive key and is with first, and a second, our diverse code to elements: portfolio engineers our our or

to walk I'll results, greater key allocation financials priorities. now financial business and an outlook fiscal our of initiatives overview through Brian will you growth capital XXXX and our turn detail. QX in then

For the per and $X.X of Simpson full of of generated year XXXX, net $X.XX share. earnings billion sales diluted

customer million throughout sales increases rising XXXX new of results reflect the price $XXX.X ETANCO implemented material costs Group. to contribution impact Our offset product from wins, and

in We ongoing delivered to execution uncertainty, results, these and reflect have pleased despite Europe. unrest which strong are pressures political macroeconomic inflationary

totaled net quarter XX.X% the of over In sales XXXX, prior fourth year. $XXX.X increase an million, of

lapped $XXX.X America, price decreased North product as the year-over-year. quarter, And reminder, million In the our increases fully fourth impact we XXXX. our throughout net X.X% implemented of of a during sales

volume to to in addition, North was down macroeconomic due prior In the quarter challenges. America compared ongoing year

channels center moderating housing in greater our down distributor slight distribution detail. Volume distributor to due a from remodel home business. our primarily This and home in by much offset and was which both year-over-year of center co-op is Looking customers, starts, repair, and see contractor includes at partially we customers was our and for improvement our volumes our dealer channel. DIY where

from selling of sales Turning impact higher of by operations lower dollar. to U.S. offset our strengthening volumes partially resulting Europe. the climate. which prices, balance include European ETANCO experienced The $XXX.X a and Fourth uncertain a macroeconomic quarter $XX.X million, from the contribution totaled million negative

team's line to which financial with with the expectations. our Returning we was are performance, ETANCO, in XXXX pleased

believe the coming opportunities. offensive efforts, persistent to positioned identified climate macroeconomic our in on we however, synergies, which will year. We shared future continue some previously look delay and Europe We integration our forward in track, meaningful gains benefit well from our to capture remain to remain continuing learnings with our we of mostly the from synergy

regulatory solutions. European a that along how headwinds, and given to offer solution construction requirements transition Despite will new now business ongoing to macroeconomic wood our construction with are set to our we confident continue we still broader encourage progress customers, the

partly compared Our as quarter to our gross consolidated was prior-year prior-year period. average gross fourth X% the in our due to costs as quarter increased margin labor of to for addition the before will the upcoming Compared further our expected, as margin of material year. Brian considering and margin elaborate raw the overhead on well factory, expectations XX. costs. for and performance and as margin key XX.X% higher drivers also the our ETANCO, declined,

like to solid challenging in now environment. our I'd use quarter which on end made economic initiatives. fourth We our a key throughout a turn to growth the discussion encompass traction markets,

market. Beginning with our commercial

We means of guard attachment for are structural healthcare provide a a a products glass for will opportunity awarded bolted and steel temporary railings. our in which center facades

past, anticipate our steel our versus to the initiative the initiatives continue in mentioned longer to will structural build other take had we we As we manifest as market.

three steel large the educational As community. on over part quarter, our solutions webinars X,XXX front, specifying we this our of which the of professionals to industry among awareness scale reached structural held during help progress increase

market, OEM our is one the In of mass timber. areas focus

mixed are space. for timber building timber to and Simpson's and been We The awarded mass will a Strong-Tie retail a connectors. feature utilizing pleased use have fasteners for cross-laminated building project Connecticut apartments and four-storey in walls floors,

in SKUs we in initiative. commitment as part new national existing strides worked great stores, commerce retail products as innovative replace continuous improvement, to with as our well space, our-e the to slow-moving and make of Within

address our technology, solution additions portfolio solutions investments more our choice to labor are to couple the both focused customers construction timelines to our technology reduce and we've efficient. be be skilled ambition that made and of strong a customers by building of investments our existing strategic to partner on In providing These help of reinforce creating help solutions sets shortages.

$XX.X Now, dividends common $XX.X turning In we and allocation. the and a in of in our business, million XX.X% stockholders expenditures free payment of to the repurchase including cash through $XX.X in invested of capital returned million our XXXX, flow of million stock. of to capital growth

XXXX, stockholders ETANCO. opportunities, opportunistic We down will capital the incurred of priorities In repurchases, the growth to and debt via and paying dividends organic to on remain returning share finance focused our quarterly our the we acquisition value allocation remain unchanged.

model, organic integration our on our we focused growth regard to initiatives key are growth, strengthen investments the In ETANCO. of to and business including

drive such our and expansion facility, customer to service. previously evaluate Ohio continuing to best-in-class also announced well and our are as opportunities, investments productivity We distribution as equipment as manufacturing maintain

priority, while continued opportunities it and would remain key As accelerate to growth the our remains pertains open M&A that initiatives we potential integration to our ETANCO of model. strengthen M&A, business our

strong and year In quarter summary, full our with fourth and operational performance. pleased are we financial

housing. to in has ahead Looking combination for ongoing increasing softer macroeconomic and interest rates, XXXX, North of shortages America, inflation, forecasts market resulted in the uncertainty labor

higher a products product this and benefited environment, same enacted we impact price while fiscal of XXXX, overhead year. addition, continue from decrease operate majority to America time, expenses. of conditions, the on in on we we factory, current including increases price North pricing based the the In in a earlier At labor our in cost

these the our we operating be of for As expense integration are [though] factors, ongoing pressure committed as of that Brian and margins as margins the the our year expecting ETANCO, detail, to areas will Nevertheless, ahead, we discuss are run in will pre-COVID ongoing well in we ahead to rate. will can (ph) more continue costs business management control. executing

Simpson new markets, environment directly well given we expansion to positioned operating to focus not will tied into believe success which that for the of the our continue remains to who prove ongoing While passionate culture challenging, on is of along mission about sheet, deeply position strong providing our and and solutions U.S. our housing stronger safer, people help build structures. design balance starts, of with market colleagues solid Simpson remain majority

ambitions, our in peer profitability relative achieve group. to to continue grow starts our top ability U.S. company confident of including proxy to housing quartile to our with above-market goal in the are We our

Now, outlook detail. our over I'd call financial fourth XXXX in like Brian, results to will quarter turn greater who the discuss to and

financial Thank and discuss fourth with I'm afternoon, our today. quarter pleased to you, everyone. you good Mike, results

quarter and discussed comparisons the Before to all prepared to refer fourth XXXX. of year-over-year be comparisons XXXX quarter versus mention unless stated, will measures financial otherwise like remarks the my in of that fourth I begin, today I'd all

results. Now, turning quarter fourth to our

our highlighted, million. net increased XX.X% Mike consolidated As to sales $XXX.X

primarily increases. volumes, lower partly to prior North the America due segment, sales price million, year offset decreased by Within sales to X.X% net $XXX.X product

ETANCO, increased million million, net from translation. primarily XXX.X% million along by foreign partly sales, Europe, in In volumes net lower the offset currency product effect approximately sales $XX.X with $XXX.X in of increases, contributed $X.X negative which price and to

of XX% XX%, products products total XX% fourth our Wood quarter Concrete sales, and sales, from slightly Construction Construction were up XX% down from of represented slightly total

Consolidated gross year. and to to margin due increased last to profit our was $XXX.X XX.X% gross XX.X% compared X.X% ETANCO million

compared price segment margin partly higher labor of a raw XX% from percentage decreased and factory offset basis, net sales, North XX.X%, primarily America year product by costs, and gross increases. in overhead prior as a On to our to material

purchase totaled $X.X for accounting. is net value which Europe ETANCO, million in dollars the inventory million profit of gross adjustments a $XX.X costs of as from fair included $XX.X Our result and million

perspective, product prior-year for fourth compared a on partly to XX.X% in the the to in XX.X% Products of the addition compared products Concrete gross quarter. margin year From was was XX.X% to our prior ETANCO quarter quarter, Wood XX.X% due and

Now quarter included expenses of $XX turning attributable and to our for expenses. approximately million or another were fourth operating Total $XXX.X Operating expenses and integration $XX.X million, $X.X ETANCO million an XX.X%. increase million to operating costs. costs

As a compared net points basis expenses sales, a increase were operating percentage slight total XX.X%, XX to of XX.X%. approximately of

XX% quarter due research from due expenses and million, well fees. expenses expenses. and primarily as ETANCO XX% trade show, primarily increased to million engineering $X.X fourth to advertising and personnel $XX.X to costs development increased and to Our increased travel-related professional personnel as million, and Selling $XX.X

up selling basis, they expenses were in X% segment a up in were and, North America XXX.X%. On Europe,

primarily expenses, expenses compensation and to intangible $X.X General professional lower XX.X% partly including acquired administrative million which amortization, $XX.X million offset million, from includes fees. operating to assets, by ETANCO, the due of stock-based North America $XX and increased in

XX.X% totaled to As a due our from decrease income operating million a expenses. consolidated result, higher from of $XX.X operations $XX.X million,

America, lower million, and sales North compensation. including lower operations gross profit, by commissions offset to cash to from $XX.X partly decreased In profit sharing, stock-based income operating due expenses, XX.X% primarily

in million income which $X.X and is In million, of inventory a million the acquired Europe, million adjustments, ETANCO's from on for aforementioned total of expense of operating which assets income million, operations for intangible loss of a compared $X.X includes was net $X.X integration to of $X.X costs million $X.X $X.X amortization $X.X million.

into our expect ETANCO continue additional incur we in integrate to XXXX. we to costs operations, European As

our On basis discuss outlook approximately was shortly. consolidated margin from decrease I our XXXX points operating of will a for a income XX.X%, XX.X%. margin fiscal XXX operating basis,

XX%. tax rate XX.X% effective Our increased from to

$XX.X of totaled fully share, fully or income net $X.X inclusive diluted Accordingly, This compares $X.XX share. of per million is million interest net diluted to or expense. $X.XX which $XX.Xmillion per

flow. Now, cash and turning to sheet our balance

totaled equivalents healthy. remained sheet At XX, cash balance and September Our XX. million, down as from cash $XXX.X million balance XXXX, our December $X.X of

$XX.X balance $XXX.X customer XX inventory strong million at changing retain at was we XX, compared to Our rapidly We'll XXXX. levels management our given up to inventory the delivery our September especially and million, focus effective continue to December ensure on-time on economic which standards, position of service environment. was

cash quarter, from flow operations of $XXX During the we generated fourth million. approximately

our repaying to repurchases. acquisition earlier, of highlighted incurred well the will of support stockholders utilized our to dividends simultaneously the Mike primary value As as to the and cash growth returning while finance as our of business we be ETANCO, debt share uses through

million of line borrowing facility. Given priorities, our and for million million our during quarter, At our with worth solid revolving our allocation balance of on $XXX in the the we line $XXX year-end, debt balance credit. repaid $XXX available primary remained sheet position, capital on was and our credit million drawn approximately fourth $XXX

fourth $XX.X million stock shares repurchase expenditures, of $XX.XX of which XXXX. per of for share million $X.X dividends our average for our a in stock we our approximately the share an and of expired $XX.X During $XXX authorization, approximately to repurchased paid invested under end capital our million $XX.X In at million. common price in stockholders quarter, million we XX,XXX the XXXX, total repurchased of common

Further, into of XXXX. of which million effect repurchase our common authorized went $XXX our up December the start the end stock, Directors of through the of Board year at of to the

to which stockholders $X.XX Additionally, be on April a on April on declared XXXX Board of per XX, record Directors XX, our share, XXXX. cash of quarterly dividend payable January XX, of will

business XX, follows. X, I'd our December today, on to and February XXXX conditions guidance trends as XXXX discuss initiating Next, outlook. Based for the financial are of year like we as ending full

top-line operating to to include: average increased make expenses, growth margin needed in in ETANCO which be slightly the peak assumptions products coming a cost our and of our some our range starts operating housing QX of the from expect costs customers; the not the million our decrease of down $X share to moderately given the goods our softness reflect We in anticipated of price on majority slowing U.S. XX%. in the Key to U.S.; to income amortization, and connector sold, costs. aforementioned $X our we to of XXXX; in most XX% weighted company gains with in ETANCO margin rest housing; than U.S. lower as meaningful believe, in position intangible continue operating markets to are company, profile expected the including the initiatives associated well integration as steel million

outstanding and Next, rate $XXX the from loan including in the the we expense and outstanding cross-currency $X.X approximately million substantially rates. facility changes interest expect swaps, benefit from be mitigating million revolving $XXX.X on all million, volatility term credit interest interest to

to income no law XX% be including enacted. range effective of XXXX assuming both and Our tax rate tax changes expected state in federal is rates, to and are the XX%, tax

million, previously to $XX including facility Ohio to million for utilized we $XX the to be Lastly, discussed range capital $XX expansion. to Columbus, approximately million in the expenditures $XX be of expect million

were our continue pleased ETANCO make to sustainable to with the year finish Simpson progress growth increase position value. initiatives and integrate we key In growth stockholder our long-term to we for to summary, on and strong as

will remain XXXX its plan. our dedicated long-term While strategy have and we to strategic challenges,

operator turn the session. begin Q&A the that, like to I call the over to With to would

you. Thank

[Operator Moore first And session. Instructions] with with question-and-answer a our conducting be question. now proceed is question your from will Daniel We Thank Please you. CJS.

Good color afternoon, Thanks taking all and Good you. Brian. Mike. Thank for questions. afternoon, the

Dan. Hi,

Hello, Dan.

in sense implemented earlier far and cadence of the the or the decline about the QX into magnitude price Maybe America. with -- of you. America thus trends Thank of you I'll North through quarter, what just volume some decrease the in saw magnitude North you sequential maybe terms in start talk January?

And So, number. get so, on my as me how volume in was I -- at the X%. that look total note starting America as right ended, quarter North -- a just with it second we my down about trailing give

on got a compared bit 'XX of little And down a X% there, a January, of XXXX, look pricing North bit don't have of Dan, that -- decline. in to -- to little percentage digit So, price XX%. as volume we range in at that America we breakdown million. was But mid-single approximately as about January versus volume it's of yet. basis, that decrease that we price, look offset specific the The X% our price, kind that I at annual we versus on an price $XX about implemented

outlook that (ph) QX [gains] in for as fiscal for margin maybe Very talk year there and for And XX% in guide margin, both well XX%? the embedded 'XX -- 'XX embedded income your helpful. to sort any about I as and that. cadence the gross of the operating of appreciate

Yes, of year that as half back at on definitely getting operating the look better range. we margin

that to through higher So, indicated, we price peaked we of work think, QX last steel continuing that QX in year.

bit So, little -- QX the I QX, the typically the it's seasonality QX. in of better. as impact would year, QX, a a get gross definitely balance through expect and typical we of go of there. we'll see we like But we see margins, that

into And the an that quarter-over-quarter some operating margin course, $X expect as we million of prepared we from tighten gave -- range that remarks that looking that up year. XX% to Also we on us sequentially to million through XX% wrapping the range. that of we're of the $X to up would year, then, through ETANCO the as again, margin But will operating guide, XX% gets perspective, anticipate improve that we, in spend to integration as go year. XX%

-- about down X% last Makes ETANCO, Europe, -- you compared was at if to look organic the Switching revenue, decline to more a significant only it bigger sense. quarter. ex it,

well whole are in you're what France, specific geographies construction commercial that markets et for ETANCO, cetera? significant in Just Europe as seeing as talk Italy, as about a

Yes.

So, mixed to Mike. Dan, in see what a U.S., it's very market. much the we Similar it's

So, around efficiency related in macro a forward. nice to now, gains seeing thermal we some still requirements are regulatory the a we are the headwind tailwind believe of that to But for more us be Nordic bit right trends little going area. going

We so our And I seeing Germany Eastern is nice we've The start France, negative. less for that, are are are In up. where to really so flattish definitely things optimistic this in are and business, doing year, going got business, pick okay. mean, to headwind a by Western Europe European we sized Europe. forecast market more that

Very helpful.

I follow me. for back it Okay. think that's jump you. Thank I'll And with any ups.

Thanks, Dan.

Thank our proceed you. Please from question. question is next Yinger D.A. with Davidson. And your Kurt with

Thanks, and Great. good everyone. afternoon,

Hi, Kurt.

the You guys kind -- or you a connector on lower what talk steel? you fasteners pricing confidence you Could you the the another of the side. on little about see to take just need won't price bit? given hey, decrease And bit moderation gives talked about then, in connector side trajectory on a step

Yes.

-- bounce we to need need than So, Kurt, we the closely watch as And to may we up believe back that that then came then our premium that to more one you though. at and because deserve again. half to premium steel closely believe point tripled, -- price we know, a and watch started we continue back products to

but we the innovation. much we are we when partners. We're actively going also for look service. demand emphasizing our market, are generating very emphasizing We're So, emphasizing forward, watching

closely watching we so, forward. as that whole equation And go we're

And then -- That right. sense. ahead. makes All go Okay.

faster the no on on change real -- price And that. question, no

ballpark operating in of kind there terms to margin way outlook, in you is Is what assumption the softening Brian, for there? kind the of some housing then, expectation starts. to any And underlying the of U.S. alluded great. Okay,

XXXX. guidance, bit are this from top-line aspire see expect thinking would what prepared grow of will is had of against prognosticators XXXX thinking a Well, to to in be we the revenue choppy for to looking perspective. to market is mentioned we perform year's not going the just housing a noise one housing-related housing a ambitions I'm above to But continue to that pretty we give business. impact on going like remarks is how in we still -- our like but

that backlog Fair All then, something And kind XXXX enough. Okay. does track into if ETANCO, terms type And so, significant of of visibility you in is of for you is and/or right. business? what the that there? give

the similar customers. ETANCO's to very try business Kurt, to out model orders to and day so the is we same day get our that next majority or Simpson of

is that backlog ongoing or people contractors we just with working not the a we're installing the orders order for sense facades grouping the So, that water really getting have we the and open an to systems general business really but don't how developing, of all and longer-term and business. are book get are the

Got it.

the have though the even longer, is you of visibility at kind commercial construction process, end? So, side necessarily the don't a kind guess, of I front

No. KPI with track. put not I getting Not could way in bit, guys a No. in talking we're around we're sense mean, a to where you quite a KPI a a those because it. hardcore but general

Okay. Makes leveraging talk I can it about know deal, about thinking manufacturers? sense. but maybe dealers And with then, big my business a you last one, and component you're wasn't how a and that that just on EstiFrame. bit

Yes.

it really to are here, a the a And the basically small a prints the is big cuts site it a of combination on component combined. correct or can length thing lumber. directions go that And Kurt, it that job to they and the manufacturer. a So, can to go then lumber saw it's and printer system relatively a

or here, thought the They -- then, plug ensures makes And connector here. bit correctly, more the fastener put is also put the put labor, are faster efficiency behind it here, i.e., it that process a it used products just the or our improves that it or skilled little anchor they and play. what seen need with less the can EstiFrame site. be construction that less we've So, the because of

Well, Okay. in good QX, luck guys. color here appreciate the and right. All

Thanks.

Sidoti Company. from [Operator Romero & your question. Please Julio with is Instructions] proceed Our next with question

afternoon, Mike Thanks. good Brian. Hey, and

Hey, Julio.

I what customers hearing given mortgage are think, in from new any January, if you're -- about change in you recently the in cautious on step housing talk your North sentiment just from down there's some you rates, at the could Just in all? seeing America? optimism demand been side

will high picture. level, very we picture optimistic our much again at Builders' customers in January Julio, week the in fourth I was big last a but quarter, were and the from got the than Show still say it's it we was more mixed

Customers that are they're Florida customers some to around some are the think seeing feeling strong the So, multifamily, around they're that area, actually, seeing positive headwind. in got it. we're significant -- West, areas We've a I pretty flattish about growth.

Some of our doing they're strong also it. feeling rent, to about customers are build

picture mixed to and the the really is better which again, negative -- So upper and end heard is of mixed of what less seen fourth type than growth, we've picture in flattish quarter.

Okay. helpful. of how terms materials, other trending And et labor, That's steel costs talk than the very on in freight, are side, just cetera? cost other through

maybe Labor those from be still freight little are but categories. challenge. still The getting challenging particular availability to of a bit, it's things pretty like continues a Moderating better.

have I little softened think cost potentially bit. there a

pressures productivity hard improvement [indiscernible] as working to much try have we ongoing a we and, those we're bit the inflationary where is plans earlier, story Julio, to little as offset Yes, can.

helpful. taking very for Very the questions. much Thanks

welcome. You're

CJS. Thank our question Daniel from Please question. proceed with your is you. And with Moore next

little again. after a sort Thanks expectations really this a bit unwind working cash QX of capital What to that flow year, Thank as inventory? start free you you guide. flow the for your are of quarter in cash and strong for especially CapEx

to perspective. due working CapEx significantly perspective, Yes, we're other Don't wouldn't would expect capital trends at items significant looking expect in or any looking -- free less we're the ought that cash say, bit additional a moving DSO DPO -- from, turn inventory we to at. needle the as flow be

of general and Nothing to out. other increased I So, business. flow of call cash other would of rest CapEx, the operations the with the than think, cyclicality free unusual elements move the

maybe be they or no And you terms sort of Similar Are in said one. seeing the opportunities of environment? arise. opportunity Okay. last the wouldn't less you set more change this quarter, you or to last in M&A to opposed should

change real very business. this we're in point. No specialized Again, a at

considering major really that and no be unique are So, change. been these we'd pretty there's assets

All right. again. Appreciate it

are As conclude this at time, teleconference. today's there this no questions further will

your time. You Thank participation. may lines this your disconnect for at you