Simpson Manufacturing (SSD) 24 Jul 232023 Q2 Earnings call transcript

Greetings and welcome to the Simpson Manufacturing Co., Second Quarter 2023 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.

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

historical Good afternoon, Company's statements to Manufacturing statements and on statements. and Quarter XXXX gentlemen, of not Second are Any call welcome are Earnings forward-looking this Simpson that ladies fact Conference made Call.

risks certain based forward-looking to and subject expressed risks reports, and expectations Actual or in from statements. those future you results described implied Such to on the and the on public number the a company's We company's statements encourage filings read are estimates website. which are materially the by of uncertainties. or are the SEC may corporate vary and available

statements required update here today, that Except extent by to of to securities whether as no or a laws, the information, otherwise. any we or result future revise events obligation forward-looking we undertake publicly new make applicable the of

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

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

in afternoon, through initiatives key me then fiscal our will today Good will results, an detail. allocation and today Kim. provide you Chief outlook financial everyone, joining Officer. capital and With for growth remarks My QX Thanks of priorities. our is thank talk our today's call. you XXXX Financial Brian Magstadt, and overview financials Brian greater our

$XXX.X an from business further improvements market to in X.X% environment. X.X%, due To in $XXX.X our which quarter volume retail national XXXX. American over double-digit a performance improving is year-over-year a our a an model increased million. operating difficult break-down We second and year-over-year showed performance, of of standpoint, X% of net environment, million, to volumes net QX North growth increase leading sales to sales delivered with solid

retail customers have down low-single market, flat merchandising in We the while sales in relatively regions US, experienced the In support. prior in dedicated our Northeast over were volumes teams and and we range Midwest training Southeast provide strength with notable digit that national the the of market. region in our year, residential with a challenging the working our holding

be an to continues of Multifamily strength. area

in of sales nicely the softer quarter In sales significant that first in the addition, precipitation west XXXX. recovered led the the following materially

in relative a of as will family below sales. levels, earlier our starts outlook, due housing single-family to to XXXX finish part high XXXX to all percentage of improve home While market share a sales the continues single new

mid believe to continue new in sustainable given the market of in to-long-term strength We the housing in a housing. the shortage

some first our confident a to short-term given of pressure, increasing stem will key products downward developing are diverse attributes for help our solutions model We markets software we portfolio and commitment the serve. complete of business of the and

to structures reputation, relationships safer, construction practices. and with and building improve Second, design contractors our and officials longstanding stronger engineers, engagement

and testing research our labs. a Third, in rigorous product engineering state-of-the extensive to nine innovation, and dedication art

to tools industry-leading Fifth, support, vast our people purchase commitment standards alleviate offering, training more on product best-in attract XX availability career opportunities that with XX labor digital to delivery and install typical hours. delivery the sixth, specify, construction organizations technical trade our partnering education field class multiple within provide and and shortages. select, and make And industry with across a deep Fourth, to to easy products. channels to and distribution expertise, to and it training product

well continues with year-over-year relatively on sales. $XXX.X a totaled volumes. lower our Europe, perform to flat to million, market Turning sales in X.X% ETANCO second challenging quarter down

modestly associated due housing starts. residential Our the down was market lower with business to housing

longer-term the new new of in shortage, regulations and potential applications given that drive increasing construction specifications. We wood European continue and ongoing market, the use believe housing of the to

for Our to our further drivers reflecting by will the improved of elaborate facilities. on consolidated our Brian production gross performance offset the second costs XX.X%, material quarter margin shortly. higher primarily in costs, lower partially key raw margin

turn our market, growth in single-family that our beginning serve and end-use builders, many helped customer them. to of longstanding now our levels wins, resulted five and be our with and our both markets, within multifamily initiatives I'll our an which choice. channel on Residential, update fuel partner to ambition high-service relationships with key customers new the residential

builders specify As a regional with reminder, top connected several that and have and we XX hundred program along solutions. products of our XX smaller homebuilders, our US the other

ETANCO commercial the application in implementation product-line New are products with solutions in early states available highlighting dealt York US US. specified adopted in Europe. facade those City, in on market, a the first rollout already the in of a for that to the similar by cities The facade be will the building conservation are energy future the regulations several our opportunity demonstrating Commercial, and to in US, ventilated

designed, of large-scale our OEM building after many the foot in manufactured withstanding damage timber XXX the support further OEM, critical wood market, suffered building no significant that used table was connections The tallest installed team the and in XXX mass world's test. for earthquakes. to initiative, shape the construction

the has shelf successfully of that safer, example off structures. our center mission to with is home our stronger and which channel, space, and our retail in build merchandising sales improved expanded rigorous within retail, efforts National effort we the product-line another consistent national resulted testing research volume. It's with have

success growth we continued software, trust technology, Building with outdoor decorative year. XXXX manufacturers to over in in trust been connector Simpson's line and set. a last versus finally building Our solution accents technology, sales and to successfully has component converting new hardware play year-over-year contributor strong double-digit our

this The last software couple has critical segment the years. improved to over substantially of market

also Our strong new become helped of has for partner several customers. the us choice business model

new extend of our segment our we mission our We the outperform to applications. market will to to comprehensive we've to on strategies, specific to made we seek to are stronger safer, by pleased all segments, with design-and-build the initiatives our date, help ambition and Throughout market be growth people housing operating product-line. each supported traction structures in believe US our as

allocation, now opportunistic opportunities, returning repurchases, remain acquisition the and ETANCO. capital centered via and debt priorities stockholders both Turning quarterly organically on dividends to to M&A, paying down value through finance to and our share incurred growth our we the of

identified operations class service growth, model, standards. our in our to it to we've business chain making replace not manufacturing order To expand to to enhance best-in uphold have only new capacity greenfield opportunity end, that in our efficiencies, facility and organic As customer to pertains key investments Tennessee. been but our our also supply strengthen a Gallatin, and we

are which on chain In addition, expand opportunities continuing smaller initiatives. we growth and majority line M&A better of to to product our manufacturing accelerate or key to achieve set supply opportunities The are solution and efficiencies. evaluate us traction potential help our

within on we includes an summary, we strengthening the our operate, being continuing above-market of US culture, markets values continuing income proxy continuing choice, operating based peers to proxy ambitions, the peers. housing of relative our starts, leader expand remain growth being company focused our In innovation in our in to which the partner expand and top-quartile top-quartile of the ROIC remain margin to our our to

on thrilled as highlight customer we very of also to like positive our achieved response internally to conclude, satisfaction their our a best approach customer-centric part have be survey. that to I conducted I'd are Before vendor

and bar. for branches are everyday all the of This across We put exceptional validates level the inspires provide thankful to to generally harder provide service into raise we deserve. the the our the of them continue we recognition work service superior efforts to they with further of us

I will turn in With results would discuss second the call that, like greater over to quarter Brian, to our financial detail. who

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

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

Now turning our to results. quarter second

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

decreased Within were primarily sales America products total X.X% from up X% quarter And construction to North increased million, to XX.X% in to XX.X% construction due million, total products sales $XXX.X of to and sales higher compared of net volumes. XX.X%. sales due Wood sales XX.X% our sales, to segment, Europe, volumes. represented concrete $XXX.X lower the net second primarily

volume primarily margin segment tooling XX.X% increased basis, to due up to increased In gross to X.X% North to compared resulted $XXX.X concrete a XX.X% North by a partially wood which and material sales. product America, product X.X%. factory a million, and XX%, offset to raw were net lower profit Consolidated of was gross last percentage On costs which costs, gross our as in higher $XX.X% XX.X% volume in up compared America was year. of margin

sales. percentage in prior our of from XX.X%, XX.X% costs Our Europe may points to margin. as the And gross raw recall, million you representing for Europe of a adjustment the period primarily in ETANCO, gross to $X.X net material costs material X.X as acquisition lower increased a inventory, margin fair-value also included due percentage of year raw

XX.X% quarter. gross to quarter product in for year prior XX.X%, to prior products compared quarter our year concrete in perspective, From the compared XX.X% second a wood on margin products the and was XX.X% was

as support operating as XX.X% costs turning increased to compensation. $XX.X operating Now higher an driven costs second expenses by increase quarter $XXX.X primarily were to expenses. Total approximately million, our and variable growth or million, of well personnel our

operating expenses compared total were to XX.X%. XX.X% a of As net percentage sales,

For initiatives. revenue of strategic and aligned expenses growth due our engineering costs second higher quarter, with in and primarily to personnel increased XX.X% generating opportunities, pursuit million $XX.X research development to our future

increased Selling segment were on expenses to Europe, expenses in personnel up North basis increased were selling primarily XX.X% commissions XX.X% America and North in in they and X.X%. $XX.X due and up million, to America a

$XX.X with to million. costs variable and administrative were million, increased expenses compensation. ETANCO to expenses due personnel Integration and associated General fees, primarily down XX.X% professional $X

primarily and income well increased result, operations of totaled income million, by $XXX.X to X.X% profit, million, a North variable $XXX as gross increased higher meaningful compensation a consolidated from professional as million. partly operations America, X% from due As to personnel fees. offset $XXX.X from our increase

million In and to Europe, higher compensation. integration costs, higher year-over-year variable which compared income lower acquisition profit to from offset gross million operations by was $X.X were due $XX and partially primarily

points margin of XXX On a from XX.X%. consolidated XX.X%, basis, our an operating income was basis increase

$X.X fully decreased This of $XXX.X interest which tax is inclusive income fully XX%, diluted from compares $X.XX or million Our net to of expense. XX% effective million net to accordingly per million share, rate or per $X.XX diluted $XX.X share. totaled

our and flow. cash to turning sheet Now balance

at sheet cash $XXX.X XXXX. million, million up totaling at balance remained cash XX, XXXX, equivalents our XXst, with and March balance Our $XXX healthy June from

was approximately net of $XXX.X only our million costs was $XXX.X Our million. capitalized balance debt and balance net-debt finance

borrowing our million on $XXX available We primary have remaining for line-of-credit.

compared million, XX, Our was $XX.X March $XXX.X was at down inventory which XX, position balance June XXXX at our million, XXXX. to

strong the of on-time delivery depend ensure Our focus the in on, service to levels effective management uncertain on our inventory customers economic remains paramount current standards that and environment.

During invested the from $XX.X our and cash expenditures to million We generated stockholders. for dividends million approximately second operations $XX approximately quarter, of capital flow to $XX.X we paid in million $XXX compared million.

of share repurchases opportunistic While we did we continue as part strategy. capital repurchase not stock, allocation evaluate shares our any our to common of

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

gross the XX.X%. our housing expect of a year. margin our at impacting decline Key starts the compared versus overall in initial to albeit range XX.X% in rate now operating US topline, assumptions Higher lower to include to our lesser XXXX. expectations of We margin earlier be

make we in share expected total in initiatives expenses, are operating growth our to $X and company integration ETANCO. to million to meaningful necessary costs Increased position $X the markets gains believe with million associated and

our realization of in some changes, to identified efforts in on delay are the synergies. make the defensive will integration the for order years subject realize and which to offensive continuing We synergies to ahead, progress previously ETANCO, offensive macroeconomic of

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

very million. be environment. In of expect now $XXX second we the we million were range capital challenging in pleased quarter expenditures performance summary, the with the $XXX our financial to ongoing Lastly, in amidst to macroeconomic

mindful on look of remain being our inventory while growth and initiatives we We focused and share. management as the executing integrating grow expense our to ETANCO acquisition,

continued for and strong company. our team for Simpson to Thanks continued again your all the the stakeholders to performance our support of at

the begin I'd call that, turn like Q&A to to With the over to operator Operator? session. the

you. Thank

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

Maybe it revision quarter. questions. outperform how in your look upward embedded the volumes as the at another what much versus Thank well for taking for versus margins on strong you. Good year, than previously a input to the If obviously maybe full start was with outperformance thanks stronger continue to afternoon America Congrats and as expectations. we of expected costs in guidance lower quarter the in guidance? North reflects

America for North thanks X%. Volume up the The overall revenue us question. Dan, impact for X.X. was

four tenths pretty America basically When a a of that five we excited all we're our pricing of four revenue as downward look So got, we've volume. and percent North at in out had positive development pressure. terms whole, segments, market of

very Our considering a Midwest a market. Southeast, are and difficult especially good growth. also difficult having flat Again, Northeast regions market, in

happy we're then And the you go happy recovering. us pretty of some how individual multifamily this US in pretty to continues year. other for there, is And look that. when at part So with Western with the spots

add were And will, where things had just for greater would than better or Mike beginning ago were at were slightly where based volumes you less the negative, compared the And talked of about. to we year. we I the on outlook months that that if three the housing

guidance, in America. volumes North better saw compared to definitely So prior

of helpful. its last into higher ETANCO job excellent over mid-XXs way percentage from Obviously, low an That's several done XXs revenue. sort the follow-up. back-down. of OpEx the as and driving back years, quick of working bit And is down back And the with little a a

Just see in full achieved. three two that synergies the are years where do metric you to once

what like? your Just look remind of maybe targets longer-term us kind

members to growth because our initiatives continue invest team realize people salespeople, the we're in so Yes, engineering need other we going to to those. and Dan

Brian? So as also to them that in go. great we'll far continue provide to invest helps continue the service as metrics

run-rate the of OpEx we as would the percent bit seeing are for from revenue balance year going this where percent we guide indicate balance higher increased of a a the where all slightly, have today, little in of relatively of And last perspective. And a we where, scenario year a a time that revenue year. than this from were a then for from we're again, or equal, being a the revenue things forward, flattish perspective

and jump Understood. out. one Last me, for I'll

seen little QX. cadence into North Just of far is X% over quarter-to-date? the that sense QX getting we've quarter. the for volume what a going has trended a thus America How in up from

that, on we've then the July. year And soft. -- the selling weeks of first week, think, of than just X off. timing reminder, normal here. the that in that got one a as few people day holiday July Again, as in with couple month. looking again, week less lot we've the think, that the July at not softer think And to, X due a little the activity, we're we also Tuesday. far industry whole and holiday to so July So of in taking due got July the I first a interesting with last A falling holiday somewhat was we're on July around We falling of things there a

any back follow-ups. jump Thank you. for I'll Understood.

Thanks, Dan.

Dan. Thanks,

you. Thank

Tim Our Wojs with next your proceed Baird. from question Please with is question.

guys, job. good nice Hey, afternoon

Hey, Tim.

you expecting that may of just kind the quarter revenue thought on starts as Maybe number to months posted even maybe guess off months you mean still you less I activity of kind six think revenue start line. to for overall growth. know down starts for the seemingly ago I XXXX? bad you with or second I the ago. three than than about the kind be of you revenue in guys, be

top in were are even less is, question if line than mean, possible 'XX? my it grow they before, organically you I guess the bad is I starts can So

got set, having versus -- has of 'XX to quarters ETANCO four only full three the then out the 'XX of Well, that to remember company-wide. level And the company-wise, taking just quarters -- a from but equation.

that up. Let's see, me pull let

Going year. quarter were where like-for-like would entering basis ETANCO to extra be take be flat the we relatively consideration, when the to a on into we compared up which

there growth starts I of more I given think the would Yeah, okay. drivers? than like And expected kind of a think just and or be, that guess, have even is year-to-date. would positive that I more there difference retail some I

to Tim, market. me let go Yeah, back the

were budgeting than we more thinking be the for when this would XX% So year, definitely were down. we starts residential

Now to it's our be heard from based down. we're XX-ish we've that customers, right going thinking may everything on XX% be around

bad. less again, So

been retail the home But to center On sitting in. the are market. expecting the negative projects national lot coming were side that lower a story, lumber of have we that also be a with costs, on

actually be we that expect market So market positive. to again

small, that's segment think above-market that if And other the area. have to look drive at then in growth us the that pretty shape we market as And on drive a then the in, you well. we're and we're segments we're the area still growth And we're segment, revenue Retail big on helping strategies still OEM, about excited National in commercial and growth albeit we side, in we driving volume perspective. still think good that that in

up, had we getting are So we we budgeted. that all in it than the the is And market strategies better place delivering. add think have

Yes. the on Understood. margin just then line. maybe And

in year, I'm Because I quarter, down how about above maybe thinking about QX margins updated in even are think or of at half kind of in they're and guess, then last you QX I little of I rest back kind margins the fourth flat QX talked the you year-over-year bit Brian, quarter. kind for now? of QX kind think guidance. the flattish the I if EBIT of being EBIT and a assume maybe and the being

Yes.

to operating year. pretty then QX, comparable. would again see, think QX comparable perspective, income let's from And So I an prior fairly

Okay.

you the on what and that the of some you're back would Gallatin And give on and that? for also or us kind replacing of of kind of just Okay, facility the maybe color why good. And Simpson kind facility. just one the of Could step benefits capital that outlay kind kind then be? then total of last just the Tennessee kind

Yes.

they are business, driver big for us. fasteners growth So Tim, been has a

We And in We we right now as a products and that continue area. the to got and for well. we some margins think expand Gallatin we've from our import of today the top offering. in an area our facility differentiated product products make line our

is more So the localize focus fastener want production. to we of here our

serve more help customers. want and vertically of that will our production. We integrate to also us support our We think fastener better

those you to if you like get then able you or it, to to if And mass be timber, you initiatives projects don't. either get be it quickly. go of tend growth some our back you need And respond to

having areas production those So better in our US, to believe the as will respond we us well. in customers help

So, We're a how it the property piece how depends there. existing selling be be along of development, facility. numbers may cost site or landlocked current our project yes, in quickly $XXX a can our total on. bit and versus net far developed and fine-tuning land on of million About

around We're able to point, to to wire of have being be to going more there. into raw able in-source finished And Mike's the good. on-site getting activities

and in forward, But and starting get So 'XX bulk 'XX, this that bit build years. to spend 'XX, of of to year. the presume mostly little couple a finding $XXX next the we're that million the on. maybe be would be outlay the would would land, ready We

Okay. at? is Got And you. where Columbus

continuing that. Columbus needed to We still acquired pretty early we're improvement land and that to from adjacent graded is be work there an perspective.

has going walls a lot and the The the a been spent is to be permitting not get we've approval yet. getting get one like. up through process. to able of money of and process, that lot Still in land foundations So ready on

process the although early that able in project through the some year expect in this pretty for facility. as would improvement be balance still of good to phases see pretty well So that to we

Good the Thanks time of on year. good. for luck the Okay, rest guys.

Tim. Thanks,

Thanks Tim.

Thank you.

Davidson. Our with is D.A. from question. next question Kurt Please your with Yinger proceed

Great. Thanks and good Brian. Mike afternoon, and

Hey, Kurt.

make to your you're so getting environment is pricing ones thinking a kind customers risk. would you're any quick and or concessions where for or getting any point Just to having on pricing the latest guess, competitive love hear to where first, from Are much? not two areas I environment more just there of me. pushback I

exceptional that So and modest that that model value Kurt, really, associated making business innovation, a with managing we pricing the believe more here, sure model, business as premium, basis. in providing driving deliver the monitoring modest, our monitoring are us all have speak. pricing But is model. that, our Doing for in we things that's service. and a products and that helps We our investing on we're emphasis and us training again, customers, actively business key the word that actively we're regular on

it. Got

trust what's that's a Okay. just wins? that. manufacturer you And love kind second, that's to Thanks catalyze I And component helped for changed I'd presumably, a about just talk bit tailwind the that? software a can more to then little mean, perspective maybe business. of the hear plate from

Yes.

So lot the into of time we're software a hits really the spending talking that's about to market. our to been last and And trust use develop needs. our specifically one we've fully here, easy customers' program years effort integrated three over and

support we a Currently, there's room made we're model coupling service efforts meaning to software And some we lot for business do now providing sure of still else and we're the development customers. perspective, our from that everything great with progress. a We've making in improvement. think

in up one growing our of had That we of competitors had in result ended years, as been picking a that. customers some I delivery customers believe several allocations customer And approach market. think an trust have and a we they impact. last problems. so had And part obviously did over we've couple putting that up significant the They on of because

make to we're them. a well that taking And customer. with we We going very so with measured a forward conscious and onboard very how goes sure new approach want now

how been we've area that's doing of to nice growth everything in has be that been driver last in think that according planned the us. And to a we well going also years we So for out working it. couple very

full piece just the things of of kind of was now supporting and software products guess, the quickly, If fully hindrance it capable for like Thanks the suite that wall that then that panels Mike. I in past. case or it. remembering Is at no? mean, a I the correctly, that. still I'm is like least Got And of

So some working couple are have there on gaps, areas of a we it. and we're do

with that trying sure understand we we're customers working the and develop we're we're what sure make So doing. we're they to basically we need them, analysis software doing and with of the capable set to need. have the customizing of what And make

We to we aren't date. we But do done. exactly want get to to I have, be where believe, very plans good

thanks Got details good it. Well the for in all guys. that. half, here and luck the Appreciate second

Thanks, Kurt.

Thanks, Kurt.

Thank you.

question with Romero your Our & proceed Julio Sidoti next Please is from Company. question. with

Hey, Mike and good afternoon, Brian.

afternoon. Hello, Good Julio.

Hey, Julio.

volumes talk afternoon. American good gradual Hey, throughout improvement in and of May you North a trend step or June? sharper quarter June? up And it more the a about the April, was throughout Could on

June got real month the second I us. for was So a nice better mean, quarter. each month in

customers any changed of Got either maybe from June, And in your improvement at competitors the has the magnitude behaviors or you. all?

to Julio, combination getting new the again And of develop numbers why they've same is new the pick a think the developed is see reason think you customers. that I improving, and market. that applications business our the And lot way customers mean versus the we to at continue up No. is I continue we their and from that hearing the time, of better. market we're

have of downward your kind in we If steel last it. inflected talk about think a since could second, maybe Got April. prices call for steel I

of cost sales that the your talk expectations of could the you about back year? impact maybe of the on just for half If

Julio, it's Brian.

on as guidance cost of material material of of we largest operating inventory the part pretty that going the sales is we component with and as we're should on And to basis for feel have So is year year purchasing how we're we go-forward consume our consistent, of or component we don't incorporates be of where it's on much of that. a the but sales, -- and is the based where disclose see back where we steel assumptions are margin the the percent markets cost much a for volume half large steel consistent how it it a that. of of positioned

on That's CapEx one just just helpful. guide. then last And Got the would be it. me for

about facility kind Just that Tennessee to talk the other of any capital is guide. projects? or in step-up the And related the

to the facility. due Mostly Tennessee

we So still spend the some year this Ohio And that acquisition a and we factory the that. for associated of spend land for costs have fastener expansion. then for fair for amount anticipate some

for the Thanks very much helpful. taking Really questions.

welcome. You're

Thank you.

you. Thank

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