Simpson Manufacturing Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 24, 2023

There are 8 speakers on the call.

Operator

Greetings, and welcome to the Simpson Manufacturing Co. 2nd 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. As a reminder, this conference is being recorded.

Operator

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

Speaker 1

Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's 2nd quarter 2023 earnings conference call. Any statements made on this call that are not statements of historical fact are forward looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward looking statements. We encourage you to read the risks described in the company's public filings and reports, which are available on the SEC's or the company's corporate website.

Speaker 1

Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward looking statements that we make here today, whether as a result of new information, future events or otherwise. Please note that the company's earnings press release was issued today at approximately 4:15 p. M. Eastern Time. The earnings press release is available on the Investor Relations page of the company's website at ir.

Speaker 1

Simpsonmfg.com. Today's call is being webcast and a replay will also be available on the Investor Relations page of the company's website. Now, I would like to turn the conference over to Mike Olofsky, Simpson's President and Chief Executive Officer.

Speaker 2

Thanks, Kim. Good afternoon, everyone, and thank you for joining today's call. With me today is Brian Magstad, our Chief Financial Officer. My remarks today will provide an overview of our financial results, key growth initiatives and capital allocation priorities. Brian will then talk you through our Q2 financials and our fiscal 2023 outlook in greater detail.

Speaker 2

We delivered solid performance in a difficult operating environment with 2nd quarter net sales of $597,600,000 which is an increase of 0.7% over Q2 2022. North American volumes increased 2.3% leading to a growth in net sales of 2% year over year to 465,500,000 To further break down our performance, national retail showed double digit improvements year over year from a volume standpoint due to our business model and an improving market environment. We have dedicated teams working with our national retail customers that provide training and merchandising support. In our residential market, With sales in the Southeast region holding relatively flat in a challenging market, multifamily continues to be an area of strength. In addition, sales in the West recovered nicely following the significant precipitation that led to materially softer sales in the Q1 of 2023.

Speaker 2

While 2023 housing starts will finish below 2022 levels, the market continues to improve relative to our earlier outlook, In part due to a high share of new single family home sales as a percentage of all single family sales. We continue to believe in the sustainable strength in the housing market the mid to long term given the shortage of new housing. We are confident key attributes of our business model will help stem some of the short term downward pressure Given first, our increasing diverse portfolio of products and software and a commitment to developing complete solutions for the markets we serve. 2nd, our long standing reputation, relationships and engagement with engineers, building officials and contractors To design safer, stronger structures and improve construction practices. 3rd, a dedication to innovation, Extensive product engineering and rigorous research and testing in our 9 state of the art labs 4th, Best in class field support, technical expertise, digital tools and training to make it easy to select, specify, install and purchase our products.

Speaker 2

5th, industry leading product availability and delivery standards on our vast product offering across multiple distribution channels With typical delivery within 24 to 48 hours and 6th, a deep commitment to trade education and partnering with organizations that provide training and career opportunities to attract more people to the construction industry and alleviate labor shortages. Turning to Europe, our 2nd quarter sales totaled $127,800,000 down 4.1% year over year on lower volumes. Atonco continues to perform well in a challenging market with relatively flat sales. Our business associated with residential housing market was down modestly due to lower housing starts. We continue to believe in the longer term potential of the European market given the ongoing housing shortage, Increasing use of wood construction and new regulations that drive new applications and specifications.

Speaker 2

Our consolidated gross margin for the 2nd quarter improved to 48.1%, primarily reflecting lower raw material costs, partially offset by higher costs in our production facilities. Brian will further elaborate on the key drivers of our margin performance shortly. I'll now turn to an update on our key growth initiatives within our 5 end use markets, which help fuel our ambition to be the partner of choice. Residential. Beginning with our residential market, our longstanding relationships and high service levels resulted in many new customer wins with Single family and multifamily builders and our channel customers that serve them.

Speaker 2

As a reminder, we have 26 of Top 30 U. S. Homebuilders along with several 100 smaller regional builders on our program that specify our connector products and other solutions. Commercial. In the commercial market, our solutions are specified for the 1st ventilated facade application on a building in New York City, Demonstrating the early implementation of energy conservation regulations by several cities and states in the U.

Speaker 2

S. That are similar to those adopted in Europe. The facade will be built with products already available in the U. S. Highlighting the future opportunity to rollout the Ataco product line in the U.

Speaker 2

S. OEM. In the OEM market, to further support the mass timber initiative, our team designed, manufactured and installed many critical connections The construction of a 112 foot wood building that was used for the world's tallest shake table test. The building suffered no significant Damage after withstanding 100 large scale earthquakes. It's another example of our rigorous research and testing effort that is consistent with our mission to build safer stronger structures.

Speaker 2

National Retail. Within the national retail space, we Successfully expanded our product line and off shelf merchandising efforts with the home center channel, which has resulted in improved sales volume. Our outdoor accents decorative hardware line has been a strong contributor to our success with double digit sales growth year over year in 2023 versus last year. Building Technology. And finally, in Building Technology, we continue successfully converting new component manufacturers over to Simpson's truss software, Trust play and connector solution set.

Speaker 2

The software critical to this market segment has improved substantially over the last couple of years. Our strong business model has also helped us become the partner of choice for several new customers. We are pleased with the traction we've made our growth initiatives to date as we seek to extend our mission to help people design and build safer, stronger structures into new applications. Throughout all of our operating segments, we believe our ambition to outperform the U. S.

Speaker 2

Housing market will be supported by our comprehensive strategies specific to each market segment and product line. Turning now to capital allocation. Our priorities remain centered on growth opportunities both organically And through M and A, returning value to our stockholders via quarterly dividends and opportunistic share repurchases and paying down the debt we incurred to finance The acquisition of Atanco. As it pertains to organic growth, we've been making key investments to not only strengthen our business model, But to also expand our operations in order to enhance our manufacturing capacity and supply chain efficiencies and uphold our best in class customer service standards. To that end, we have identified a new greenfield opportunity to replace our facility in Gallatin, Tennessee.

Speaker 2

In addition, we are continuing to evaluate potential M and A opportunities to accelerate traction on our key growth initiatives. The majority of which are small opportunities to expand our product line or solution set and help us achieve better manufacturing and supply chain efficiencies. In summary, we remain focused on our company ambitions, which include strengthening our values based culture, being the partner of choice, Being an innovation leader in the markets we operate, continuing above market growth relative to U. S. Housing starts, Continuing to expand our operating income margin to remain in the top quartile of our proxy peers and continuing to expand our ROIC within the top quartile of our proxy peers.

Speaker 2

Before I conclude, I'd also like to highlight that as part of our customer centric approach to be their best vendor, We are thrilled to have achieved a very positive response on our internally conducted customer satisfaction survey. We are generally thankful for the recognition of the everyday efforts

Speaker 3

Thank you, Mike, and good afternoon, everyone. I'm pleased to discuss our Q2 financial results with you today. Before I begin, I'd like to mention that unless otherwise stated, all financial measures discussed in my prepared remarks Refer to the Q2 of 2023 and all comparisons will be year over year comparisons versus the Q2 of 2022. Now turning to our 2nd quarter results. As Mike highlighted, our consolidated net sales increased 0.7 Percent TO $597,600,000 Within the North America segment, net sales increased 2% to $465,500,000 primarily due to higher sales volumes.

Speaker 3

And in Europe, net sales decreased 4.1 percent to $127,800,000 primarily due to lower sales volumes. Wood construction products represented 86.2% of our total 2nd quarter sales compared to 86.7% And concrete construction products were 13.6 percent of total sales, up from 13.2%. In North America, wood product volume was up 2.4% and concrete product volume was up 1.6%. Consolidated gross profit increased 10.8 percent to $287,500,000 which resulted in a gross margin of 48.1% compared to 43.7% last year. On a segment basis, our gross margin in North America increased to 51.2% compared to 48%, primarily due to lower raw material costs, which were partially offset by higher factory and tooling costs as a percentage of net sales.

Speaker 3

Our gross margin in Europe increased to 37.4% from 29.3%, Also primarily due to lower raw material costs as a percentage of net sales, and as you may recall, Our raw material costs in the prior year period included a $9,200,000 inventory fair value adjustment for the acquisition of Atanko, representing 6.9 percentage points of Europe gross margin. From a product perspective, our 2nd quarter gross margin On wood products was 48.4% compared to 43.7% in the prior year quarter And was 45.9 percent for concrete products compared to 43.2% in the prior year quarter. Now turning to our Q2 costs and operating expenses. Total operating expenses were $140,700,000 An increase of $20,300,000 or approximately 16.9 percent, driven primarily by increased personnel costs to support our growth as well as higher variable compensation. As a percentage of net sales, total operating expenses were 23 0.6% compared to 20.3%.

Speaker 3

Our 2nd quarter research and development Engineering expenses increased 27.1 percent to $21,500,000 primarily due to higher personnel costs in pursuit of our Future revenue generating opportunities aligned with our strategic growth initiatives. Selling expenses increased 11.9% The $50,400,000 primarily due to increased personnel and commissions in North America And on a segment basis, selling expenses in North America were up 15.6% and in Europe, they were up 2.1%. General and administrative expenses increased 17.7 percent to $68,800,000 primarily due to professional fees, Personnel costs and variable compensation. Integration expenses associated With Atonco, we're down $4,000,000 As a result, our consolidated income from operations totaled 145,000,000 dollars a meaningful increase of 9% from $133,100,000 North America income from operations increased 4.5 percent to $143,400,000 primarily due to higher gross profit, partly offset by increased personnel and variable compensation as well as professional fees. In Europe, Income from operations was $14,000,000 compared to $5,600,000 primarily due to higher gross profit and lower year over year acquisition and integration costs, which were partially offset by higher variable compensation.

Speaker 3

On a consolidated basis, our operating income margin was 24.3%, an increase of 184 basis points from 22.4%. Our effective tax rate decreased to 25% from 26%. Accordingly, net income totaled $107,200,000 or $2.50 per fully diluted share, which is inclusive of $700,000 of net interest expense. This compares to $93,600,000 or $2.16 per fully diluted share. Now turning to our balance sheet and cash flow.

Speaker 3

Our balance sheet remained healthy with cash and cash equivalents totaling $408,000,000 at June 30, 2023, up $155,400,000 from our balance at March 31, 2023. Our debt balance was approximately $566,800,000 net of capitalized finance costs And our net debt balance was only $158,800,000 We have $300,000,000 remaining available for on our primary line of credit. Our inventory position at June 30, 2023 was $522,200,000 which was down $54,300,000 compared to our balance at March 31, 2023. Our focus on effective inventory management remains paramount to ensure the strong levels of service and on time delivery standards that our customers depend on in the current uncertain economic environment. During the second quarter, We generated cash flow from operations of approximately $194,000,000 compared to $93,800,000 We invested approximately $21,000,000 for capital expenditures and paid $11,100,000 in dividends to our stockholders.

Speaker 3

While we did not repurchase any shares of our common stock, we continue to evaluate opportunistic share repurchases as part of our capital allocation strategy. Next, I'd like to discuss our 2023 financial outlook. Based on business trends and conditions as of today, July 24, we are updating certain elements of our guidance for the full year ending December 31, 2023 as follows. We now expect our operating margin to be in the range of 20.5 percent to 21.5%. Key assumptions include Lower U.

Speaker 3

S. Housing starts impacting our top line, albeit at a lesser rate of decline versus our initial expectations earlier in the year, Higher overall gross margin compared to 2022, increased operating expenses we believe are necessary to $8,000,000 in expected total integration and costs associated with Atomco. We are continuing to make progress on our integration efforts for Atomco In order to realize previously identified offensive and defensive synergies in the years ahead, subject to macroeconomic changes, which will delay the realization of some of the offensive synergies. Nexstar 2023 effective tax rate is expected to be in the range 25% to 26%, including both federal and state income tax rates and again assuming no tax law changes are enacted. Lastly, we now expect capital expenditures to be in the range of $105,000,000 to $115,000,000 In summary, we were very pleased with our financial performance in the Q2 amidst the ongoing challenging macroeconomic environment.

Speaker 3

We remain focused on executing our growth initiatives and integrating the Atanko acquisition, while being mindful of Thanks again to our team at Simpson for the continued strong performance and to all our stakeholders for your continued support of the company. With that, I'd like to turn the call over to the operator to begin the Q and A session. Operator?

Operator

Thank you. We will now be conducting a question and answer session. Thank you. And our first question is from Daniel Moore with CJS Securities.

Speaker 4

Thank you. Good afternoon and thanks for taking the questions. Congrats on obviously another strong quarter. Maybe just start with North America. Margins continue to outperform expectations.

Speaker 4

If we look at the outperformance in the quarter as well as the Upward revision and guidance for the full year. How much of it reflects stronger volumes than you expected Versus maybe lower input costs versus what was embedded previously in your guide?

Speaker 2

So Dan, thanks for the question. So North America overall revenue for us was up 2%. Volume impact, 2.4%, so 0.4% basically downward pricing pressure. When we look at North America as a whole, we've got we're pretty excited that 4 out of our 5 market segments all had positive development in terms of revenue and volume. Our Midwest and Northeast regions are having very good growth, again, especially considering a difficult market.

Speaker 2

Southeast, Also flat in a difficult market, so we're pretty happy with that. And the western part of U. S. Is recovering. And then when you look at other individual spots in there.

Speaker 2

We're pretty happy with how multifamily continues to go for us this year.

Speaker 3

And I would add that volumes were greater than where we were 3 months ago Based on the things that Mike had just talked about and the less Negative, if you will, or slightly better outlook for housing compared to where we were at the beginning of the year. So definitely saw Compared to prior guidance, better volumes in North America.

Speaker 4

That's helpful. And a quick follow-up, obviously over the last several years done an excellent job of driving down OpEx as a percentage of revenue And ticked a little bit back higher back from the sort of the low 20s into the mid-20s with the Tonko and is working its way back down. Just Where do you see that metric in 2 to 3 years once full synergies are achieved? Just remind us maybe what your kind of longer term targets look like?

Speaker 2

Yes. So Dan, we're going to continue to invest in our growth initiatives, because we need the salespeople, engineering people and Other team members to realize those, so we'll continue to invest in it. That also helps us continue to provide great service as far as the metrics go. Brian?

Speaker 3

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

Speaker 4

Understood. Last one for me and I'll jump out. Just getting a sense of the cadence going into Q3, North America volume is up a little over 2% for the quarter. How has that trended thus far in Q3 from what we've seen quarter to date.

Speaker 3

So as we're looking at July and just as a reminder, July last year, It was somewhat soft and we're around that Again, so far and the 1st few weeks of the month, couple of the interesting things there with July with the holiday Falling on July 4th holiday, falling on a Tuesday, we think we've got not we think we've got one less selling day in July. And then also that activity that 1st week, little softer than normal due to, I think a lot of people in the industry taking that whole week off, again due to the timing of the July 4 holiday

Speaker 4

here. Understood. I'll jump back with any follow ups. Thank you.

Speaker 2

Thanks, Dan. Thanks, Dan.

Operator

Thank you. Our next question is from Tim Wojs with Baird.

Speaker 5

Maybe just to start off on the revenue line. I know that you may be expecting Starts activity to be less bad than maybe you thought 6 months ago or even 3 months ago. I guess as you kind of think about the overall kind of revenue number for 2023, I mean, Even with the starts seemingly kind of down in the Q2 for you guys, you still posted revenue growth. So I guess my question is, Even if starts are less bad than they were before, I mean, is it possible you can grow the top line organically in 2023?

Speaker 3

Well, from a just remember to level set, 2023 has got the full 4 quarters of Atanko versus 2022 only having the 3 quarters company wise Company wide. And then but taking that out of the equation, Let's see. Let me pull that up.

Speaker 2

It's going to

Speaker 3

be relatively flat On a like for like basis, when we take the Atalco extra quarter Into consideration, which would be up compared to where we were entering the year.

Speaker 2

Yes. Okay. And is the difference there

Speaker 5

like retail and some of the growth drivers? Because I think that would be, I guess more positive than I think I would have expected just given what starts are kind of that even year to date.

Speaker 2

Yes, Tim, let me go back to So when we were budgeting for this year, we were thinking the residential starts would be definitely more than 10% down. Now we're Thank you, Dave, of everything we've heard from our customers, it's going to be 10 ish, maybe right around that 10% down. So again, less bad. On the national retail home center story, we were also expecting that to be a negative market. But with the lower lumber Costs, a lot of projects that have been sitting on the side are coming in.

Speaker 2

So we actually expect that market to be market again positive. And then the strategies we have to drive growth in the national retail segment, we're pretty excited about and we think that's helping us drive above market growth in that area. And then if you look at the other market segments that we're in, OEM, albeit still small, we're still driving big growth in that segment, volume and Revenue perspective and on the commercial side, we still think we're in good shape on that area as well. So add it all up, the market is getting Better than we had budgeted and we think the strategies that we have in place are delivering. Yes.

Speaker 5

No, understood. And then maybe just on the margin line, I think last quarter, Brian, you talked about kind of EBIT margins being kind of flat year over year in Q2 and Q3 and then maybe being down a little bit in the Q4. I guess, how are you thinking about the back half margins now? Because I think if I kind of assume they're flattish in Q3 and Q4 for the rest of the year, I'm kind of at maybe even above the updated EBITDA guidance.

Speaker 3

Yes. So from an operating income perspective, Q3, pretty comparable to prior year. And then I would think Q4 and Let's see. Again, fairly comparable.

Speaker 5

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

Speaker 2

Yes. So the Fasteners business, Tim, has been a big growth driver for us. We continue to expand the top line and the margins in area. We think we've got a differentiated product offering. And right now, We make some of our products in our Gelson facility today and we import some of our products for that area as well.

Speaker 2

So the focus here is we want to localize More of our fastener production, we also want to vertically integrate more of our fastener production. We think that will better help us serve and support our customers. And then if you go back to some of our growth initiatives like mass timber, those tend to be projects you either get it or you don't. And if you

Speaker 5

get it and you need to

Speaker 2

be able to respond quickly, so having production in the U. S, We believe will help us better respond to our customers in those areas as well.

Speaker 3

So yes, and the total Project cost or fine tuning numbers and estimates and depends on Land development, how far along a piece of property may be versus how quickly it can be developed on? About $100,000,000 net of selling our existing facility. We're a bit landlocked in our current site there. And to Mike's point, being able to in source more of the activities around getting raw wire into finished good, We're going to be able to have on-site there. So $100,000,000 and The outlay would be mostly 2024 and forward, 2024, 2025, A little bit this year.

Speaker 3

We would presume that we're finding land, maybe starting to get that ready to build on.

Speaker 5

Okay.

Speaker 3

But the bulk of where the spend would be in the next couple of years.

Speaker 5

Okay. Got you. And where is Columbus at?

Speaker 3

Columbus is still pretty early from an improvement perspective. We acquired adjacent land There that needed to be graded and we're Continuing to work that. So we've not spent a lot of money on that one yet. Still had been going through a lot of the permitting process, approval process. The land is getting ready to be able to get foundations in and get Walls up and the like.

Speaker 3

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

Speaker 5

Okay, good. At least with time guys, good luck on the rest of the year.

Speaker 2

Thanks, Tim.

Operator

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

Speaker 6

Great. Thanks and good afternoon Mike and Brian.

Speaker 2

Just two quick ones

Speaker 6

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

Speaker 2

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

Speaker 6

Got it. Okay. Thanks for that. And then second, A tailwind to the truss plate business. And I'd just love to hear what's kind of changed from a software perspective that's Maybe help catalyze that?

Speaker 2

Yes. So we're talking specifically about the trust market. And here, we've been spending a lot of time and effort Over the last 3 years to really develop our software into a one fully integrated program that's easy to use and hits Our customers' needs, we've made a lot of progress. Kurt, we think there's still some room for improvement, and we're now coupling that Development efforts in the software with everything else we do from a business model perspective, meaning Making sure that we're providing great service and support to our customers. And so we have been picking up trust customers over the last The year is in part because we believe one of our competitors had some significant delivery problems.

Speaker 2

They ended up putting customers on allocations, and they did that in a growing market. That obviously had an impact and I think we've had several customers approach as a result of that. And so now we are taking a very Measured and conscious approach with how we onboard our new customers, we want to make sure that goes very well, going forward with them. So we think that's also going to be a nice growth driver for us and everything that we've been doing in that area the last couple of years has been working out very well according to how we planned it.

Speaker 6

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

Speaker 2

So we do have a couple of gaps and there are some areas we're working on it. So the customers that we're working with, we're doing basically analysis with them, trying to make sure we understand what they need and what we're capable of doing and we're customizing and develop the software to make sure we hit the needs. We aren't exactly where we want to be to date, but we do have, I believe, very good plans to get there.

Speaker 6

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

Speaker 3

Thanks, sir.

Operator

Thank you. Our next question is from Julio Romero with Sidoti and Company. Please proceed with your question.

Speaker 7

Hey, good afternoon, Mike and Brian.

Speaker 3

Hello, William. Good morning.

Speaker 7

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

Speaker 2

yes, June was a real nice month for us. I mean, each month got better In the

Speaker 7

Q2. Got you. And Has the magnitude of the improvement in June maybe changed any behaviors either from your customers or Competitors at

Speaker 2

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

Speaker 7

Got it. If we could talk about maybe steel for a second. I think Steel prices have kind of inflected downward since your last call in April. If you could just maybe talk about the impact of that on your Cost of sales expectations for the back half of the year.

Speaker 3

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

Speaker 7

Got it. That's helpful. And then just last one for me would be just on the CapEx guide. Just talk about the step up in the guide and is that related to the Tennessee facility or any other kind of capital projects?

Speaker 3

Mostly due to the Tennessee facility. So we still have a fair amount of spend for this year that we anticipate for the Ohio And then some spend for the fastener Factory, land acquisition and some associated costs with that.

Speaker 7

Really helpful. Thanks very much for taking the questions.

Speaker 2

You're welcome. Thank you.

Operator

Thank you. We have reached the end of our question and answer session. And with that, this concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.

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Key Takeaways

  • Simpson reported Q2 net sales of $597.6 million, a 0.7% year-over-year increase driven by a 2.3% rise in North American volumes, while European sales fell 4.1%, and achieved a gross margin of 48.1% versus 43.7% last year.
  • The company advanced its five end-use market initiatives, including new national retail and homebuilder wins, double-digit growth in decorative hardware, critical mass-timber testing in OEM, a ventilated façade project in commercial, and expanded TrustPlay truss software adoption.
  • Simpson emphasized six business-model pillars—product diversity, extensive R&D, best-in-class field support, rapid delivery, robust software tools, and trade education partnerships—to sustain its market leadership and customer loyalty.
  • Capital allocation remains focused on organic and small-scale M&A growth, paying down acquisition debt, maintaining quarterly dividends and opportunistic share buybacks, and investing in a new greenfield fastener facility in Tennessee to enhance vertical integration.
  • For fiscal 2023, the company updated its outlook to a 20.5%–21.5% operating margin, a 25%–26% effective tax rate, $105–115 million in capital expenditures, and expects U.S. housing starts to decline less severely than earlier forecast.
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Earnings Conference Call
Simpson Manufacturing Q2 2023
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