Simpson Manufacturing Q1 Earnings Call Highlights

Key Points

• Simpson reported Q1 net sales of $588 million, up 9.1% year-over-year, driven roughly by ~6% from 2025 pricing actions and ~3% from favorable FX while volumes fell about 1% due to softer U.S. housing starts; management now expects those 2025 price moves to annualize at approximately $130 million.
• Consolidated gross margin declined 130 basis points to 45.2%—partly from higher materials, labor and a Gallatin plant startup that management said cost about 100 basis points—while operating margin improved to 19.5%, net income rose to $88.2 million, and adjusted EBITDA increased 14.1% to $139.4 million.
• For 2026 the company reaffirmed operating-margin guidance of 19.5%–20.5%, expects U.S. housing starts down low single digits, and continued capital returns (including a $50 million buyback in Q1 and $12 million of dividends) with net debt of roughly $29.5 million and ample revolver availability.

Simpson Manufacturing NYSE: SSD reported first-quarter 2026 results that reflected strong price realization and foreign exchange benefits, partly offset by softer end-market volumes tied to housing starts. Management also updated its outlook for U.S. housing starts and reiterated its focus on sustaining margins through pricing discipline, cost actions, and productivity initiatives.

First-quarter sales rose 9% as price and FX offset softer volumes

President and CEO Michael Olosky said the company generated net sales of $588 million, up 9.1% year over year. Olosky attributed the increase primarily to the company’s 2025 pricing actions, which contributed “approximately 6%,” and foreign exchange, which contributed “approximately 3%.” Those benefits were “partially offset by an approximate 1% decline in volume as a result of softer housing start activity during the quarter,” he said.

In North America, net sales were $461.9 million, up 9.8% from the prior-year quarter, including a $31 million benefit from pricing actions, according to Olosky.

In Europe, net sales totaled $121 million, up 6.3% year over year, which Olosky said was driven by foreign currency translation. On a local-currency basis, he said sales declined 5.4%, as lower volumes were partly offset by price increases. CFO Matt Dunn added that Europe’s reported increase included $13.2 million of favorable foreign currency translation and noted that lower volumes were “partly from adverse weather conditions across the region.”

Segment commentary: strength in component manufacturing and OEM; retail and commercial mixed

Olosky described North American performance as “mixed by market segment and varies by geography,” but highlighted resilience in several areas.

• Component manufacturing: Olosky said the business delivered “a strong quarter with volumes up double digits, driven primarily by new customer wins.” He said customer engagement remained solid around “productivity-enhancing solutions” across software, plates, equipment, and design services. During Q&A, Olosky said the segment can be “a little lumpy” because customer conversions take time, adding that Simpson added “a couple” of customers in late 2025 that “are now starting to build in 2026.”
• OEM: Olosky said the OEM business delivered “another strong quarter with double-digit volume growth,” supported by trends toward prefabrication and off-site construction methods including engineered wood systems and mass timber. He said the company’s “pipeline of opportunities continues to build.”
• Residential: Olosky said residential volume increased “modestly year-over-year,” supported by cross-selling connectors, fasteners, and anchoring solutions. He said Simpson renewed builder agreements, launched new products, and expanded service offerings.
• Commercial: Olosky said commercial volumes were “down slightly” year over year, though demand for cold-formed steel and anchoring systems remained “relatively resilient.”
• National retail: Olosky said shipments declined “low single digits” and point-of-sale volumes declined “mid-single digits.” He characterized the retail environment as competitive, with customers “value-focused and selective in discretionary spending.” In Q&A, he said the company has seen periods where sell-in and sell-through were “a little bit disconnected” and that the relationship “flipped” in the first quarter, while noting inventory shifts can occur with large retailers.

On geographic trends, Olosky said Florida and California housing starts are “down significantly from their peak” about three years ago. He said customers in California “are saying they’ve got a strong backlog” and projects “about ready to get kicked off,” but Simpson has “not yet started to realize that in our sales revenue.” In Florida, he said there had been “no significant change” and conditions remained “a little soft.”

Margins: gross margin declined; operating margin improved despite one-time costs

Simpson’s consolidated gross margin declined 130 basis points year over year to 45.2%. Olosky said the decline was driven by “higher material, factory, tooling, and labor costs as a percentage of net sales,” including startup costs from the ramp of the Gallatin facility that opened late last year. Dunn quantified the Gallatin startup impact as “an approximate 100 basis points headwind” to first-quarter gross margin, which he said should “moderate as we progress through the year.”

Dunn said North America gross margin was 47.8%, down from 49.8% a year ago, reflecting tariffs and higher factory overhead and labor costs as a percentage of net sales, along with “some unfavorable product mix.” In Europe, gross margin rose to 36.3% from 35.2% due to higher pricing and lower material costs, partially offset by higher factory and tooling costs.

By product category, Dunn said wood construction product gross margin was “relatively flat at approximately 46%,” while concrete product gross margin fell to 40.2% from 49.5% due to tariffs, “partly offset by recent pricing actions.”

Operating margin improved to 19.5% from 19.0% a year earlier. Dunn said operating income rose 12% to $114.6 million. He noted operating results included $2.3 million of one-time costs related to strategic cost savings initiatives. North America operating income margin was 25.6% (up from 24.9%), while Europe operating income margin fell to 5.9% from 8.2% due to lower volumes.

Net income was $88.2 million, or $2.13 per diluted share, compared with $77.9 million, or $1.85 per diluted share. Adjusted EBITDA increased 14.1% to $139.4 million, producing a 23.7% margin.

Pricing, tariffs, and cost actions: no new North America price moves announced

Olosky said the company’s 2025 price increases are now expected to contribute approximately $130 million in annualized net sales. During Q&A, Dunn explained the change from the company’s previous $100 million annualized pricing figure, saying Simpson realized about $60 million of that in 2025 and now expects $130 million annualized, implying about $70 million incremental in 2026. Dunn said the increase reflects a combination of “pricing we’ve enacted in Europe” including surcharges and price increases, plus product mix in North America with faster growth in higher-price-increase categories such as “fasteners and anchors.”

On additional pricing, Dunn said, “We haven’t taken any additional price increases in North America beyond the two that we announced last year,” adding that the company is monitoring costs such as fuel and steel.

Dunn also said early-April announcements related to Section 232 did not materially impact Simpson, stating that the tariffs the company was paying were “pretty much staying the same.” He added that while the company is seeing supplier surcharges tied to fuel and other factors, Simpson has not implemented freight surcharges and is monitoring conditions, including whether to adjust minimum purchase levels for prepaid freight eligibility.

Cash flow, balance sheet, and 2026 outlook

As of March 31, 2026, Dunn said Simpson had $74.2 million drawn on its revolver with $525.8 million of remaining availability. Total debt was $370.5 million and cash was $341 million, resulting in net debt of $29.5 million.

Inventory ended the quarter at $549 million, down $45.2 million from December 31, 2025. Dunn said pounds of inventory on hand in North America were down double digits, while cost per pound increased nearly double digits, driven primarily by raw materials. He added that much of the reduction was on the raw material side, including steel and steel coils, and that inventory could “bump back up a little bit” as the year progresses given lumpy raw material purchasing patterns and rising prices.

First-quarter cash flow from operations was $35.9 million. Dunn said the company invested $17.7 million in capex, paid $12 million in dividends, and repurchased $50 million of common stock. He also referenced the board’s previously announced authorization permitting up to $150 million in repurchases through year-end 2026.

For full-year 2026, Dunn reaffirmed guidance for consolidated operating margin of 19.5% to 20.5%. Key assumptions include:

• U.S. housing starts down in the low single-digit range versus 2025
• Lower overall gross margin due to imposed tariffs and increased depreciation costs
• Higher realization of the annualized contribution from 2025 price increases
• $3 million to $5 million of footprint optimization costs in Europe
• A projected $10 million to $12 million benefit from the sale of vacant land in the back half of 2026
• Effective tax rate of 25% to 26%
• Capital expenditures of $75 million to $85 million

Olosky said the company now expects 2026 U.S. housing starts to be down low single digits compared to 2025. In Europe, he said the company expects “flat to modest growth” in 2026, and added that market growth could be “flat to low single-digit” over the next couple of years. Dunn and Olosky both cautioned that the company does “not anticipate sustaining the same level of revenue growth through the remainder of the year,” given the housing outlook and the timing of 2025 pricing actions.

About Simpson Manufacturing NYSE: SSD

Simpson Manufacturing Co, Inc, through its Simpson Strong-Tie® brand, is a leading global supplier of structural building products. The company specializes in the design, testing, manufacture and supply of connectors, anchors, fasteners and lateral systems that enhance the safety and performance of wood, concrete and masonry structures. Its product portfolio also includes repair and strengthening systems, concrete reinforcement and high-performance adhesives used in residential, commercial and industrial construction projects.

Founded in 1956 by Barclay Simpson in Oakland, California, Simpson Manufacturing has grown from a single product business into a diversified manufacturer with worldwide operations.

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