Simpson Manufacturing Co., Inc. Q2 FY2025 earnings call

• Mike Olosky mentioned net sales growth in challenging housing market, North America net sales up 6.4%, contributions from acquisitions and price increases. North America volumes mixed but end markets growing. OEM, commercial, component manufacturer, national retail had various performance. Europe net sales up, gross margin improved. Operating margin 22.2%, adjusted EBITDA $159.9 million, up 4.8%. - Three financial ambitions: above-market growth vs US housing starts, operating income margin at or above 20%, EPS growth ahead of net sales growth. - Matt Dunn discussed financials: consolidated net sales up 5.7% to $631.1 million, gross profit up 5.7% to $294.5 million, gross margin 46.7%. Operating expenses up 6.5%, operating income margin 22.2%. Balance sheet healthy, cash and cash equivalents up, debt balance ~$374.5 million. Capital expenditures outlook $140M-$160M.

North America: Net sales totaled $492.7 million, up 6.4% from $463 million last year. Included ~$9 million from 2024 acquisitions and partial month price increase effect. Volumes mixed but sales to end markets at or above market growth. OEM had double-digit volume growth, commercial up mid-single digits, component manufacturer mid-single-digit growth, national retail flat shipment but point-of-sale up, residential down slightly. Europe: Net sales of $133.4 million increased 2.7% y-o-y but down $2.8 million on local currency. Volumes down but outperforms local markets. Gross margin 36.2%, up from 35.4% due to lower material costs.

• Reaffirm full year 2025 guidance: operating margin 18.5%-20.5%, revised US housing starts down low single digits, slightly lower gross margin due to tariffs but offset by price increases and new facilities, interest expense ~$2M, effective tax rate 25.5%-26.5%, capital expenditures $140M-$160M.

• Uncertainty in macro environment, second round of tariffs impacting costs, unknowns in market conditions affecting ability to hit guidance.

Q: Maybe start, just make sure I heard correctly. I think you said a $9 million contribution in the quarter from acquisitions and then the balance of revenue growth predominantly price with volumes relatively flat. Is that the right way to kind of think about the buckets in the quarter?

A: Yes, Dan, this is Matt. The $9 million from acquisitions in the quarter is correct, which is acquisitions we acquired last year that we haven't quite anniversaried. There was a little bit of exchange rate help in the quarter as well from Europe, I think about $7 million. And then pricing was really the balance of it. Volume largely flat.

Q: Maybe just first, just a clarification. On the North America business, were volumes up in Q2? Or is that organic number predominantly price?

A: The volumes are pretty much flat on the quarter, Tim. The revenue number is driven by price, the carryover of the acquisitions, which generally don't have volume, if you think about equipment and software, which was 2 of the big acquisitions from last year. They don't factor in the volume calculation. And then the last piece is a little bit of exchange rate help coming from Europe.

Q: Just wanted to, I guess, stick with pricing to start. Maybe you could just confirm, is the 8% kind of weighted average increase in North America still the right way to think about kind of the back half as that's fully implemented for a quarter? And then secondly, you kind of referenced some of the incremental tariff headwinds relative to when you announced the price increases. I guess going forward, how do you kind of balance competitive dynamics? You alluded to affordability just a minute ago versus that end goal of making sure the business is positioned to maintain a 20% operating margin?

A: Yes. Yes, Kurt, you're right. The weighted average 8% is the right way to think about it. That was our the net of the kind of the published list price increases that went out in early April and were implemented in June. In terms of how we think about it going forward, I'll let Mike jump in here. Yes. Kurt, when we look at it, I mean, we're focused on helping our customers win. We're focused on making sure that we're delivering great service and innovative solutions and our products are adding a lot of value associated with that. So we believe that's worth a modest premium. At the same time, we're doing everything we can to make sure that we can control costs. So in a slow to low-growth market, we can get close to that 20% operating income