Simpson Manufacturing Co., Inc. (NYSE:SSD) Q2 2023 Earnings Conference Call July 24, 2023 5:00 PM ET Company Participants Kimberly Orlando - ADDO Investor Relations Michael Olosky - President and Chief Executive Officer Brian Magstadt - Chief Financial Officer and Treasurer Conference Call Participants Daniel Moore - CJS Securities Timothy Wojs - Robert W. Baird & Co. Kurt Yinger - D.A. Davidson Julio Romero - Sidoti & Company Operator Greetings and welcome to the Simpson Manufacturing Co., Second Quarter 2 ...

Sales Performance - The Company reported a 9.9% decrease in wood construction product sales for Q1 2023 compared to Q1 2022, while concrete construction product sales increased by 6.3% during the same period[110]. - Europe sales increased by 141.4% for Q1 2023 compared to Q1 2022, primarily due to the acquisition of ETANCO, contributing $80.0 million in net sales[112]. - Net sales increased by 8.3% to $534.4 million from $493.6 million, primarily due to ETANCO contributing $80.0 million in net sales[116]. - North America net sales decreased by 7.4%, while Europe net sales increased by 141.4%[123]. Financial Projections - The Company anticipates operating margin for fiscal 2023 to be in the range of 19% to 21%[115]. - The effective tax rate is estimated to be in the range of 25% to 26% for fiscal 2023[115]. - The Company expects to incur additional costs in 2023 related to the integration of ETANCO, which were planned since the acquisition announcement[115]. - The Company aims to achieve above-market growth relative to U.S. housing starts in fiscal 2023 and beyond[106]. Capital Expenditures - Capital expenditures for fiscal 2023 are estimated to be between $90.0 million and $95.0 million, including $22.0 million to $25.0 million for the Columbus facility expansion[115]. - Total approved capital spending for 2023 is projected to be between $90.0 million and $95.0 million, including $22.0 million to $25.0 million for the Columbus, Ohio facility expansion[136]. - Capital spending for the same period was $18.8 million in 2023 compared to $17.8 million in 2022, mainly for machinery, equipment purchases, and software development[136]. Profitability and Expenses - Gross profit rose by 6.8% to $252.9 million, resulting in a consolidated gross margin of 47.3%, down from 48.0% last year[117]. - Research and development expenses increased by 30.8% to $20.7 million, driven by higher personnel costs and professional services[118]. - Selling expenses increased by 32.1% to $48.7 million, primarily due to higher personnel costs and commissions[119]. - General and administrative expenses rose by 18.5% to $63.7 million, mainly due to increased depreciation and personnel costs[120]. - Net income decreased to $88.0 million from $94.6 million, with diluted earnings per share at $2.05 compared to $2.18[122]. Cash Flow and Financing - Cash and cash equivalents as of March 31, 2023, were $252.5 million, down from $984.4 million a year earlier[134]. - Operating activities provided $2.96 million in cash, significantly lower than $44.68 million in the same period last year[135]. - Cash used in investing activities was $27.0 million for the three months ended March 31, 2023, primarily for capital expenditures and acquisition-related activities[136]. - Cash used in financing activities was $23.8 million, which included $11.1 million for dividends, $7.4 million for employee tax payments, and $5.6 million for debt repayment[137]. - The company has returned $417.0 million to stockholders since 2019, representing 55.5% of free cash flow, including the repurchase of over 3.1 million shares[139]. Debt and Risk Management - As of March 31, 2023, the outstanding debt under the Amended and Restated Credit Agreement was $577.5 million, exposing the company to interest rate fluctuations[144]. - The company has entered into an interest rate swap agreement to convert variable interest rates to fixed rates to manage cash flow variability[145]. - The company is exposed to commodity price risk, particularly with steel, which has seen price increases due to global shortages[146]. - Higher steel prices not mitigated by price increases may lead to declines in operating margins for 2023 compared to 2022[146]. - The company has no off-balance sheet arrangements as of March 31, 2023[140]. Integration and Strategic Initiatives - The Company has integrated ETANCO into its operations, contributing $9.4 million to operating income for Q1 2023, net of amortization and integration costs[112]. - The Company plans to continue expanding its wood product line and investing in venture capital funds focused on the home building industry[107]. - The company has passed four price increases to customers in 2021 to offset higher material costs, but has begun to reduce some prices in response to lower raw material costs in early 2023[107].

Financial Data and Key Metrics Changes - Consolidated net sales increased by 8.3% to $534.4 million, with North America segment net sales decreasing by 7.4% to $406.3 million due to lower sales volumes, while Europe saw a significant increase of 141.4% to $124.2 million, primarily from ETANCO [3][19] - Consolidated gross profit rose by 6.8% to $252.9 million, resulting in a gross margin of 47.3%, down from 48% in the previous year [4][10] - Net income totaled $88 million or $2.05 per fully diluted share, compared to $94.6 million or $2.18 per share in the prior year [10] Business Line Data and Key Metrics Changes - Wood construction products accounted for 85% of total sales, down from 88%, while concrete construction products increased to 14% from 12% [4] - Gross margin for wood products was 48%, slightly down from 48.1% in the prior year, while concrete products saw a decrease to 41.8% from 46.9% [5][10] - Research and development expenses increased by 30.8% to $20.7 million, driven by higher personnel costs and additional costs attributed to ETANCO [6] Market Data and Key Metrics Changes - North America faced a decline in sales due to significant precipitation affecting the residential market, while Europe experienced growth despite ongoing macroeconomic challenges [19][23] - The commercial market saw a decline in sales, but revenues from OEM customers increased year-over-year [21][23] - The overall operating income margin decreased to 22.1%, down approximately 310 basis points from 25.2% [10] Company Strategy and Development Direction - The company aims to maintain its industry-leading position through a diverse product portfolio and commitment to innovation, focusing on five end-use markets not solely tied to U.S. housing starts [21][25] - Continued integration of ETANCO is a priority, with a focus on achieving synergies in procurement and operational efficiencies [24][97] - The company is evaluating expansion opportunities, including a new manufacturing facility in Ohio, while also considering potential M&A opportunities to strengthen its business model [30][97] Management's Comments on Operating Environment and Future Outlook - Management expects continued softness in the North American housing market but remains confident in the company's ability to outperform due to its strong business model [21][36] - The effective tax rate is projected to be between 25% and 26%, and capital expenditures are expected to be in the range of $90 million to $95 million [38][39] - Despite macroeconomic uncertainties, management believes the future looks bright for the company, supported by ongoing growth initiatives [39][98] Other Important Information - Cash flow from operations was approximately $3.1 million, a decrease from $44.7 million in the previous year, with a debt balance of approximately $572.6 million [33][11] - The company is committed to effective inventory management to maintain high levels of customer service and on-time delivery [32] Q&A Session Summary Question: Guidance and Margin Outlook - Analyst inquired about the margin guidance and the factors that could lead to a decline in margins despite a strong Q1 performance [43] - Management indicated that they expect some weakness in the latter half of the year, particularly in Q4, but are optimistic about volume outlook [44][46] Question: Demand Perspective - Analyst asked for context on demand trends compared to three months ago and how April is trending [50] - Management noted that while housing starts are down, other markets like multifamily and the East Coast are performing relatively well [53] Question: Steel Costs Impact - Analyst questioned the impact of steel prices on operating margins and how much increase would be concerning [61] - Management confirmed that steel prices are currently favorable, and any significant changes would take time to impact margins due to inventory dynamics [63][64] Question: ETANCO Performance - Analyst asked about the performance of ETANCO and the sustainability of its growth [70] - Management expressed confidence in ETANCO's growth, attributing it to cross-selling and market share gains, although some offensive synergies may be delayed [76] Question: Seasonal Trends - Analyst inquired about expected seasonal trends for Q2 compared to Q1 [79] - Management indicated that while seasonality has been less impactful in recent years, they expect a more pronounced difference this year due to weather conditions [80] Question: Asia Pacific Initiatives - Analyst asked for updates on the Asia Pacific market and initiatives [89] - Management highlighted ongoing efforts in Australia and New Zealand, focusing on expanding product offerings and sales initiatives [93]

Part I [Business](index=5&type=section&id=Item%201.%20Business) Simpson Manufacturing is a leading global manufacturer of wood and concrete construction products, expanding its European presence via ETANCO acquisition - The company designs, engineers, and manufactures high-quality wood and concrete construction products to make structures safer and more secure, with strong brand recognition for its **Simpson Strong-Tie®** brand[18](index=18&type=chunk) - On April 1, 2022, the company acquired **ETANCO**, a leading European manufacturer of fixing and fastening solutions, to expand its product portfolio and market presence across Europe[19](index=19&type=chunk) - The company's strategy includes increasing market share by maintaining high service levels, sponsoring training seminars, investing in digital tools, and diversifying product offerings[21](index=21&type=chunk) [Products and Services](index=5&type=section&id=Products%20and%20Services) The company offers extensive wood and concrete construction product lines, including connectors, fasteners, and anchors, with engineering support - Wood Construction Products: Over **15,000** standard and custom products including connectors, fasteners (Quik Drive system), and lateral resistive systems to strengthen wood applications[24](index=24&type=chunk)[26](index=26&type=chunk) - Concrete Construction Products: Over **3,000** products including mechanical and adhesive anchors, tools, and repair/strengthening systems for concrete, masonry, and steel applications[25](index=25&type=chunk)[26](index=26&type=chunk) - The company provides engineering support services, assisting customers with product selection, design, and proper installation, which serves as a competitive differentiator[25](index=25&type=chunk)[39](index=39&type=chunk) [Distribution Channels and Markets](index=6&type=section&id=Distribution%20Channels%20and%20Markets) The company distributes products globally across North America, Europe, and Asia/Pacific, with Europe's market expanded by ETANCO - Key distribution channels include distributors, home centers, lumber dealers, contractors, and OEM relationships[27](index=27&type=chunk)[33](index=33&type=chunk) - The company's sales to home centers increased year-over-year in 2022, 2021, and 2020, and it brought back **Lowe's** as a customer in Q2 2020[28](index=28&type=chunk) - The company's three operating segments are North America (U.S., Canada), Europe (France, UK, Germany, etc.), and Asia/Pacific (Australia, China, etc.)[29](index=29&type=chunk) [Human Capital Resources](index=9&type=section&id=Human%20Capital%20Resources) As of December 31, 2022, the company employed **5,158** people globally, focusing on diversity, talent development, and safety Employee Count by Region (as of Dec 31, 2022) | Region | Employees | | :--- | :--- | | North America | 3,035 | | Europe | 1,579 | | Asia Pacific | 544 | | **Total** | **5,158** | Global Gender Demographics (as of Dec 31, 2022) | Level | Women | Men | Not Disclosed | | :--- | :--- | :--- | :--- | | All employees | 19% | 64% | 17% | | Senior Leadership | 27% | 73% | 0% | - Approximately **9%** of the company's employees are represented by labor unions. Two union contracts in Stockton, CA are set to expire in 2023, and two in San Bernardino County, CA will expire in 2025 and 2026[58](index=58&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from global economic conditions, housing market cyclicality, raw material price volatility, acquisition integration, and regulatory compliance - Global economic conditions, including inflation and supply chain disruptions, could adversely affect operations, demand, and costs[63](index=63&type=chunk) - The business is highly dependent on the housing market and residential construction, with the North America Segment accounting for approximately **80%** of net sales in fiscal year 2022[68](index=68&type=chunk) - The integration of the **ETANCO** acquisition presents risks, including failure to achieve anticipated synergies, significant integration expenses, and diversion of management's attention[115](index=115&type=chunk) - Increases in the price of steel, the principal raw material, could negatively affect sales and profits if the company cannot pass these costs to customers[76](index=76&type=chunk) [Properties](index=28&type=section&id=Item%202.%20Properties) The company operates **74** global facilities, primarily owned, totaling over **6 million** square feet, with headquarters in Pleasanton, CA Owned and Leased Facilities by Region (as of Feb 28, 2023) | Region | Number Of Properties | Owned (sq. ft. in thousands) | Leased (sq. ft. in thousands) | Total (sq. ft. in thousands) | | :--- | :--- | :--- | :--- | :--- | | North America | 28 | 2,235 | 1,031 | 3,266 | | Europe | 36 | 1,749 | 725 | 2,474 | | Asia/Pacific | 9 | 175 | 40 | 215 | | **Total** | **74** | **4,248** | **1,796** | **6,044** | - The company owns its headquarters in Pleasanton, California, and its principal U.S. manufacturing facilities. The majority of its principal manufacturing facilities outside the U.S. are also owned[144](index=144&type=chunk)[145](index=145&type=chunk) [Legal Proceedings](index=29&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal proceedings, none of which are currently expected to materially impact its financial condition or operations - The Company is not currently a party to any legal proceedings that it expects to have a material adverse effect on its financial condition, cash flows, or results of operations[147](index=147&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=29&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NYSE under 'SSD', with **$43.9 million** in 2022 dividends and a new **$100.0 million** share repurchase program - The company's common stock is listed on the New York Stock Exchange (NYSE) under the symbol **'SSD'**[150](index=150&type=chunk) - In 2022, the company paid a total of **$43.9 million** in cash dividends. A quarterly dividend of **$0.26 per share** was declared on January 24, 2023[151](index=151&type=chunk) - In 2022, **811,330 shares** were repurchased for **$78.6 million**. The Board authorized a new repurchase program of up to **$100.0 million** for the period of January 1, 2023, through December 31, 2023[157](index=157&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2022, net sales increased **34.5%** to **$2.12 billion**, driven by price increases and ETANCO acquisition, with gross margin at **44.5%** 2022 vs 2021 Financial Highlights | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,116.1M | $1,573.2M | +34.5% | | Gross Profit | $941.3M | $755.0M | +24.7% | | Gross Margin | 44.5% | 48.0% | -3.5 p.p. | | Income from Operations | $459.1M | $367.8M | +24.8% | | Net Income | $334.0M | $266.4M | +25.4% | | Diluted EPS | $7.76 | $6.12 | +26.8% | - The acquisition of **ETANCO** on April 1, 2022, contributed **$212.6 million** in net sales for the nine months it was part of the company[177](index=177&type=chunk)[325](index=325&type=chunk) - For fiscal year 2023, the company expects operating margin to be between **18% and 20%**, and capital expenditures to be between **$90.0 million and $95.0 million**[179](index=179&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) In 2022, net sales grew **34.5%** to **$2.12 billion** due to price increases and ETANCO acquisition, with gross margin at **44.5%** due to higher costs Net Sales by Segment (in thousands) | Segment | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | North America | $1,701,041 | $1,362,941 | 24.8% | | Europe | $400,303 | $196,996 | 103.2% | | Asia/Pacific | $14,743 | $13,280 | 11.0% | | **Total** | **$2,116,087** | **$1,573,217** | **34.5%** | Gross Margin by Segment | Segment | 2022 | 2021 | | :--- | :--- | :--- | | North America | 47.7% | 50.0% | | Europe | 31.4% | 35.1% | | Asia/Pacific | 33.3% | 36.9% | | **Total** | **44.5%** | **48.0%** | - Europe's income from operations decreased by **$3.0 million**, primarily due to **$17.3 million** in acquisition and integration costs, a **$13.6 million** inventory fair-value adjustment, and **$12.4 million** in amortization related to the **ETANCO** acquisition[177](index=177&type=chunk)[200](index=200&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2022, the company maintained **$300.7 million** in cash, with operating cash flow of **$399.8 million**, funding ETANCO acquisition through debt Cash Flow Summary (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from Operating activities | $399,821 | $151,295 | | Net cash used in Investing activities | ($870,244) | ($58,805) | | Net cash from (used in) Financing activities | $465,526 | ($71,616) | - To finance the **ETANCO** acquisition, the company borrowed **$250.0 million** under its revolving credit facility and **$450.0 million** under a term loan facility[214](index=214&type=chunk) - In 2022, the company returned **$122.5 million** to stockholders through **$78.6 million** in share repurchases and **$43.9 million** in dividends[221](index=221&type=chunk)[223](index=223&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages foreign exchange and interest rate risks through derivatives, while steel commodity price risk is mitigated by price adjustments - The company is exposed to foreign exchange risk from its international operations. It uses foreign currency forward contracts to hedge some of this exposure[231](index=231&type=chunk)[232](index=232&type=chunk) - Interest rate risk exists due to **$583.2 million** in outstanding variable-rate debt as of Dec 31, 2022. The company uses interest rate swaps to convert this to a fixed rate, mitigating cash flow variability[235](index=235&type=chunk)[236](index=236&type=chunk) - The company faces commodity price risk from steel, its primary raw material. It does not use derivatives to hedge this risk but attempts to pass on cost increases to customers[237](index=237&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=45&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for FY2022, including an unqualified audit opinion and detailed notes, highlighting ETANCO intangible asset valuation - The independent auditor, Grant Thornton LLP, issued an unqualified opinion on the financial statements and internal control over financial reporting[242](index=242&type=chunk)[253](index=253&type=chunk) - The valuation of the acquired customer relationships intangible asset from the **ETANCO** acquisition was identified as a critical audit matter due to the complex and subjective judgments involved[247](index=247&type=chunk)[248](index=248&type=chunk) Key Balance Sheet Figures (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $1,179,250 | $998,835 | | Total Assets | $2,503,971 | $1,484,125 | | Total Current Liabilities | $348,563 | $244,602 | | Total Liabilities | $1,090,592 | $300,127 | | Total Stockholders' Equity | $1,413,379 | $1,183,998 | [Note 3. Acquisition](index=63&type=section&id=Note%203.%20Acquisition) On April 1, 2022, the company acquired **ETANCO** for **$805.4 million**, recognizing **$365.6 million** goodwill and **$357.3 million** intangible assets, contributing **$212.6 million** in net sales - The company acquired **100%** of **ETANCO** on April 1, 2022, for a total purchase consideration of **$805.4 million**, net of cash acquired[323](index=323&type=chunk) ETANCO Purchase Price Allocation (in thousands) | Asset/Liability | Fair Value | | :--- | :--- | | Goodwill | $365,591 | | Intangible assets, net | $357,327 | | Property and equipment, net | $89,695 | | Inventory | $107,185 | | **Total Purchase Price** | **$824,405** | - The acquisition resulted in **$17.3 million** of acquisition and integration related costs in fiscal year 2022[335](index=335&type=chunk) [Note 14. Debt](index=76&type=section&id=Note%2014.%20Debt) On March 30, 2022, the company secured a **$450.0 million** revolving credit and **$450.0 million** term loan, totaling **$583.2 million** outstanding debt as of December 31, 2022 - The company entered into an Amended and Restated Credit Facility on March 30, 2022, consisting of a **$450.0 million** revolving credit facility and a **$450.0 million** term loan facility[388](index=388&type=chunk) - As of December 31, 2022, the company had **$150.0 million** outstanding on the revolving credit facility and **$433.1 million** outstanding on the term loan[388](index=388&type=chunk)[393](index=393&type=chunk) [Note 19. Segment Information](index=81&type=section&id=Note%2019.%20Segment%20Information) The company operates in North America, Europe, and Asia/Pacific segments, with North America dominating sales and assets, and Wood Construction products comprising **87%** of 2022 net sales 2022 Net Sales and Total Assets by Segment (in thousands) | Segment | Net Sales | Total Assets | | :--- | :--- | :--- | | North America | $1,701,041 | $1,393,968 | | Europe | $400,303 | $675,634 | | Asia/Pacific | $14,743 | $34,599 | 2022 Net Sales by Product (in thousands) | Product Line | 2022 Net Sales | | :--- | :--- | | Wood Construction | $1,831,580 | | Concrete Construction | $282,205 | | Other | $2,302 | | **Total** | **$2,116,087** | - No single customer accounted for **10%** or more of net sales in 2022, 2021, or 2020[420](index=420&type=chunk) [Controls and Procedures](index=86&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of December 31, 2022, management deemed disclosure controls and internal control over financial reporting effective, excluding ETANCO operations - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[427](index=427&type=chunk) - Management's assessment of internal control over financial reporting concluded it was effective, but excluded the operations of **ETANCO**, which was acquired on April 1, 2022[431](index=431&type=chunk)[432](index=432&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Security Ownership](index=88&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for Items 10-14, including directors, executive compensation, and security ownership, is incorporated by reference from the 2023 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accounting Fees (Item 14) is incorporated by reference from the company's 2023 Proxy Statement[437](index=437&type=chunk)[438](index=438&type=chunk)[439](index=439&type=chunk)[440](index=440&type=chunk)[441](index=441&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=88&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section details all documents filed with the Form 10-K, including consolidated financial statements, schedules, and various corporate and legal exhibits - This section includes the consolidated financial statements and Schedule II - Valuation and Qualifying Accounts[443](index=443&type=chunk)[445](index=445&type=chunk) - Exhibits filed include key corporate documents, the Amended and Restated Credit Agreement, the **ETANCO** Securities Purchase Agreement, and various management compensation plans[447](index=447&type=chunk)[449](index=449&type=chunk)

Simpson Manufacturing Co., Inc. (NYSE:SSD) Q4 2022 Earnings Conference Call February 6, 2023 5:00 PM ET Company Participants Kim Orlando - ADDO Investor Relations Mike Olosky - President and Chief Executive Officer Brian Magstadt - Chief Financial Officer Conference Call Participants Daniel Moore - CJS Kurt Yinger - D.A. Davidson Julio Romero - Sidoti & Company Operator Greetings, and welcome to the Simpson Manufacturing Co. Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in ...

Acquisition and Integration - The Company completed the acquisition of ETANCO for $805.4 million, enhancing its market presence in Europe and expanding its product portfolio[113]. - The Company expects to achieve annual operating income synergies of approximately $30.0 million post-integration of ETANCO[114]. - The Company believes net sales will likely increase during the remainder of fiscal year 2022, even if demand decreases, due to the addition of ETANCO[122]. - Europe sales increased 104.1% to $111.9 million for the quarter ended September 30, 2022, primarily due to the acquisition of ETANCO, which contributed $67.5 million in net sales[128]. - The Company expects to incur additional costs in 2022 as it continues to integrate ETANCO into its European operations[148]. Financial Performance - Net sales increased by 42.1% to $1,640.5 million from $1,154.7 million, driven by the acquisition of ETANCO contributing $147.8 million in net sales[148]. - Consolidated net income was $88.2 million, including a $1.8 million loss from ETANCO, compared to $73.8 million in the previous year[139]. - Net income rose to $276.4 million compared to $196.7 million, with diluted earnings per share increasing to $6.40 from $4.52[154]. - Income from operations increased by $27.1 million, primarily due to higher gross profit, despite increased operating expenses[148]. - Income from operations increased by $125.9 million, driven by higher sales and gross profit[161]. Sales and Revenue Growth - Wood construction product sales increased by 32.1% for the quarter ended September 30, 2022, while concrete construction product sales rose by 11.4% compared to the same period in 2021[126]. - North America net sales increased 29.3% to $437.8 million, driven by product price increases and higher sales volumes[143]. - Full phased-in product price increases for 2022 could result in an additional $300.0 million in net sales compared to 2021[126]. - Net sales surged by 90.7% due to the acquisition of ETANCO, contributing $147.8 million[161]. - Net sales increased by 34.7%, primarily due to product price increases and slightly higher sales volumes[161]. Cost and Margin Analysis - The Company anticipates gross margin and operating margin compression for the remainder of fiscal year 2022 due to rising raw material costs[126]. - Gross profit increased 23.5% to $244.5 million, while gross margins decreased to 44.2% from 49.9% due to the lower margin profile of ETANCO and higher raw material costs[135]. - The Company expects operating margin to be in the range of 20.0% to 21.0%, with integration and transaction costs for ETANCO estimated at $16.0 to $18.0 million[133]. - Gross profit increased by 33.0% to $740.6 million from $556.8 million, while gross margins decreased to 45.1% from 48.2% due to the lower margin profile of ETANCO[149]. - Gross margin decreased to 48.4% from 50.2%, attributed to higher raw material costs[161]. Operating Expenses - Research and development expenses increased 17.3% to $17.1 million, primarily due to personnel costs and professional services[136]. - Selling expenses rose 21.3% to $42.5 million, mainly due to increases in personnel, travel, and professional fees[137]. - General and administrative expenses increased 26.2% to $60.3 million, driven by higher depreciation, professional fees, and personnel costs[138]. - Research and development expenses rose by 15.2% to $49.9 million from $43.3 million, primarily due to increases in personnel costs and professional fees[150]. - Selling expenses increased to $124.4 million from $99.1 million, largely due to the ETANCO acquisition adding $12.7 million in selling expenses[151]. - General and administrative expenses increased to $172.5 million from $143.8 million, with the ETANCO acquisition contributing an additional $17.0 million[152]. Cash Flow and Financial Position - Cash and cash equivalents as of September 30, 2022, totaled $309.3 million, up from $301.2 million at December 31, 2021[164]. - Cash provided by operating activities was $263.4 million for the nine months ended September 30, 2022[165]. - Cash used in investing activities was $845.5 million, mainly for the acquisition of ETANCO[166]. - Financing activities provided $586.4 million, primarily from loan proceeds for the ETANCO acquisition[167]. - The company returned $390.8 million to stockholders since 2019, representing 59.1% of free cash flow[169]. Taxation - The effective income tax rate decreased to 25.3% from 26.1%[139]. - The effective income tax rate decreased to 25.3% from 25.9%[153].

Simpson Manufacturing Co., Inc. (NYSE:SSD) Q3 2022 Earnings Conference Call October 24, 2022 5:00 PM ET Company Participants Kim Orlando - ADDO IR Karen Colonias - CEO Brian Magstadt - CFO Conference Call Participants Daniel Moore - CJS Securities Tim Wojs - Baird Kurt Yinger - D.A. Davidson Julio Romero - Sidoti & Company Operator Greetings, and welcome to the Simpson Manufacturing Company Third Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. ...

Investment Highlights - Simpson Manufacturing has returned approximately 64% of its free cash flow to stockholders since 2019, covering the period from January 1, 2019, to June 30, 2022[6, 7] - The company's product availability fill rate in North America is 953%[22] Market Share and Opportunities - Simpson's current share in the wood connectors & truss market is $132 billion, representing 53% of a $25 billion addressable market[25] - In the fasteners market, Simpson has a $489 million share, which is 28% of a $17 billion addressable market[27] - Simpson's share of the concrete market is $267 million, accounting for 21% of a $13 billion addressable market[29] Financial Performance - Simpson Manufacturing's 2021 sales from wood construction were $1361 billion and from concrete construction were $211 million[77] - In 2021, North America accounted for $1363 billion of sales, Europe $197 million, and Asia/Pacific $13 million[78] ETANCO Group Acquisition - The acquisition of ETANCO Group had net sales of approximately €258 million (~$291 million) and an operating income margin of 197% for the twelve months ended September 30, 2021[106] - The net purchase price for ETANCO Group was €725 million (~$800 million)[106]

[Part I - Financial Information](index=3&type=section&id=Part%20I%20-%20Financial%20Information) This section presents the company's financial statements, management's analysis, market risk exposures, and internal control effectiveness [Financial Statements](index=4&type=section&id=Item%201%20-%20Financial%20Statements) The financial statements show substantial growth in assets, liabilities, and revenue, primarily due to the ETANCO acquisition [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the company's balance sheet, income statement, and cash flow highlights for the reporting period Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | **Total Assets** | **$2,485,468** | **$1,484,125** | **+67.5%** | **ETANCO acquisition** | | Goodwill | $492,338 | $134,022 | +267.4% | Acquisition-related goodwill | | Intangible assets, net | $357,698 | $26,269 | +1261.9% | Acquisition-related intangibles | | Inventories | $539,844 | $443,756 | +21.7% | ETANCO inventory & higher costs | | **Total Liabilities** | **$1,200,830** | **$300,127** | **+300.1%** | **New debt for acquisition** | | Long term debt, net | $665,449 | $— | N/A | Debt incurred for ETANCO acquisition | Condensed Consolidated Statement of Earnings Highlights (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,086,802 | $757,922 | +43.4% | | Gross Profit | $496,114 | $358,727 | +38.3% | | Gross Margin | 45.6% | 47.3% | -170 bps | | Income from Operations | $257,514 | $170,112 | +51.4% | | Net Income | $188,145 | $122,872 | +53.1% | | Diluted EPS | $4.34 | $2.82 | +53.9% | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $138,451 | $81,632 | | Net cash used in investing activities | ($833,552) | ($26,214) | | Net cash provided by (used in) financing activities | $631,531 | ($25,603) | | Net decrease in cash | ($55,021) | $31,157 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes provide context on the ETANCO acquisition, segment performance, and financing arrangements - On April 1, 2022, the Company acquired ETANCO for a total purchase consideration of **$805.4 million**, net of cash acquired. For the period from acquisition to June 30, 2022, ETANCO contributed **$80.3 million** in net sales and a net loss of **$2.0 million**, which includes costs for fair-value inventory adjustments and amortization[44](index=44&type=chunk)[46](index=46&type=chunk) Preliminary Purchase Price Allocation for ETANCO (in thousands) | Assets Acquired & Liabilities Assumed | Amount | | :--- | :--- | | Goodwill | $376,908 | | Intangible assets, net | $358,761 | | Inventory | $102,608 | | Property and equipment, net | $87,156 | | Deferred income tax and other long-term liabilities | ($121,360) | | **Total purchase price** | **$824,405** | Net Sales by Product Group (in thousands) | Product Group | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Wood construction products | $950,191 | $657,365 | | Concrete construction products | $136,185 | $99,828 | | **Total** | **$1,086,802** | **$757,922** | Segment Performance - Six Months Ended June 30 (in thousands) | Segment | Net Sales 2022 | Net Sales 2021 | Income from Ops 2022 | Income from Ops 2021 | | :--- | :--- | :--- | :--- | :--- | | North America | $895,140 | $651,120 | $273,064 | $174,215 | | Europe | $184,689 | $100,734 | $4,189 | $8,164 | | Asia/Pacific | $6,973 | $6,068 | $664 | $628 | - To finance the ETANCO acquisition, the company entered into an Amended and Restated Credit Facility on March 30, 2022, consisting of a **$450.0 million** revolving line of credit and a **$450.0 million** term loan. The company borrowed **$250.0 million** from the revolver and the full **$450.0 million** from the term loan[90](index=90&type=chunk) [Management's Discussion and Analysis (MD&A)](index=27&type=section&id=Item%202%20-%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, strategic initiatives, and future outlook, emphasizing the ETANCO acquisition's impact [Overview and Strategic Initiatives](index=28&type=section&id=Overview%20and%20Strategic%20Initiatives) This section outlines the company's strategic focus, including the ETANCO acquisition and key growth initiatives - The acquisition of ETANCO for **$805.4 million** is a key strategic development, expected to expand the company's European market presence and product portfolio. The company anticipates realizing approximately **$30.0 million** in annual run-rate operating income synergies from the integration[116](index=116&type=chunk)[117](index=117&type=chunk) - The company is executing on key growth initiatives announced in March 2021, focusing on organic growth in markets such as original equipment manufacturers (OEM), repair/remodel, mass timber, concrete, and structural steel[119](index=119&type=chunk) - Recent strategic actions include realigning sales teams to five end-use markets, investing in a home building technology venture fund, and forming alliances with Hundegger USA and Structural Technologies to enhance offerings in mass timber and concrete strengthening solutions[122](index=122&type=chunk)[126](index=126&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section details the consolidated and segment-specific financial performance for the current reporting periods Consolidated Results - Q2 2022 vs. Q2 2021 (in thousands) | Metric | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $593,232 | $410,281 | +44.6% | | Gross Profit | $259,333 | $196,446 | +32.0% | | Gross Margin | 43.7% | 47.9% | -420 bps | | Income from Operations | $133,076 | $101,728 | +30.8% | | Net Income | $93,570 | $72,483 | +29.1% | - **North America (Q2):** Net sales grew **30.2%** to **$456.4 million**, primarily due to price increases offsetting rising material costs, on relatively flat volumes. Gross margin decreased to **48.0%** from **49.9%** due to higher material costs[143](index=143&type=chunk)[147](index=147&type=chunk) - **Europe (Q2):** Net sales surged **136.1%** to **$133.2 million**, driven by the ETANCO acquisition (**$80.3 million** in sales). Gross margin fell to **29.3%** from **36.0%**, impacted by a **$9.2 million** inventory fair-value adjustment from the acquisition. The segment reported an operating loss due to **$19.3 million** in acquisition-related costs (inventory adjustment, amortization, integration costs)[131](index=131&type=chunk)[148](index=148&type=chunk) Consolidated Results - Six Months 2022 vs. 2021 (in thousands) | Metric | H1 2022 | H1 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,086,802 | $757,922 | +43.4% | | Gross Profit | $496,114 | $358,727 | +38.3% | | Gross Margin | 45.6% | 47.3% | -170 bps | | Income from Operations | $257,514 | $170,112 | +51.4% | | Net Income | $188,145 | $122,872 | +53.1% | [Business Outlook](index=31&type=section&id=Business%20Outlook) This section provides the company's updated financial projections and key assumptions for the full year 2022 Updated Full-Year 2022 Financial Outlook | Metric | Outlook | | :--- | :--- | | Operating Margin | 19.0% to 21.0% | | Interest Expense | Approx. $10.4 million | | Effective Tax Rate | 25.5% to 26.5% | | Capital Expenditures | $80.0 million to $90.0 million | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flow, financing activities, and capital allocation strategies - The company's primary uses of capital include operations, working capital, capital expenditures, dividends, and stock repurchases. The acquisition of ETANCO was financed with cash on hand and borrowings of **$700 million** under a new credit facility[165](index=165&type=chunk)[171](index=171&type=chunk) Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Cash from Operations | $138,451 | $81,632 | | Cash from Investing | ($833,552) | ($26,214) | | Cash from Financing | $631,531 | ($25,603) | - During the first six months of 2022, the company used **$46.3 million** to repurchase **455,030 shares** of common stock and paid **$21.6 million** in dividends[171](index=171&type=chunk) - Following the ETANCO acquisition, the company has revised its capital return target from **50%** of free cash flow to **35%**[173](index=173&type=chunk) [Market Risk Disclosures](index=39&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from foreign exchange rates, interest rates, and commodity price fluctuations - **Foreign Exchange Risk:** The company has exposure from international operations and purchases from foreign vendors. It uses foreign currency forward contracts to hedge some transactional exposures[176](index=176&type=chunk)[177](index=177&type=chunk) - **Interest Rate Risk:** Exposure results from **$694.4 million** in outstanding variable-rate debt under the new credit agreement. The company uses interest rate swap agreements to convert this to a fixed rate, mitigating cash flow variability[178](index=178&type=chunk)[179](index=179&type=chunk) - **Commodity Price Risk:** The company is exposed to fluctuations in the price of steel, a significant raw material. It does not use derivatives to hedge this risk and relies on price increases to mitigate cost pressures, which may not always be successful[180](index=180&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management confirmed the effectiveness of disclosure controls, with ETANCO's integration into internal controls ongoing - The CEO and CFO concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[181](index=181&type=chunk) - Due to the acquisition of ETANCO on April 1, 2022, the company is integrating its operations. As permitted by SEC guidelines, management will exclude ETANCO from its assessment of internal control over financial reporting for the year 2022[184](index=184&type=chunk) [Part II - Other Information](index=40&type=section&id=Part%20II%20-%20Other%20Information) This section covers legal proceedings, risk factors, share repurchases, and a list of filed exhibits [Legal Proceedings](index=40&type=section&id=Item%201%20-%20Legal%20Proceedings) The company is involved in routine legal proceedings, none of which are expected to have a material adverse effect - The Company is not currently a party to any legal proceedings that it expects, individually or in the aggregate, to have a material adverse effect on its financial condition or results of operations[186](index=186&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A%20-%20Risk%20Factors) No material changes to risk factors have been identified since the last Annual Report on Form 10-K - No material changes to risk factors have been identified since the last Annual Report on Form 10-K[188](index=188&type=chunk) [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **260,285 shares** in Q2 2022, with **$53.7 million** remaining under authorization Common Stock Repurchases - Q2 2022 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | April 2022 | — | — | — | $78,719,058 | | May 2022 | 10 | $110.38 | — | $78,719,058 | | June 2022 | 260,285 | $96.05 | 260,285 | $53,719,063 | [Exhibits](index=42&type=section&id=Item%206%20-%20Exhibits) This section lists key exhibits filed with the Form 10-Q, including credit agreements and certifications - Key exhibits filed include the Amended and Restated Credit Agreement (10.1), the Securities Purchase Agreement for the ETANCO acquisition (10.2), and CEO/CFO certifications (31.1, 31.2)[195](index=195&type=chunk)

Simpson Manufacturing Co., Inc. (NYSE:SSD) Q2 2022 Earnings Conference Call July 25, 2022 5:00 PM ET Company Participants Kim Orlando - ADDO Investor Relations Karen Colonias - CEO Brian Magstadt - CFO Conference Call Participants Daniel Moore - CJS Securities Timothy Wojs - Robert W. Baird Julio Romero - Sidoti & Co. Kurt Yinger - D.A. Davidson Operator Greetings. Welcome to Simpson Manufacturing Co. Inc. Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode ...