Simpson(SSD) - 2024 Q3 - Quarterly Results

Financial Highlights The company reported a modest 1.2% increase in Q3 2024 net sales to $587.2 million, while operating income and net income declined by 11.0% and 10.1% respectively Q3 2024 Consolidated Financial Highlights (vs. Q3 2023) | Metric | Q3 2024 (Millions USD) | Q3 2023 (Millions USD) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $587.2 | $580.1 | +1.2 | | Gross Profit | $275.1 | $282.9 | -2.8 | | Gross Profit Margin | 46.8% | 48.8% | -2.0 p.p. | | Income from Operations | $124.9 | $140.2 | -11.0 | | Operating Income Margin | 21.3% | 24.2% | -2.9 p.p. | | Net Income | $93.5 | $104.0 | -10.1 | | Diluted EPS | $2.21 | $2.43 | -9.1 | | Adjusted EBITDA | $148.3 | $158.8 | -6.6 | Management Commentary Management noted modest sales growth despite housing market pressures, with North American retail and OEM strength offsetting residential weakness, while European sales outperformed expectations - In North America, volumes were flat year-over-year, with strength in national retail, component manufacturer, and OEM markets offsetting weakness in residential and commercial sectors[3] - European sales increased modestly, outperforming the market due to new customer wins and product applications[3] - The company is actively working to align costs with market conditions to improve profitability, which is currently below expectations[4] - The 2024 outlook for U.S. housing starts is now expected to be down in the low single-digit range from 2023, with European housing starts expected to be down in the high single-digit range[4] Segment Performance Both North America and Europe segments reported modest sales growth in Q3 2024, but profitability declined across both regions due to margin compression and increased expenses North America Segment North America net sales rose 1.0% to $461.4 million, but gross margin declined to 49.5% and operating income fell 9.1% due to higher costs North America Q3 2024 Performance (vs. Q3 2023) | Metric | Q3 2024 (Millions USD) | Q3 2023 (Millions USD) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $461.4 | $456.8 | +1.0 | | Gross Margin | 49.5% | 51.8% | -2.3 p.p. | | Income from Operations | $123.3 | $135.6 | -9.1 | Europe Segment Europe net sales increased 1.8% to $121.2 million, but gross margin contracted to 36.6% and operating income decreased 18.2% due to higher costs Europe Q3 2024 Performance (vs. Q3 2023) | Metric | Q3 2024 (Millions USD) | Q3 2023 (Millions USD) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $121.2 | $119.0 | +1.8 | | Gross Margin | 36.6% | 37.9% | -1.3 p.p. | | Income from Operations | $12.6 | $15.5 | -18.2 | Corporate Developments The company completed two strategic acquisitions in Q3, Monet DeSauw Inc. for $48.5 million and QuickFrames USA, expanding capabilities in truss and commercial construction - Completed the acquisition of Monet DeSauw Inc. for approximately $48.5 million, a company specializing in equipment for the truss industry[7] - Completed the acquisition of QuickFrames USA, a manufacturer of structural support systems for North American commercial construction[7] Balance Sheet & Cash Flow As of September 30, 2024, the company held $339.4 million in cash and $465.4 million in debt, with operating cash flow significantly decreasing to $102.5 million Key Balance Sheet & Cash Flow Items (as of Sept 30, 2024) | Metric | Q3 2024 (Millions USD) | Q3 2023 (Millions USD) | | :--- | :--- | :--- | | Cash and Cash Equivalents | $339.4 | - | | Total Debt Outstanding | $465.4 | - | | Cash Flow from Operations | $102.5 | $200.9 | | Cash Flow used in Investing | $106.6 | $18.5 | 2024 Business Outlook The company updated its full-year 2024 outlook, anticipating an operating margin of 19.0-19.5%, an effective tax rate of 25.3-25.8%, and capital expenditures of $175.0-185.0 million Full-Year 2024 Outlook | Metric | Outlook Range (Millions USD) | | :--- | :--- | | Operating Margin | 19.0% to 19.5% | | Effective Tax Rate | 25.3% to 25.8% | | Capital Expenditures | $175.0 to $185.0 | - The capital expenditure forecast includes $90.0 million to $100.0 million for the Columbus, Ohio facility expansion and the new Gallatin, Tennessee fastener facility[10] Financial Statements The unaudited condensed consolidated financial statements detail the company's performance for the three and nine months ending September 30, 2024, including Statements of Operations, Balance Sheets, and Segment/Product Group Information Condensed Consolidated Statements of Operations For the nine months ended September 30, 2024, net sales were nearly flat at $1.715 billion, but gross profit, operating income, and net income all declined year-over-year Year-to-Date Financial Performance (Nine Months Ended Sept 30) | Metric | 2024 (Millions USD) | 2023 (Millions USD) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $1,714.7 | $1,712.1 | +0.2 | | Gross Profit | $798.1 | $823.3 | -3.1 | | Income from Operations | $353.1 | $403.6 | -12.5 | | Net Income | $266.8 | $299.2 | -10.8 | | Diluted EPS | $6.28 | $6.98 | -10.0 | Condensed Consolidated Balance Sheets As of September 30, 2024, total assets increased to $2.90 billion, driven by inventories and property, plant & equipment, while total liabilities and stockholders' equity also rose Key Balance Sheet Items (as of Sept 30, 2024 vs. Dec 31, 2023) | Metric | Sept 30, 2024 (Millions USD) | Dec 31, 2023 (Millions USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $339.4 | $429.8 | | Inventories | $583.4 | $551.6 | | Total current assets | $1,334.8 | $1,312.4 | | Total assets | $2,897.5 | $2,704.7 | | Total current liabilities | $378.0 | $361.3 | | Long-term debt | $442.9 | $458.8 | | Stockholders' equity | $1,863.2 | $1,679.7 | Segment and Product Group Information Q3 2024 sales were primarily North America (78.6%) and Wood Construction (84.2%), with both segments and product groups experiencing profitability declines Q3 2024 Net Sales by Reporting Segment | Segment | Net Sales (Q3 2024, Millions USD) | % of Total | YoY Change (%) | | :--- | :--- | :--- | :--- | | North America | $461.4 | 78.6% | +1.0 | | Europe | $121.2 | 20.6% | +1.8 | Q3 2024 Net Sales by Product Group | Product Group | Net Sales (Q3 2024, Millions USD) | % of Total | YoY Change (%) | | :--- | :--- | :--- | :--- | | Wood Construction | $494.4 | 84.2% | +0.6 | | Concrete Construction | $86.7 | 14.8% | +3.1 | Non-GAAP Financial Measures The company presents Adjusted EBITDA as a non-GAAP measure to evaluate operational performance, which decreased 6.6% to $148.3 million in Q3 2024, with a detailed reconciliation provided - The company defines Adjusted EBITDA as net income before income taxes, adjusted to exclude depreciation and amortization, integration/acquisition costs, interest, and foreign exchange effects, among other items[18] Reconciliation of Net Income to Adjusted EBITDA (Q3) | (In thousands USD) | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net Income | $93,519 | $104,021 | | Provision for income taxes | $32,974 | $36,055 | | Interest (income) expense, net | ($1,668) | ($1,292) | | Depreciation and amortization | $21,276 | $18,180 | | Other* | $2,177 | $1,828 | | Adjusted EBITDA | $148,278 | $158,792 |