Simpson(US:SSD)2026-02-09 23:02Financial Data and Key Metrics Changes - Full year 2025 net sales reached $2.3 billion, an increase of 4.5% from 2024, with growth driven by pricing (3%), acquisitions (1%), and foreign exchange (1%), partially offset by a 1% decline in volume due to weaker housing starts [5][12] - Consolidated net sales for Q4 2025 increased 4.2% year-over-year to $539.3 million, with North America segment net sales up 3% to $416.9 million [17] - Consolidated gross profit increased 3.4% to $235.1 million, resulting in a gross margin of 43.6%, down 30 basis points from Q4 2024 [18] - Adjusted EBITDA for Q4 was $104.7 million, a decrease of 0.9%, resulting in a margin of 19.8% [22] Business Line Data and Key Metrics Changes - North American volumes were down year-over-year, pressured by lower housing starts, with the OEM business delivering strong growth with volume up double digits [7][8] - The component manufacturing business grew with volumes up in the low single digits, driven by new customer acquisitions and expanded capabilities [8] - The commercial business saw flat volumes year-over-year, while the residential business volume declined modestly due to challenging market conditions [10][11] Market Data and Key Metrics Changes - In Europe, full year net sales totaled $499.6 million, up 4.3% year-over-year, with volumes slightly higher compared to 2024 [12] - The North American market faced a decline in housing starts, with expectations of a 2-3% decrease for the year [29][74] - The commercial market is anticipated to be flat to up 1-2% in 2026, while national retail is expected to remain flat to low single digits [40] Company Strategy and Development Direction - The company aims to maintain above-market volume growth relative to U.S. housing starts, with a focus on innovation, customer service, and operational excellence [14][15] - Strategic priorities include expanding digital capabilities and enhancing customer relationships through software and services [9][81] - The company is targeting a 20% operating income margin and plans to return at least 35% of free cash flow to shareholders [25][27] Management's Comments on Operating Environment and Future Outlook - Management expressed a conservative view on the housing market for 2026, expecting flat conditions and potential risks from declining housing starts [29][32] - The company remains optimistic about its ability to outperform the market, citing historical performance and ongoing strategic initiatives [30][31] - Management highlighted the importance of maintaining high customer satisfaction and operational efficiency as key drivers for future success [14][26] Other Important Information - The company achieved a recordable incident rate of less than 1.0 for safety, reflecting its commitment to employee safety [4] - Total operating expenses for 2025 increased by 6.5%, primarily due to variable incentive costs and personnel costs [20] - The company has authorized a new share repurchase program for 2026, reflecting confidence in long-term prospects [24] Q&A Session Summary Question: Can you talk about the upside and downside cases to your outlook for flat North American housing starts? - Management noted a conservative view on the market, expecting flat conditions and potential risks from declining housing starts [29] Question: Can you add some more color to the outlook for growth in Europe? - Management expressed satisfaction with progress in Europe, expecting low single-digit growth and focusing on profitability [33][35] Question: What are the expectations for the commercial side or R&R in the U.S.? - Management anticipates flat to low single-digit growth in the commercial market, with ambitions to outperform housing starts [40][41] Question: Can you elaborate on the gross margin outlook for 2026? - Management expects slightly lower gross margins due to tariff costs and pricing dynamics, with a focus on maintaining operating income margins [42][45] Question: How do you view the impact of steel prices on gross margins? - Management is comfortable with current steel prices and does not expect significant impacts on gross margins for 2026 [60][61] Question: How are customer expectations aligning with market forecasts for 2026? - Management indicated that customer expectations are merging with third-party forecasts, but they remain cautious until a market pickup is observed [62][64]