SIMPSON MANUFACTURING CO., INC. ANNOUNCES 2024 SECOND QUARTER FINANCIAL RESULTS

Rhea-AI Summary

Simpson Manufacturing Co. (NYSE: SSD) reported its Q2 2024 financial results with net sales of $597.0 million, a slight 0.1% decrease year-over-year. The company's income from operations was $132.2 million, resulting in an operating income margin of 22.1%. Net income per diluted share was $2.31, down from $2.50 in Q2 2023. Despite challenging housing markets in the U.S. and Europe, Simpson's North America segment saw relatively flat sales, while Europe experienced a modest 1.6% increase. The company repurchased $50.0 million of common stock during the quarter and completed the acquisition of Calculated Structured Designs, Inc. Simpson updated its 2024 outlook, projecting an operating margin between 20.0% and 21.0%.

Positive

• Maintained stable net sales of $597.0 million despite challenging housing markets
• Europe net sales increased 1.6% to $129.9 million due to higher sales volumes
• Strong gross margin of 46.7%, although decreased from 48.1% in Q2 2023
• Repurchased $50.0 million of common stock, demonstrating confidence in the company's value
• Completed strategic acquisition of Calculated Structured Designs, Inc. to enhance software solutions

Negative

• Income from operations decreased 8.9% to $132.2 million
• Operating margin declined to 22.1% from 24.3% in Q2 2023
• Net income per diluted share decreased to $2.31 from $2.50 year-over-year
• Cash flow provided by operating activities decreased by $78.2 million to $119.0 million
• Lowered 2024 operating margin outlook to 20.0% - 21.0% from previous estimates

Insights

Financial Analyst

Net Sales and Profit Margins: Simpson Manufacturing's net sales of $597.0 million for Q2 2024, only slightly decreased by <0.1%> compared to the same quarter last year, highlights a stable revenue stream despite challenging market conditions. However, the slight decrease in gross profit margins from 48.1% to 46.7% and operating margins from 24.3% to 22.1% indicates rising operational costs, which could be a red flag for investors. This trend is primarily attributed to higher warehouse and freight costs and increased personnel expenses. Investors should carefully watch these indicators as they have a direct impact on the bottom line.

Share Repurchase and Acquisition: The company's repurchase of $50.0 million worth of its common stock signals confidence from management in the company's long-term value. Additionally, the acquisition of Calculated Structured Designs (CSD) could strategically enhance Simpson's software solutions offering, potentially contributing to future revenue growth. However, the terms of the acquisition were not disclosed which leaves some uncertainty about its immediate financial impact.

Outlook and Guidance: The updated 2024 financial outlook indicates a cautious yet optimistic view. With an estimated operating margin range of 20.0% to 21.0% and capital expenditures increasing significantly due to expansion projects in Ohio and Tennessee, the company is making substantial investments in its infrastructure. While these investments could drive long-term growth, there’s a short-term risk associated with higher capital spending during uncertain market conditions.

Market Research Analyst

Market Conditions and Geographic Performance: The Q2 results reflect a challenging housing market both in the U.S. and Europe, with North America experiencing flat sales volumes and Europe showing a modest increase in net sales by <1.6%>. The decline in North American gross margins from 51.2% to 50.0% due to increased warehouse and freight costs could indicate logistical inefficiencies or rising input costs, which need management attention.

Regional Insights: The European market's slight sales increase despite the difficult environment suggests robust demand for Simpson's solutions-based selling approach. However, the decrease in gross margins in both North America and Europe underscores the need for stringent cost control measures. Monitoring these regional dynamics will be important for investors to gauge the company's adaptability to market conditions.

Strategic Moves: The acquisition of CSD enhances Simpson’s portfolio, potentially positioning it well against competitors by offering integrated solutions. However, the lack of disclosed financial details on the acquisition makes it challenging to assess its immediate financial contribution. Investors should follow subsequent quarterly reports for clarity on this front.

Tech Expert

Acquisition of Calculated Structured Designs: The strategic acquisition of CSD, a software development company, represents a significant step for Simpson Manufacturing in terms of broadening its capability portfolio. By integrating CSD's expertise in engineered wood, engineering, design and building solutions, Simpson can offer more comprehensive and intelligent solutions to its clientele. This move aligns well with the growing trend of digital transformation within the construction and manufacturing sectors, which increasingly rely on advanced software for design and operational efficiencies.

Synergies and Integration: Successful integration of CSD could lead to considerable synergies, enhancing Simpon's competitive edge by combining software solutions with their existing hardware product lines. This could result in improved customer satisfaction and open up new revenue streams. However, integration risks remain and the true impact of this acquisition will be clearer in the coming quarters.

PLEASANTON, Calif., July 22, 2024 /PRNewswire/ -- 

• Net sales of $597.0 million
• Income from operations of $132.2 million, resulting in operating income margin of 22.1%
• Net income per diluted share of $2.31
• Repurchased $50.0 million of common stock during the quarter

Simpson Manufacturing Co., Inc. (the "Company") (NYSE: SSD), an industry leader in engineered structural connectors and building solutions, today announced its financial results for the second quarter of 2024. Refer to the "Segment and Product Group Information" table below for additional segment information (including information about the Company's Asia/Pacific segment and Administrative and All Other segment).

All comparisons below (which are generally indicated by words such as "increased," "decreased," "remained," or "compared to"), unless otherwise noted, are comparing the quarter ended June 30, 2024, with the quarter ended June 30, 2023.

2024 Second Quarter Financial Highlights

• Consolidated net sales of $597.0 million decreased 0.1% from $597.6 million.
  • North America net sales of $463.0 million decreased 0.5% from $465.5 million on relatively flat sales volumes.
  • Europe net sales of $129.9 million increased 1.6% from $127.8 million, primarily due to higher sales volumes, partly offset by price decreases in some regions as well as the negative effect of approximately $0.7 million in foreign currency translation.
• Consolidated gross profit of $278.5 million decreased 3.1% from $287.5 million. Gross margin decreased to 46.7% from 48.1%.
  • North America gross margin decreased to 50.0% from 51.2%, primarily due to higher warehouse and freight costs, as a percentage of net sales, partially offset by efficiency gains in the factories.
  • Europe gross margin decreased to 35.4% from 37.4%, primarily due to higher labor, factory overhead, warehouse and freight costs, as a percentage of net sales.
• Consolidated income from operations of $132.2 million decreased 8.9% from $145.0 million. The decrease was primarily due to lower gross profits noted above and higher operating expenses including: personnel costs resulting from the increase in the number of employees supporting production, engineering and sales activities and professional fees, partially offset by lower incentive compensation. Consolidated operating margin decreased to 22.1% from 24.3%.
  • North America income from operations of $132.1 million decreased 7.9% from $143.4 million. The decrease was primarily due to a decrease in gross profits, as well as increased personnel costs and professional fees.
  • Europe income from operations of $12.1 million decreased 13.1% from $14.0 million, primarily due to decrease in gross profits, as well as higher personnel costs, partially offset by lower integration expenses.
• Net income of $97.8 million, or $2.31 per diluted share of the Company's common stock, decreased 8.7% compared to net income of $107.2 million, or $2.50 per diluted share.
• Adjusted EBITDA¹ of $152.6 million decreased 7.8% compared to $165.6 million.
• Cash flow provided by operating activities decreased approximately $78.2 million from $197.2 million to $119.0 million, due primarily to increases in working capital.
• Cash flow used in investing activities increased approximately $49.1 million from $48.0 million to $97.1 million. Capital expenditures were approximately $79.6 million compared to $37.9 million.

1 Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to U.S. GAAP ("GAAP") net income see the schedule titled "Reconciliation of Net Income to Adjusted EBITDA."

Management Commentary

"Our net sales of $597.0 million were in-line with the prior year quarter in a continued challenging housing market in both the U.S. and Europe," commented Mike Olosky, President and Chief Executive Officer of Simpson Manufacturing Co., Inc. "In North America, both volumes and sales dollars were relatively flat year-over-year with pockets of strength in our OEM, component manufacturer and commercial end markets which were offset by weakness in national retail. In Europe, sales increased modestly year-over-year despite the difficult operating environment driven by our solutions-based selling approach that continues to fuel new customer wins and product applications. We look forward to benefiting from the attainment of defensive synergies in 2024 to drive increased profitability in Europe over time."

Mr. Olosky continued, "While we remain optimistic in the longer-term growth prospects of the housing market, our expectation for modest growth this year has been extended out into 2025 where we expect mid-single digit growth in U.S. housing starts. For 2024, we expect U.S. housing starts to be flat to slightly down and European housing starts to be below prior year. While our strong gross margins continue to fuel our organic growth initiatives, we will monitor the market and control costs accordingly, as was evident during the second quarter. We remain optimistic that execution against our growth strategy will enable us to continue outperforming the U.S. housing market on an annual basis."

Corporate Developments

The Company repurchased 283,273 shares of common stock in the open market at an average price of $176.51 per share, for a total of $50.0 million. As of June 30, 2024, approximately $50.0 million remained available for share repurchase through December 31, 2024 under the Company's previously announced $100.0 million share repurchase authorization.

During the second quarter, the Company completed the acquisition of Calculated Structured Designs ("CSD"), Inc., a software development company providing solutions for the engineered wood, engineering, design and building industries in North America, Australia, and the U.K. The terms of the transaction were not disclosed.

Business Outlook

The Company has updated its 2024 financial outlook based on two quarters of financial information to reflect its latest expectations regarding demand trends, raw material costs and operating expenses. Based on business trends and conditions as of today, July 22, 2024, the Company's outlook for the full fiscal year ending December 31, 2024 is as follows:

• Operating margin is estimated to be in the range of 20.0% to 21.0%.
• The effective tax rate is estimated to be in the range of 24.5% to 25.5%, including both federal and state income tax rates as well as international income tax rates, and assuming no tax law changes are enacted.
• Capital expenditures are estimated to be in the range of $180.0 million to $190.0 million, which includes $90.0 million to $100.0 million for the Columbus, Ohio facility expansion and the new Gallatin,Tennessee fastener facility construction with the remaining spend carrying over into 2025.

Conference Call Details

Investors, analysts and other interested parties are invited to join the Company's second quarter 2024 financial results conference call on Monday, July 22, 2024, at 5:00 pm Eastern Time (2:00 pm Pacific Time). To participate, callers may dial (877) 407-0792 (U.S. and Canada) or (201) 689-8263 (International) approximately 10 minutes prior to the start time. The call will be webcast simultaneously and can be accessed through https://viavid.webcasts.com/starthere.jsp?ei=1677484&tp_key=9ca7c4c9d3 or a link on the Company's website at https://ir.simpsonmfg.com/home/default.aspx. For those unable to participate during the live broadcast, a replay of the call will also be available beginning that same day at 8:00 p.m. Eastern Time until 11:59 p.m. Eastern Time on Monday, August 5, 2024 by dialing (844) 512–2921 (U.S. and Canada) or (412) 317–6671 (International) and entering the conference ID: 13747339. The webcast will remain posted on the Investor Relations section of Simpson's website at ir.simpsonmfg.com for 90 days.

A copy of this earnings release will be available prior to the call, accessible through the Investor Relations section of the Company's website at ir.simpsonmfg.com.

About Simpson Manufacturing Co., Inc.

Simpson Manufacturing Co., Inc., headquartered in Pleasanton, California, through its subsidiary, Simpson Strong-Tie Company Inc., designs, engineers and is a leading manufacturer of wood construction products, including connectors, truss plates, fastening systems, fasteners and shearwalls, and concrete construction products, including adhesives, specialty chemicals, mechanical anchors, powder actuated tools and reinforcing carbon & glass fiber materials. The Company primarily supplies its building product solutions to both the residential and commercial markets in North America and Europe. The Company's common stock trades on the New York Stock Exchange under the symbol "SSD."

Copies of Simpson Manufacturing's Annual Report to Stockholders and its proxy statements and other SEC filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, are made available free of charge on the company's website on the same day they are filed with the SEC. To view these filings, visit the Investor Relations section of the Company's website.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally can be identified by words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "outlook," "target," "continue," "predict," "project," "change," "result," "future," "will," "could," "can," "may," "likely," "potentially," or similar expressions. Forward-looking statements are all statements other than those of historical fact and include, but are not limited to, statements about future financial and operating results, our plans, objectives, business outlook, priorities, expectations and intentions, expectations for sales and market growth, comparable sales, earnings and performance, stockholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, our ongoing integration of ETANCO, our strategic initiatives, including the impact of these initiatives on our strategic and operational plans and financial results, and any statement of an assumption underlying any of the foregoing.

Forward-looking statements are subject to inherent uncertainties, risks and other factors that are difficult to predict and could cause our actual results to vary in material respects from what we have expressed or implied by these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those expressed in or implied by our forward-looking statements include the effect of global pandemics such as the COVID-19 pandemic and other widespread public health crisis and their effects on the global economy, the effects of inflation and labor and supply shortages, on our operations, the operations of our customers, suppliers and business partners, and our ongoing integration of ETANCO, as well as those discussed in the "Risk Factors" and " Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q and other reports we file with the SEC.

We caution that you should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Readers are urged to carefully review and consider the various disclosures made in our reports filed with the SEC that advise of the risks and factors that may affect our business, results of operations and financial condition.

Non-GAAP Financial Measures

This press release includes certain financial information, not prepared in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"). Since not all companies calculate non-GAAP financial information identically (or at all), the presentations herein may not be comparable to other similarly titled measures used by other companies. Further, these measures should not be considered substitutes for the performance measures derived in accordance with GAAP. The Company uses Adjusted EBITDA as an additional financial measure in evaluating the ongoing operating performance of its business. The Company believes adjusted EBITDA allows it to readily view operating trends, perform analytical comparisons, and identify strategies to improve operating performance. Adjusted EBITDA should not be considered in isolation or as a substitute for GAAP financial measures such as net income or any other performance measures derived in accordance with GAAP. See the Non-GAAP Reconciliation of Non-GAAP Financial Measures.

The Company defines adjusted EBITDA as net income (loss) before income taxes, adjusted to exclude depreciation and amortization, integration, acquisition and restructuring costs, goodwill impairment, gain on bargain purchase, net loss or gain on disposal of assets, interest income or expense, and foreign exchange and other expense (income).

 

Simpson Manufacturing Co., Inc. and Subsidiaries UNAUDITED Condensed Consolidated Statements of Operations (In thousands, except per share data)
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net sales	$           596,978		$     597,580		$   1,127,557		$            1,132,010
Cost of sales	318,431		310,114		604,456		591,669
Gross profit	278,547		287,466		523,101		540,341
Research and development and engineering expense	22,708		21,538		44,626		42,284
Selling expense	55,918		50,438		110,417		99,106
General and administrative expense	66,383		68,767		136,577		132,474
Total operating expenses	145,009		140,743		291,620		273,864
Acquisition and integration related costs	1,590		1,859		3,636		3,301
Gain on disposal of assets	(238)		(157)		(436)		(207)
Income from operations	132,186		145,021		228,281		263,383
Interest income (expense), net and other	2,092		(705)		2,443		(1,274)
Other & foreign exchange gain (loss), net	(1,588)		357		381		(42)
Income before taxes	132,690		144,673		231,105		262,067
Provision for income taxes	34,859		37,462		57,847		66,903
Net income	$             97,831		$     107,211		$      173,258		$               195,164
Earnings per common share:
Basic	$                 2.32		$           2.51		$            4.09		$                     4.58
Diluted	$                 2.31		$           2.50		$            4.07		$                     4.55
Weighted average shares outstanding:
Basic	42,251		42,669		42,319		42,640
Diluted	42,418		42,813		42,534		42,857
Cash dividend declared per common share	$                 0.28		$           0.27		$            0.55		$                     0.53
Other data:
Depreciation and amortization	$             19,370		$       18,680		$        38,559		$                 36,045
Pre-tax equity-based compensation expense	$               5,081		$         6,535		$        10,427		$                 11,164

 

Simpson Manufacturing Co., Inc. and Subsidiaries UNAUDITED Condensed Consolidated Balance Sheets (In thousands)
		June 30,				December 31,
		2024		2023		2023
Cash and cash equivalents		$             354,851		$            407,982		$            429,822
Trade accounts receivable, net		377,584		387,917		283,975
Inventories		533,625		523,561		551,575
Other current assets		65,016		53,344		47,069
Total current assets		1,331,076		1,372,804		1,312,441
Property, plant and equipment, net		459,297		375,240		418,612
Operating lease right-of-use assets		84,305		63,358		68,792
Goodwill		497,990		495,065		502,550
Intangible assets, net		352,496		369,649		365,339
Other noncurrent assets		48,197		43,233		36,990
Total assets		$          2,773,361		$         2,719,349		$         2,704,724
Trade accounts payable		$             104,670		$              97,847		$            107,524
Long-term debt, current portion		22,500		22,500		22,500
Accrued liabilities and other current liabilities		233,155		276,601		231,233
Total current liabilities		360,325		396,948		361,257
Operating lease liabilities, net of current portion		69,223		51,560		55,324
Long-term debt, net of current portion and issuance costs		448,171		544,309		458,791
Deferred income tax		93,098		104,113		98,170
Other long-term liabilities		37,743		38,808		51,436
Stockholders' equity		1,764,801		1,583,611		1,679,746
Total liabilities and stockholders' equity		$          2,773,361		$         2,719,349		$         2,704,724

 

Simpson Manufacturing Co., Inc. and Subsidiaries UNAUDITED Segment and Product Group Information (In thousands)
		Three Months Ended						Six Months Ended
		June 30,				%		June 30,				%
		2024		2023		change*		2024		2023		change*
Net Sales by Reporting Segment
	North America	$      463,022		$               465,467		(0.5) %		$   869,771		$   871,797		(0.2) %
	Percentage of total net sales	77.6 %		77.9 %				77.1 %		77.0 %
	Europe	129,877		127,817		1.6 %		249,814		252,031		(0.9) %
	Percentage of total net sales	21.8 %		21.4 %				22.2 %		22.3 %
	Asia/Pacific	4,079		4,296		(5.1) %		7,971		8,182		(2.6) %
		$      596,978		$               597,580		(0.1) %		$ 1,127,556		$  1,132,010		(0.4) %
Net Sales by Product Group**
	Wood Construction	$      507,082		$               515,378		(1.6) %		$   956,593		$   970,137		(1.4) %
	Percentage of total net sales	84.9 %		86.2 %				84.8 %		85.7 %
	Concrete Construction	86,447		81,319		6.3 %		165,177		157,990		4.5 %
	Percentage of total net sales	14.5 %		13.6 %				14.6 %		14.0 %
	Other	3,449		883		N/M		5,786		3,883		49.0 %
		$      596,978		$               597,580		(0.1) %		$ 1,127,556		$  1,132,010		(0.4) %
Gross Profit (Loss) by Reporting Segment
	North America	$      231,581		$               238,245		(2.8) %		$   432,117		$   443,767		(2.6) %
	North America gross margin	50.0 %		51.2 %				49.7 %		50.9 %
	Europe	45,949		47,819		(3.9) %		89,762		94,423		(4.9) %
	Europe gross margin	35.4 %		37.4 %				35.9 %		37.5 %
	Asia/Pacific	1,486		1,820		N/M		2,161		2,744		N/M
	Administrative and all other	(469)		(418)		N/M		(938)		(593)		N/M
		$      278,547		$               287,466		(3.1) %		$   523,102		$   540,341		(3.2) %
Income (Loss) from Operations
	North America	$      132,055		$               143,430		(7.9) %		$   230,960		$   257,823		(10.4) %
	North America operating margin	28.5 %		30.8 %				26.6 %		29.6 %
	Europe	12,145		13,974		(13.1) %		20,402		27,444		(25.7) %
	Europe operating margin	9.4 %		10.9 %				8.2 %		10.9 %
	Asia/Pacific	(302)		379		N/M		(877)		241		N/M
	Administrative and all other	(11,712)		(12,762)		N/M		(22,204)		(22,125)		N/M
		$      132,186		$               145,021		(8.9) %		$   228,281		$   263,383		(13.3) %

	*	Unfavorable percentage changes are presented in parentheses, if any.
	**	The Company manages its business by geographic segment but presents sales by product group as additional information.
	N/M	Statistic is not material or not meaningful.

 

Simpson Manufacturing Co., Inc. and Subsidiaries Reconciliation of Non-GAAP Financial Measures (In thousands) (Unaudited) A reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure, is set forth below.
	Three Months Ended June 30,
	2024		2023
Net Income	$               97,831		$              107,211
Provision for income taxes	34,859		37,462
Interest (income) expense, net and other financing costs	(2,092)		705
Depreciation and amortization	19,370		18,680
Other*	2,603		1,492
Adjusted EBITDA	$             152,571		$              165,550

*Other: Includes acquisition integration and restructuring related expenses, other & foreign exchange loss net, and net loss or gain on disposal of assets.

CONTACT:
Addo Investor Relations
investor.relations@strongtie.com 
(310) 829-5400

 

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SOURCE Simpson Manufacturing Co., Inc.

FAQ

What were Simpson Manufacturing's (SSD) Q2 2024 net sales?

Simpson Manufacturing (SSD) reported net sales of $597.0 million for Q2 2024, a slight decrease of 0.1% compared to Q2 2023.

How did Simpson Manufacturing's (SSD) Q2 2024 earnings per share compare to last year?

Simpson Manufacturing's (SSD) net income per diluted share was $2.31 in Q2 2024, down from $2.50 in Q2 2023, representing a decrease of 7.6%.

What was Simpson Manufacturing's (SSD) operating margin in Q2 2024?

Simpson Manufacturing's (SSD) operating margin in Q2 2024 was 22.1%, down from 24.3% in the same quarter of the previous year.

Did Simpson Manufacturing (SSD) repurchase any shares in Q2 2024?

Yes, Simpson Manufacturing (SSD) repurchased 283,273 shares of common stock for a total of $50.0 million at an average price of $176.51 per share during Q2 2024.

What is Simpson Manufacturing's (SSD) updated operating margin outlook for 2024?

Simpson Manufacturing (SSD) updated its 2024 outlook, estimating an operating margin in the range of 20.0% to 21.0% for the full fiscal year.