Simpson Manufacturing Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 28, 2025

Key Takeaways

  • Positive Sentiment: Net sales rose 5.7% year-over-year to $631.1 million, driven by a 6.4% increase in North America and pricing/acquisition contributions despite flat volumes.
  • Negative Sentiment: Gross margin held at 46.7% despite higher input and labor costs, but newly expanded tariffs on imported steel could force additional price increases and pressure margins.
  • Neutral Sentiment: Full-year guidance was reaffirmed for an 18.5%–20.5% operating margin, with US housing starts now expected to decline in the low single digits for 2025.
  • Positive Sentiment: The company repurchased $35 million of stock in Q2, has $40 million remaining under its $100 million authorization, and remains committed to returning at least 35% of free cash flow to shareholders.
  • Positive Sentiment: Capacity expansions include an upgraded Columbus facility now online and a new Gallatin, Tennessee plant due by year-end to boost domestic fastener production and reduce tariff exposure.
AI Generated. May Contain Errors.
Earnings Conference Call
Simpson Manufacturing Q2 2025
00:00 / 00:00

Transcript Sections

Skip to Participants
Kimberly Orlando
Senior Managing Director at ADDO Investor Relations

Afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's Second Quarter twenty twenty five Earnings Conference Call. Any statements made on this call that are not statements of historical fact are forward looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward looking statements. We encourage you to read the risks described in the company's public filings and reports, which are available on the SEC or the company's corporate website.

Kimberly Orlando
Senior Managing Director at ADDO Investor Relations

Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward looking statements that we make here today, whether as a result of new information, future events or otherwise. On this call, we will also refer to non GAAP measures such as adjusted EBITDA, which is reconciled to the most comparable GAAP measure of net income in the company's earnings press release. Please note that the earnings press release was issued today at approximately 04:15 p. M. Eastern Time.

Kimberly Orlando
Senior Managing Director at ADDO Investor Relations

The earnings press release is available on the Investor Relations page of the company's website at ir.simpsonmfg.com. Today's call is being webcast, and a replay will also be available on the Investor Relations page of the company's website. Now I would like to turn the conference over to Mike Olowski, Simpson's President and Chief Executive Officer.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Thanks, Kim. Good afternoon, everyone, and thank you for joining today's call. With me today is Matt Dunn, our Chief Financial Officer. Today, my remarks will provide an overview of our second quarter performance and highlights from our key end markets. Matt will then walk you through our financials and our fiscal twenty twenty five outlook in greater detail.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Now turning to our results. Our net sales of $631,100,000 reflected growth over the prior year quarter in a challenging residential housing market in both The US and Europe. While our second quarter volumes were relatively flat year on year, our North American volumes once again exceeded US housing starts by approximately two forty basis points over the last twelve months. In North America, net sales totaled $492,700,000 up 6.4% from $463,000,000 last year. Our results included a contribution of roughly $9,000,000 from our twenty twenty four acquisitions.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Additionally, we benefited from a partial month contribution from the price increases that went into effect on June 2. Collectively these items offset our flat volumes. As a reminder, software services and equipment are not included in our volume calculations. Our North American volume results were mixed in the second quarter, so sales to all of our end markets continue to demonstrate at or above market growth on a trailing twelve month basis. The OEM business had a strong quarter with volume up double digits over Q2 twenty twenty four.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

We saw significant growth in solutions for mass timber and continued momentum in off-site construction, including post frame, shed and modular manufacturers. In the commercial business, volumes improved mid single digits year over year, driven by the continued strong performance of our adhesive and cold form steel product lines. Our takeoff services, which generate an accurate bill of material, continue to add value and build customer loyalty helping us win additional cold form steel projects. In the component manufacturer business, we delivered mid single digit volume growth year over year. Our customer centric digital solutions and expanded equipment offering contributed to the above market performance.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

In the second quarter we expanded our customer base and launched key enhancements to our digital solutions portfolio, strengthening existing partnerships and delivering greater value to our customers. Our national retail business experienced relatively flat shipment growth while point of sale performance improved with mid single digit gains. This was driven by new product listings and expanded retail space secured in late twenty twenty four. Growth was primarily fueled by our strong performance in our outdoor accents product line and anchoring products, increased e commerce activity and pro growth initiatives within our two largest retail partners. In the residential business volumes declined slightly versus last year due to continued challenging market conditions.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

We remain focused on driving customer conversions and expanding product lines with a particular emphasis on delivering integrated equipment and software solutions tailored for pro suppliers and billers. Additionally, we're encouraged by the recent momentum in the multifamily market. Finally, I'm proud to share that our dedication to relentless customer service resulted in several renewed partnership agreements with key builders and a supplier award announced in the second quarter from David Weekly Homes. Turning to Europe, our net sales of $133,400,000 increased 2.7% compared to the prior year, but decreased by $2,800,000 on a local currency basis. Although volumes were down year over year, our European business continues to outperform local markets driven by new application launches and recent customer wins.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Consolidated gross margin was 46.7% consistent with the prior year quarter despite higher input and labor costs. As a reminder, on June 2, we implemented targeted price increases in North America in direct response to rising input costs, both material and non material, as well as a portion related to recent trade policy actions. While our supply chain is primarily domestic, we do source certain components including fasteners from countries affected by the newly imposed tariffs. These increases offset some but not all of the incremental tariff related costs as of the date of our price increase announcement resulting in a modest negative impact to gross margin. Looking ahead, the expansion of tariffs on steel and related metals announced in early June could prompt additional pricing actions, which we are currently evaluating.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

However, we believe that disciplined cost management, targeted pricing strategies and ongoing productivity initiatives position us to maintain our gross margins while continuing to make selective investments and enhance customer service. Our second quarter operating margin was relatively flat with the prior year at 22.2%. Consolidated adjusted EBITDA totaled $159,900,000 an increase of 4.8% year over year. Next, I'd like to touch on our three financial ambitions. First, continuing above market growth relative to U.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

S. Housing starts. For 2025, we are updating our assumption for US housing starts to be down in the low single digits compared to 2024. In Europe, housing starts are expected to remain broadly in line with 2024 levels. We are focusing on continuing to grow above the market.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Next, maintaining an operating income margin at or above 20%. In a favorable growing market environment, we are confident in our ability to sustain at least a 20% operating margin. And finally, as a growth focused company with industry leading margins, we believe we can consistently drive EPS growth ahead of net sales growth, as evidenced by our year to date earnings per share increasing by approximately two sixty basis points ahead of our revenue growth. In summary, we delivered a solid quarter with revenue growth and stable volumes that outpaced the broader market despite continued macro housing headwinds. Our solid operating margin and disciplined cost control underscore the resilience of our team and our business model.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

We continue to believe in the prospects of the housing market in the mid to long term. In the short term, we remain focused on being the partner of choice and maintaining our margins in this dynamic operating environment. With that, I'd like to turn the call over to Matt, who will discuss our financial results and outlook in greater detail.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Good afternoon, everyone. Thank you for joining us on our earnings call today. Before I begin, I'd like to mention that unless otherwise stated, all financial measures discussed in my prepared remarks refer to the second quarter of twenty twenty five, and all comparisons will be year over year comparisons versus the second quarter of twenty twenty four. Now turning to our results. Our consolidated net sales increased 5.7% year over year to $631,100,000 Within the North America segment, net sales increased 6.4% to $492,700,000 In Europe, net sales increased 2.7% to $133,400,000 primarily due to the positive effect of approximately $7,000,000 in foreign currency translation, which was partly offset by lower sales volume.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Globally, wood construction product sales were up 5% and concrete construction product sales were up 9.2%. Consolidated gross profit increased 5.7% to $294,500,000 resulting in a gross margin of 46.7%, in line with the second quarter of twenty twenty four. On a segment basis, our gross margin in North America was 49.7%, marginally lower than the 50% reported in the prior year, due primarily to higher warehouse costs as a percentage of net sales. Our gross margin in Europe increased to 36.2% from 35.4, primarily due to lower material costs. From a product perspective, our second quarter gross margin was 47.1% for Wood Products compared to 47.2% and was 45% for concrete products, compared to 47.5%.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Now, turning to expenses. Total Q2 operating expenses were $154,400,000 an increase of 6.5%, driven by higher personnel costs, primarily from our twenty twenty four acquisitions, as well as variable compensation and computer software and hardware costs. As of June 30, our headcount was down slightly from the start of the year. As a percentage of net sales, Q2 twenty twenty five operating expenses were 24.5% compared to 24.3% last year. We are focused on ensuring our spending results in above market growth, while targeting an operating income margin above 20% that is consistent with our long term strategic objective.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Given the current outlook for housing starts and the recent price increases, in addition to the year to date headcount reductions mentioned above, we anticipate the cadence of SG and A investment will continue to moderate. To further detail our second quarter SG and A, our research and development and engineering expenses increased by 4.1% to $20,800,000 Selling expenses increased by 3.6% to $56,400,000 primarily due to higher travel related costs. On a segment basis, selling expenses in North America were up 6.5%, and in Europe, they were down 5.8%. General and administrative expenses increased by 9.4% to $77,200,000 largely as a result of higher personnel costs, including increased variable compensation, and computer hardware and software costs. As a result, our second quarter consolidated income from operations totaled $140,200,000 an increase of 6.1% from $132,200,000 Our consolidated operating income margin was 22.2%, generally consistent with last year at 22.1%.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

In North America, income from operations increased 2.7% to $135,700,000 driven by higher net sales. In Europe, income from operations increased 29% to $15,700,000 due to reduced operating expenses on higher gross margins, including a slight favorability from foreign exchange. This resulted in our highest second quarter operating income margin in more than a decade of 11.7%, compared to 9.4% last year. Our midterm goal in Europe remains an operating income margin of 15%, predicated on improved market conditions. Our second quarter effective tax rate was 25.8%, approximately 50 basis points below the prior year period.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Accordingly, net income totaled $103,500,000 or $2.47 per fully diluted share, compared to $97,800,000 or $2.31 per fully diluted share. Adjusted EBITDA for the second quarter was 159,600,000 an increase of 4.8%, resulting in a margin of 25.3%. Now turning to our balance sheet and cash flow. Our balance sheet remained healthy with cash and cash equivalents totaling $190,400,000 at 06/30/2025, up $40,100,000 from our balance at 03/31/2025, due to higher net income and lower inventory levels. Our debt balance was approximately $374,500,000 net of capitalized finance costs, and our net debt position was $184,100,000 We have $450,000,000 remaining available for borrowing on our primary line of credit.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Our inventory position as of 06/30/2025, was $586,600,000 which was down $32,200,000 compared to our balance as of 03/31/2025, with lower pounds of inventory on hand. Our disciplined capital allocation strategy ensures that our investments are aligned with market dynamics and long term value creation. We generated strong cash flow from operations of $124,700,000 for the second quarter. This enabled us to invest $39,900,000 for capital expenditures, including our investments for facility upgrades and expansions, pay $11,800,000 in dividends to our stockholders and pay down $5,600,000 of our term loan. In addition, we repurchased 216,645 shares common stock at an average price of $161.55 per share for a total of 35,000,000 As of June 30, dollars 40,000,000 remained available for repurchases through year end 2025 under our $100,000,000 authorization.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Next, I'll turn to growth investments. We held the grand opening of our expanded Columbus, Ohio facility in May. The project finished on time and under budget. Our Gallatin, Tennessee facility is scheduled to open in the 2025 and is expected to become fully operational by the end of this year. This facility will play a critical role in helping to support growth and enhance operational efficiency across our fastener product lines.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

As a reminder, this new greenfield expansion will enable us to manufacture approximately 50% of our fastener products in house. This shift to primarily domestic production will reduce our tariff exposure, improve responsiveness to customer demand, enable us to more effectively compete for larger projects with short lead times that we could not historically fulfill with imported passengers. Additionally, we are continuing to integrate our twenty twenty four acquisitions. At the same time, we are evaluating potential M and A opportunities in alignment with our strategic objectives. Next, I'll turn to our 2025 financial outlook.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Based on business trends and conditions as of today, July 28, we are reaffirming our guidance for the full year ending 12/31/2025 as follows. We continue to expect our operating margin to be in the range of 18.5% to 20.5%. Additional key assumptions include our revised expectation for U. S. Housing starts to be down in the low single digit range from 2024 levels.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Additionally, we are expecting a slightly lower overall gross margin based on the recently imposed tariffs, which we anticipate will be partly offset by the price increases that went into effect on June 2, as well as the addition of new facilities as a percentage of net sales. Our margin guidance also includes a projected benefit of 12,000,000 to $13,000,000 from the sale of the original Gallatin, Tennessee property based on a contracted sales price of $19,100,000 Next, interest expense on our term loan, which had borrowings of $374,500,000 as of 06/30/2025, is expected to be approximately $2,000,000 including the benefit from interest rate and cross currency swaps, mitigating substantially all of the volatility from changes in interest rates. Interest on our cash and money markets is expected to offset this expense. Our effective tax rate is estimated to be in the range of 25.5% to 26.5%, including both federal and state income tax rates based on current laws. And finally, we are reducing our capital expenditures outlook to be in the range of $140,000,000 to $160,000,000 which includes approximately $70,000,000 to $75,000,000 for the completion of both the Columbus facility expansion and the new Gallatin Fastener facility.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

In closing, we performed well in the first half of twenty twenty five. We are focused on achieving our financial ambitions through the balance of the year despite ongoing macroeconomic uncertainty, and we'll continue to monitor our investments to ensure that they are aligned with market conditions. We also remain committed to returning at least 35% of our free cash flow to stockholders, reinforcing our emphasis on balancing growth with maximizing stockholder returns. As always, we are focused on being the partner of choice by providing our customers with world class service, support and innovation. With that, I will now turn the call over to the operator to begin the Q and A session.

Operator

Thank you. We will now be conducting a question and answer please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator

One moment please while we poll for questions. Thank you. Our first question comes from the line of Dan Moore with CJS Securities. Please proceed.

Daniel Moore
Director - Research at CJS Securities

Thank you. Good afternoon, Mike and Matt, and thanks for taking the questions.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Good morning, Dan.

Daniel Moore
Director - Research at CJS Securities

Maybe start, just make sure, I heard correctly. I think you said a $9,000,000 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?

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Dan, this is Matt. The $9,000,000 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 $7,000,000 and then pricing was really the balance of it. Volume, largely flat.

Daniel Moore
Director - Research at CJS Securities

Perfect. Thank you. And then margins, obviously, solid quarter generated in op margins of 22 a little over 22%, bringing the H1 margin to nearly 21%. Yet, we're kind of maintaining the full year outlook with 19.5 at the midpoint. I realize there's seasonality.

Daniel Moore
Director - Research at CJS Securities

Q4 is usually lighter, but it implies a bit of a step down. Just are you expecting you talked about maybe the gross margin headwind from tariffs, but is there anything else? And is there maybe a little bit of conservatism built in and kind of an uncertain macro environment?

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Actually, Dan, you said it perfectly well in that last statement, a lot of uncertainty. When you look at the market, the forecast that we get from Zonda and the message we hear from our customers, second half is going to be a little bit tougher. There is a second round of or another round of tariffs that went in impact after we announced our price increase in April that we need to think through. And just a lot of unknowns and we want to make sure that we're doing everything we can to hit our guidance.

Daniel Moore
Director - Research at CJS Securities

Helpful. I appreciate it. And then this is more of a housekeeping question, but maybe just what drove the reclassification of expenses? And does it have is there any implication for the overall level of spend or investment going forward?

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

No, there was a change that we made as we brought on primarily as we brought on a new CTO mid last year, and wanted to align kind of where the work was happening and where the leadership was. So we moved some dollars from one bucket within SG and A to another, but essentially a left pocket, right pocket and no real change in the work being done or the spend, just more of a kind of a housekeeping thing like you said.

Daniel Moore
Director - Research at CJS Securities

Okay. And then maybe one or two quick ones on cash flow and capital allocation. You got a little bit of an inventory benefit in the quarter. How should we think about kind of working capital more generally for the balance of the year? And then you continue to buy back stock, you know, with the stock having pulled back a bit.

Daniel Moore
Director - Research at CJS Securities

I think you said $40,000,000 left on the authorization. The foresee potentially replenishing that? Or is that sort of $100,000,000 as we think about that as what you have left to work with for the balance of the year? Thanks again for taking all the questions.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Yeah, I'll take the last part there on the stock repurchase. We're sitting at $60,000,000 through the front half of the year against our $100,000,000 authorization from the board. Think, like in our outlook, there's a lot of uncertainty, but we remain focused on returning free cash flow to shareholders and being opportunistic when we have that opportunity. So I think the authorization for the year is clear and we're always looking to do what we can there from the standpoint of being opportunistic. So nothing specific there yet, but more to come.

Daniel Moore
Director - Research at CJS Securities

Helpful. And just kind of working capital as we think

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Sorry. Working capital, I think, seasonally, the higher volume quarters for us are Q2 and Q3, where we tend to work down inventory a bit. There's a lot of wildcards out there about steel pricing and inventory levels. So as you know, we tend to try to hedge steel prices through inventory more so than a specific hedging program. So we remain vigilant and opportunistic in the market based on what we see from a steel standpoint and also knowing that the volume forecast is a bit variable.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

So I think not a whole lot different than where we've been from that standpoint. Cost of inventory certainly is going up on imported items from a tariff standpoint. So while the dollars may be going up a bit, the pounds are flat to down.

Daniel Moore
Director - Research at CJS Securities

Got it. Okay. I'll circle back if there's any follow ups. Thank you.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Thanks, Dan. Thanks, Dan.

Operator

Thank you. Our next question comes from the line of Tim Wojs with Baird. Please proceed.

Timothy Wojs
Senior Research Analyst at Robert W. Baird & Co

Hey, guys. Good afternoon. Nice job.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Hey, Dan. Good afternoon, Tim.

Timothy Wojs
Senior Research Analyst at Robert W. Baird & Co

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

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

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 two of the big acquisitions from last year, they don't factor into volume calculation. And then the last piece is a little bit of exchange rate help coming from Europe.

Timothy Wojs
Senior Research Analyst at Robert W. Baird & Co

Okay. But I guess in North America, I mean, I guess what I'm trying to get at is you only had a couple of weeks of price, I think in the quarter. So I'm just trying to square the 5% with only a couple of weeks of price relative to your pricing increasing kind of flat volumes. It seems like there's something there that I'm missing.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Tim, if you look at year to date volumes, North America, we are down roughly 1% versus prior year.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Year to date basis. Year to date.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Yeah, year to date down 1% versus prior year North American volumes.

Timothy Wojs
Senior Research Analyst at Robert W. Baird & Co

So the price contribution was like mid single digits in the quarter?

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Yes, think that's right. I mean, volume on the quarter, I think it's up slightly in North America because we were down a little bit in the first quarter. So maybe we're getting a point of volume in North America, getting a point from the acquisitions and then the balance is pretty much pricing in the quarter.

Timothy Wojs
Senior Research Analyst at Robert W. Baird & Co

Okay. Okay. And the reason I'm clarifying is because I think the price realization actually accelerates or fully anniversaries into the back half of the year, right? So if we would assume kind of flattish volumes, you should actually get more pricing realization in the third and fourth quarter relative to Q2?

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Yes, there was only essentially three weeks and change of the quarter is where the price increase was in effect in Q2.

Timothy Wojs
Senior Research Analyst at Robert W. Baird & Co

Okay. Okay, got you. And then I guess when you're thinking about just kind of a more difficult housing kind of market, has your ability to take share changed at all, either positively or negatively? Or is it pretty similar to one in the market was growing two or three years ago? Do you guys have to do anything differently? Yeah.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Position doesn't change, Tim. I think when the market's growing like crazy, it's all about service and making sure that the job site's up and running. When the market slows down and there's a big emphasis on affordability, it's doing everything we can to help our customers be successful. It's value engineering. It's looking at lower installed cost.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

It's looking at things like our Esterframe saw that helps develop cut packages. It's better software that can develop a more accurate bill of material and reduce waste. So the overall business model I don't think changes much. But what we emphasize in a fast growing market versus a market where maybe you've got more time to and there's more emphasis on affordability, there is a different emphasis within the business model.

Timothy Wojs
Senior Research Analyst at Robert W. Baird & Co

Okay. And then just on the headcount that you mentioned, is it lower because of normal attrition? Or did you guys do something maybe more structural with the organization?

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Yeah. Tim, we've been leveraging attrition to help us get to that point where we're below prior year.

Timothy Wojs
Senior Research Analyst at Robert W. Baird & Co

Sounds like that will continue?

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Yes. I mean, we are committed to the guide and we're committed to getting to 20% with a little bit of help from the market. And until things pick up, we need to be very cost disciplined. And that's one of the ways we're being cost disciplined.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Okay.

Timothy Wojs
Senior Research Analyst at Robert W. Baird & Co

Sounds good. Thank you guys for the answers.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

All right. Thanks, Tim. Thanks, Tim.

Operator

Thank you. Our next question comes from the line of Kurt Yinger with D. A. Davidson. Please proceed.

Kurt Yinger
SVP & Research Analyst at D.A. Davidson Companies

Great. Thanks and good afternoon. 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.

Kurt Yinger
SVP & Research Analyst at D.A. Davidson Companies

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?

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Kurt, you're right. The weighted average age versus 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.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Kurt, when we look at it, 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.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

So in a slow to low growth market, we can get close to that 20% operating income.

Kurt Yinger
SVP & Research Analyst at D.A. Davidson Companies

Got it. And when you think about that modest premium and ensuring you're not out of whack with that kind of traditional spread. I guess from a competitive standpoint, does it feel like or are you seeing increases out there that would allow you to make another move of a smaller magnitude or something like that?

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Mean, Curt, I would say, just stepping back, our connector business is largely sourced with US steel, like the tariffs don't have a direct impact, although impact steel prices. I think where we see bigger tariff impacts is on imported items in fasteners and anchors. And we compete against a number of different competitors in those space, some of which are similar footprint to us and that some is domestically sourced and some is imported, others are exclusively imported. So we're watching what's happening with various competitors in the space, where we're positioned in the market and trying to strike that balance. So obviously, we're getting additional tariff costs from the tariffs that were announced June 4, the additional 25% on imports.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

We have not announced any pricing related to that, obviously, because our price increase was announced in April. So it's something we're watching very closely. Think ultimately, just kind of depends where that all nets out and where we see competition and making sure that we're delivering what we need to deliver, but at the same time, focused on affordability challenges in the market and making sure that we continue to deliver good customer service.

Kurt Yinger
SVP & Research Analyst at D.A. Davidson Companies

Okay. Okay. That's great. And then could you maybe just talk about kind of order progression through the quarter? Anything visible to you guys in terms of maybe a little bit of pre buying ahead of the price increase?

Kurt Yinger
SVP & Research Analyst at D.A. Davidson Companies

We saw May and June starts obviously sequentially weaker. Have you kind of seen that same type of progression on a year over year basis in your business? Can you just talk maybe a little bit more about that from a monthly perspective?

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Yeah. So Kurt, we did not see any substantial pre buying. And when we look at the market forecast for the second half of the year and how our second half is starting, it's very much in line with the market forecast. So things are definitely softer.

Kurt Yinger
SVP & Research Analyst at D.A. Davidson Companies

Okay, perfect. And then just lastly, I think you mentioned customer expansion in the component manufacturer space. Can you maybe just provide a little bit more color there. And then I think you'd also referenced maybe some improvements on the software side. So any detail there would be great.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

Yeah. So we continue, we believe, to make really good progress on the software perspective. We've got a couple areas we're working on to improve the engineering part of our truss solutions. We're also working on tools that can help our customers manage their overall project list. We've got tools that we're working on to help them improve basically the supply chain and the manufacturing of the trusses.

Michael Olosky
Michael Olosky
CEO, President & Director at Simpson Manufacturing

And we're making good progress in that space. When we look at the solutions that we have today, it's a really good fit for a lot of customers. And as a result, we continue to pick up share and deliver the value proposition that we've been delivering everybody else.

Kurt Yinger
SVP & Research Analyst at D.A. Davidson Companies

Okay, perfect. Appreciate the color. Thank you.

Matt Dunn
Matt Dunn
CFO & Treasurer at Simpson Manufacturing

Thanks, Kurt.

Operator

Thank you. There are no further questions at this time. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Executives
Analysts
    • Kimberly Orlando
      Senior Managing Director at ADDO Investor Relations
    • Daniel Moore
      Director - Research at CJS Securities
    • Timothy Wojs
      Senior Research Analyst at Robert W. Baird & Co
    • Kurt Yinger
      SVP & Research Analyst at D.A. Davidson Companies
Powered by Quartr