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SM

Simpson Manufacturing Co., Inc. (SSD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered modest growth with better margins and a clean beat vs consensus: revenue $538.9M (+1.6% Y/Y) and diluted EPS $1.85; gross margin expanded 70 bps to 46.8% and operating margin rose 90 bps to 19.0% . Versus S&P Global consensus, SSD beat on both revenue ($538.9M vs $528.5M*) and EPS ($1.85 vs $1.54*). The beat was aided by a ~$9M contribution from 2024 acquisitions and a favorable prior-year comparison tied to volume discount timing, offsetting modest volume declines .
  • Management reaffirmed full-year 2025 guidance: operating margin 18.5–20.5% (including a $10–$12M benefit from the Gallatin property sale), tax rate 25.5–26.5%, and capex $150–$170M; CFO guided ~$(0.4)M interest expense net for 2025 (largely hedged), with pricing actions effective June 2 intended to keep gross margin roughly flat for the year .
  • Strategic levers: weighted-average ~8% U.S. price increases (effective June 2) to offset multi-year cost inflation and some tariff impact; continued cost discipline and productivity to preserve margins; ongoing progress on Columbus expansion (opened May) and Gallatin fastener facility (H2’25) to reduce tariff exposure and improve lead times .
  • North America outperformed housing starts by ~420 bps (TTM); Europe sales declined Y/Y on FX and cost inflation, but operating income improved on lower opex. Net share repurchases were $25M in Q1 with $75M remaining under the 2025 authorization; regular dividend was $0.28 in Q1, subsequently raised to $0.29 on May 7, 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Margin resilience and expansion: gross margin rose to 46.8% (+70 bps Y/Y) and operating margin to 19.0% (+90 bps Y/Y) aided by cost discipline and a favorable prior-year comparison on volume discounts; Adjusted EBITDA grew 3.8% to $121.8M .
    • North America outperformance and mix: NA gross margin 50.0% (+70 bps Y/Y) and operating margin 24.8% (+50 bps Y/Y); volumes continued to outperform U.S. housing starts by ~420 bps TTM .
    • Clear pricing/tariff playbook: “we implemented target price increases at a weighted average rate of approximately 8% … to offset rising costs and a portion related to current trade policy actions,” effective June 2, while not passing through the full tariff impact .

  • What Went Wrong

    • Europe softness and margin pressure: Europe net sales fell 5.1% Y/Y (FX -$4M); gross margin declined to 35.2% on higher factory/overhead and labor/warehouse costs (partly offset by lower materials) .
    • Modest volume decline and uneven demand cadence: management called out slightly down volumes in North America (absent acquisitions/discount timing) and inconsistent seasonal momentum (Jan/Feb soft; March “okay”) .
    • Macro visibility tempered: housing starts now expected flat to low-single-digit up (vs prior view for low-single-digit up), with pricing partly offsetting incremental tariff costs and inventory cost roll-through; management targets full-year gross margin “essentially flat” Y/Y .

Financial Results

  • Multi-period performance (oldest → newest):
MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue ($M)$530.6 $587.2 $517.4 $538.9
Diluted EPS ($)$1.77 $2.21 $1.31 $1.85
Gross Margin (%)46.1% 46.8% 44.0% 46.8%
Operating Income ($M)$96.1 $124.9 $76.8 $102.3
Operating Margin (%)18.1% 21.3% 14.9% 19.0%
Adjusted EBITDA ($M)$117.3 $148.3 $102.0 $121.8
  • Q1 2025 actuals vs S&P Global consensus:
MetricQ1 2025 Estimate*Q1 2025 Actual
Revenue ($M)$528.5*$538.9
Diluted EPS ($)$1.54*$1.85
# Estimates (Rev / EPS)3 / 1*—

Values retrieved from S&P Global.

  • Segment breakdown (Q1 2025 vs Q1 2024):
SegmentNet Sales ($M) Q1’24Net Sales ($M) Q1’25Gross Margin Q1’24Gross Margin Q1’25Op Income ($M) Q1’24Op Income ($M) Q1’25Op Margin Q1’24Op Margin Q1’25
North America$406.7 $420.7 49.3% 50.0% $98.9 $104.2 24.3% 24.8%
Europe$119.9 $113.9 36.5% 35.2% $8.3 $9.3 6.9% 8.2%
Asia/Pacific$3.9 $4.3 N/MN/M$(0.6) $0.4 N/MN/M
  • Product group mix (Q1 2025 vs Q1 2024):
Product GroupQ1’24 Sales ($M)Q1’25 Sales ($M)
Wood Construction$451.6 $459.4
Concrete Construction$78.7 $77.7
Other$0.3 $1.8
  • KPIs and Balance Sheet/Cash Flow
KPIQ1 2024Q4 2024Q1 2025
TTM U.S. Housing Starts (M)1.426 1.364 1.362
Cash & Equivalents ($M)369.1 239.4 150.3
Total Debt Outstanding ($M)475.9† 388.1 382.5
Cash From Ops ($M)7.9 117.7 7.6
Cash Used in Investing ($M)39.4 59.6 50.5
Share Repurchases ($M)—50.0 25.0
Net Debt ($M)——229.5 (CFO)

† As of 9/30/24: total debt $465.4M; table cell reflects the broader period context from filings .

Guidance Changes

MetricPeriodPrevious Guidance (Feb 10, 2025)Current Guidance (Apr 28, 2025)Change
Operating MarginFY 202518.5%–20.5% (includes Gallatin sale benefit based on $19.1M sale price) 18.5%–20.5% (includes $10–$12M Gallatin sale benefit) Maintained
Effective Tax RateFY 202525.5%–26.5% 25.5%–26.5% Maintained
Capital ExpendituresFY 2025$150–$170M (incl. ~$75M for Columbus/Gallatin) $150–$170M (incl. ~$75M for Columbus/Gallatin) Maintained
Interest Expense (net)FY 2025—~$(0.4)M; hedged by swaps, largely offset by interest income New detail
DividendQ1/Q2 2025$0.28 per share (declared Q4’24; Q1 press release shows $0.28) Raised to $0.29 per share on May 7, 2025 Raised post-Q1

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
Macro/housing startsQ3’24: 2024 starts down LSD; 2025 LSD growth possible . Q4’24: 2025 LSD recovery possible .Outlook tempered to flat to low-single-digit up; H2 weighted .Slightly more cautious near-term; H2 skew maintained.
Pricing & tariffsLimited prior disclosure in Q3/Q4 press releases.~8% weighted average U.S. price increases effective June 2; not fully passing tariffs; aim to keep gross margin ~flat .New pricing action to offset inflation/tariffs.
North America performanceVolumes flat-to-mixed; still above-market growth vs starts .TTM NA volume +420 bps vs starts; outdoor living strong; OEM growth HSD; component manufacturer conversions continue .Sustained outperformance vs starts.
EuropeCosts pressured margins; Q4’24 Europe op margin 0.7% .Sales -5.1% (FX -$4M); op margin improved to 8.2% on lower opex .Improving profitability despite soft demand.
Product mixQ3’24: Wood +0.6%, Concrete +3.1% Y/Y .Wood +1.7% Y/Y; Concrete -1.3% Y/Y .Concrete softness; wood steady.
Capacity/capex2024 capex elevated for Columbus/Gallatin .Columbus opening May; Gallatin H2’25; improves fastener in-sourcing, lead times, reduces tariff exposure .Execution on capacity adds.
Digital/tech2024 acquisitions (Monet, QuickFrames); expanding digital offerings .Reclass of some digital engineering costs to G&A; progress on digital solutions; CSD integration .Building digital capabilities.

Management Commentary

  • “Our first quarter net sales reflected modest growth over the prior year… volume performance in North America once again exceeded U.S. housing starts by approximately 420 basis points over the trailing twelve months.” — CEO Mike Olosky .
  • “We implemented target price increases at a weighted average rate of approximately 8% … effective June 2 … to offset rising costs … and a portion related to … tariffs.” — CEO Mike Olosky .
  • “Our first quarter operating margin expanded by 90 basis points to 19% over last year … Consolidated adjusted EBITDA totaled $121.8 million, an increase of 3.8% year-over-year.” — CEO Mike Olosky .
  • “We believe our business can deliver a 20% operating margin in a growing market environment … and drive EPS growth ahead of net revenue growth.” — CEO Mike Olosky .
  • “Our goal would be to keep our gross margin relatively flat versus a year ago for the whole year.” — CFO Matt Dunn .

Q&A Highlights

  • Housing outlook and guidance: Management reiterated confidence in FY margin guidance, with housing starts now viewed flat to slightly up (H2 weighted) and pricing actions providing flexibility not embedded in initial guide .
  • Pricing/tariff stance: Company is “not passing through the full dollar impact of the tariff,” balancing market conditions and competitiveness; pricing addresses multi-year cost increases plus a portion of tariff impact .
  • Tariff mitigation and sourcing: Gallatin will shift fastener sourcing from ~1/3 in-house to ~50/50, in-sourcing heat treat and coatings to cut lead times and tariff exposure; also evaluating European sourcing options .
  • Capital allocation: Repurchased $25M in Q1; $75M remains on 2025 authorization; steady approach vs large opportunistic buybacks; active but balanced between growth and returns .
  • One-time gain timing: Gallatin property sale gain expected in Q3 .

Estimates Context

  • Versus S&P Global consensus, Q1 2025 revenue beat by ~$10.4M and EPS beat by ~$0.31. Continued above-starts outperformance in NA, acquisitions (+$9M), and favorable prior-year discount timing lifted results; Europe costs/FX remained a headwind, but opex control helped operating income .
  • With new pricing effective June 2 and a reaffirmed FY margin range (including a Q3 one-time gain), Street EPS trajectories may drift higher for Q2–Q3, while gross margin is expected to be roughly flat for the full year due to offsetting cost/tariff mix .
Q1 2025Consensus*Actual
Revenue ($M)$528.5*$538.9
Diluted EPS ($)$1.54*$1.85

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat with durable margin levers: Pricing (effective June 2), productivity, and cost discipline underpin a reaffirmed FY margin guide despite macro/tariff headwinds .
  • Above-market growth vector intact: NA volumes continue to outperform starts; outdoor living and OEM provide incremental growth vectors; component manufacturer conversions continue .
  • Europe is stabilizing: Sales softness persisted, but operating income improved on opex control; operating margin rose to 8.2% vs 6.9% LY .
  • Capacity optionality reduces tariff risk: Columbus opened in May; Gallatin in H2’25 will increase in-sourced fasteners and reduce lead times/tariff exposure—supportive of service levels and margin stability into 2026 .
  • Q3 catalyst: Gallatin property sale gain ($10–$12M) expected in Q3; monitor gross margin progression as tariff-inflated inventory rolls through and pricing ramps .
  • Capital returns steady: $25M repurchased in Q1; $75M remaining authorization for 2025; dividend stepped up to $0.29 in May .
  • Trading setup: Reaffirmed guide + pricing action + Q3 gain create near-term support; watch demand cadence into peak season, pricing realization vs competitive response, and Europe cost trajectory .