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SM

Simpson Manufacturing Co., Inc. (SSD)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid execution with net sales of $631.1M (+5.7% YoY), diluted EPS of $2.47 (+6.9% YoY), gross margin held at 46.7%, and operating margin at 22.2%; management reaffirmed FY25 guidance despite tariff and housing headwinds .
  • Results beat Wall Street consensus: EPS $2.47 vs $2.26*, revenue $631.1M vs $599.4M*, and adjusted EBITDA $159.9M vs $152.4M*; strength driven by pricing (partial month), ~$9M acquisitions, and ~$7M FX in Europe while volumes were largely flat .
  • Europe delivered its highest second-quarter operating margin in over a decade (11.7%) on lower material costs and reduced OpEx; North America grew sales 6.4% with slight gross margin compression from higher warehouse costs .
  • Capital allocation remains disciplined: capex outlook reduced to $140–$160M (from $150–$170M), $35M buybacks in Q2 (216,645 shares), dividend maintained at $0.29/share, and expected $12–$13M gain from Gallatin property sale .
  • Near-term stock reaction catalysts: price increases fully annualize in H2, Gallatin fastener facility opening in Q3 (shifting ~50% fastener production in-house to reduce tariff exposure), and continued share repurchases; key watch items are additional tariff costs and softer housing starts .

What Went Well and What Went Wrong

What Went Well

  • Europe margin expansion: operating margin reached 11.7%, the highest second quarter level in over a decade, aided by lower material costs and disciplined OpEx control .
  • Strategic pricing and acquisitions: NA net sales up 6.4% with ~$9M acquisition contribution and targeted price increases effective June 2; volumes outperformed U.S. housing starts by ~240 bps TTM .
  • Cash generation and returns: Q2 cash from operations of $124.7M enabled $35.0M buybacks and dividend continuity; capex cadence moderated while keeping strategic projects on track .
  • CEO quote: “Our results underscore the strength and resilience of our business model… operating income margin of 22.2%… We remain confident in our ability to execute our strategic plan through the remainder of 2025” .

What Went Wrong

  • Tariff headwinds: new 25% tariffs on certain imports increased costs beyond initial price actions; management is evaluating additional pricing but highlighted affordability dynamics and competition .
  • NA gross margin slight decline to 49.7% (from 50.0%) on higher warehouse costs; consolidated gross margin held flat despite input and labor pressure .
  • Macro softness: management expects a tougher 2H with housing starts down low single digits YoY and did not see meaningful pre-buying ahead of price increases; guidance caution reflects uncertainty .

Financial Results

Headline financials vs prior year and prior quarter

Metric (USD)Q2 2024Q1 2025Q2 2025
Revenue ($ Millions)$596.98 $538.90 $631.06
Diluted EPS ($)$2.31 $1.85 $2.47
Gross Margin %46.7% 46.8% 46.7%
Operating Income Margin %22.1% 19.0% 22.2%
Net Income ($ Millions)$97.83 $77.88 $103.54
Adjusted EBITDA ($ Millions)$152.57 $121.77 $159.89

Actuals vs Wall Street consensus (Q2 2025)

MetricConsensus*Actual
Revenue ($ Millions)$599.40*$631.06
Diluted EPS ($)$2.26*$2.47
Adjusted EBITDA ($ Millions)$152.45*$159.89

Values retrieved from S&P Global.*

Segment performance (Q2 2025 vs Q2 2024)

SegmentNet Sales Q2 2024 ($M)Net Sales Q2 2025 ($M)YoY %Operating Margin Q2 2024Operating Margin Q2 2025
North America$463.02 $492.69 +6.4% 28.5% 27.5%
Europe$129.88 $133.40 +2.7% 9.4% 11.7%
Asia/Pacific$4.08 $4.97 +21.8% N/M N/M

Product sales and product margins

Product GroupNet Sales Q2 2024 ($M)Net Sales Q2 2025 ($M)YoY %
Wood Construction$510.13 $535.56 +5.0%
Concrete Construction$86.45 $94.40 +9.2%
ProductGross Margin Q2 2024Gross Margin Q2 2025
Wood Products47.2% 47.1%
Concrete Products47.5% 45.0%

KPIs and balance sheet

KPI (USD)Q1 2025Q2 2025
Cash from Operations ($M)$7.6 $124.7
Capital Expenditures ($M)$50.5 investing outflow $39.9
Inventory ($M)$618.78 $586.62
Total Debt ($M)$382.5 $376.9
Net Debt ($M)N/A$184.1
Share Repurchases ($M)$25.0 $35.0
Shares Repurchased146,640 216,645
Dividend per share ($)$0.28 $0.29

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating MarginFY 202518.5%–20.5% 18.5%–20.5% Maintained
Effective Tax RateFY 202525.5%–26.5% 25.5%–26.5% Maintained
Capital ExpendituresFY 2025$150M–$170M $140M–$160M Lowered
Gallatin Property Sale BenefitFY 2025$10M–$12M $12M–$13M Raised

Earnings Call Themes & Trends

TopicQ4 2024 (Prev-2)Q1 2025 (Prev-1)Q2 2025 (Current)Trend
Pricing & tariffsCost pressure, margins down YoY Announced price increases effective June 2; tariffs impacting fasteners and select products Tariff costs rose (additional 25% on imports); evaluating further pricing with affordability in mind Tariff headwinds intensifying; price actions staged
Supply chain & domestic fastenersN/ACapex plan includes Gallatin fastener facility Gallatin to enable ~50% in-house fastener production, reducing tariff exposure and improving responsiveness Strategic reshoring to mitigate tariffs
Housing starts outlookPossible low single-digit recovery in 2025 TTM U.S. housing starts down; cautious outlook 2025 U.S. housing starts now expected down low single digits; volumes still above market Softer 2H; above-market volume ambition intact
Europe performanceQ4 op margin 0.7% (weak) Q1 op margin 8.2% Q2 op margin 11.7%, best in over a decade Improving through cost discipline
Digital solutions/softwareN/AReclass of digital engineering costs to G&A; portfolio enhancing customer value Expanded customer base; key enhancements to digital solutions bolstered share gains Ongoing productization, customer adoption
Capital allocationCompleted $100M buyback for 2024; new $100M for 2025 $25M repurchases $35M repurchases; commitment to return ≥35% of FCF to shareholders Consistent return of capital; opportunistic buys
SG&A/headcountN/ACost discipline noted SG&A moderation expected; attrition used to reduce headcount modestly Tight cost control

Management Commentary

  • CEO: “We achieved an operating income margin of 22.2%… Our volumes outperformed U.S. housing starts by approximately 240 basis points… In Europe… operating margin expansion to 11.7%, our highest second quarter level in over a decade.” .
  • CEO on tariffs and pricing: “Targeted price increases… offset some but not all of the incremental tariff-related costs… expansion of tariffs on steel and related metals… could prompt additional pricing actions.” .
  • CFO: “Adjusted EBITDA… $159.6M… effective tax rate 25.8%… net debt $184.1M… capex outlook reduced to $140–$160M including $70–$75M for Columbus and Gallatin.” .
  • Strategy: “Remain committed to returning at least 35% of free cash flow to stockholders… focus on being the partner of choice by providing world-class service, support, and innovation.” .

Q&A Highlights

  • Revenue composition: ~$9M from 2024 acquisitions, ~$7M FX tailwind in Europe, pricing the balance; volumes largely flat in Q2 .
  • Guidance conservatism: Midpoint implies step-down vs H1 as management factors seasonality, additional tariffs post-April price announcement, and macro uncertainty .
  • Pricing realization: Weighted-average ~8% NA list price increase is the right framework; only ~3+ weeks realized in Q2, larger H2 contribution expected if volumes flattish .
  • Tariffs and competition: Additional 25% import tariffs impacting fasteners/anchors; watching competitive moves before additional pricing; connector business mostly U.S. steel .
  • Working capital and inventory: Q2 benefited from inventory reduction; company hedges steel via inventory rather than derivatives; imported item costs rising with tariffs .
  • Headcount & SG&A: Leveraging attrition to lower headcount; continuing cost discipline to sustain ~20% operating margins in slower markets .

Estimates Context

  • SSD beat consensus across key metrics: EPS $2.47 vs $2.26*, revenue $631.1M vs $599.4M*, adjusted EBITDA $159.9M vs $152.4M*. Drivers: partial-month pricing, acquisitions, FX; gross margin steady despite tariffs .
  • Estimate revisions likely: H2 pricing will fully annualize, but tariffs and softer housing starts temper margin trajectory; capex lowered, Gallatin sale benefit raised, supporting EPS resilience vs prior expectations .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Beat-and-raise quality without changing FY targets: Strong Q2 beat on EPS/revenue/EBITDA with guidance reaffirmed, signaling disciplined execution amid macro/tariff headwinds .
  • H2 setup: Price increases should be a bigger tailwind in Q3/Q4, partly offsetting incremental tariffs; watch competitive pricing and affordability constraints .
  • Europe inflection: Multi-quarter progression in Europe margins (8.2% → 11.7%) supports consolidated resilience; continued cost discipline and local market outperformance are positives .
  • Tariff mitigation strategy: Gallatin fastener facility (Q3 opening) and in-house ~50% fastener production should reduce tariff exposure and improve service levels—an operational catalyst .
  • Capital allocation: Reduced capex ($140–$160M) plus buybacks ($35M in Q2) and dividend ($0.29) provide support; expected $12–$13M Gallatin sale gain augments FY profitability .
  • Volume vs market: Volumes continue to outpace U.S. housing starts by ~240 bps TTM; OEM, commercial adhesives/cold-formed steel, and digital solutions underpin share gains .
  • Risk monitor: Additional tariffs, softer housing starts, and warehouse/logistics costs could pressure margins; management is evaluating pricing and moderating SG&A to sustain ~20% operating margin .