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SM

Simpson Manufacturing Co., Inc. (SSD)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered modest top-line growth with net sales up 3.1% to $517.4M and diluted EPS up 2.3% to $1.31; gross margin ticked up 10 bps to 44.0% while operating margin compressed to 14.9% on higher labor, warehouse, and overhead costs .
  • North America net sales rose 4.4% to $404.8M with gross margin steady at 47.0%; Europe saw net sales down 1.5% and operating margin fall to 0.7% amid lower volumes and cost pressures .
  • Management initiated FY2025 guidance: operating margin 18.5%–20.5% (includes expected $10–$12M gain on sale of Gallatin site), tax rate 25.5%–26.5%, and capex $150–$170M; midpoint below the company’s ≥20% operating margin ambition, reflecting cost inflation and mix headwinds .
  • Catalysts: potential pricing actions in response to tariff-related steel and non-steel cost inflation, continued share gains vs. housing starts, and completion of Columbus and Gallatin facilities; dividend maintained at $0.28 per share and $100M 2025 repurchase authorization supports capital returns .

What Went Well and What Went Wrong

What Went Well

  • Above-market volume growth: “volume growth in North America exceeded U.S. housing starts by approximately 600 basis points” TTM; share gains across national retail, component manufacturing, commercial, and OEM end markets .
  • North America margin resilience: Q4 North America gross margin held at 47% YoY, with operating income up 7% to $85.4M despite higher personnel and warehouse/factory costs .
  • Adjusted EBITDA growth in Q4: +9.9% YoY to $102.0M as net sales rose and cost actions moderated investment pace in 2H24 .

What Went Wrong

  • Europe margin pressure: Q4 Europe operating margin fell to 0.7% (from 2.8% YoY) on lower volumes and higher labor/warehouse/freight costs; income from operations declined 75.2% to $0.8M .
  • Consolidated margin compression: operating margin declined to 14.9% from 21.3% in Q3 (and 22.1% in Q2) due to broad-based cost increases and product/customer mix headwinds .
  • Cost inflation and tariffs: management flagged ongoing inflation in production and transportation (ex-steel historically), and potential pricing actions to preserve margins amid evolving tariff landscape on non-U.S. steel and anti-dumping risks .

Financial Results

Consolidated Quarterly Metrics (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Millions)$596.978 $587.153 $517.429
Diluted EPS ($USD)$2.31 $2.21 $1.31
Gross Margin %46.7% 46.8% 44.0%
Operating Income Margin %22.1% 21.3% 14.9%
Adjusted EBITDA ($USD Millions)$152.571 $148.278 $102.035

Q4 Year-over-Year

MetricQ4 2023Q4 2024YoY Change
Net Sales ($USD Millions)$501.710 $517.429 +3.1%
Gross Profit ($USD Millions)$220.498 $227.703 +3.3%
Gross Margin %43.9% 44.0% +10 bps
Operating Income ($USD Millions)$71.555 $76.849 +7.4%
Operating Margin %14.3% 14.9% +60 bps
Net Income ($USD Millions)$54.803 $55.458 +1.2%
Diluted EPS ($USD)$1.28 $1.31 +2.3%
Adjusted EBITDA ($USD Millions)$92.872 $102.035 +9.9%

Segment Breakdown (Q4 2024 vs Q4 2023)

SegmentNet Sales Q4 2023 ($M)Net Sales Q4 2024 ($M)Gross Margin Q4 2023Gross Margin Q4 2024Op Inc Q4 2023 ($M)Op Inc Q4 2024 ($M)Op Margin Q4 2023Op Margin Q4 2024
North America$387.805 $404.752 47.0% 47.0% $79.773 $85.354 20.6% 21.1%
Europe$109.682 $108.071 34.2% 32.3% $3.103 $0.769 2.8% 0.7%
Asia/Pacific$4.223 $4.606 N/M N/M $(0.183) $0.323 N/M N/M

KPIs and Capital Allocation (Q4/FY Context)

KPIQ4 2024 / FY 2024 Value
Cash from Operations (Q4) ($M)$117.7
Cash & Equivalents (12/31/24) ($M)$239.371
Total Debt (12/31/24) ($M)$388.1
Net Debt (12/31/24) ($M)$145.7
Q4 Share Repurchases275,906 shares; $50.0M; $181.22 avg price
2024 Total Repurchases559,179 shares; $100.0M
Dividend$0.28 per share declared Jan 31, 2025; payable Apr 24, 2025

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating Income MarginFY2025Ambition: ≥20% operating margin 18.5%–20.5%; includes benefit from Gallatin property sale Lower vs ambition; cautious on costs/mix
Effective Tax RateFY2025N/A25.5%–26.5% New
Capital ExpendituresFY2025FY2024: $175–$185M (with $90–$100M for Columbus/Gallatin; carryover into 2025) $150–$170M; ~$75M remaining for Columbus and Gallatin Lower vs FY2024 run-rate; project completion in 2025
Interest Expense (Term Loan)FY2025N/A~$6.3M; largely offset by cash/money market interest New
Gallatin Property Sale GainFY2025N/AContract price $19.1M; expected gain $10–$12M New

Note: An 8-K 2.02 for Q4 2024 was not available in the document catalog during the period searched (Jan 1–Mar 31, 2025). The primary earnings press release and call transcripts were used instead .

Earnings Call Themes & Trends

TopicQ2 2024 (7/22)Q3 2024 (10/21)Q4 2024 (2/10)Trend
Housing starts outlook2024 flat-to-down; 2025 mid-single digit growth expected 2024 down low-single digit; 2025 growth, more likely later 2025 low single-digit, 2H-weighted; Zonda reduced outlook to ~2.8% with cautious tone Recovery timing pushed out; more 2H-weighted
Volume vs marketContinue outperforming US starts on an annual basis +500 bps TTM vs US starts +600 bps TTM vs US starts Sustained share gains
Cost inflation & mixMonitoring costs; gross margins fuel growth initiatives Higher overhead/warehouse costs; customer discounts, mix headwinds Inflation in labor/warehouse/tooling; tariffs may drive pricing actions; slight gross margin pressure expected Cost pressure intensifying; evaluating pricing
Europe footprint & marginsDefensive synergies targeted to improve profitability GM down; OI down on higher costs Midterm goal: 15% Europe OI margin; restructuring/severance charges $2.0M in Q4 Optimization ongoing; margins under pressure
Capex & facilities$180–$190M FY24 capex; Columbus/Gallatin spend to carry into 2025 $175–$185M FY24 capex; carryover into 2025 $150–$170M FY25; ~$75M for project completions; Columbus early Q2; Gallatin 2H25 Projects nearing completion
Pricing strategyNot highlightedHigher average price per pound from mix Considering price increases for tariffs/other cost buckets to preserve margins Potential pricing action
Capital returns$50M repurchased in Q2 —$50M repurchased in Q4; 2025 $100M authorization; dividend $0.28 Ongoing buybacks/dividends

Management Commentary

  • “During 2024, we grew revenues modestly… In North America, … volume growth in pounds shipped exceeded U.S. housing starts by approximately 600 basis points. In Europe, sales were flat despite a difficult demand environment.” — Mike Olosky, CEO .
  • “We have revised our financial ambitions to continue above market growth… maintain an operating income margin at or above 20%, and drive EPS growth ahead of net revenue growth… We are working to offset significant input cost increases… and will carefully evaluate avenues to preserve our profitability.” — Mike Olosky .
  • “We have experienced increases in all of our major input costs over the past several years… incremental investments will be very limited until we see a more meaningful improvement in the housing market.” — Matt Dunn, CFO .
  • Pricing/tariffs: “If the tariffs remain, we believe we’ll have to… pass some of that on… if we’re not able to offset other cost increases… we may need to take action to preserve our margins.” — CEO/CFO .
  • Europe: “A 15% operating income margin in Europe remains our midterm goal… assumptions include improved economic conditions… and broader secular trends” — CFO .

Q&A Highlights

  • Housing starts trajectory and margin guide: Low single-digit starts in 2025, second-half-weighted; midpoint (19.5%) implies flat market with continued outperformance; margin path depends on tariffs and tailwinds .
  • Pricing response to tariffs and inflation: Last price increase in 2022 and decrease in Jan 2023; with new cost pressures (tariffs, labor, freight, electricity), company is evaluating pricing to protect margins and service .
  • Share gains visibility: Track record of outperforming starts by ~300 bps over 8 years and ~700 bps over past 3 years; aiming above long-term average again in 2025 .
  • Capex normalization: FY2025 capex $150–$170M with ~half for Columbus/Gallatin; base capex expected thereafter for safety, capacity, additional warehouses, and productivity .
  • Gallatin property sale: expected gain sized at ~$10–$12M, supporting FY2025 operating margin range .

Estimates Context

  • Wall Street consensus (S&P Global) EPS/revenue estimates for Q4 2024 were unavailable at time of analysis due to S&P Global daily request limits; as a result, explicit “vs. estimates” comparisons are not shown [GetEstimates error].
  • Implication: Consensus models likely need to reflect FY2025 operating margin guidance below the long-stated ≥20% ambition, Europe margin pressure, potential pricing actions, and project timing/benefits (Gallatin sale gain) .

Key Takeaways for Investors

  • North America strength offsets Europe weakness; expect continued share gains vs. housing starts, but consolidated margins remain sensitive to labor, warehouse, and overhead costs .
  • FY2025 operating margin guidance (18.5%–20.5%) embeds cautious macro and mix; potential upside if housing starts trend to the higher end and pricing actions offset cost inflation; downside if tariffs and anti-dumping actions elevate input costs without pricing relief .
  • Watch for price actions and timing: management explicitly signaled willingness to take price to defend margins if tariffs/costs persist—an important stock catalyst .
  • Europe remains the margin recovery story; progress on footprint optimization and synergy realization will be key to achieving 15% midterm OI margin target .
  • Capital allocation remains shareholder-friendly: ongoing buybacks ($100M authorization for 2025) and consistent dividend ($0.28), balanced with strategic capex to support growth and service levels .
  • Near-term trading: sentiment may hinge on pricing clarity and H1 demand; medium term thesis: share gains, digital/equipment solutions, and facility expansions support above-market growth with margin recovery as costs normalize .
  • Monitor Gallatin property sale and completion milestones (Columbus early Q2, Gallatin 2H25) for operating leverage and service improvements; gain on sale ($10–$12M) provides incremental FY2025 margin benefit .