Q1 2025 Simpson Manufacturing Co Inc Earnings Call

Speaker Change: [music].

Operator: Greetings and welcome to the Simpson Manufacturing Co Inc. first quarter 2025 earnings conference. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Simpson manufacturing Co Inc. First quarter 2025 earnings conference call. At this time, all participants are in a listen only mode.

Operator: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone key.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star Zero I and telephone keypad. It is now my pleasure to introduce your host Kim Orlando with Investor Relations. Thank you Kim you may begin.

Kimberly Orlando: It is now my pleasure to introduce your host Kim Orlando with congratulations. Thank you, Kim, you may begin.

Michael Olosky: Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's first quarter 2025 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 statement.

Speaker Change: Good afternoon, ladies and gentlemen.

Speaker Change: To Simpson manufacturing Companys first quarter 2025 earnings conference call.

Speaker Change: Any statements made on this call that are not statements of historical fact are forward looking statements.

Speaker Change: 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.

Michael Olosky: 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. 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.

Speaker Change: We encourage you to read the risks described in the company's public filings and reports, which are available on sec's or the company's corporate website.

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.

Michael Olosky: 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 4.15 p.m. Eastern Time. 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.

Speaker Change: 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.

Speaker Change: Please note that the earnings press release was issued today at approximately 415 P M Eastern time.

Speaker Change: The earnings press release is available on the Investor Relations page of the company's website.

Simpson: I R Dot Simpson and that's G dotcom.

Simpson: Today's call is being webcast and a replay will also be available on the Investor Relations page of the company's website.

Michael Olosky: Now I would like to turn the conference over to Michael Olosky, Simpson's President and Chief Executive Officer. Thanks, Kim. Good afternoon, everyone. And thank you for joining today's call.

Speaker Change: Now I would like to turn the conference over to Michael Laski, Simpson's President and Chief Executive Officer.

Speaker Change: Thanks, Kim and good afternoon, everyone and thank you for joining today's call with me today is Matt Don <unk>, Our Chief Financial Officer.

Michael Olosky: With me today is Matt Dunn, our Chief Financial Officer. Today, my remarks will provide an overview of our first quarter performance and highlights from our end market. Matt will then walk you through our financials and fiscal 2025 outlook in greater detail. Now turning to our results, our net sales of $538.9 million dollars reflected modest growth over the prior year in a highly uncertain macroeconomic environment in both the US and Over the past 12 months, I'm pleased to report that our volume performance in North America once again exceeded U.S. housing starts by approximately 420 bases. net sales in North America total $420.7 million up 3.4% $406.7 million last year Results included a contribution of roughly $9 million from our 2024 acquisition.

Michael Laski: Today, My remarks will provide an overview of our first quarter performance and highlights from our end markets.

Michael Laski: He will then walk you through our financials and fiscal 2025 outlook in greater detail.

Michael Laski: Now turning to our results our net sales of $538 $9 million reflected modest growth over the prior year and highly uncertain macroeconomic environment in both the U S and Europe.

Over the past 12 months I'm pleased to report that our volume performance in North America. Once again exceeded U S housing starts by approximately 420 basis points.

Michael Laski: Net sales in North America, telephone and $27 million up three 4% $406 $7 million last year.

Michael Laski: <unk> included a contribution of roughly $9 million from our 2024 acquisitions.

Michael Olosky: and a favorable comparison to prior year net sales, which were negatively affected by the timing of volume discount estimates. Collectively, these items more than offset a modest decline in our volumes. Absent these factors, North American sales were relatively flat year over year. As a reminder, software services and equipment are not included in our volume calculations. Our North American volume results were mixed in the first quarter, though sales to all end markets continue to demonstrate above market growth on a trailing 12-month basis. In the component manufacturing market volumes declined slightly versus last year, we saw solid results from our acquisition of calculated structure designs and made progress aligning operations and sales to prepare for the scalability of our broadened digital solutions offering.

Michael Laski: And a favorable comparison to prior year net sales, which were negatively affected by the timing of volume discount estimates.

Michael Laski: Collectively these items more than offset a modest decline in our volumes absent. These factors North American sales were relatively flat year over year.

Michael Laski: As a reminder, software services and equipment are not included in our buying and calculations.

Michael Laski: Our North American volume results were mixed in the first quarter.

Michael Laski: Sales to all end markets continue to demonstrate above market growth on a trailing 12 month basis.

Michael Laski: And the component manufacturing market volumes declined slightly versus last year.

Michael Laski: We saw solid results from our acquisition of calculated structure designed and made progress aligning operations and sales to prepare for the scalability of our broadened digital solutions offering.

Michael Olosky: We continue to execute our digital solutions roadmaps to satisfy key component manufacturing customers and leverage our equipment offering to reach opportunities in this market. This has resulted in the conversion of several small to midsize truss manufacturing customers in the first quarter. In residential volume performance was down modestly. We continue to focus on conversions and line expansions while also deepening builder partnerships through professional services, digital solutions and equipment. Additionally, our outdoor living category had low double digit growth from a prior year, showing a strong start to the spring building season. We attribute this to our growing product offering and intentional marketing sales efforts to reach pro and DIY customers.

We continue to execute our digital solutions roadmap dissatisfied key component manufacturing customers and leverage our equipment offering to reach opportunities in this market.

Michael Laski: This has resulted in the conversion of several small to mid sized trust manufacturing customers in the first quarter.

Michael Laski: In residential volume performance was down modestly we continued to focus on conversions and line expansions, while also deepening builder partnerships through professional services digital solutions and equipment.

Michael Laski: Additionally, our outdoor living category had low double digit growth over prior year, showing a strong start to the spring building season.

Michael Laski: We attribute this to our growing product offering an intentional marketing sales efforts to reach pro and DIY customers.

Michael Olosky: The national retail market saw mid single digit decreases. We offset a slow market by driving growth in e commerce, new anchor product listings introduced last year, and additional retail space gained in our two largest In OEM, we delivered high single digit volume growth year over year with strong sales growth and mass timber and offsite construction solution. OEM remains a relatively small contributor to our overall revenue, with significant opportunity for share gains. And finally, in the commercial market, we improved volumes broadly across the business resulting in low single digit growth over last year, despite a challenging commercial market.

Michael Laski: The national retail markets saw mid single digit decreases we offset a slow market by driving growth in ecommerce new anchor product listings introduced last year and additional retail space gains in our two largest retailers.

Michael Laski: In OEM, we delivered high single digit volume growth year over year with strong sales growth of mass timber it off site construction solutions.

Michael Laski: OEM remains a relatively small contributor to our overall revenue with significant opportunity for share gains.

Michael Laski: And finally in the commercial market, we improved volumes broadly across the business, resulting in low single digit growth over last year, despite a challenging commercial market.

Michael Olosky: This momentum was driven by the strong performance of our anchor and cold form steel product line. Turning to Europe, our net sales of $113.9 million decreased 5.1% compared to prior year and decreased by $1.3 million on a local currency basis. On a volume basis, we believe our European businesses continue to outperform the local markets, supported by new applications and customer wins. Consolidated gross margin modestly improved to 46.8% from 46.1% in Q1 2024. Despite higher input and labor costs. Additionally, the timing of volume discount estimates just discussed had an unfavorable impact in the prior year. When excluding this factor, gross margin would have been relatively flat year on year.

Michael Laski: This momentum was driven by the strong performance of our anchor and called formed steel product lines.

Turning to Europe, our net sales of $113 $9 million decreased five 1% compared to prior year and decreased by $1.3 million on a local currency basis.

Michael Laski: On a volume basis, we believe our European business has continued to outperform the local markets supported by new applications and customer wins.

Michael Laski: Consolidated gross margin modestly improved to 46, 8% from 46, 1% in Q1 2024, despite higher input and labor cost.

Michael Laski: Additionally, the timing of volume discount estimates just discussed had an unfavorable impact in the prior year.

Michael Laski: When excluding this factor gross margin would've been relatively flat year on year.

Michael Olosky: Further product and customer mix have and will continue to be a gross margin headwind.

Michael Laski: Further product and customer mix have and will continue to be a gross margin headwind.

Michael Olosky: Next, I'd like to take a moment to discuss some recent pricing dynamics in the marketplace. As previously announced, in early April, we implemented target price increases at a weighted average rate of approximately 8% across certain wood connectors, fasteners, and mechanical anchor products in the U.S. Since our last pricing change, which was a decrease a few years back, we have experienced significant increases in our cost, from our cost of goods to labor, energy, transportation and equipment. Additionally, while we are largely domestically sourced, we procure fasteners and a limited number of other products from countries that are subject to the recent announced tariff.

Michael Laski: Next I'd like to take a moment to discuss some recent pricing dynamics in the marketplace as previously announced in early April we implemented targeted price increases at a weighted average rate of approximately 8% of certain wood connectors fasteners and mechanical anchor products in the U S.

Since our last pricing change, which was a decrease a few years back we have experienced significant increases in our cost from a cost of goods to labor energy transportation and equipment.

Michael Laski: Additionally, while we are largely domestically sourced we procure fasteners and a limited number of other products in countries that are subject to the recently announced tariffs.

Michael Olosky: Accordingly, the price increases were an effort to offset both rising costs across non-material and material categories, as well as a portion related to the current Trade Policy Act. The increases will go into effect on June 2, following a 60 day notice period to our customers. We understand that rising prices are especially challenging in a construction market where affordability remains a key concern. Therefore, we have and will continue to minimize additional increase. These price increases combined with strong cost discipline and productivity improvements will help us generally maintain our current gross margins and make selective investments to provide even better customer service.

Michael Laski: Accordingly, the price increases weren't effort to offset those rising costs across non material and material categories as well as a portion related to the current trade policy actions.

Michael Laski: The increases will go into effect on June 2nd following a 60 day notice period to our customers.

Michael Laski: We understand that rising prices are especially challenging in a construction market, where affordability remains a key concern.

Therefore, we have and will continue to minimize additional increases.

Michael Laski: These price increases combined with strong cost discipline and productivity improvements will help us generally maintain our current gross margins make selective investments to provide even better customer service.

Michael Olosky: Our first quarter operating margin expanded by 90 basis points at 19% over the last year, reflecting investments that were more commensurate with our volumes and overall market performance in 2025. consolidated adjusted EBITDA totaled $121.8 million, an increase of 3.8% year over year. Looking ahead we will remain disciplined in cost management to protect our margins while prioritizing the retention of our valued customers and highly skilled workforce to support long term execution.

Michael Laski: Our first quarter operating margin expanded by 90 basis points to 19% over last year, reflecting investments that were more commensurate with our volumes and overall market performance in 2025.

Michael Laski: Consolidated adjusted EBITDA totaled $121 $8 million, an increase of three 8% year over year.

Michael Laski: Looking ahead, we will remain disciplined in cost management to protect our margins, while prioritizing the retention of our valued customers and highly skilled workforce to support long term execution.

Michael Olosky: Next, I'd like to highlight our strategic growth plan in the context of our three financial ambitions, which are continuing above market growth relative to US housing starts, maintaining an operating income margin at or above 20%, and driving EPS growth ahead of net revenue growth. We believe our business can deliver a 20% operating margin in a growing market environment. For 2025, our outlook for US housing starts is to remain flat to up in the low single digit range from 2024 levels, with growth weighted towards the second half of the year. In Europe, housing starts are expected to remain broadly in line with 2024 with more substantial recovery anticipated in 2026.

Next I'd like to highlight our strategic growth plan in the context of our three financial ambitions, which are continuing above market growth relative to U S housing starts maintaining an operating income margin at or above 20%.

Michael Laski: And driving EPS growth ahead of net revenue growth.

Michael Laski: We believe our business can deliver 20% operating margin in a growing market environment for.

Michael Laski: For 2025, our outlook for U S. Housing starts is to remain flat to up low single digit range from 2024 levels with growth weighted towards the second half of the year.

And Europe housing starts are expected to remain broadly in line with 2024 with more substantial recovery anticipated in 2026 and beyond.

Michael Olosky: As a growth focused company with industry leading margins, we believe we can consistently drive EPS growth ahead of net revenue growth. We also remain committed to returning at least 35% of our free cash flow to shareholders, reinforcing our balanced approach to capital allocation.

Michael Laski: It's a growth focused company with industry, leading margins. We believe we can consistently drive EPS growth ahead of net revenue growth.

Michael Laski: We also remain committed to returning at least 35% of our free cash flow to shareholders reinforcing our balanced approach to capital allocation.

Michael Olosky: Before I conclude, I'm proud to share that both customer and employee engagement remains strong as evidenced by recent survey results, showing high levels of satisfaction and connection across both groups. These findings reflect the success of our strategy to inspire our employees and relentlessly serve our customer while also advancing our first two company ambitions. strengthening our values based culture and being the business partner of choice. In summary, we were pleased to deliver above market growth in a challenging environment. Our focus on cost discipline while improving our position in diversified end markets has strengthened our business through the cycle, particularly in a soft housing market.

Michael Laski: Before I conclude I am proud to share that both customer and employee engagement remains strong as evidenced by recent survey results showing high levels of satisfaction connection across both groups.

Michael Laski: Findings reflect the success of our strategy is to inspire employees and relentlessly serve our customer while also advancing our first two company ambitions strengthening our values based culture and being in the business partner of choice.

Michael Laski: In summary, we were pleased to deliver above market growth in a challenging environment.

Michael Laski: Our focus on cost discipline, while improving our position in diversified end markets has strengthened our business through the cycle, particularly in soft housing market.

Michael Olosky: We remain confident in the mid to long term housing outlook and believe Simpson is well positioned to capitalize on future growth.

Michael Laski: We remain confident in the mid to long term housing outlook and believe Sympson is well positioned to capitalize on future growth.

Matt Dunn: With that, I'd like to turn the call over to Matt, who will discuss our financial results and outlook in greater detail. 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 first quarter of 2025, and all comparisons will be year-over-year comparisons versus the first quarter of 2024. Now turning to our results. consolidated net sales increased 1.6% year over year to $538.9 million. Within the North America segment, net sales increased 3.4% to $420.7 million, which includes approximately $1.5 million in negative foreign currency translation.

Michael Laski: With that I'd like to turn the call over to Matt, who will discuss our financial results and outlook in greater detail.

Matt: 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 first quarter of 2025, and all comparisons will be year over year comparisons versus the first quarter of 2024.

Now turning to our results.

Matt: Our consolidated net sales increased one 6% year over year to $538 9 million.

Within the North America segment net sales increased three 4% to $427 million, which includes approximately $1 5 million and negative foreign currency translation.

Matt Dunn: In Europe, net sales declined 5.1% to $113.9 million, primarily due to the unfavorable effect of approximately $4 million in foreign currency translation. Globally, wood construction product sales were up 1.7% and concrete construction product sales were down 1.3%. consolidated gross profit increased 3.1% to $252 million, resulting in a gross margin of 46.8% compared to 46.1%. On a segment basis, our gross margin in North America was 50% marginally higher than the 49.3% reported in the prior year, due primarily to the timing of volume discounts adversely affecting net sales and gross profit in the prior year. Without the benefit from the absence of these discounts, gross margins would have been flat.

Matt: In Europe net sales declined five 1% to $113 9 million, primarily due to the unfavorable effect of approximately $4 million and foreign currency translation.

Matt: Globally wood construction products sales were up one 7% and concrete construction products sales were down one 3%.

Matt: Consolidated gross profit increased three 1% to $252 million, resulting in a gross margin of 46, 8% compared to 46, 1%.

Matt: On a segment basis, our gross margin in North America was 50% marginally higher than the 49, 3% reported in the prior year due primarily to the timing of volume discounts adversely affecting net sales and gross profit in the prior year.

Matt: Without the benefit from the absence of these discounts gross margins would have been flat.

Matt Dunn: gross margin in Europe decreased to 35.2% from 36.5% primarily due to higher factory and overhead as well as labor and warehouse costs which were partly offset by lower material costs all as a percentage of net sales. From a product perspective, our first quarter gross margin was relatively flat at 46% for wood products, and was 49.5% for concrete products compared to 46.5%.

Matt: Our gross margin of Europe decreased to 35, 2% from 36, 5%, primarily due to higher factory and overhead as well as labor and warehouse costs, which were partly offset by lower material costs, all as a percentage of net sales.

Matt: From a product perspective, our first quarter gross margin was relatively flat at 46% for wood products and was 49, 5% for concrete products compared to 46, 5%.

Matt Dunn: Now, turning to expenses. Total Q1 operating expenses were $149.7 million, an increase of 2.1%, primarily due to higher personnel costs and variable compensation. As a percentage of net sales, Q1 2025 operating expenses were 27.8% compared to 27.6%. As Mike indicated, we have seen increases in our major input costs over the past several years. Further, the current tariffs and trade policy, coupled with a run-up in both non-material and material input costs, led us to enact price increases on our products effective June 2nd, the impact of which will be partly reflected in our Q2 results. and recognizing price increases are generally not welcomed.

Matt: Now turning to expenses.

Matt: Q1, operating expenses were $149 7 million, an increase of two 1% primarily due to higher personnel costs and variable compensation.

Matt: As a percentage of net sales Q1, 2025 operating expenses were 27, 8% compared to 27, 6%.

Matt: As Mike indicated we have seen increases in our major input costs over the past several years.

Matt: Further the current tariffs and trade policy, coupled with a run up in both non material and material input costs led us to enact price increases on our products effective June 2nd the impact of which will be partly reflected in our Q2 results.

Matt: And recognizing price increases are generally not welcomed we have worked to minimize them as much as possible by passing on only a portion of the anticipated tariff impacts.

Matt Dunn: We have worked to minimize them as much as possible by passing on only a portion of the anticipated tariff impact. Additionally, we are evaluating sourcing options to mitigate the potential effects of tariff. It will continue to monitor the market in 2025 and will be limiting incremental investments in the business until we see a more meaningful improvement in the housing market.

Matt: Additionally, we are evaluating sourcing options to mitigate the potential effects of tariffs.

Matt: We will continue to monitor the market in 2025, and we will be limiting incremental investments in the business until we see a more meaningful improvement in the housing market.

Matt: To further detail, our first quarter SG&A, our research and development and engineering expenses decreased nine 5% to $19 8 million, primarily due to a reorganization of our it group, which resulted in the movement of approximately $3 4 million of expense from R&D to general and administrative expense.

Matt Dunn: further detail our first quarter SG&A. Our research and development and engineering expenses decreased 9.5% to $19.8 million, primarily due to a reorganization of our IT group, which resulted in the movement of approximately $3.4 million expense from R&D to general and administrative expense. selling expenses decreased modestly by 0.6% to 54.2 million, primarily due to reduced personnel costs, which were partly offset by higher travel costs. On a segment basis, selling expenses in North America were up approximately 0.7% and Europe they were down approximately 5%. general and administrative expenses increased by 7.8% to 75.7 million, largely as a result of the reallocation of it group expenses I just discussed, and higher personal costs of 3.9 million.

Matt: Selling expenses decreased modestly by <unk>, 6% to $54 2 million, primarily due to reduced personnel costs, which were partly offset by higher travel costs.

Matt: On a segment basis selling expenses in North America were up approximately 0.7% in Europe, they were down approximately 5%.

Matt: General and administrative expenses increased by seven 8% to $75 7 million largely as a result of the reallocation of group expenses I, just discussed and higher personnel costs of $3 9 million.

Matt Dunn: As a result, our first quarter consolidated income from operations totaled $102.3 million, an increase of 6.5% from $96.1 million. consolidated operating income margin with 19% up from 18.1% In North America, income from operations increased 5.4% to 104.2 million, primarily due to higher gross profit, which was partly offset by increased personal costs and variable incentive compensation. In Europe, income from operations increased 12.7% to $9.3 million due to reduced operating expenses including variable compensation costs. Operating Income Margin of 15% in Europe remains our midterm goal. As a reminder, this target is predicated on various assumptions, including improved economic conditions and starts in Europe, the realization of offensive synergies .

Matt: As a result, our first quarter consolidated income from operations totaled $102 3 million, an increase of six 5% from $96 1 million or.

Matt: Our consolidated operating income margin was 19% up from 18, 1%.

Matt: In North America income from operations increased five 4% to $104 2 million, primarily due to higher gross profit, which was partly offset by increased personnel costs and variable incentive compensation.

Matt: In Europe income from operations increased 12, 7% to $9 3 million due to reduced operating expenses, including variable compensation costs.

Matt: And operating income margin of 15% and Europe remains our midterm goal.

Matt: As a reminder, this target is predicated on various assumptions, including improved economic conditions and starts in Europe.

Matt: The realization of offensive synergies to <unk>.

Matt Dunn: The continuation of secular trends toward greater wood construction and more stringent environmental regulations in Europe. Our first quarter effective tax rate was 25.5%, approximately 210 basis points above the prior year period. Accordingly, net income totaled $77.9 million, or $1.85 per fully diluted share, compared to $75.4 million, or $1.77 per fully diluted share. Adjusted EBITDA for the first quarter was $121.8 million, an increase of 3.8%, resulting in a margin of 22.6%.

Matt: Continuation of secular trends toward greater wood construction.

And more stringent environmental regulations in Europe.

Matt: Our first quarter effective tax rate was 25, 5% approximately 210 basis points above the prior year period.

Matt: Accordingly, net income totaled $77 9 million or $1 85 per fully diluted share compared to $75 4 million or $1 77 per fully diluted share.

Matt: Adjusted EBITDA for the first quarter was $121 8 million, an increase of three 8%, resulting in a margin of 22, 6%.

Matt Dunn: Now turning to our balance sheet and cash flow. Our balance sheet remained healthy with cash and cash equivalents totaling $150.3 million at March 31, 2025, down $89.1 million from our balance at December 31, 2024, due primarily to capital investments and working capital increases. Our debt balance was approximately $379.8 million net of capitalized finance costs, and our net debt position was $229.5 million. We have 450 remaining available for borrowing on our primary line of credit. Our inventory position as of March 31st 2025 was 618.8 million, which was up 25.6 million compared to our balance as of December 31st 2024, mostly as a result of the higher price per pound from inventory on hand.

Matt: Now turning to our balance sheet and cash flow.

Matt: Our balance sheet remained healthy with cash and cash equivalents totaling $150 3 million at March 31, 2025 down $89 1 million from our balance at December 31, 2024, due primarily to capital investments and working capital increases.

Matt: Our debt balance was approximately $379 8 million net of capitalized finance cost and our net debt position was $229 5 million we.

Matt: We have 450 million remaining available for borrowing on our primary line of credit.

Matt: Our inventory position as of March 31, 2025 was $618 8 million, which was up $25 6 million compared to our balance as of December 31 2024.

Matt: Mostly as a result of the higher price per pound from inventory on hand.

Matt Dunn: Overall pounds in inventory were mostly flat. We generated cash flow from operations of 7.6 million for the first quarter.

Matt: Overall pounds in inventory were mostly flat.

Matt: We generated cash flow from operations of $7 6 million for the first quarter with regard to capital allocation. Our disciplined strategy remains focused on both growth and shareholder returns in the first quarter, we invested $50 5 million for capital expenditures, including our investments for facility upgrades and <unk>.

Matt Dunn: With regard to capital allocation, our discipline strategy remains focused on both growth and shareholder returns. In the first quarter, we invested 50.5 million for capital expenditures, including our investments for facility upgrades and expansions, paid 11.7 million in dividends to our stockholders, and paid down 6.8 million in debt. In addition, we repurchased 146,640 shares of common stock at an average price of $170.48 per share for a total of 25 million. As of March 31, $75 million remained available for repurchases through year-end 2025 under our $100 million authorization. In regard to our growth investments, both the Columbus, Ohio and Gallatin Tennessee projects remain on time and on budget.

Matt: Expansions.

Matt: At $11 7 million in dividends to our stockholders and paid down $6 8 million in debt.

Matt: In addition, we repurchased 146640 shares of common stock at an average price of $170 48 per share for a total of $25 million.

Matt: As of March 31, $75 million remained available for repurchases through year end 2025 under our $100 million authorization.

Matt: In regard to our growth investments, both the Columbus, Ohio, and Gallatin, Tennessee projects remain on time and on budget.

Matt Dunn: As a reminder, these two investments expand our warehouse and manufacturing capacity, ensuring we continue to provide industry leading service and support to our valued customers. The grand opening of our Columbus facility is scheduled for May. Gallatin's new facility is anticipated to open in the second half of 2025. Gallatin will play a strategic role in optimizing our fastener sourcing model. Currently, we manufacture approximately one third of our fasteners in Gallatin with the remaining two thirds sourced from Taiwan. The new greenfield operation will improve this mix closer to 5050 and allows to insource key third party processes such as heat treating and coating.

Matt: As a reminder, these two investments expand our warehouse and manufacturing capacity.

Matt: We continue to provide industry, leading service and support to our valued customers.

Matt: The Grand opening of our Columbus facility is scheduled for May.

Matt: Gallatin is new facility is anticipated to open in the second half of 2025.

Speaker Change: Gallatin will play a strategic role in optimizing our fastener sourcing model currently be manufacturer approximately one third of our fasteners and galison with the remaining two thirds or from Taiwan.

Speaker Change: The new Greenfield operation will improve this mix closer to 50 50 and allow us to in source key third party processes, such as heat treating and coatings.

Matt Dunn: This initiative is expected to reduce tariff exposure and gives a significant advantage in terms of inventory lead time. Separately, we are continuing to integrate our recent 2024 acquisitions which have been performing in line with our expectations. At the same time, we will continue to actively evaluate potential M&A opportunities that accelerate progress on our key growth initiatives and improve our overall operating efficiency.

Speaker Change: This initiative is expected to reduce tariff exposure and gives a significant advantage in terms of inventory lead times.

Speaker Change: Separately, we are continuing to integrate our recent 2024 acquisitions, which have been performing in line with our expectations.

Speaker Change: At the same time, we will continue to actively evaluate potential M&A opportunities that accelerate progress on our key growth initiatives and improve our overall operating efficiencies.

Matt Dunn: Next, I'll turn to our 2025 financial outlook. Based on business trends and conditions as of today, April 28, we are reaffirming our guidance for the full year ending December 31, 2025 as follows. We expect our operating margin to be in the range of 18.5% to 20.5%. Additional key assumptions include US housing starts to be flat to up low single digits from 2024 levels. As a reminder, if housing starts are up low single digits, we'd expect to turn toward the higher end of the range. If the market growth is flat or slightly down, we would expect to be closer to the mid and low end of the range respectively.

Speaker Change: Next I'll turn to our 2025 financial outlook.

Speaker Change: Based on business trends and conditions as of today April 28, we are reaffirming our guidance for the full year ending December 31, 2025 as follows.

Speaker Change: We expect our operating margin to be in the range of 18, 5% to 25% additional key assumptions include.

Speaker Change: U S housing starts to be flat to up low single digits from 2024 levels. As a reminder, if housing starts are up low single digits, we'd expect to trend towards the higher end of the range if.

Speaker Change: If the market growth is flat or slightly down we would expect to be closer to the mid and low end of the range respectively.

Matt Dunn: Additionally, we are expecting a slightly lower overall gross margin based on the addition of new warehouses, as well as increases in labor, factory and tooling as a percentage of net sales, which we anticipate will be partly offset by the price increases that will go into effect June 2. and an ongoing mix headwind from products and customers that continues to impact our margins. Further, our margin guidance includes a projected benefit of $10 to $12 million from the sale of the Gallatin property based on a contracted sales price of $19.1 million. Interest expense on our term loan, which had borrowings of $379.8 million as of March 31, 2025, is expected to be approximately $0.4 million, including the benefit from interest rate and cross currency swaps mitigating substantially all of the volatility from changes in interest rates.

Speaker Change: Additionally, we are expecting a slightly lower overall gross margin based on the addition of new warehouses as well as increases in labor factory and tooling as a percentage of net sales, which we anticipate will be partly offset by the price increases that will go into effect June 2nd.

Speaker Change: And an ongoing mix headwind from products and customers that continues to impact our margins.

Speaker Change: Further our margin guidance includes a projected benefit of $10 million to $12 million from the sale of the Galison property based on a contracted sales price of $19 1 million.

Speaker Change: Next.

Speaker Change: Interest expense on our term loan, which had borrowings of $379 8 million as of March 31 2025.

Speaker Change: It is expected to be approximately 0.4 million, including the benefit from interest rate and cross currency swaps mitigating substantially all of the volatility from changes in interest rates.

Matt Dunn: interest in our cash and money markets is expected to offset this 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 tax laws. And finally, our capital expenditures are estimated to be in the range of $150 million to $170 million, which includes approximately $75 million for the completion of both the Columbus Facility Expansion and the new Gallatin Fastener Facility.

Speaker Change: Interest on our cash and money market is expected to offset this expense.

Speaker Change: 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 tax laws.

Speaker Change: And finally, our capital expenditures are estimated to be in the range of $150 million to $170 million, which includes approximately 75 million for the completion of both the Columbus facility expansion and the new Galaxy faster facility.

Matt Dunn: In closing, Simpson had a solid start to 2025. continue to believe Simpson is poised to execute our strategic plan for the balance of 2025 through ongoing macroeconomic uncertainty. As part of that plan, we will work diligently to ensure that our expense base and investments are aligned with market conditions to ensure the delivery of a strong operating income margin. As always, we will continue to provide our customers with unparalleled service and support. As a result of our significant investments in growth, Simpson is well positioned to continue above market growth.

Speaker Change: In closing Simpson had a solid start to 2025, we continue to believe Sympson is poised to execute our strategic plan for the balance of 2025 through ongoing macroeconomic uncertainty.

Speaker Change: As part of that plan, we will work diligently to ensure that our expense base and investments are aligned with market conditions to ensure the delivery of our strong operating income margin.

Speaker Change: As always we will continue to provide our customers with unparalleled service and support.

Speaker Change: As a result of our significant investments in growth Sympson is well positioned to continue above market growth.

Operator: With that, I will now turn the call over to the operator to begin the Q&A. Thank you. We will now be conducting a question and answer session.

Speaker Change: With that I will now turn the call over to the operator to begin the Q&A session.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Operator: If you would like to ask a question, 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 to remove yourself from the queue.

Speaker Change: Confirmation tone will indicate your line is in the question queue. You May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Daniel Moore: For participants using speaker equipment, it may be necessary to pick up the handset before pressing One moment, please, while we pull for Our first question comes from the line of Daniel Moore with CJS Securities.

Speaker Change: One moment, please while we poll for questions.

Our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Daniel Moore: Please proceed with your Good afternoon, Mike, Matt. Thanks for taking the questions as always. Maybe just start with the outlook. You know, obviously, the guidance unchanged, how is all the tariff noise and related impact to consumer confidence impact did? range, or your outlook in general for US housing starts? I know you mentioned unchanged a couple of times.

Daniel Moore: Good afternoon, Mike Matt.

Speaker Change: Thanks for taking the questions as always maybe just start with the outlook.

Daniel Moore: You know.

Daniel Moore: Obviously the guidance unchanged how has all the tariff noise and related impact to consumer confidence impact did I guess, either a range or your outlook in general for U S. Housing starts I know you mentioned unchanged a couple of times you know it was it.

Michael Olosky: You know, is it more a function of maybe visibility has changed a bit, you know, relative likelihood of kind of the top bottom end of the range, just how are you thinking about housing? We're obviously talking with our customers, getting a lot of input from them, and then we're spending a lot of time with the people that are building market forecasts, and you've still got a lot of different mixed views. I think consistently everybody believes first half's going to be a little bit softer than the second half with the hopes that things pick up, and I think the big driver that we keep hearing from our customers is maybe the possibility of increased interest rate cuts.

Daniel Moore: It's more a function of maybe.

Daniel Moore: Visibility has changed a bit or relative likelihood of kind of the top bottom end of the range. Just how are you thinking about housing relative to maybe you know 60 days ago.

Daniel Moore: Yeah, Great question, Dan. So, we're obviously talking with our customers getting a lot of input from them and we're spending a lot of time with the people that are building market forecasts and you still got a lot of different mixed views.

Daniel Moore: They consistently everybody believes first half is going to be a little bit softer than in the second half with the hopes that things pick up and I think the big driver that we keep hearing from our customers is maybe the possibility of increased interest rate cuts.

Matt Dunn: So when you add it all up, when we came into the year, we were thinking low single digits. We put in there, now our estimate's flat to low single digits. It's kind of how we're thinking about it from a market perspective.

Daniel Moore: Add it all up when we can.

Daniel Moore: Came into the year, we were thinking low single digits.

Daniel Moore: Put in there now are estimates flat to low single digits is kind of how we're thinking about it from a market perspective, Matt you want to talk about how that affects our guidance. Yes. So in terms of our guidance, Dan and we still feel comfortable with the outlook that we provided in Q1, you know looking at the latest forecast outlook.

Daniel Moore: Matt, you wanna talk about how that impacts our guidance? Yeah, sure. In terms of our guidance, Dan, I mean, still feel comfortable with the outlook that we provided in Q1, looking at the latest forecast outlook, , Matt Dunn, Unknown Attendee, Kimberly Orlando, Matt Dunn, Unknown Attendee, Kimberly Orlando, really helpful and then appreciate all the color on the price increase.

Matt: Flat to maybe slightly up as you said from a market perspective, we still feel we can be in that range and obviously the pricing impact that we announced gives us some flexibility that we didn't have visibility of where that was going to be when we gave guidance before so still still feel very confident in the range.

The middle of the fairway so to speak.

Matt: Really helpful and then I appreciate all the color on the price increases.

Michael Olosky: Unknown Speaker Just wondering, you know, what feedback you've gotten at this point, just given the general macro uncertainty, any more pushback than usual? I guess I'm thinking particularly from big box retailers. Um, you know, you've always been able to push through when needed. So just to see if there's any change there. Yeah, I mean, Dan, we try very hard to have a fair price for our products. As you know, we're typically less than 1% of the material house. We like to think we add a lot of value and service and support through our engineering teams, our innovation teams, our sales teams out in the field, and everything we do to provide great service in the out in the field.

Matt: Just wondering you know what feedback you've gotten at this point just given the general macro uncertainty any more pushback unusual I guess I'm thinking, particularly from big box retailers who are.

Matt: You know you've always had been able to push through when needed. So just to see if there's any any.

Matt: Change there in terms of the tone of conversations with customers.

Yes, I mean, Dan we tried very hard to have a fair price for our products. As you know we're typically that's 1% of those material house.

Matt: We'd like to think we have a lot of value and service and support through our engineering teams. Our innovation teams our sales teams out in the field and in everything we do to provide great service and the.

Michael Olosky: So we're working hard to make sure that our customers understand the value that we bring. And we're doing our best to try to offset as much of these costs as we can so that we've got a, you know, an reasonable premium that allows us to invest back into the business to better support our customers.

Matt: Out in the field. So we're working hard to make sure that our customers understand the value that we bring and we're doing our best to try to offset as much of these costs as we can so that we've got a.

Matt: A reasonable premium that allows us to invest back into the business to better support our customers.

Matt Dunn: And I would add, Dan, this is Matt. In terms of our price increase, you know, as we mentioned, we've seen our cost inputs going up over the last couple years. And then obviously, with the recent tariff announcements, but I think just to be clear, we're, we're not passing through the full dollar impact of the tariff, because we recognize, you know, market conditions, the affordability challenges, you know, some of our competitors in terms of where they source from. And so I've been very thoughtful in where we've adjusted the prices and have not passed fully through the tariff impact.

Matt: Dan This is Matt.

Speaker Change: In terms of our price increase.

Speaker Change: And we've seen our cost inputs have gone up over the last couple of years and then obviously with the recent tariff announcements, but I think just to be clear, where we're not passing through the full dollar impact of the tariff because we recognize market condition. The affordability challenges some of our competitors in terms of where they source from and so I've been very.

Speaker Change: Poland, where we've adjusted the prices and have not passed fully through the tariff impact obviously, we'll see where that all nets out after negotiations on tariffs with the governments that are involved.

Daniel Moore: Obviously, we'll see where that all nets out after negotiations on tariffs with the governments that are involved. But just, you know, being very thoughtful of where we take those price increases, because we do need to offset the costs that have gone up over the last several years, including the tariff impacts most recently. make sense.

Speaker Change: Just being very thoughtful of where we take those price increases because we do need to offset the costs have gone up over the last several years, including the tariff impacts most recently.

Certainly makes sense.

Daniel Moore: You mentioned A couple of things you potentially freezing capital investments until housing improves. I assume that's, you know, obviously post the Gallatin and Tennessee Projects, or I should say the Ohio and Tennessee Projects, which are already underway.

Speaker Change: You mentioned.

Speaker Change: A couple of things potentially freezing capital investments until housing improves I assume that's a you know obviously post the gallatin.

Speaker Change: And Tennessee projects, I should say, the Ohio, and Tennessee projects, which are already underway any other.

Michael Olosky: Any other. kind of steps to mitigate potential tariffs or exposure that you're contemplating beyond the Yeah, if you if you look at our single biggest investment, the Gallatin facility, so that certainly is going to help us strike a better balance of locally produced fasteners and eventually some anchors compared to where we are today. So there's some work that we're trying to do there. We're trying to accelerate some equipment that we put in that facility. We also had the option of maybe importing some products from Europe. But I think the thing that we want to do, Daniel, is we're thinking mid and long term on this story.

Speaker Change: Steps to mitigate potential terrorists or exposure.

Speaker Change: That you're contemplating beyond the pricing that you described.

Speaker Change: Yeah. If you look at our single biggest investment the Gallatin facility. So that certainly is going to help us strike a better balance of locally produced fasteners and eventually some anchors compared to where we are today. So there's some work that we're trying to do there and we're trying to accelerate some equipment that we put in that facility. We also had the <unk>.

Speaker Change: <unk> of may be importing some products from Europe.

Speaker Change: But I think the thing that we wanted to do Dan is we're thinking mid and long term on this story as well as trying to balance the short term cost because we don't want to make a bunch of changes than just have everything on new and then maybe the business case doesn't work out as well as we had hoped originally so.

Michael Olosky: As well as trying to balance the short term costs, because we don't want to make a bunch of changes and just have everything undue. And then maybe the business case doesn't work out as well as we had hoped originally. So we're looking at all kinds of options and doing everything we can to manage both the short term and the long term.

Speaker Change: We're looking at all kinds of options and doing everything we can to manage both the short term and the long term.

Daniel Moore: Perfect and last for me and I'll jump back in queue. But just given the strength of the balance sheet, you know, and the pullback in share price, obviously, you're active in Q1. Any changes in terms of the relative order of capital allocation? And how aggressive the area like? buy them back stock. maybe looking at M&A and at least in the near term. Thanks again. Perfect. I'll jump back with any follow ups. Thank you.

Speaker Change: Perfect and last for me and I'll jump back in queue, but just given the strength of the balance sheet.

Speaker Change: The pullback in the share price.

Speaker Change: So you were active in Q1.

Speaker Change: Any changes in terms of the relative order of capital allocation.

Speaker Change: How aggressively are you likely to be buying back stock versus maybe looking at M&A and at least in the near term. Thanks again.

Speaker Change: Yes, again, we were active in the first quarter, we bought back $25 million against our 100 million authorization for 2025% to $75 million left side, we continue to be a desire to return capital to shareholders via share repurchase I think youll see us.

Speaker Change: And kind of stay the course like we've been on the last few years I don't I don't know that we would.

Speaker Change: Jump into any significant opportunistic.

Speaker Change: Repurchase versus what we've already sort of announced as part of the authorization.

Speaker Change: Perfect I'll jump back with any follow ups. Thanks again.

Speaker Change: Thanks, Dan.

Dan: Thank you.

Tim Weiss: Our next question comes from the line of Tim Weiss with Baird, please proceed with your Hey, guys. Good. Good afternoon. Nice. Nice job.

Speaker Change: Our next question comes from the line of Tim Weiss with Baird. Please proceed with your question.

Tim Weiss: Hey, guys. Good good afternoon, nice a nice job.

Tim Weiss: Maybe just for what is the annualized tariff impact that you guys have to absorb without any sort of mitigation? Yeah, so, Tim, when we look at the business, we import a relatively small percentage of the cost of goods from Asia.

Tim Weiss: Maybe just what is the annualized tariffs impact that you guys have to absorb.

Tim Weiss: Any sort of litigation.

Tim Weiss: Yes, so Tim when we look at the business, we import a relatively small percentage of the cost of goods from Asia. So we're not releasing the agent.

Matt Dunn: So we're not releasing the, we're not releasing the exact number. When we look at the price increase that we talked about, it's a weighted average 8%. So that helps us basically manage all the cost increases we've seen over the last three plus years, and pretty much everything but steel, now we see steel going up. And then that also helps us offset part of the tariff. So just to be clear, we are not passing through all of the tariff related costs to our customers. But, you know, bigger, big picture, relatively small percentage of the goods that we sell today come from Europe, come from Asia, sorry, come from Okay, okay, gotcha.

Tim Weiss: Not releasing the exact number when we look at the price increase that we talked about it's a weighted average 8%. So that helps us basically manage all the cost increases we've seen over the last three plus years and pretty much everything but steel now we see steel going up.

Tim Weiss: And then that also helps us offset part of the tariffs. So just to be clear we are not passing through all of the tariff related cost work to our customers, but bigger.

Tim Weiss: Bigger picture relatively small percentage of the goods that we sell today come from come from Asia, sorry confirmation.

Speaker Change: Okay. Okay got you that's helpful. And then I guess, just when you're thinking about the kind of prices.

Matt Dunn: That's helpful. And then, I guess, just when you're thinking about the kind of price, so just, I want to make sure I kind of understand this. So all of the costs outside of tariffs were kind of included in the original guide. And now we kind of have pricing layered in. So obviously, of tariffs, it sounds like it's not a big portion of the number. But all of the costs that you guys had incurred in terms of inflation and things like that, that was largely in the guidance range before, right?

Speaker Change: Just I want to make sure I kind of understand this so all all of the cost outside of tariffs were kind of included in the original guide.

Speaker Change: And now we kind of have pricing layered and so obviously if tariffs it sounds like it's not a big portion of the number but all of the costs that you guys had incurred in terms of inflation and things like that that was largely in the in the guidance range before right.

Matt Dunn: Yes, I'd say you kind of have three factors moving Tim, you have the cost were already in the guidance, the pricing was not, we've announced the pricing, the tariffs weren't in the guidance, we're offsetting part of that with the pricing. And then we've also, you know, when we gave our original guidance, we gave the range, we sort of clarified high end of the range based on low single digit housing starts in the market, middle of the range would be flattish. And then, you know, lower end of the range would be if we saw a decline, I think we sitting where we are today in terms of the housing starts, you know, we first quarter a little bit soft in terms of the market, we believe there's upside in the back half, and we can get to still get to a low single digits, housing starts, market environment.

Speaker Change: Yes, I'd say you kind of have three factors, maybe Tim you have the costs are already in the guidance. The pricing was not we've announced the pricing the tariffs werent in the guidance, we're offsetting part of that with the pricing and then we're also when.

Speaker Change: When we gave our original guidance, we gave the range I mean sort of clarified high end of the range based on St. Low single digit housing starts in the market a middle of the range would be flattish and then you had a lower end of the range would be if we saw a decline I think sitting where we are today in terms of.

Speaker Change: The housing.

Speaker Change: Housing starts we fell.

Speaker Change: First quarter, a little bit soft in terms of the market. We believe there's upside in the back half and we can get to still get to a low single digits.

Matt Dunn: And we hear that from the customers that we talked to, and various forecasters are all over the board a little bit, we still think it's possible. But so we've softened that a little bit in terms of flat to slightly up US housing starts. But yeah, that was all essentially everything was baked into the guide. Except for the pricing and the tariffs. Okay, okay, gotcha.

Speaker Change: Housing starts.

Speaker Change: Market environment, and we hear that from the customers we talked to you in various forecasters are all over the board a little bit we still think it's possible, but so we can soften that a little bit in terms of flat to slightly up.

Speaker Change: U S housing starts, but yeah that was all essentially everything was baked into the guidance that for the pricing and the tariffs.

Speaker Change: Okay. Okay got you and then just to add on.

Matt Dunn: And then just that, um, the gain that you have coming through with Gallatin, is that going to hit in a specific quarter, I just want to make sure that if that's kind of running through the P&L that we get the modeling right on. Yeah, it should hit in the third quarter, Tim. Okay, okay, gotcha.

Speaker Change: The gain that you have coming through with Galton.

Speaker Change: Going to hit in this specific quarter I, just want to make sure that if if that's kind of running through the P&L that we get the modeling right on that yeah. It should hit in the third quarter.

Okay, Okay, Gotcha, Alright, I'll hop back in queue. Thanks, a lot guys.

Tim Weiss: All right, I'll hop back in queue. Thanks a lot, guys. Thank you.

Speaker Change: Okay.

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

Kurt Yinger: Our next question comes from the line of Kurt Yinger with DA Davidson. Please proceed with your Great, thanks and good afternoon, everyone.

Speaker Change: Great. Thanks, and good afternoon, everyone I'm just wanted to start off on the demand side was hoping you could talk about kind of the seasonal progression of volumes maybe.

Kurt Yinger: Just wanted to start off on the demand side was hoping you could talk about kind of the seasonal progression of volumes, maybe moving into March and what you've seen here in early April, as well as you know how consistent that is with kind of what you would expect normally with seasonality, and maybe on a year over year basis as well. It's a good question, Kurt. So as you know, pre COVID, there was a fairly significant difference in seasonality between this second, third quarter and the first and the fourth. During the COVID times, that kind of evened out a little bit.

Speaker Change: Maybe moving into March and what you've seen here in early April as well as you know how consistent that is with kind of what you would expect normally with seasonality and maybe on a year over year basis as well.

Speaker Change: Yeah. Good question, Kurt So as you know pre Covid there was a fairly.

Speaker Change: The significant difference in seasonality between this second and third quarter and the first and the fourth during the Covid times that kind of evened out a little bit and now we're trending back towards that more traditional season seasonality split.

Michael Olosky: And now we're trending back towards that more traditional season seasonality split. So the if we look at it this year, and actually the second half of last year into this year, we're still not seeing big trends, one way or another. October last year was a pretty good month for us. November, December wasn't. January and February were not particularly good months. March was okay. April, you know, let's see on how that plays out. So we're not seeing a consistent pickup in the business. Yet, we do believe that's going to come going forward. Yeah, and then a year over year perspective, Kurt.

Speaker Change: If we look at it this year and actually the second half of last year into this year, we're still not seeing big trends, one way or another.

Speaker Change: Tober last year was a pretty good month for US November December was in January and February were not particularly good months March was Okay. April you know, let's see how that plays out so we're not seeing.

Speaker Change: Consistent pickup in the business yet we do believe that's going to come going forward yes.

Speaker Change: And then a year over year perspective occurred last year Q1, our volume was up I believe 8%. This.

Michael Olosky: Last year, Q1, our volume was up, I believe, 8%. This year, Q1 volume is down slightly. So we definitely had a tough comparison period from a volume standpoint a year ago. As you know, last year, the rest of the year got a little bit softer, both in the market and obviously on our volume. But, you know, to be pretty close to flat on volume in this Q1, compared to Q1 a year ago with what Mike described, which is, you know, January and February were a little soft. There definitely were, you know, some kind of weird weather and things in terms of snow in the southeast and, you know, not being a leap year, one less shipping day, all those things.

Speaker Change: This year Q1 volume is down slightly so.

Speaker Change: We definitely had a tough comparison period from a volume standpoint year ago.

Speaker Change: As you know last year that the rest of the year got a little bit softer in both in the market and obviously on our volume but.

Speaker Change: To be pretty close to flat on volume and this Q1 compared to Q1 year ago with what Mike described which is you know what January and February were a little soft there definitely was some kind of weird weather and things in terms of snow in south eastern.

Speaker Change: Not being a leap year, one less shipping day, all of those things, but overall, a pretty solid volume quarter against a pretty tough comparison, and then as Mike said seasonally generally Q1 is maybe a little bit lower than kind of the core two quarters Q2 Q3.

Kurt Yinger: But overall, you know, pretty solid volume quarter against a pretty tough comparison. And then as Mike said, seasonally, generally, Q1 is maybe a little bit lower than kind of the core two quarters, Q2, Q3. Right. Okay. That's helpful. And then just going back to post March Kurt, usually it's 22, 28, 28, 22 is typically the percentage of our year. Yeah, if you look at the year.

Speaker Change: Right. Okay. That's helpful.

Speaker Change: Just going back to the gross margin.

Usually it's 'twenty two 'twenty eight 'twenty eight 'twenty two is typically a percentage of our year over year.

Speaker Change: Okay. That's helpful.

Matt Dunn: Going back to gross margin. In Q2, obviously you only get pricing benefits for part of the quarter. typically we see some seasonal uplift, which is beneficial there as well. I guess as we get into the back half, and think about some of these additional costs, you know, an inventory starting to roll through, I guess, how would you have us think about kind of the trajectory of gross margins? 3 to Q4 and maybe even kind of a jumping off point and into early next year. Yeah, there's lots of moving parts. Obviously, Kurt, you're right, the pricing will kick in June.

Speaker Change: Going back to gross margin.

Speaker Change: In Q2, obviously, you only get pricing benefits for part of the quarter.

Speaker Change: Typically we see some seasonal up left which is beneficial there as well I guess as we get into the back half and think about some of these additional costs you know an inventory starting to roll through.

Speaker Change: I guess, how would you have us think about kind of the trajectory of gross margins. You know Q3 to Q4, and maybe even kind of a jumping off point and into early next year all considered.

Speaker Change: Yes, there's lots of moving parts, obviously, you're right the pricing will kick in June so, we'll get a little bit of a slight bump for one month in Q2 to offset some of the costs that are that are already coming in and we're already receiving containers of tariffs goods tariff burden goods.

Matt Dunn: So we'll get a little bit of a slight bump for one month in Q2 to offset some of the costs that are that are already coming in. We're already receiving containers of, you know, tariff goods and tariff burden goods, you know, already in April, so that the costs are starting to roll in. I think we get a little bit of leverage, if you will, from a volume standpoint in those higher volume quarters, Q2 and Q3. But I think overall, for the year, we're expecting our gross margin to be essentially flat, right? We're trying to maintain our gross margin.

Speaker Change: Already in April so that the costs are starting to roll in I think we get a little bit of.

Speaker Change: Leverage if you will from a volume standpoint in those higher volume quarters, Q2, and Q3, but I think overall for the year, we're expecting our gross margin to be essentially essentially flat right. We're trying to maintain our gross margin. So while we're taking some of the costs were baked in in terms of the things that have gone over the last few years, we're not pricing on dollar for dollar onto.

Matt Dunn: So while we're taking, while some of the costs were baked in, you know, in terms of the things that have gone up in the last few years, we're not pricing on dollar for dollar on tariff. So I think our goal would be to keep our gross margin relatively flat versus a year ago for the whole year. We had a weird comparison in Q1. Obviously, we talked about some of the timing of volume discounts that were negatively impacted Q1 a year ago. That's why the gross margin shows more favorable in Q1 this year than it really would be on an adjusted basis.

Speaker Change: So I think our goal would be to keep our gross margin relatively flat versus year ago for the whole year.

Speaker Change: We had a weird comparison in Q1, obviously, we talked about some of the.

Speaker Change: Timing of volume discount that were negatively impacted Q1 year ago, that's why the gross margin shows.

Speaker Change: More favorable in Q1 this year than it really would be on an adjusted basis.

Matt Dunn: Okay, and maybe just a point of clarification to make sure I understand it right, you know, when you're talking about not fully offsetting the additional tariff increases, that conversation would also kind of incorporate the other cost inflation the last couple years, right? If we were just to kind of isolate that weighted average 8% increase, that itself would offset the tariffs or am I maybe misunderstanding? Yeah, so we've got a tariff impact. Kurt, we have impact from increasing costs that we've seen over the last three years. We've got productivity that we're trying to drive. We've got additional investments into the business in terms of the factories we've talked about, but also additional warehouses to provide even better support to our customers.

Speaker Change: Okay.

Speaker Change: Maybe just a point of clarification to make sure I understand it right. When you were talking about not fully offsetting the additional tariff increases.

Speaker Change: That conversation would also kind of incorporate the other cost inflation. The last couple of years right. If we were just to kind of isolate that weighted average 8% increase that.

Speaker Change: That itself.

Speaker Change: Would offset the tariffs are or am I.

Speaker Change: Misunderstanding that.

Speaker Change: So we've got a tariff impact Kurt we have impact from increase in costs that we've seen over the last three years.

Speaker Change: We've got productivity that we're trying to drive we got additional investments into the business in terms of the factories, you've talked about but also additional warehouses to provide even better support to our customers.

Matt Dunn: You know, add all that up. The target, as Matt said, is to keep gross margins flat. And ultimately, the target here is to be that 20% average income driving solid above U.S. housing starts volume growth.

Speaker Change: Add all that up the target as Matt said is to keep gross margins flat and ultimately the target here to be that 20% operating income driving solid above U S housing starts volume growth.

Speaker Change: Okay Alright.

Michael Olosky: All right, just last one, you talked about some small and medium sized kind of conversions in the component manufacturer space. I think you alluded to some expanded shelf space in the national retail side. Anyway, you can kind of roughly maybe size those opportunities as we look out over the next kind of 12 to 18 months. Well, I bet that at the end of the day is what helping us drive that 420 basis points above us housing starts occurred. And you I think you've heard me say this before, it's typically a lot of singles and doubles using a baseball analogy.

Speaker Change: Just last one you talked about.

Speaker Change: Some small and medium sized kind of conversions in the component manufacturers space I think you alluded to some expanded shelf space in the national retail side any way you can kind of roughly maybe size those opportunities as we look out over the next kind of 12 to 18 months.

Speaker Change: Well I think that that at the end of the day is what helping us drive that 420 basis points above the U S housing starts Curt and you've I think you've heard me say before it was typically a lot of singles and doubles using a baseball analogy.

Speaker Change: And that's what's been able to drive that above market growth.

Kurt Yinger: And that's what's been able to drive that above market growth. Okay, thank you very much. Thanks, Kurt. Thank you. And we have reached the end of the question and answer session. And this also concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thanks, Gary.

Speaker Change: Thank you.

Speaker Change: And we have reached the end of the question and answer session.

Speaker Change: Also concludes today's conference.

You may disconnect your lines at this time, thank you for your participation.

Speaker Change: Yeah.

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