Simpson Manufacturing Company, Inc.

Greetings, and welcome to Simpson Manufacturing Company's first quarter 2021 earnings conference call. At this time, all participants are in the listen-only mode. 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 cell phone keypad. As a reminder, this conference is being recorded. Now, I would like to turn the conference over to your host, Kim Orlando of Addo Investor Relations.

Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's first quarter 2021 earnings conference call. Any statements made on this call that are not based on historical facts are forward-looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward-looking statements. We encourage you to read the risks described in the company's public filing 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. Please note that the company's 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. Now I would like to turn the conference over to Taryn Colonius, Simpson's President and Chief Executive Officer.

Thanks, Kim, and good afternoon, everyone, and thank you for joining us today. I'll begin with a summary of our key first quarter performance drivers and initiatives. Brian will then walk you through our financials and updated full-year 2021 business outlook in greater detail. Our first quarter consolidated net sales were strong, growing 22.6% year-over-year to $347.6 million last year. on significantly higher sales volumes. Our gross margin expanded to 46.7% from 45.7% in the prior year quarter, primarily due to lower labor, factory, warehouse and shipping costs, which were partially offset by higher material costs. Our solid gross margin, combined with our diligent expense management and reduced costs due to COVID-19, drove a significant year-over-year increase of 38.6% in our income from operations to $68.4 million and an increase of 39.8% in our earnings per diluted share to $1.16. The increase in sales volume we experienced in the first quarter was primarily as a result of the continued momentum in the home center distribution channel where sales increased over 60% compared to the prior year period. As a reminder, the home center distribution channel includes both our home center and co-op customers and is where we see much of our repair and remodel business. We are continuing to see increased activity in the repair and remodel space, likely as a result of the ongoing pandemic as consumers continue home renovations. Lows contributed significantly to the channel growth compared to the first quarter last year, due to their return as a home center customer in the second quarter of 2020. Our sales further benefited from solid trends in U.S. housing starts. As we generally experience a multiple month lag in demand from the time of the start, in the first quarter, we benefited from strong fourth quarter 2020 housing starts, which grew over 10% year over year. In addition, housing starts in the markets where we sell the most content continue to surpass the broader U.S. housing starts, especially in single-family space and in the western and southern regions of the U.S. While adverse weather conditions in the month of February resulted in certain supply chain interruptions, most notably in Texas, we have since addressed any back-order demand and did not report a material impact to our first quarter performance. Now let's turn to Europe. Our first quarter sales improved over the prior year on local currency basis, given strong demand trends and our ability to continue meeting our customers' needs due to our solid inventory management practices amid broader supply chain shortages. As a reminder, net sales in the first quarter of 2020 were negatively affected by weaker conditions in Europe due to COVID-19 when two of our larger European operations in the United Kingdom and France were ordered to cease operations in late March. As of today, all of our major production and distribution facilities remain open and operational in Europe, so we continue to promote remote work from home where possible, such as in our corporate offices, to help prevent the spread of COVID-19. Lastly, I'd like to take a moment to discuss some recent pricing dynamics in the marketplace. As previously announced in early February, we implemented price increases ranging from 5% to 12%, depending on the product mix for certain of our wood connectors, fasteners, and concrete products in the U.S., in an effort to offset rising material costs. These price increases went into effect on April 5th, following a 60-day notice period to our customers. The notification also included a clause that prohibited significant pre-buying ahead of the increases in order for us to properly manage our inventory levels. As a result, we do not believe we experienced meaningful pre-buying activity related to these increases. More recently, we announced a second price increase ranging from 6% to 12%, primarily for our wood connector products in the U.S., in an effort to further offset rising material costs. Our customers were notified of this increase on April 16th, which will go into effect on June 15th. We expect the impact of these price increases will help support our ability to maintain strong gross profit margins through the end of the year. I'd now like to turn to a high-level discussion on our key growth initiatives. As many of you are aware, we held a Virtual Analyst and Investor Day event on March 23rd in which we unveiled several growth initiatives that we believe will help us continue our track record of above-market growth through a combination of organic and inorganic opportunities. Our organic opportunities are focused on expansion into new markets within our core competencies of wood and concrete products. Our inorganic opportunities will be focused on licensing, purchasing IP, and traditional M&A. As a reminder, our growth initiatives focus on the following markets, which I'll list in no particular order of priority. OEM, original equipment manufacturers, repair-remodel, the do-it-yourself market, mass timber, concrete, and structural steel. In order to appropriately grow in the first three markets, that being OEM, R&R, as well as DIY, and mass timber, we aspire to be a leader in engineered load-rated construction fastener solutions, given that each of these markets have a broader product opportunity within the fastener solutions. In addition, we're striving to be a stronger leader in customer-facing technology, which has been a focus of ours for a number of years. Here I'm referring to software that helps our customers better run their business by providing them with the proper tools to design, select, and specify the right Simpson solutions for the job. We expect technological advancements will drive enhanced growth in all of our key growth initiatives, as well as across all of Simpson manufacturing in general. We believe our business model will support our ability to be successful throughout each of these areas given our engineering expertise, our deep-rooted relationship with top builders, engineers, contractors, code officials and distributors, along with our ongoing commitment to testing, research and innovation. Importantly, we currently have existing products, test results, distribution and manufacturing capabilities for all five of our growth initiatives. It is also important to note that these initiatives are currently in different stages of development. Our successful growth in these areas will ultimately be a function of expanding our sales and marketing functions to promote our products to different end users and distribution channels, expanding our customer base, and potentially introducing new products in the future. We will keep you appraised of significant updates regarding our key growth initiatives as they arise. I'd also like to highlight our five-year company ambitions that we unveiled at our Analyst Investor Day. First, we want to strengthen our values-based culture. Barclay Simpson founded our company on the nine principles of doing business, which continue to guide our organization today. Our Simpson StrongTie employees are our most important asset, so we spend a significant amount of time communicating with them to ensure a relentless customer focus, involving them in leadership programs, and instilling a safety-first culture. Second, we want to be the partner of choice. This ambition takes on many meanings. It means we want to be your solution provider, your trusted brand to provide you a solution and quickly get that product out to your job site, and we want to make it easy to do business with us. We aspire to be the partner of choice in all aspects of our business. Third, We strive to be an innovative leader in product categories. If we can accomplish this, we have no doubt we will be able to accomplish ambition number four, which is to continue our above-market growth relative to U.S. housing starts. Fifth, we will continue to expand our operating income margin to remain within the top quartile of our proxy peers. And finally, we will continue expanding our return on invested capital to remain in the top quartile of those peers. After building our strong foundation through the 2020 plan, we look forward to an even stronger future ahead. Before I close today, I'd like to briefly touch on our capital allocation strategy. As our business continues to generate strong cash flows, we remain focused on appropriately balancing our growth and stockholder return priorities. We will prioritize investing in our growth initiatives in areas such as engineering, talented marketing and sales personnel, and testing capabilities. M&A also remains a key focus in order to expand our product lines and develop complete solutions for the markets in which we operate to strengthen our business and improve our market share. As previously stated, we are leveraging M&A venture capital expertise to help identify potential strategic acquisitions or investments, including innovative technologies of interest in the building space. In summary, we are thrilled with our strong first quarter performance despite global macroeconomic turbulence stemming from the ongoing pandemic. We expect the second quarter of 2021 will reflect ongoing sales momentum with strong Q1 housing starts in the areas we primarily serve, which positions us well to continue to benefit from this unique environment. I'd like to thank all of our employees for their dedication to operational excellence, health and safety, which has enabled our business continue to operate during the pandemic from a position of strength. Our employees have been thoughtfully engaged with our leadership team as it pertains to our company ambitions and growth initiatives to ensure a collaborative environment and to assist in the execution of our strategy. We look forward to capitalizing on our growth opportunities in adjacent markets by leveraging our business model built on engineering, testing, and innovation. Thank you for your time and attention. Now I'd like to turn the call over to Brian, who will discuss our first quarter financial results and our 2021 outlook in greater detail. Brian?