Simpson Manufacturing Company, Inc.

Greetings and welcome to Simpson Manufacturing Company Inc. first quarter 2022 earnings conference call. At this time, all participants are in a 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 telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kim Orlando with Addo Investor Relations. Please go ahead.

Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's first quarter 2022 earnings conference call. Any statements made on this call that are not statements of 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 filings and reports, which are available on the 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. 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 Karen Colonius, Simpson's Chief Executive Officer.

Thanks, Kim, and good afternoon, everyone, and thank you for joining us today. I'll begin with an overview of our first quarter financial results and performance drivers before turning to an update on our key growth initiatives and capital allocation priorities. Brian will walk you through our financials and updated fiscal 2020-22 business outlook in greater detail. We delivered strong financial and operational performance in the first quarter. Net sales of $493.6 million increased 42% over the prior year period. Sales growth was primarily driven by the four product price increases we implemented in April, June, August, and October of 2021 to offset rising raw material costs. The price increases ranged from mid-single digits to mid-teens, depending on the product mix of our wood connectors, fasteners, and concrete products in the United States. While our sales benefited from higher volumes in our home center channel, which includes both our home center and co-op customers and is where we see much of our repair and remodel and DIY business, this was offset by softer volumes through our other distribution channels. As such, volume was flat year over year. Our consolidated net sales in Europe for the first quarter grew 16.2% year over year, also due primarily to product price increases in response to rising material costs through 2021. Our consolidated gross margin, supported by our product price increases, grew 130 basis points to 48% compared to 46.7% in the year-ago period. As a result, we grew our income from operations to $124.4 million and generated strong earnings per diluted share of $2.18. Brian will elaborate further on our margin expectations for the remainder of the year. I'd like to thank our entire Simpson StrongTie team for their solid operational execution. We appreciate your dedication to serving our customers and remaining on track with our company ambitions. Those ambitions being to strengthen our values-based culture, be the partner of choice, be the innovation leader in the markets we operate, continue our above market growth relative to U.S. housing starts, expand our operating income margin to remain within the top quartile of our proxy peers, and expand our return on invested capital to remain within the top quartile of our proxy peers. Overall, we are confident that we remain on track to achieve our company ambitions. Now more specifically, I'd like to discuss our progress regarding ambition number four, continuing our track record of above-market growth relative to U.S. housing starts. To achieve this, we're focused on growing in the OEM, R&R DIY space, and mass timber markets, where we are striving to be a leader in engineered, load-rated construction fastening solutions, given that each of these markets have a broader product opportunity for fastening solutions. We are also focused on building our presence in concrete construction, as well as solutions for structural steel construction, a new market for Simpson. And finally, we're working to become a leader in building technology space, which supports all of our key growth initiatives. We made significant progress over the past year to support these different end users and distribution channels. Included in our efforts was a realignment of our sales teams to more specifically focus on the five end-use markets, residential, commercial, OEM, national retail, and building technology, which has led to new customer and project wins within each of our five key growth initiatives. I'd like to provide just a few examples of these developments during the first quarter of 2022. Within national retail markets, Our focus on growing in the R&R and DIY space, combined with our ongoing efforts to continually improve execution with our retail customers, drove the reset of certain of our fastener sets with one of our key customers. The new fastener sets will include products such as our quick drive auto feed driving system and our outdoor accents, promoting further visibility of the breadth of line of Simpson products. Within the commercial market, we're continuing to expand our offerings, including the expansion of our structural steel product line. We had some notable wins and progress pertaining to structural steel. Our structural steel solutions are being used in the construction of 10 recreational and amusement locations in the United States, two of which have already been delivered. Additionally, our structural steel solutions are being used in the construction of 50 electric vehicle charging stations throughout the United States. I'd like to reiterate that these are just a few select examples of our progress on our growth initiatives in Q1 within our five end use markets. We believe advancements in these end markets and growth initiatives will contribute to our above market growth in fiscal 2022 and beyond. Our future growth and diversification efforts were further supported by the acquisition of the Etanko Group, a leader in fixing and fastening solutions, primarily for commercial building construction market throughout Europe, which closed on April 1st of 2022. We are very pleased to officially welcome the Etanko employees to the Simpson family. Over the past few months, our team has been working closely with many of the Etanko's managers and leaders as they engage in pre-closing activities, including integration and planning for synergies and detailed initiatives. Our cultures, both built on high-quality products and customer service, have fostered strong teamwork and collaboration. We believe Etanco's extensive and complementary product offering will strengthen our overall product portfolio in Europe, enabling us to deliver even more value to our customers. Importantly, the acquisition further diversifies our business away from U.S. housing starts. While we continue to benefit from solid ongoing demand for U.S. housing, we now believe approximately 50% of our business is reliant on U.S. housing starts compared to approximately 60% pre-acquisition, which helps further balance and diversify our business to be more resilient throughout industry cycles. One important item to note is that we have suspended all business activity within Russia and Belarus by halting all product sales and shipments. We estimate the revenue impact will be less than $5 million. Additionally, we have donated $100,000 to the International Rescue Committee, which is currently in Poland supporting displaced children and families. Our thoughts are with the people of the Ukraine and everyone affected by the war. Now turning to capital allocation. Our priorities in 2022 are centered on organic growth, returning value to our stockholders in the form of quarterly dividends and selectively repurchasing of our shares, while focusing on repaying the debt we incurred to finance the acquisition of Etanco. In regard to growth, we remain dual focused on both organic growth and M&A opportunities. We are investing in areas such as engineering, marketing, sales personnel, and testing capabilities across many areas of our business. We also plan to invest in facility expansions to support our growth. While we are primarily concentrated on the integration of Etanco, we may also consider opportunities that would promote product line expansion in order to develop complete solutions for the markets in which we operate, as well as opportunities in areas that support our key growth initiatives. In summary, we are extremely pleased with our first quarter solid results. And while we continue to experience headwinds from continued increases in raw material costs, as well as impacts to our customers from tightening labor and supply chain conditions, we believe the underlying demand in our key markets and regions should remain strong throughout 2022. I would like to once again thank and acknowledge all the Simpson StrongTie employees for their commitment to health and safety and outstanding customer service as we work toward our mission of providing the highest quality solution sets to build safer, stronger structures. I would also like to thank our customers, suppliers, and stockholders for your continued support of Simpson. Now I'll turn the call over to Brian, who will discuss our first quarter financial results and our 2022 outlook in a greater detail.