Simpson Manufacturing Company, Inc.

Welcome to the Simpson Manufacturing Company first quarter 2023 earnings conference call. At this time, all participants are on 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. Please note, this conference is being recorded. I'll now turn the conference over to your host. Team Orlando, you may begin.

Good afternoon, ladies and gentlemen. and welcome to Simpson Manufacturing Company's first quarter 2023 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. 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.simpsommfg.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 Mike Oloski, Simpsons President and Chief Executive Officer.

Thanks, Kim. Good afternoon, everyone, and thank you for joining today's call. With me today is Brian Magsbat, our Chief Financial Officer. My remarks today will provide an overview of our financial results, key growth initiatives, and capital allocation priorities. Brian will then walk you through our Q1 financials and fiscal 2023 outlook in greater detail. Net sales in the first quarter totaled $534.4 million, an increase of 8.3% year over year. In North America, our net sales of $406.3 million declined 7.4% year-over-year, primarily due to lower volumes. Significant precipitation on the West Coast during the first quarter drove materially softer sales in a residential end market, contributing to the decline. As a reminder, builders use a higher volume of Simpson content in homes in the western and southern regions of the United States to meet stricter building codes that address higher wind and seismic requirements. In our commercial end markets, sales also declined year over year. However, revenues from our sales to OEM customers, although small, increased year over year. While we continue to believe our North American net sales will be pressured by a softer housing market in 2023, we expect to maintain our industry-leading position as the partner of choice due to our strong business model and competitive differentiators. These include an increasingly diverse portfolio of products and software and a commitment to developing complete solutions for the markets we serve, a dedication to innovation, extensive product engineering, and research and testing in our state-of-the-art labs, unparalleled product availability and delivery standards on our vast product offering across multiple distribution channels with typical delivery within 24 to 48 hours, field support, technical support, literature, and digital tools to help select and specify our products, and online ordering tools to make it easier to do business with us, and our longstanding reputation, relationships, and engagement with engineers, building officials, and contractors to design safer, stronger structures and improve construction practices, along with helping to develop talent, provide career opportunities, and alleviate labor shortages in the construction industry. In addition, we remain focused on continued growth in our five end-use markets, many of which are not tied to U.S. housing starts. I will touch on our progress there in a moment. Turning to Europe. First quarter sales totaled $124.2 million. Including Europe net sales was an $80 million contribution from Etanco, reflecting a modest year-over-year increase. Our net sales were partially offset by lower sales volumes, resulting from ongoing macroeconomic challenges in Europe and foreign currency translation. As April 1st marked the one-year anniversary of Etanco acquisition, I'd like to comment on our progress, key learnings, and synergy accomplishments to date. The acquisition was accreted to our earnings in the first quarter of 2023, and we remain on track with our defensive synergies of procurement optimization, footprint rationalization, and manufacturing and operating expense efficiencies. In regards to our offensive synergy opportunities, while we have made strides to expand our market share and cross-selling opportunities in several countries, The continued persistent weakness in the European macroeconomic climate will delay some of our offensive synergy opportunities. Longer term, we remain confident in health of our business model in Europe. In all of our operating segments, we believe our ambition to outperform the housing market will be supported by a broader set of offerings to our customers, along with the ongoing transition to wood construction and regulatory requirements that encourage new construction solutions. Our consolidated gross margin for the first quarter was 47.3%, primarily reflecting strong cost control. Our first quarter operating margin of 22.1% was pressured, as expected, by a higher cost environment, as well as ongoing planned Etanco integration expenses. We remain committed to ongoing expense management and executing the areas of our business that we can control. Brian will elaborate further on the key drivers of our margin performance shortly. I now want to turn to a discussion on our end-use markets, which encompasses our growth initiatives. We made solid traction through the first quarter in a challenging environment. First, beginning with our commercial market. In line with our growth initiative to be the partner of choice, our inventory availability and rapid delivery standards resulted in various new customer wins, as well as new product launches to support our structural steel initiative. Second, in our OEM market, we have seen strong growth across all OEM customer types, We continue to work on developing the market for mass timber, one of our key growth focus areas. This aligns with our initiative to be the innovation leader in the markets we operate. And third, within the national retail space, and as part of our focus on growing our business above market relative to U.S. housing startups, we continue to show positive traction on our outdoor accidents line by broadly expanding our offering into many home centers during the first quarter. We are very pleased to have our industry-leading offerings prominently displayed by our home center customers, driving further brand recognition and promoting product sales. Turning now to capital allocation. Our priorities remain focused on organic growth opportunities, returning value to our stockholders via dividends and opportunistic share repurchases, and paying down the debt we incurred to finance the acquisition of a taco. In regard to organic growth, we are focused on key investments to strengthen our business model, including our growth initiatives and the integration of Etanco. We are also continuing to evaluate expansion opportunities to support and maintain our industry-leading position, such as our previously announced Ohio Manufacturing and Distribution Facility, as well as our equipment investments to drive productivity and maintain our best-in-class customer service. While finalizing the integration of Etanco remains our priority, we continue to evaluate potential M&A opportunities that would accelerate our key growth initiatives and strengthen our business model and manufacturing efficiencies. Looking ahead, while we expect the operating environment in 2023 will remain choppy, we are confident in our ability to continue to achieve our company ambitions, including our goal to grow above the market relative to U.S. housing starts with profitability in the top quartile of our proxy peer group. Our progress will be supported by our strong business model and our commitment to remain responsible stewards of capital, along with the anticipated growth in our five end-use markets and the dedication of our 5,000-plus strong Simpson employees. Simpson's mission was created by our founder, Barclay Simpson, and his values remain the cornerstones of how we operate our business today. A key component of our business model is to maintain our longstanding relationship with engineers, building code officials, and contractors to improve construction practices. Our actions include training our customers and hosting national programs that provide educational content for the building industry at large. We believe these efforts further help to maintain our leadership role in industry knowledge and developments, drive brand awareness, inform customers about nuisance and products and innovations, and help attract new customers. We are proud to play a large part in educating and empowering our industry as we further Barclays' mission to help people design and build safer, stronger structures. With that, I'd like to turn the call over to Brian, who will discuss our first quarter financial results in greater detail.