Simpson Manufacturing Co., Inc. 2026 Q3 Earnings Call

Please go ahead. Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's third quarter 2026 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 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.

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 4:00 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 Mike Olosky, Simpson's President and Chief Executive Officer.

Thanks, Kim. Good afternoon, everyone, and welcome to today's call. With me is Matt Dunn, our Chief Financial Officer. Our performance this quarter reflects the resilience of our business and the progress we continue to make despite a challenging market environment. We remain focused on what we can control, strengthening our customer relationships, bringing new innovations to market, investing in our people and culture, and executing with discipline. One of the many things that makes Simpson special is the commitment of our people, many of whom have dedicated decades of their career to our company and our customers. Their experience, relationships, and commitment to our culture have played an important role in our success. As we continue recognizing these long-tenured employees throughout the year, I'd like to take a moment today to highlight a few of them.

First is Mike Woodall, who has been with Simpson for 35 years supporting our Southeast operations and was recently promoted to our multifamily project operations manager. Mike has built an incredibly diverse career at Simpson with experience on the production floor, in retail sales and technical support, and most recently supporting our multifamily business in estimating and project management. His journey is a great example of the opportunities to grow over a long career at Simpson. Simpson is truly a family connection for Mike with his father, Pat Woodall, also spending more than 30 years with the company making lasting contributions to our quality and operations team. I would also like to recognize Bob Boucher, a product engineer celebrating 37 years with Simpson. Bob began his career in quality control at our San Leandro facility and has worked in engineering, product design, and customer support throughout his career.

Early on, Bob managed a spreadsheet of hanger load values that ultimately evolved into our Hanger Selector software, which he continues to manage today. It is a great example of the deep product expertise and commitment to customers that Bob has demonstrated throughout his nearly four decades at Simpson. Finally, I would like to recognize Cheryl Paylor, a material handler in our automatics department at our Stockton, California, facility, celebrating 39 years with Simpson. Cheryl began her career when our Northwest operations were still located in San Leandro and has been part of the Simpson team for nearly four decades. In fact, Cheryl appears in a company video with our founder, Barc Simpson, as he walks the factory floor and talks about one of our company values, everybody matters. It is a small but fitting connection to the values and culture that continue to define Simpson today.

As we celebrate our 70th year, stories like these are a reminder that our culture is ultimately built and carried forward by our people, and we are grateful for everything they continue to contribute to Simpson. Now turning to our financial results. Net sales of $638.1 million were up 2.3% from the prior year quarter. As outlined in our investor presentation, net sales growth was primarily driven by pricing, which contributed to 2.5% of the increase. Our global sales volumes for the quarter were relatively flat. Over the last 12 months, our global volumes declined by 1.3%, comparing favorably versus the 1.9% decline in U.S. housing starts. We believe on a volume and revenue basis, we are outperforming the majority of our relevant end markets.

As a reminder, we exited some business in 2025, which negatively impacted our global year-over-year volume comparisons by 30 basis points on a trailing 12-month basis and by 30 basis points in Q3 2026. In North America, net sales were $502 million, up 3.8% from the prior year quarter, including an approximately $10 million benefit from pricing actions. For additional context, North American volumes were approximately 400 basis points above the 5% decline in single-family housing starts on a trailing 12-month basis. Despite continued pressure across the market, we delivered solid progress in several key growth areas, demonstrating our ability to strengthen our position with customers through differentiated products, solutions, and service. Supplier awards from two channel partners and a top 10 builder further reflects the strength of our customer relationships and the value our teams deliver every day.

Our residential business delivered low single-digit volume growth year-over-year, despite continued softness in the broader housing market. Our multifamily business remained a relative bright spot, while our teams continue to capture opportunities through customer conversions, new product adoption, and expanded engagement with builders and pro dealers. We saw several meaningful dealer conversions during the quarter and continued to generate strong adoption of new products. While affordability pressures and cautious builder sentiment continue to weigh on housing activity, our teams remain focused on gaining share, expanding our product offering, and providing excellent customer service. Our commercial business delivered a strong quarter with volumes up high single digits year-over-year. Growth was supported by continued momentum in the cold-formed steel and anchoring solutions.

We continue to see attractive opportunities in data centers and other large projects where our inventory position, engineering expertise, and relationships with contractors and distribution partners are helping us win new business. We continue to focus on field engagement, technical support, and converting specifications to Simpson products. The OEM business delivered another strong quarter with volumes up double digits year-over-year. Growth was broad-based with continued momentum in mass timber and further expansion of our relationships with key OEM customers and distributors. We remain encouraged by our growing mass timber project pipeline and customer engagement. Our combination of innovative products, engineering expertise, testing capabilities, and field support continues to position us well across these growing applications. The component manufacturer business delivered a solid quarter with volumes up mid-single digits year-over-year. Growth was driven by new customer wins and continued expansion with existing customers.

We also reached an important milestone in the Building Component Manufacturers Conference, where we introduced our next-generation software platform to strong customer interest and engagement, while our equipment solutions generated new sales opportunities. The positive response reinforced our view that there is meaningful demand for an alternative supplier partner in this market. As customers evaluate the new platform, we expect growth to moderate in the near term before accelerating as adoption builds. During the quarter, we also launched our new Software Academy, bringing training for our component manufacturing and residential software customers together on a single platform and strengthening the support we provide across our growing portfolio of digital solutions. Finally, our national retail business saw volumes decline mid-single digits year-over-year, reflecting softer demand for larger projects across the broader home center channel.

Even in a softer environment, we made progress expanding product placement, adding locations, and securing new merchandising opportunities. We remain focused on strong retail execution, close collaboration with our customers, and translating these expanded placements into sustained sell-through as demand improves. In Europe, third quarter net sales totaled $129.9 million, down 3.4% year-over-year, driven by a 5% year-over-year volume decline as market conditions turned less favorable amid higher interest rates and broader economic headwinds, particularly in France, where heightened political and fiscal uncertainty has pressured construction activity. Net sales also reflected the negative effect of foreign currency translation. On a local currency basis, net sales were down 2.1%. Throughout the quarter, we maintained strong customer engagement and achieved several notable wins, among them a number of mass timber projects, despite the challenging market.

Our consolidated gross margin declined modestly by 40 basis points year-over-year to 45.7%, driven by higher material costs, depreciation, and freight expenses. Following more than a year of rising steel prices, steel is now up over 50% versus a year ago and at its highest level in over four years. As a result, we expect to take additional pricing actions driven by rising steel costs and anticipate communicating further details in the coming weeks. Our operating margin was 22.1%, down 50 basis points year-over-year, as the benefit approximately $10 million in lower operating expenses were more than offset by $12.9 million gain from the sale of our Gallatin, Tennessee facility recognized in the third quarter of 2025. The gain contributed approximately 210 basis points to our prior year margin. Adjusted EBITDA totaled $167.2 million, a 7.4% increase year-over-year.