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    SSD
    Earnings call· Jun 2026(Q2 FY26)

    Simpson Manufacturing Co. Q2 FY26 earnings call SSD

    Jul 27, 2026 Source

    Executive summary

    Simpson Manufacturing Co., Inc. Q2 FY26 — Strong Margins Despite Softer Market

    Simpson Manufacturing delivered solid Q2 FY26 results, driven by effective pricing actions and disciplined cost management, despite ongoing market softness and rising input costs. The company remains focused on strategic priorities, including innovation and customer partnerships, while navigating mix headwinds and steel price volatility. Management reiterated its commitment to strong margins and returning capital to shareholders.

    Highlights

    5

    • Net sales increased 6.3% year-over-year to $671.1 million, primarily driven by pricing actions.

    • Consolidated gross margin improved 100 basis points year-over-year to 47.4%.

    • Operating margin expanded 300 basis points year-over-year to 25.2%.

    • Adjusted EBITDA grew 22.6% year-over-year to $196.1 million.

    • Europe segment achieved a record operating income margin of 13.7%.

    Concerns

    5

    • Global volumes declined approximately 1% year-over-year due to a softer market.

    • Rising steel costs and increasing availability constraints are creating a challenging backdrop for the second half of 2026.

    • Mix headwinds are expected to impact profitability in the back half of 2026.

    • Start-up costs from the Gallatin facility continued to impact Q2 gross margin by 20 basis points.

    • Competitive pricing in the fastener market has made new business acquisition more challenging.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2026 Consolidated Operating Margin
    19.7% to 20.5%
    high materiality
    High
    Full-year 2026 U.S. Housing Starts
    down low single-digit range
    high materiality
    Medium
    Full-year 2026 Europe Market Growth
    flat to modest market growth
    medium materiality
    Medium
    Full-year 2026 Effective Tax Rate
    25% to 26%
    medium materiality
    High
    Full-year 2026 Capital Expenditures
    $80 million to $90 million
    medium materiality
    High
    Full-year 2026 Europe Footprint Optimization Costs
    $2 million to $4 million
    low materiality
    High
    Full-year 2026 Gain on Sale of Vacant Land
    $10 million to $12 million
    medium materiality
    High
    Free Cash Flow Return to Shareholders
    at least 35%
    high materiality
    High
    Europe Operating Income Margin Goal
    15%
    medium materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    North America
    Driven by pricing and favorable mix, partially offset by lower sales volumes. Operating income increased 15.8% to $158 million due to higher net sales and reduced operating expenses.
    Operating Income Margin: 30.2% vs 27.7% last yearVolume: down slightlyComponent Manufacturer volume: mid-single digits year-over-yearOEM volume: high single digits year-over-yearResidential volume: down modestly year-over-yearNational Retail volume: slight increase year-over-yearCommercial volume: down modestly year-over-year
    		$522.3 million6%—30.2%
    Europe
    Driven by higher volumes, price increases, and favorable foreign currency translation. Achieved a record operating income margin, progressing towards the 15% midterm goal.
    Operating Income Margin: 13.7% vs 11.7% last yearNet sales growth (local currency): 4.9%Volume: up 3% year-over-year
    		$143.5 million7.6%—13.7%

    Operational metrics

    51
    Consolidated Net Sales Growth
    6.3%YoY
    Q2 FY26

    Total company net sales growth.

    Pricing Contribution to Net Sales Growth
    5%
    Q2 FY26

    Contribution from 2025 pricing actions.

    Sales Mix Contribution to Net Sales Growth
    1%
    Q2 FY26

    Contribution from sales mix.

    Foreign Exchange Contribution to Net Sales Growth
    1%
    Q2 FY26

    Contribution from foreign exchange.

    Volume Decline Impact on Net Sales Growth
    1%
    Q2 FY26

    Offset to net sales growth due to softer market.

    Global Volumes Decline
    1.6%
    LTM

    Trailing 12-month global volume decline.

    Volume Impact from Exited Business
    30 bpsnegative
    LTM

    Negative impact on global year-over-year volume comparisons from business exited in 2025.

    Volume Impact from Exited Business
    70 bpsnegative
    Q2 FY26

    Negative impact on global year-over-year volume comparisons from business exited in 2025.

    Consolidated Gross Profit
    $318.2 millionup 8.6% YoY
    Q2 FY26

    Total gross profit for the quarter.

    Gross Margin
    47.4%up 100 bps YoY
    Q2 FY26

    Consolidated gross margin, driven by 2025 price increases.

    North America Gross Margin
    50.2%up from 49.5% YoY
    Q2 FY26

    Reflecting impact from 2025 price increases and prior year strategic cost savings.

    Gallatin Facility Start-up Costs Impact on Gross Margin
    20 bpsheadwind
    Q2 FY26

    Headwind to gross margin from ongoing ramp-up of Gallatin facility.

    Europe Gross Margin
    38.2%up from 36.2% YoY
    Q2 FY26

    Primarily driven by better absorption of overhead costs through volume gains, pricing, and footprint optimization.

    Wood Products Gross Margin
    47.3%vs 47.1% YoY
    Q2 FY26

    Gross margin for wood construction products.

    Concrete Products Gross Margin
    48.3%vs 45% YoY
    Q2 FY26

    Gross margin for concrete construction products, reflecting lower material costs and price increases.

    Operating Expenses as % of Net Sales
    23%improved from 24.2% YoY
    Q2 FY26

    Efficiency improvement in operating expenses.

    Operating Expenses
    $154.4 millionup 1% YoY
    Q2 FY26

    Total operating expenses.

    SG&A Headcount
    down 8%YoY
    Q2 FY26

    Reduction in personnel-related costs.

    Nonqualified Deferred Compensation Program Impact on OpEx
    $3 millionincrease
    Q2 FY26

    Increase in operating expenses driven by quarter-ending stock price.

    Incentive-based Compensation Impact on OpEx
    $2 millionincrease
    Q2 FY26

    Increase in operating expenses.

    R&D and Engineering Expenses
    $18 milliondown 13.3% or $2.8 million YoY
    Q2 FY26

    Decrease driven by lower headcount, reduced professional fees, and cost reductions from footprint optimization.

    Patent Filing-related Costs Reclassified
    $700,000
    Q2 FY26

    Reclassified to G&A from R&D.

    Selling Expenses
    $52.8 milliondown 6.4% YoY
    Q2 FY26

    Result of reduced travel, entertainment, and advertising expenses.

    North America Selling Expenses
    down 10%YoY
    Q2 FY26

    Selling expenses in North America.

    Europe Selling Expenses
    up 4.2%YoY
    Q2 FY26

    Selling expenses in Europe.

    General and Administrative Expenses
    $83.6 millionup 10.5% YoY
    Q2 FY26

    Primarily driven by nonqualified deferred compensation program, incentive-based compensation, and higher professional fees.

    Income from Operations
    $169.1 millionup 20.6% YoY
    Q2 FY26

    Consolidated income from operations.

    Consolidated Operating Income Margin
    25.2%up from 22.2% YoY
    Q2 FY26

    Consolidated operating income margin, partially driven by eminent domain settlement and leverage from flat operating expenses.

    Eminent Domain Settlement Benefit
    $5.5 million
    Q2 FY26

    Gain from an eminent domain settlement, contributing 100 bps to operating margin.

    One-time Costs from Strategic Cost Savings Initiatives
    $0.5 million
    Q2 FY26

    One-time costs related to strategic cost savings initiatives.

    Effective Tax Rate
    25.7%10 bps below prior year
    Q2 FY26

    Effective tax rate for the quarter.

    Net Income
    $127 million
    Q2 FY26

    Consolidated net income.

    Diluted EPS
    $3.09vs $2.47 YoY
    Q2 FY26

    Diluted earnings per share.

    Adjusted EBITDA
    $196.1 millionup 22.6% YoY
    Q2 FY26

    Adjusted EBITDA for the quarter.

    Adjusted EBITDA Margin
    29.2%
    Q2 FY26

    Adjusted EBITDA as a percentage of net sales.

    Debt Balance
    $336.7 milliondown $33.8 million QoQ
    as of June 30, 2026

    Total debt balance.

    Revolver Availability
    $555.8 million
    as of June 30, 2026

    Remaining available on the revolver.

    Cash and Cash Equivalents
    $450.5 million
    as of June 30, 2026

    Total cash and cash equivalents.

    Net Cash Position
    $113.8 million
    as of June 30, 2026

    Net cash position after accounting for debt.

    Inventory Position
    $513.5 milliondown $80.7 million YTD
    as of June 30, 2026

    Total inventory position.

    Raw Material Inventory Reduction
    $46 millionreduction
    YTD

    Reduction in raw material inventory levels on hand.

    Finished Goods Inventory Reduction
    $35 millionreduction
    YTD

    Reduction in finished goods inventory, including $20 million from optimization initiatives.

    North America Inventory Pounds on Hand
    down 27.4%
    since Dec 31, 2025

    Reduction in physical inventory pounds.

    Cash Flows from Operations
    $250.6 million
    YTD 2026

    Generated strong cash flows from operations.

    Capital Expenditures
    $33.7 million
    YTD

    Invested in capital expenditures.

    Dividends to Stockholders
    $23.9 million
    YTD

    Returned to stockholders through dividends.

    Common Stock Repurchased
    $98.7 million
    YTD

    Value of common stock repurchased year-to-date.

    Revolver Repaid
    $30 million
    Q2 FY26

    Amount repaid towards the revolver.

    Shares Repurchased Subsequent to Quarter End
    127,132 shares for $24.5 million
    through July 22

    Shares repurchased after quarter end.

    Share Repurchase Authorization Increase
    $50 million
    2026

    Board increased authorization, bringing total to $200 million.

    Remaining Share Repurchase Authorization
    $76.8 million
    through year-end as of July 23

    Amount available for repurchases through year-end.

    Industry KPIs

    2
    MetricValueDetails
    Price cost5%%
    Orders bookings growth by verticalmid-single digits to high single digits%

    Product announcements

    1
    ProductTypeDetails
    Cornerstone programlaunch

    Capital programs

    2
    Gallatin facility ramp-upunderway
    Start: late 2025

    Ongoing ramp-up of the facility opened late last year, with start-up costs impacting Q2 gross margin by 20 basis points. Costs are expected to moderate as the year progresses.

    Europe Footprint Optimizationunderway
    Period spend: $2 million to $4 million

    Ongoing initiatives to optimize the European footprint, with expected costs of $2 million to $4 million for the full year 2026. Contributed to improved gross margin in Europe.

    Risks & headwinds

    5
    Softer Market and Volume DeclineQ2 FY26 and full-year 2026

    Global volumes declined approximately 1% year-over-year; U.S. housing starts expected to be down low single digits for FY26.

    Mitigation: Focus on launching new products, increasing content per home, improving merchandising efforts with National Retail customers, and leveraging market and product playbooks.

    Rising Steel Costs and Availability ConstraintsH2 2026

    Creating a more challenging backdrop, particularly in the back half of 2026.

    Mitigation: Maintaining value-based pricing, driving productivity, and optimizing the manufacturing footprint to manage costs.

    Mix HeadwindsH2 2026

    Expected to impact profitability.

    Mitigation: Disciplined pricing, productivity, and footprint optimization.

    Competitive Pricing in Fastener MarketOngoing

    Competitors leveraging price for undifferentiated products, making new business acquisition more challenging.

    Mitigation: Differentiating the product line, driving cost out from manufacturing, and focusing on patented products and load ratings.

    Housing Affordability PressuresQ2 FY26

    Residential business volumes were down modestly year-over-year.

    Mitigation: Supporting builders with high service levels, a deep portfolio of engineered solutions, and engaging customers through training and product campaigns.

    What to watch in Q3 FY26

    5

    Gallatin facility start-up costs moderation

    as we progress through the year
    Current20 basis point headwind to Q2 gross margin
    Targetcontinue to moderate

    Why it matters

    The moderation of start-up costs is crucial for improving gross margin trajectory in the latter half of the year.

    While start-up costs associated with the Gallatin ramp-up continued to impact gross margin in the second quarter, we saw improvement versus the impact in the first quarter. We expect this will continue to moderate as we progress through the year.

    Q&A highlights

    6

    What were the key drivers behind the better-than-expected gross and operating margin performance in Q2, considering the eminent domain settlement, lower material costs, and start-up costs?

    Matt Dunn attributed the 300 basis point operating margin increase to three roughly equal factors: 100 bps from an eminent domain settlement, 100 bps from gross margin absorption and efficiency, and 100 bps from operating expense leverage on revenue growth. Gross margin also benefited from strategic cost savings and favorable mix.

    “The quarterly operating margin was up 300 basis points. I'd basically categorize that into 3 buckets, roughly 100 basis points from the gain on the eminent domain settlement in Texas. Roughly $100 million from -- sorry, 100 basis points from the gross margin, call it, absorption and efficiency and having the better volumes, a little bit better volume than maybe what we had last quarter and being roughly flat on volume. And then the last 100 is really leverage on keeping OpEx essentially flat in the quarter and then getting the revenue growth primarily behind the pricing.”

    asked by Ethan Roberts · answered by Matt Dunn

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Priorities and Employee Contributions

    Simpson Manufacturing continues to focus on deepening customer partnerships, driving innovation, and strengthening its values-based culture. The company highlighted the long-term commitment of its employees, recognizing individuals like Dean Pickrell (40 years), Gwen Silva (47 years), and Bill McGahan (42 years) for their significant contributions to the company's growth and consistent performance through multiple economic cycles.

    02

    North America Segment Performance Overview

    North America net sales increased 6% to $522.3 million, driven by pricing and favorable mix, partially offset by lower volumes. Performance varied by market segment: component manufacturer volumes grew mid-single digits, OEM volumes were up high single digits, residential volumes were down modestly due to affordability pressures, national retail saw a slight volume increase, and commercial volumes were down modestly amidst mixed construction activity.

    03

    European Segment Achieves Record Profitability

    The European segment reported net sales of $143.5 million, up 7.6% year-over-year (4.9% in local currency), driven by a 3% volume increase, price increases, and favorable foreign currency translation. The segment achieved a record operating income margin of 13.7%, up from 11.7% last year, demonstrating strong cost control and progress towards its 15% midterm goal.

    04

    Gross Margin Expansion and Headwinds

    Consolidated gross margin improved 100 basis points year-over-year to 47.4%, primarily due to the impact of 2025 pricing actions, which contributed approximately $34 million to net sales. This improvement was partially offset by higher factory and overhead costs, including a 20 basis point headwind from ongoing start-up costs at the Gallatin facility, which are expected to moderate📎 through the year.

    05

    Operating Expense Management and Efficiency

    Operating expenses as a percentage of net sales improved to 23% from 24.2% in the prior year. This was driven by an approximate 8% reduction in SG&A headcount and lower R&D and engineering expenses. While total operating expenses increased 1% to $154.4 million, this was mainly due to increases in nonqualified deferred compensation and incentive-based compensation.

    06

    Capital Allocation and Liquidity Position

    The company generated strong cash flow from operations of $250.6 million year-to-date. Debt was reduced by $33.8 million, resulting in a net cash position of $113.8 million. Inventory levels decreased by $80.7 million year-to-date, including $46 million in raw materials and $35 million in finished goods. The Board of Directors increased the 2026 share repurchase authorization by $50 million to $200 million, with $76.8 million remaining for repurchases through year-end.

    AI-generated summary of the company’s earnings call. Not investment advice.