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| Statement |
|---|
| Our ambitions for this accelerated growth include us exceeding our historical average performance in North America for approximately 250 basis points above U.S |
| We continue to think it’s a good business model |
| Together, we achieved above market growth and high profitability with $2.2 billion in annual net sales, a 21.5% operating income margin and a record $8.26 of earnings per diluted share |
| Our topline performance was driven by continued share gains across all of our end markets and product lines |
| We’re pleased with the gross margins over there |
| Importantly, our 2023 North American net sales were up 0.9% from last year to a total of $1.7 billion on a 1% improvement in volumes, outperforming the broader market, which saw an annual U.S |
| Our outperformance is driven by high single-digit volume increases in our component manufacturer in commercial end markets and modest increases in national retail and OEM, which is partly offset by a minor reduction in our residential market |
| We are proud of this year’s revenue outperformance and we will continue to invest in and improve all elements of our business in 2024 to ensure that we lay the foundation for continued outperformance over the longer term |
| Help us better serve and support our customers and help us drive more growth |
| following more than a decade of under-building coupled with modestly improved outlook for 2024 |
| And now as we start to go to our end channel partners or our distributors, we can have interaction with them, we can explain the whole product line, we can tell them everything we’re doing to drive specs, we can tell them everything we’re doing with builders to pull things through, and by having now access to a couple of these distribution customers, we’ve been able to make some really nice gains |
| And so when we look at that, we think that also that business model helps us keep that 600 basis points of operating margin improvement we’ve realized versus the pre-COVID years |
| To further break down our North American performance, we achieved double-digit volume improvements year-over-year in our residential, commercial and component manufacturer markets as we’ve continued to benefit from various new customer wins |
| But the last three years, we’ve been able to over invest in the business and provide that great support for our customers, we’ve grown about 800 basis points above the market |
| In the OEM market, our volumes improved in the low single-digit range compared to last year, while national retail was down only slightly |
| And as we look into 2024, we’re very happy with the playbooks we have by market segment, very happy with the playbooks we have by product segment and so we continue to see really strong growth across all of our markets and product lines |
| We’ve had good solid growth across all market segments and across all of our major product lines |
| Our solution selling approach combined with our high service levels in Europe, give us confidence Simpson will benefit from broader secular trends, including the growing use of wood construction and increasingly stringent environmental regulations that drive new applications coupled with the ongoing housing shortage |
| On a consolidated basis, our full year gross margin improved to 47.1% and 44.5% last year, reflecting lower raw material costs and productivity improvements, partly offset by higher fixed costs in our factory tooling and warehouses |
| The higher gross margins have enabled us to further invest in our business and provide even better customer support |
| These customer wins are a result of our high service levels, increasingly diverse portfolio of products and software, as well as our commitment to innovation and developing complete solutions for the markets we serve |
| Our strong balance sheet and cash flow enable us to make investments to support our organic growth initiatives |
| We remain focused on providing our customers excellent service, innovation and value by expanding our broad solution set throughout our five key end use markets |
| In the multifamily space, we also recently expanded our product offering to appeal to a broader range of projects, which we anticipate will drive further share gains, given our industry-leading product availability and delivery standards |
| In the commercial market, our strong relationships, field support and dedication to educating engineers, distributors and contractors about our solutions continues to earn specifications on commercial projects and generate demand in the field |
| In summary, we were very pleased with our financial and operational performance in 2023, where we grew revenues above market growth rates |
| Within the national retail space, we tested new products and markets, as well as enhanced our merchandising efforts and education of our customer sales staff, which contributed to year-over-year performance improvements for our home center customers in 2023 |
| Effective management of the on-hand inventory remains a key element of our business model as we strive to ensure on-time delivery standards and superior customer service levels that drive our competitive advantage |
| As Mike noted, while this was below our recently announced expectations, we were very pleased with our financial performance in a difficult operating environment, as a further testament to our strong business model that enables us to perform throughout market cycles |
| In addition, we had strong interest in our EasyFrame saws, which leverage our technology solutions, enabling our customers to produce structures more efficiently by automating the pre-cut lumber process with detailed printing instruction |
| Statement |
|---|
| Our operating income margin came in below our October guidance, primarily due to additional costs incurred to pursue our growth opportunities in the areas of new products and market penetration |
| We continue to see demand variability on a month-to-month level, and believe the market for the first half of this year will be more challenging than the market for the second half of the year |
| As a result, our consolidated income from operations totaled $71.6 million to decline of 9.1% from $78.7 million |
| So from an equity compensation perspective, we’ve got a multi-year performance periods, and a year ago, we were looking at 2023 to be more negative than it ultimately turned out to be |
| In North America, income from operations decreased 6.8% to $79.8 million, primarily due to increased personnel costs, professional fees and variable compensation, which was partly offset by higher gross profit |
| Our consolidated operating income margin was 14.3%, a decrease of 2.3 percentage points from 16.6% |
| housing starts decline by approximately 9% |
| As it relates to the outlook for 2024, you mentioned H1 maybe starting out a little tougher than H2 from an overall housing market perspective |
| As we said in our prepared remarks, the business was flattish with prior year in a negative market |
| Kurt Yinger I mean, it sounds like warehouse -- the new warehouses and distribution hubs that you guys opened will be a little bit of a gross margin drag in 2024 |
| What we’re hearing from our customers is first half, again, flat-ish to maybe down a little bit |
| And the expense associated with multi-year equity of grants reflected the kind of lower expectations of 2023 and then a little bit forward there |
| The market improved in the second half, but it was a challenging year with lower housing starts |
| However, for the full year of 2023, our consolidated income from operations increased 3.5% to $475.1 million from $459.1 million, reflecting only a modest decline in our operating income margin to 21.5%, compared to 21.7% |
| So again, not great visibility from a backlog perspective, because that’s just the way it operates |
| So it’s not a huge gross margin driver over time |
| So it would be just a modest, small pullback in gross margin for 2024 relative to 2023 for those items that you mentioned, additional warehousing costs, additional labor costs, factory and tooling costs |
| But that’s something that we pay a lot of attention to, and if we see things slowing down, we don’t want to do the things that impact us over that medium- to long-term |
| Could you maybe just remind us, content per single-family versus multifamily unit on average and how you think about, the growth on the single-family side, perhaps being, dampened or offset by weakness in multifamily or whether, the backlog of units under construction, you think can carry you kind of through 2024 |
| We need to keep that trajectory in order for us to hit our ambition of continuing to achieve that above market growth |
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