Simpson Manufacturing Company, Inc. · NYSE:SSD
Simpson Manufacturing — Q3 2017 Earnings Presentation
19 slides from Simpson Manufacturing's earnings presentation, Oct 30, 2017
Slide 1: Q3 2017 Earnings Conference Call Supplemental: 2020 Plan Details
October 30, 2017 Q3 2017 Earnings Conference Call Supplemental 2020 Plan Details Karen Colonias CEO Brian Magstadt CFO
Slide 2: Safe Harbor
Safe Harbor This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, based on numerous assumptions and subject to risks and uncertain
Slide 3: 2020 Plan Key Objectives
2020 Plan 3 KEY OBJECTIVES FY 2016A 2020 TARGETS FOCUS ON ORGANIC GROWTH • $861 M Net Sales (1) Based on FY 2016 reported net sales of $861 million. (2) Operating income margin refers to consolidated income from operations as a percentage of net sales. (3) See appendix for Return on Invested Capital
Slide 4: Net Sales Correlation to U.S. Housing Starts
Net Sales Correlation to U.S. Housing Starts 4 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 H o u s in g S tar ts (M ) ($ M ) North America Net Sales Total Net Sales Gross Profit Income from Operati
Slide 5: Strategic Growth Initiatives Rationale
Strategic Growth Initiatives Rationale 5 SOFTWARE • Preserves market share of core connector business through availability of end- to-end product and software solution • Development of best-in- class truss software solution, specifically, enhances technological capabilities to remain competitive • O
Slide 6: Focus on Organic Growth
Focus on Organic Growth 6 • Steady growth in North America and Europe • Estimate YOY growth in U.S. housing starts in mid single-digit range • Improved economic conditions in Europe • Concrete market share improvement from approximately 10% to 14% of ~$1.3 B addressable market • Deemphasize acquisit
Slide 7: Addressable Market Opportunity
Addressable Market Opportunity(1) 7(1) Note: Market sizes and market shares based on internal estimates. Includes North America, Europe and Pacific Rim. Addressable Market $1.3 B (9%) Addressable Market $730 M (13%) Addressable Market: $1.5 B (100%) $15.0 B $5.8 B $1.5 B Fasteners (Addressable) Conc
Slide 8: Simpson's Market Share
Simpson’s Market Share(1) 8(1) Note: Market sizes based on internal estimates. Includes North America, Europe and Pacific Rim. SSD’s Share $106 M (15%) $1.3 B Fasteners (SSD Share) Concrete (SSD Share) Wood Connectors & Truss (SSD Share) $730 M $1.5 B SSD’s Share $128 M (10%) SSD’s Share $626 M (43%
Slide 9: 2020 Plan Improvements by Initiative
2020 Plan Improvements by Initiative 9 In an effort to both reduce costs and drive profitability, we will be focused on operational improvements in our key focus areas. • Holding R&D expenses steady to enhance sophistication of our software solutions • Refocus efforts on medium-sized truss component
Slide 10: Path to Improved Operating Leverage
31.8% ~1% <1% ~1% ~3% ~26% - 27% 2016A Truss R&D Europe Concrete Zero-based Budgeting & Operational Efficiencies 2020E Path to Improved Operating Leverage 10 FY 2018 consolidated SG&A dollars will be less than FY 2017, on an absolute dollar basis (inclusive of ~$8 M of SAP expenses) ~$3 M reduction
Slide 11: Path to Improved Profitability in Europe
Path to Improved Profitability in Europe 11 In Europe, we are reducing total operating expense dollars by $2 million in 2018, contributing to ~700 basis points of operating margin improvement in 2018 through reductions in both headcount and other expenses. 0.8% ~2-3% ~2% ~7% ~12%+ 2016A Gross Profit
Slide 12: Focus on Higher-Margin Markets in Concrete
Focus on Higher-Margin Markets in Concrete 35% ~38% - 39% ~42%+ 2016A 2018E 2020E 12 CONCRETE GROSS MARGIN TARGETCONCRETE STRATEGY • Reprioritizing efforts in the concrete space to drive improved profitability • Effective immediately, ceasing development of lower-margin concrete repair lines (exclud
Slide 13: Software Critical to Preserve & Grow Core Business
Software Critical to Preserve & Grow Core Business Over 40% of our core wood connector business is tied to customers with software needs. ~$500 M 13 • Without software solutions, we believe a meaningful portion of our market share in our core wood connector products would be at risk • Enhances techn
Slide 14: Improve Working Capital & Balance Sheet Discipline
FY 2016A FY 2020E Improve Working Capital & Balance Sheet Discipline 14 • Established internal team to better manage inventory without impacting product availability standards • Delivering products typically within 24 hours is a key competitive factor • Eliminating ~25% - 30% of SKU’s • Expect enhan
Slide 15: Return on Invested Capital Improvement
Return on Invested Capital(1) Improvement 15 Through execution on the 2020 Plan, we expect to substantially increase our return on invested capital above our weighted average cost of capital which will drive enhanced shareholder value. 10.5% ~3% ~3% ~1% ~17% - 18% 2016A Operating Expense Reductions
Slide 16: Disciplined Capital Allocation Strategy
Cash Flow from Operations Share Repurchases Organic Growth Investments Dividends Disciplined Capital Allocation Strategy 16 • Improve cash flow through better management of working capital and overall balance sheet discipline • Committed to return 50% of cash flow from operations to shareholders • F
Slide 17: Summary
Summary 17 Now → 2020: Focusing on organic growth Rationalizing our cost structure to improve Company-wide profitability Improving working capital management and balance sheet discipline Increasing capital return to shareholders Working with external management and Lean consultants to perf
Slide 18: = Sion Fane
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Slide 19: Return on Invested Capital (ROIC) Definition
Return on Invested Capital (“ROIC”) Definition When referred to in this presentation, the Company’s return on invested capital (“ROIC”) for a fiscal year is calculated based on (i) the net income of that year as presented in the Company’s consolidated statements of operations prepared pursuant to ge
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