Simpson Manufacturing Co., Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Each of the terms the “Company,” “we,” “our,” “us” and similar terms used herein refer collectively to Simpson Manufacturing Co., Inc., a Delaware corporation, and its wholly-owned subsidiaries, including Simpson Strong-Tie Company Inc., unless otherwise stated. The Company regularly uses its website to post information regarding its business and governance. The Company encourages investors to use http://www.simpsonmfg.com as a source of information about the Company. The information on our website is not incorporated by reference into this report or other material we file with or furnish to the Securities and Exchange Commission (the “SEC”), except as explicitly noted or as required by law. The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s consolidated financial condition and results of operations. This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and notes thereto included in this report. “Strong-Tie” and our other trademarks appearing in this report are our property. CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “target,” “continue,” “predict,” “project,” “change,” “result,” “future,” “will,” “could,” “can,” “may,” “likely,” “potentially,” or similar expressions. Forward-looking statements are all statements other than those of historical fact and include, but are not limited to, statements about future financial and operating results, our plans, objectives, business outlook, priorities, expectations and intentions, expectations for sales and market growth, comparable sales, earnings and performance, stockholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, our strategic initiatives, including the impact of these initiatives on our strategic and operational plans and financial results, and any statement of an assumption underlying any of the foregoing. Forward-looking statements are subject to inherent uncertainties, risks and other factors that are difficult to predict and could cause our actual results to vary in material respects from what we have expressed or implied by these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those expressed in or implied by our forward-looking statements include, the effect of tariffs and international trade policies on our business operations, the effects of inflation and labor and supply shortages on our operations, and the operations of our customers, suppliers and business partners, and those factors discussed under Item 1A. Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Additional risks include: the cyclicality and impact of general economic conditions; changing conditions in global markets including the impact of sanctions and tariffs, quotas and other trade actions and import restrictions; the impact of sales price increases of our products, the impact of pandemics, epidemics or other public health emergencies; volatile supply and demand conditions affecting prices and volumes in the markets for both our products and raw materials we purchase; the impact of foreign currency fluctuations; potential limitations on our ability to access capital resources and borrowings under our existing credit agreement; restrictions on our business and financial covenants under our credit agreement; reliance on employees subject to collective bargaining agreements; and our ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any. We caution that you should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC that advise of the risks and factors that may affect our business, results of operations, and financial condition. 26 Overview We design, manufacture, and sell building construction products that are of high quality and performance, easy to use, and cost-effective for customers. We operate in three business segments determined by geographic region: North America, Europe, and Asia/Pacific. Within the North America segment, our sales efforts are aligned to customer market teams dedicated to serving the following markets: • Residential; • Commercial; • Original Equipment Manufacturers (“OEM”); • National Retail; and • Component Manufacturers Our organic growth opportunities are focused on expanding our product lines with our current customers while also identifying new market share gain opportunities within our core product and market competencies. To grow in these markets, we aspire to be among the leaders in engineered load-rated construction building products and systems as well as digital product offerings. We also aspire to leverage our engineering expertise, deep-rooted relationships with top builders, engineers, contractors, code officials and distributors, along with our ongoing commitment to testing, research and innovation. Importantly, we currently have existing products, testing results, distribution and manufacturing capabilities to support our ambitions. This will ultimately be a function of expanding our sales and/or marketing functions to promote our products to different end users and distribution channels, expanding our customer base, and introducing new products in the future. Our commitment to continuous improvement has fostered our core Company ambitions, which we will pursue including: • Strengthen our values-based culture; • Be the partner of choice; • Be an innovative leader in the markets we operate; • Above market growth relative to the U.S. housing starts (exceeding our historical average volume performance in North America of approximately 250 basis points above the housing starts market); • An operating income margin at or above 20%; and • Earnings per share growth exceeding net revenue growth. Since announced in 2021, we have made great progress on our key growth initiatives. Examples include: • Added approximately $1.0 billion in revenue and $200.0 million in operating profit. • Realigned our sales team by end market, making our distribution process more efficient, and made significant investments in our field sales and engineering teams. • Made significant footprint investments in both production and warehouses. Our investment in our new Gallatin, Tennessee facility enables us to onshore additional fastener and anchor production, and the operation will in-source key manufacturing processes such as heat treating and coating of fasteners. Additional warehouse capabilities will also enhance next day delivery for our North American customers. • Invested significantly in digital solutions, combined with the other initiatives strengthened our business model, which drove hardware sales, created value for our customers and made us a partner of choice. • Strengthened our senior leadership team through a combination of internal development and external experts. As a result, we believe we are now in an even stronger market position in connectors with significant gains in both fasteners and anchors. In addition, due to 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, we believe we can continue to achieve above market growth in the North America relative to U.S. housing starts for fiscal 2025 and beyond. These examples further emulate our Founder, Barclay Simpson’s, nine principles of doing business, and more specifically the focus and obsession on customers and users. During the six months ended June 30, 2025, the recent tariff and trade policy actions have had some impact and will continue to impact our results of operations. We also experienced increased foreign currency exchange rate volatility, which we attribute, in part, to the rapidly changing global trade environment. As previously announced, we increased prices as of June 2, 2025 on certain wood connectors, fasteners and mechanical anchors in the U.S. We believe North America net sales could increase in future periods even if demand does not increase. However, 27 increased selling prices are expected to be offset by increased non-material costs including labor, energy, transportation, and equipment incurred over the prior three years. In addition, the announced price increases will partly offset the increased costs related to the initial tariffs that effected a portion of our fastener and anchors sales, while it does not offset tariffs announced after June 2, 2025. Non-GAAP Financial Measures In addition to financial information prepared in accordance with GAAP, we use adjusted EBITDA as a non-GAAP financial measure in evaluating the ongoing operating performance of our business. We define adjusted EBITDA as net income (loss) before income taxes, adjusted to exclude depreciation and amortization, integration, acquisition and restructuring costs, non-qualified deferred compensation adjustments, goodwill impairment, gain on bargain purchase, net loss or gain on disposal of assets, interest income or expense, and foreign exchange and other expense (income). This provides additional insight into the Company’s operating performance in light of the significant levels of growth investment we have made in our operations, the effect depreciation and acquisition as well as integration costs will have on our operating results. We believe this will also provide a better approximation of our cash flows compared to operating income. Factors Affecting Our Results of Operations Our business, financial condition, and results of operations depend in large part on the level of U.S. housing starts and residential construction activity. Overall U.S. housing starts decreased under the trailing twelve months ending June 30, 2025, compared to the trailing twelve months ending June 30, 2024. Lower housing starts in the U.S. could result in lower demand, which would affect our sales and possibly operating profit. Unlike lumber or other products that have a more direct correlation to U.S. housing starts, our products are used to a greater extent in areas that are subject to natural forces, such as seismic or wind events. Our products are generally used in a sequential progression that follows the construction process. Residential and commercial construction begins with the foundation, followed by the wall and the roof systems, and then the installation of our products, which flow into a project or a house according to these schedules. We are closely monitoring the recent tariff and trade policy actions taken by the U.S. and foreign governments. As the situation continues to remain fluid due to the rapidly changing global trade environment, we are still evaluating the potential implications of these actions on our business. While we are largely domestically sourced, we continue to monitor macroeconomic trends such as the impact of inflation, the effects of recently implemented tariffs, and the potential imposition of modified or additional tariffs in markets where we and our supplier operate. As a result of the tariff’s announced by the U.S. presidential administration on April 2, 2025 and June 15, 2025, and potential tariff modifications or the imposition of tariffs or export controls by other countries there is significant economic uncertainty. The extent and duration of tariffs and the resulting impact on macroeconomic conditions and on our business are uncertain and may depend on various factors beyond our control. We are closely monitoring the potential for the imposition of new or additional U.S. tariffs on imports, as well as potential retaliatory tariffs or other measures other countries may impose on U.S. imports, that may adversely affect the global economy. We are currently uncertain as to the ultimate impact these measure may have given the rapidly changing environment surrounding tariffs and other related political topics; however, if enacted as currently proposed, we expect that the proposed tariffs would primarily impact our North America segment as we procure fasteners and a small number of other products from countries that will be subjected to the these tariffs. Additionally, economic pressures on our customers, including the potential of higher inflation, fluctuations in consumer confidence, driven by economic concerns or price increases, such as those we recently announced, could reduce demand for our products and services negatively affecting our net sales and profitability in the future. In prior years, our sales were heavily seasonal with operating results varying from quarter to quarter depending on weather conditions that could delay construction starts. Our sales and income have historically been lower in the first and fourth quarters than in the second and third quarters of a fiscal year. Increased tariffs (as noted above), political uncertainty, and rising costs can also have an effect on our gross and operating profits as well. Due to efforts in diversifying our geographic footprint, product offerings, and changing our path to market in the U.S., sales from our product lines, customer base, and customer purchases are becoming less seasonal. Changes in raw material cost could impact the amount of inventory on-hand, and negatively affect our gross profit and operating margins depending on the timing of raw material purchases or how much sales prices can be increased to offset any increases in raw material costs. Changes in labor, freight and warehousing costs, could also negatively impact gross profit depending on timing and amount of sales price can be increased to offset the higher costs. Our operations also expose us to risks associated with pandemics, epidemics or other public health crises. 28 Business Segment Information Historically, our North America segment has generated more revenues from wood construction products compared to concrete construction products. North America net sales increased for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 due to incremental sales from the Company's 2024 acquisitions and price increase that took effect in June 2025. The increases were partly offset by decreased sales volumes and the negative effect of approximately $1.9 million in foreign currency translation. Our wood construction product net sales increased 4.6% for the six months ended June 30, 2025 compared to June 30, 2024. Our concrete construction product net sales increased 6.2% over the same periods. For 2025, U.S. housing starts could decline in the low-single digit range from 2024 levels. With the investments we have made, we believe we will be able to continue to grow volumes above the U.S. housing starts market, one of our ambitions . For the year-to-date period, housing starts have decreased in 2025 compared to the same period in 2024. Operating income increased 4.5% to $241.3 million. The increase was primarily due to higher gross profits, partially offset by higher operating expenses. The operating expense increases were driven primarily by higher personnel costs and variable compensation . Additional incremental investments in the business will be limited until the U.S. housing market shows long-term improvement. In May 2025, we held the grand opening on our Columbus, Ohio facility. We expect the construction of our new Gallatin, Tennessee facility to be completed and operations to commence in the fourth quarter of 2025. These facilities are expected to improve our overall service, production efficiencies and safety in the workplace, as well as reduce our reliance on certain outsourced finished goods and component products. These facilities will help ensure we have ample capacity to meet our customer needs. These investments reinforce our core business model differentiators to remain the partner of choice as we continue to produce products locally and ensure superior levels of customer service. Europe net sales decrease d 1.0% for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, Wood construction product net sales decrease d 0.9% f or the six months ended June 30, 2025 compared to June 30, 2024 and concrete construction product net sales, which are mostly project based, decreased 1.6% over the same periods. Gross profit decrea sed $1.5 million primarily due to lower net sales as well as gross margins decreasing to 35.7% from 35.9% due to increased factory overhead, warehouse and labor costs, partially offset by lower material costs, as a percentage of net sales . Operating income increased $4.6 million and operating margin increased to 10.1% from 8.2% due to lower operating and integration expenses. We currently anticipate Europe 2025 results to be impacted by economic headwinds but also believe in the long term potential given Europe's on-going housing shortage (with an increasing use of wood construction) and new environmental regulations for which we have products and solutions. Our Asia/Pacific segment has generated revenues from both wood and concrete construction products. We believe that the Asia/Pacific segment is not significant to our overall performance. Business Outlook Based on business trends and conditions, the Company's outlook for the full fiscal year ending December 31, 2025 is as follows: • Consolidated operating margin is estimated to be in the range of 18.5% to 20.5% given the declining trends and projections for 2025 U.S. housing starts compared to the prior year and the current trade environment. The outlook reflects the previously announced price increases that went into effect on June 2, 2025. The operating margin range does not include any additional pricing actions in 2025 and includes a projected benefit of $12.0 million to $13.0 million from the sale of the original Gallatin, Tennessee facility based on a contracted sales price of $19.1 million. • The effective tax rate is estimated to be in the range of 25.5% to 26.5%, including both federal and state income tax rates as well as international income tax rates, and assuming no tax law changes are enacted. • Capital expenditures are estimated to range between $140.0 and $160.0 million, which includes approximately $70.0 million to $75.0 million remaining for both the Columbus, Ohio facility expansion and the new Gallatin, Tennessee facility construction. 29 Results of Operations for the Three Months Ended June 30, 2025, Compared with the Three Months Ended June 30, 2024 Unless otherwise stated, the below results, when providing comparisons (which are generally indicated by words such as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the three months ended June 30, 2025, against the results of operations for the three months ended June 30, 2024. Unless otherwise stated, the results announced below, when referencing “both quarters,” refer to the three months ended June 30, 2024 and the three months ended June 30, 2025. In the first quarter of 2025, the Company reclassified certain engineering costs related to the Company's digital efforts from research and development and engineering expense as well as selling expense to general and administrative expense. The financial results of prior three months ended June 30, 2024 were revised to reflect these changes with $2.8 million of costs being reclassified from research and development expenses and $1.4 million from selling expense to general and administrative expense. The reclassification did not have any impact on the total operating expenses. Second Quarter 2025 Consolidated Financial Highlights The following table shows the change in the Company's results of operations from the three months ended June 30, 2024 to the three months ended June 30, 2025, and the increases or decreases for each category by segment: Three Months Ended Three Months Ended Increase (Decrease) in Operating Segment (in thousands) June 30, 2024 North America Europe Asia/ Pacific Admin & All Other June 30, 2025 Net sales $ 596,978 $ 29,665 $ 3,521 $ 891 $ — $ 631,055 Cost of sales 318,431 15,801 1,195 841 337 336,605 Gross profit 278,547 13,864 2,326 50 (337) 294,450 Research and development and other engineering expense 19,948 545 18 256 — 20,767 Selling expense 54,494 2,615 (774) 108 — 56,443 General and administrative expense 70,567 6,275 77 (478) 747 77,188 Total operating expenses 145,009 9,435 (679) (114) 747 154,398 Acquisition and integration related costs 1,590 — (610) — (967) 13 Net gain on disposal of assets (238) (5) 89 (51) — (205) Income from operations 132,186 4,434 3,526 215 (117) 140,244 Interest income (expense), net and other 2,092 (333) 64 (6) (922) 895 Other & foreign exchange gain (loss), net (1,588) (9,777) 1,123 (326) 8,884 (1,684) Income before income taxes 132,690 (5,676) 4,713 (117) 7,845 139,455 Provision for income taxes 34,859 (953) 186 (55) 1,877 35,914 Net income $ 97,831 $ (4,723) $ 4,527 $ (62) $ 5,968 $ 103,541 Net sales increased 5.7% to $631.1 million from $597.0 million. Wood construction product sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented 84.9% and 85.5% of the Company's total sales in the second quarters of 2025 and 2024, respectively. Concrete construction product sales, including sales of adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, represented 15.0% and 14.5% of the Company's total sales in the second quarters of 2025 and 2024, respectively. Gross profit increased 5.7% to $294.5 million from $278.5 million primarily due to higher net sales on flat gross margins of 46.7%. From a product perspective, gross margin decreased to 47.1% from 47.2% for wood construction products and decreased to 45.0% from 47.5% for concrete construction products, respectively. Selling expense increased 3.6% to $56.4 million from $54.5 million, primarily due to an increase of $1.9 million in personnel costs. 30 General and administrative expense increased 9.4% to $77.2 million from $70.6 million, primarily due to increases of $2.9 million in variable compensation, $1.8 million in personnel costs, and $1.0 million in computer and software, net of amount capitalized. Our effective income tax rat e decreased to 25.8%from 26.3%. Consolidated net income was $103.5 million compared to $97.8 million. Diluted earnings per share was $2.47 compared to $2.31. Adjusted EBITDA 1 of $159.9 million increased 4.8% compared to $152.6 million, primarily due to higher gross profits. Net sales The following table shows net sales by segment for the three months ended June 30, 2025 and 2024, respectively: (in thousands) North America Europe Asia/ Pacific Total Three months ended June 30, 2024 $ 463,022 $ 129,877 $ 4,079 $ 596,978 June 30, 2025 492,687 133,398 4,970 631,055 Increase $ 29,665 $ 3,521 $ 891 $ 34,077 Percentage increase 6.4 % 2.7 % 21.8 % 5.7 % The following table shows segment net sales as percentages of total net sales for the three months ended June 30, 2025 and 2024, respectively: North America Europe Asia/ Pacific Total Percentage of total 2024 net sales 77 % 22 % 1 % 100 % Percentage of total 2025 net sales 78 % 21 % 1 % 100 % Gross profit The following table shows gross profit (loss) by segment for the three months ended June 30, 2025 and 2024, respectively: (in thousands) North America Europe Asia/ Pacific Admin & All Other Total Three months ended June 30, 2024 $231,581 $45,949 $1,486 $(469) $278,547 June 30, 2025 245,445 48,275 1,536 (806) 294,450 Increase (decrease) $13,864 $2,326 $50 $(337) $15,903 Percentage Increase 6.0 % 5.1 % * * 5.7 % * The statistic is not meaningful or material. The following table shows gross margin by segment for the three months ended June 30, 2025 and 2024, respectively: North America Europe Asia/ Pacific Admin & All Other Total 2024 gross margin percentage 50.0 % 35.4 % 36.4 % * 46.7 % 2025 gross margin percentage 49.8 % 36.2 % 30.9 % * 46.7 % * The statistic is not meaningful or material. 31 North America • Net sales increased 6.4%, primarily due to price increases that took effect in June 2025 and incremental sales from the Company's 2024 acquisitions. • Gross margin decreased to 49.8% from 50.0%, primarily due to higher warehouse costs, as a percentage of net sales. • Selling expense increased 6.5% , primarily due to increases of $1.8 million in personnel costs and $0.8 million in variable compensation. • General and administrative expense increased 15.0%, primarily due to increases of $1.8 million in depreciation and amortization, $1.7 million in professional fees, $1.6 million in variable compensation and $1.1 million in personnel costs. • Income from operations increased by $4.4 million due to the factors discussed above. Europe • Net sales increased 2.7%, primarily due to the positive effect of approximately $7.0 million in foreign currency translation, partly offset by lower sales volumes. • Gross margin increased to 36.2% from 35.4% , primarily due to lower material costs, partly offset by an increase in factory overhead, as a percentage of net sales. • Income from operations increased by $3.5 million to $15.7 million from $12.1 million primarily due to an increase in gross profit and a decrease in operating expenses including variable compensation and travel related costs. Asia/Pacific • For information about the Company's Asia/Pacific segment, please refer to the tables above setting forth changes in our operating results for the three months ended June 30, 2025 and 2024. 32 Results of Operations for the Six Months Ended June 30, 2025, Compared with the Six Months Ended June 30, 2024 Unless otherwise stated, the results announced below, when providing comparisons (which are generally indicated by words such as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the six months ended June 30, 2025, against the results of operations for the six months ended June 30, 2024. Unless otherwise stated, the results announced below, when referencing “both periods,” refer to the six months ended June 30, 2024 and the six months ended June 30, 2025. In the first quarter of 2025, the Company reclassified certain engineering costs related to the Company's digital efforts from research and development and engineering expense as well as selling expense to general and administrative expense. The financial results of prior six months ended June 30, 2024, were revised to reflect these changes with $5.4 million of costs being reclassified from research and development expenses and $2.7 million from selling expense to general and administrative expense. The reclassification did not have any impact on the total operating expenses. Year-to-Date (6-month) 2025 Consolidated Financial Highlights The following table illustrates the differences in our operating results for the six months ended June 30, 2025, from the six months ended June 30, 2024, and the increases or decreases for each category by segment: Six Months Ended Increase (Decrease) in Operating Segment Six Months Ended (in thousands) June 30, 2024 North America Europe Asia/ Pacific Admin & All Other June 30, 2025 Net sales $ 1,127,557 $ 43,615 $ (2,556) $ 1,334 $ — $ 1,169,950 Cost of sales 604,456 19,386 (1,092) 236 474 623,460 Gross profit 523,101 24,229 (1,464) 1,098 (474) 546,490 Research and development and other engineering expense 39,213 912 194 287 — 40,606 Selling expense 107,758 4,122 (1,418) 146 (1) 110,607 General and administrative expense 144,649 8,729 (2,344) (432) 2,252 152,854 Total operating expenses 291,620 13,763 (3,568) 1 2,251 304,067 Acquisition and integration related costs 3,636 — (2,590) — (906) 140 Net gain on disposal of assets (436) 89 118 (51) — (280) Income from operations 228,281 10,377 4,576 1,148 (1,819) 242,563 Interest income (expense), net and other 2,443 (457) 296 315 (599) 1,998 Other & foreign exchange gain (loss), net 381 (18,800) (483) (145) 18,421 (626) Income (Loss) before income taxes 231,105 (8,880) 4,389 1,318 16,003 243,935 Provision for income taxes 57,847 463 185 312 3,703 62,510 Net income $ 173,258 $ (9,343) $ 4,204 $ 1,006 $ 12,300 $ 181,425 Net sales increased 3.8% to $1,170.0 million from $1,127.6 million driven by incremental sales from the Company's 2024 acquisitions and price increases that took effect in June 2025, partly offset by an overall decrease in sales volumes. Wood construction product sales represented 85.1% and 85.3% of the Company's total sales in the first six months of 2025 and 2024. Concrete construction product sales represented 14.7% and 14.6% of the Company's total sales in the first six months of 2025 and 2024. Gross profit increased 4.5% to $546.5 million from $523.1 million. Gross margins increased to 46.7% from 46.4%. The increase is due to lower material costs for the Company overall. Gross margins increased to 46.9% from 46.2% for wood construction products and decreased to 47.0% from 47.1% for concrete construction products. Research and development and engineering expense increased 3.6% to $40.6 million from $39.2 million primarily due to increases of $4.8 million in in computer and software cost, net of amount capitalized and $0.6 million in personnel costs, partially offset by a decrease of $3.8 million in professional fees. Selling expense increased to $110.6 million from $107.8 million, primarily due to increases of $4.8 million in personnel costs, $1.3 million in variable compensation, partially offset by decreases of $1.2 million in advertising and trade shows costs and $1.0 million in travel related costs. 33 General and administrative expense increased to $152.9 million from $144.6 million, primarily due to increases of $5.2 million in personnel costs and $5.0 million in variable compensation, partially offset by a decrease of $1.1 million in travel related costs. Our effective income tax rate increased to 25.6% from 25.0%. Consolidated net income was $181.4 million compared to $173.3 million. Diluted earnings per share was $4.33 compared to $4.07. Adjusted EBITDA 1 of $281.7 million increased 4.4% compared to $269.9 million primarily due to higher gross profits. Net sales The following table represents net sales by segment for the six-month periods ended June 30, 2024 and 2025: (in thousands) North America Europe Asia/ Pacific Total Six Months Ended June 30, 2024 $ 869,771 $ 249,814 $ 7,972 $ 1,127,557 June 30, 2025 913,386 247,258 9,306 1,169,950 Increase (decrease) $ 43,615 $ (2,556) $ 1,334 $ 42,393 Percentage increase (decrease) 5.0 % (1.0) % 16.7 % 3.8 % The following table represents segment sales as percentages of total net sales for the six-month periods ended June 30, 2024 and 2025, respectively: North America Europe Asia/ Pacific Total Percentage of total 2024 net sales 77 % 22 % 1 % 100 % Percentage of total 2025 net sales 78 % 21 % 1 % 100 % Gross profit The following table represents gross profit (loss) by segment for the six-month periods ended June 30, 2024 and 2025: (in thousands) North America Europe Asia/ Pacific Admin & All Other Total Six Months Ended June 30, 2024 $ 432,117 $ 89,761 $ 2,162 $ (939) $ 523,101 June 30, 2025 456,346 88,297 3,260 (1,413) 546,490 Increase (decrease) $ 24,229 $ (1,464) $ 1,098 $ (474) $ 23,389 Percentage increase (decrease) 5.6 % (1.6) % * * 4.5 % * The statistic is not meaningful or material The following table represents gross margins by segment for the six-month periods ended June 30, 2024 and 2025: North America Europe Asia/ Pacific Admin & All Other Total 2024 gross margin percentage 49.7 % 35.9 % 27.1 % * 46.4 % 2025 gross margin percentage 50.0 % 35.7 % 35.0 % * 46.7 % * The statistic is not meaningful or material. 1 Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to U.S. generally accepted accounting principles (“GAAP”) net income see the schedule titled “Reconciliation of Net Income to Adjusted EBITDA.” 34 North America • Net sales increased 5.0%, primarily due to incremental sales from the Company's 2024 acquisitions and price increases that took effect in June 2025 . • Research and development and engineering expense increased 2.6%, primarily due to an increase of $4.7 million in computer and software expenses, net of amounts capitalized, partially offset by a decrease of $3.7 million in professional fees. • Selling expense increased 5.2%, primarily due to increases of $4.7 million in personnel costs and $1.5 million in variable compensation, partially offset by decreases of $0.9 million in advertising and trade shows expenses and $0.8 million in travel related expenses. • General and administrative expense increased 10.0%, primarily due to increases of $3.7 million in personnel costs, $3.5 million in variable compensation, and $2.6 million in professional fees, partially offset by a decrease of $2.3 million in computer and software expenses, net of amounts capitalized. • Income from operations increas ed $10.4 million , du e to higher net sales, partially offset by increases in operating expenses. Europe • Net sales decreased 1.0%, primarily due to lower sales volumes, partially offset by the positive effect of $3.0 million in foreign currency translation. • Income from operations increased $4.6 million, primarily due to lower operating expenses. Asia/Pacific • For information about the Company's Asia/Pacific segment, please refer to the tables above setting forth changes in our operating results for the six months ended June 30, 2025 and 2024. Effect of New Accounting Standards See “Note 1 Basis of Presentation — Accounting Standard Adopted ” and “Note 1 Basis of Presentation — Accounting Standards Not Yet Adopted ” to the accompanying unaudited interim Condensed Consolidated Financial Statements. Liquidity and Capital Resources We have historically met our capital needs through a combination of cash flows from operating activities and, when necessary, borrowings under our credit facilities. Our principal uses of capital include the costs and expenses associated with our operations, including financing working capital requirements and continuing our capital allocation strategy, which includes supporting capital expenditures, paying cash dividends, repurchasing the Company's common stock, and financing other investment opportunities from time to time. On March 30, 2022, the Company entered into a Credit Agreement. The Credit Agreement provides for a 5-year revolving credit facility of $450.0 million, which includes a letter of credit sub-facility up to $50.0 million and for a 5-year term loan facility of $450.0 million. As of June 30, 2025, the Company had no borrowings under the revolving credit facility and $376.9 million under the term loan facility, and has $450.0 million available to borrow under the revolving credit facility. As of June 30, 2025, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions, including $82.0 million that is held in the local currencies of our foreign operations and could be subject to additional taxation if repatriated to the U.S. The Company is maintaining a permanent reinvestment assertion on its foreign earnings relative to remaining cash held outside the United States. 35 We believe the Company's balances of cash and cash equivalents, cash flows from operating activities, and access to borrowings under our credit facilities are sufficient to satisfy its liquidity requirements and capital needs over the next 12 months and beyond. The following table shows selected financial information as of June 30, 2025, December 31, 2024 and June 30, 2024, respectively: As of June 30, As of December 31, As of June 30, (in thousands) 2025 2024 2024 Cash and cash equivalents $ 190,400 $ 239,371 $ 354,851 Property, plant and equipment, net 597,536 531,655 459,297 Equity & other investments, goodwill and intangible assets 977,877 903,498 866,238 Non-cash net working capital 694,858 570,602 615,900 The following table presents the significant categories of cash flows used or provided during the six-month periods ended June 30, 2025 and 2024, respectively: Six Months Ended June 30, (in thousands) 2025 2024 Net cash provided by (used in): Operating activities $ 132,778 $ 119,086 Investing activities (90,568) (95,686) Financing activities (95,617) (93,113) Cash flow from operating activities result primarily from our earnings before non-cash items such as depreciation, amortization, and stock-based compensation, and are also affected by changes in operating assets and liabilities which consist primarily of working capital balances. Our revenues are derived from manufacturing and sales of building construction materials. Our operating cash flows are impacted by prevailing macro-economic conditions and subject to seasonality, which is cyclically associated with the volume and timing of construction project starts. For example, as a result of seasonality our trade accounts receivable are generally lowest at the end of the fourth quarter and increases during the first, second, and third quarters as construction activity ramps in markets we serve. During the six months ended June 30, 2025, operating activities provided $132.8 million in cash, as a result of $181.4 million from net income plus $60.1 million non-cash expenses such as depreciation and amortization, deferred compensation, stock-based compensation, and leases. This amount was partly offset by $108.7 million used for the net change in operating assets and liabilities. The net change in operating assets and liabilities included increases of $120.8 million in trade accounts receivable, partly offset by a decrease of $26.1 million in inventory. Cash flow used in investing activities of $90.6 million during the six months ended June 30, 2025 was primarily used for facility expansion projects as well as machinery and equipment purchases. Due to updated forecasts on the timing of the spend and subject to future events and circumstances, capital expenditures are estimated to be in the range of $140.0 million and $160.0, which includes approximately $70.0 million to $75.0 million remaining for both the Columbus, Ohio facility expansion and the new Gallatin, Tennessee facility. The remaining capital expenditures will be primarily focused on purchases of new equipment to support increased productivity and efficiencies, enhancements to our existing facilities to expand our manufacturing footprint in-line with increasing customer needs, as well as investments for adjacencies and key growth initiatives . Cash flow used in financing activities of $95.6 million during the six months ended June 30, 2025 consisted primarily of $60.0 million in stock repurchases and $23.5 million used to pay dividends to our stockholders. On July 24, 2025, the Company's Board of Directors (the “Board”) declared a quarterly cash dividend of $0.29 per share payable on October 23, 2025, to the Company's stockholders of record on October 2, 2025. 36 Since the beginning of 2022 through the period ended June 30, 2025 , we have returned $447.7 million to stockholders, which represents 51.0% of our free cash flow from operations during the same period, and over the same period the Company has repurchased over two million shares of the Company's common stock, which represents approximately 4.8% of the outstanding shares of the Company's common stock at the start of 2022. Reconciliation of Non-GAAP Financial Measures (In thousands) (Unaudited) A reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure, is set forth below. Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net Income $ 103,541 $ 97,831 $ 181,425 $ 173,258 Provision for income taxes 35,914 34,859 62,510 57,847 Interest (income) expense, net and other financing costs (895) (2,092) (1,998) (2,443) Depreciation and amortization 20,995 19,370 40,517 38,559 Other* 333 2,603 (804) 2,629 Adjusted EBITDA $ 159,888 $ 152,571 $ 281,650 $ 269,850 *Other: Includes acquisition integration and restructuring related expenses, non-qualified deferred compensation plan adjustments, other & foreign exchange loss net, and net loss or gain on disposal of assets. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of June 30, 2025.