Simpson Manufacturing Co., Inc. (NYSE:SSD) Q1 2024 Earnings Call Transcript

Simpson Manufacturing Co., Inc. (NYSE:SSD) Q1 2024 Earnings Call Transcript April 22, 2024

Simpson Manufacturing Co., Inc. misses on earnings expectations. Reported EPS is $1.77 EPS, expectations were $1.84. Simpson Manufacturing Co., Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings. Welcome to the Simpson Manufacturing Company First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Kim Orlando of ADDO Investor Relations. You may begin.

Kim Orlando: Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company’s first quarter 2024 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 4:15 pm 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.

Mike Olosky: Thanks, Kim. Good afternoon, everyone, and thank you for joining today’s call. With me today is Brian Magstadt, our Chief Financial Officer. Our remarks today will provide an overview of our first quarter performance and updates on our end markets and capital allocation priorities. Brian will then talk you through our first quarter financials and fiscal 2024 outlook in greater detail. I am pleased with our first quarter performance in what continues to be a challenging market for new housing starts in both the U.S. and Europe. Our team continues executing our strategy and maintaining our relentless customer focus, which led to various new customer wins and awards during the quarter. Our first quarter net sales totaled $530.6 million, a modest decline year-over-year.

Looking at our regions in greater detail. North American volumes for quarter one were up approximately 8% year-over-year in a relatively flat U.S. housing market. Our increased sales volumes were partly offset by the timing of volume discounts applied with price decreases we implemented in the prior-year period, which led to North American net sales of $406.7 million versus $406.3 million in the prior year. The significant variability in starts we saw last year created a wider disparity in volume discounts than we’ve seen historically. To further break down our North American volume performance, we achieved double-digit growth year-over-year in both our component manufacturer and national retail markets as we have carryover benefit from previous new business wins.

We also improved our volumes in the mid-single digit range in both the residential and commercial markets with a modest improvement in the OEM market. Turning to Europe. Our first quarter net sales of $119.9 million were as anticipated, declining 3.4% or 4.3% on a local currency basis year-over-year. While the market in Europe remains pressured due to macroeconomic challenges and lower overall construction activity, our teams continued our solution-selling approach with our broad product line, resulting in new applications and customer wins. While reduced from prior-year quarter, our European gross margins remained elevated compared to historical levels, given our ongoing focus on pricing discipline and cost management. Our strong commitment to customer service in Europe, coupled with our strategy to grow our share in the midst of an ongoing housing shortage, provides us with optimism that Simpson is well positioned to benefit from broader secular trends, including the growing use of wood construction and increasingly stringent environmental regulations that drive new applications.

On a consolidated basis, our first quarter gross margin declined to 46.1% as anticipated, primarily reflecting higher fixed costs, which were partly offset by productivity improvements. The year-over-year decline in our operating margin to 18.1% primarily reflected additional costs incurred to pursue our growth opportunities in the areas of new products and market penetration. Beginning this quarter, we are now also disclosing consolidated adjusted EBITDA, which totaled $117.3 million for the quarter, a decline of 14% year-over-year. I’ll now turn to an update on new business wins within our five end use markets, which further underscore the investments we are making to drive sustainable long-term growth above the market. Beginning with the residential market, we benefited from share gains during the first quarter through the conversion of lumber dealers in both the U.S. and Canada by recapturing business from competing solutions due to our relentless customer service, specification and builder programs.

Further, we conducted various job site training exercises and demonstrations for a division of a large national homebuilder honor program, which led to the specification of structural fasteners into their regional plans. In addition, we formed a new partnership agreement with a large independent co-op serving more than 12,000 retail hardware stores, home centers and pro lumber dealers, which led to significant conversions for our connectors, fasteners, and anchor products. In the commercial market, sales of our cold-formed steel products were a bright spot in the quarter with double-digit year-over-year sales growth. We continue to educate and partner with the commercial building industry to provide innovative solutions. In the OEM market, we gained new customers during the quarter, including manufacturers of modular buildings, metal buildings, sheds, off-site construction, and material handling.

The OEM market is one of the areas we’re providing additional focus on to accelerate growth. Within the national retail space, we added structural fastener carts near our connectors with one of our largest home center customers, and are continuing to test other off-shelf opportunities with additional home center locations. This has led to increased sales growth for our customers. Our merchandising and marketing efforts also continue to drive growth in our Outdoor Accents product line. Our national retail sales teams remain focused on merchandising and education efforts with our customers, sales staffs, as we head into the build season. And finally, in the component manufacturer market, we are committed to ongoing investment and growing our offering in this space with new product development, software improvements, equipment solutions, and improved manufacturing processes to increase capacity in order to better serve our customers.

As an example, we recently released a new truss plate product for long-span agriculture and commercial applications. These customer wins are in direct alignment with our core company ambitions that we continue to pursue, including strengthening our values-based culture, being the business partner of choice, striving to be an innovative leader in the markets we operate, continuing above market growth relative to the U.S. housing starts, returning to the top quartile of our proxy peers for operating income margin, and returning to the top quartile of our proxy peers for return on invested capital. These ambitions stem from our dedication to superior levels of customer service as well as our high product availability and delivery standards to provide innovative and complete solutions for the markets we serve.

Being the partner of choice for our customers was recognized during the first quarter following the receipt of multiple awards from several of our major customers. Next, I’ll turn to a discussion on our capital allocation priorities. We maintain a balanced approach through our focus on both growth opportunities and stockholder returns. In Q1, we generated cash from operations of $8.6 million, which helped finance $28.5 million in capital expenditures and $11.4 million of quarterly cash dividends. We also paid down $5.6 million against our term loan, which we incurred to finance the acquisition of ETANCO. As previously discussed, we continue evaluating a number of tuck-in M&A opportunities to help us accelerate our growth initiatives. Concurrent with this strategy, we are making significant investments in people, engineering, equipment, and other capabilities to drive organic growth in the business.

We are also expanding our facilities for increased capacity and improving overall efficiencies. We believe these investments are important to provide high levels of service and customer support for an expected housing market recovery in 2025, leading to mid-single-digit growth in U.S. housing starts. For 2024, we expect low-single-digit growth in U.S. housing starts, with European housing starts below prior year. In summary, I’m pleased with our execution to date in 2024 as we lay the groundwork necessary to ensure our continued outperformance versus the market longer term. We believe the strategic investments we are making in the business will help us accelerate our historical average performance for compounded annual growth in North American sales volume above the market of approximately 250 basis points over the mid to long term while also returning to the top quartile profitability.

With that, I’d like to turn the call over to Brian, who will discuss the first quarter financial results in greater detail.

Brian Magstadt: Thanks, Mike, and good afternoon, everyone. Thank you for joining us to discuss our first quarter financial results today. Before I begin, I’d like to mention that unless otherwise stated, all financial measures discussed in my prepared remarks refer to the first quarter of 2024, and all comparisons will be year-over-year comparisons versus the first quarter of 2023. Now, beginning with our first quarter results. Our consolidated net sales decreased 0.7% to $530.6 million. Within the North America segment, net sales increased 0.1% to $406.7 million, primarily due to the higher sales volumes of 8%, as Mike mentioned, which were partially offset by the timing of volume discount applied, as well as price decreases implemented during 2023.

As you may recall, estimated allowances for volume discounts are deducted from revenues and are estimated for expected volumes. As such, volume discounts impacted our first quarter net sales more than anticipated. In North America, wood product volume was up 8.3% and concrete product volume was up 5.7%. In Europe, net sales decreased 3.4% to $119.9 million, primarily due to lower sales volumes, partially offset by the positive effect of $2.2 million in foreign currency translation. Consolidated gross profit decreased 3.3% to $244.6 million, resulting in a gross margin of 46.1% compared to 47.3%. On a segment basis, our gross margin in North America decreased to 49.3% compared to 50.6%, primarily due to higher warehouse and freight costs, partially offset by lower material costs, all as a percentage of net sales.

Our gross margin in Europe decreased to 36.5% from 37.5%, also primarily due to higher warehouse and freight costs as a percentage of net sales. From a product perspective, our first quarter gross margin on wood products was 46% compared to 47%, and was 47% for concrete products in both periods. Now turning to our first quarter costs and operating expenses. Total operating expenses were $146.6 million, an increase of $13.5 million or approximately 10.1%, primarily due to increased personnel costs, including added headcount to drive our growth, higher professional fees, and software licenses. In addition, we increased our IT spend to improve our internal processes and enhance our systems. As Mike touched on, many of these costs are growth-oriented investments to engineer and deliver new products, increase services to fuel take-off and designs, and continue the development of digital solutions which enable our customers and specifiers to select Simpson products.

As a percentage of net sales, total operating expenses were 27.6% compared to 24.9%. To further detail our SG&A investments, our first quarter research and development and engineering expenses increased 5.6% to $21.9 million, primarily due to the higher personnel costs noted above. Selling expenses increased 12% to $54.5 million, primarily due also to the higher personnel costs, as well as increases in travel costs, in advertising, promotion, and trade shows. On a segment basis, selling expenses in North America were up 17.3%, and in Europe, they were down 2.4%. General and administrative expenses increased 10.2% to $70.2 million, primarily due to higher software licensing and IT spend as well as personnel costs, both as noted above. As a result, our consolidated income from operations totaled $96.1 million, a decline of 18.8% from $118.4 million.

Our consolidated operating income margin was 18.1%, down from 22.1%. In North America, income from operations decreased 13.5% to $98.9 million, primarily due to increased personnel costs, travel related, advertising and trade show costs, software licenses and IT related spend, coupled with lower gross profit. In Europe income from operations was $8.3 million compared to $13.5 million, due to lower gross profit and higher personnel costs. Our effective tax rate was 23.4%, approximately 170 basis points lower than the prior-year period. Accordingly, net income totaled $75.4 million, or $1.77 per fully diluted share, compared to $88 million, or $2.05 per fully diluted share. We continue to make significant levels of growth investment in the business, which has and is expected to result in higher-than-expected depreciation.

As Mike noted, we are now disclosing adjusted EBITDA, a non-GAAP financial measure, to provide additional insight into our operating performance in light of the stack. This will also provide a better approximation of our cash flows compared to operating income. For the first quarter, adjusted EBITDA of $117.3 million declined 14%. Adjusted EBITDA is reconciled to the most comparable GAAP measure of net income in our earnings press release. Now, turning to our balance sheet and cash flow. Our balance sheet remained healthy with cash and cash equivalents totaling $369.1 million at March 31, 2024, down $60.7 million from our balance at December 31, 2023, due to changes in working capital, and up $116.6 million from our balance at March 31, 2023.

Our debt balance was approximately $476 million net of capitalized finance costs, and our net debt position was $106.8 million. We have $375 million remaining available for borrowing on our primary line of credit. Our inventory position as of March 31, 2024, was $555.7 million, which was down $4.2 million compared to our balance as of December 31, 2023, a slightly higher pounds. Effective inventory management remains a core element of our strategy and competitive advantage to ensure on-time delivery and exceptional service to our customers. During the first quarter, we generated cash flow from operations of approximately $8.6 million compared to $3 million. We invested $39.4 million for capital expenditures, including our facility investments, and paid $11.4 million in dividends to our stockholders.

While we did not repurchase shares of our common stock, we expect to continue being opportunistic. We also remain committed to our quarterly dividend. Next, turning to our 2024 financial outlook. Based on business trends and conditions as of today, April 22, our guidance for the full year ending December 31, 2024 is as follows. We expect our operating margin to be in the range of 20% to 21.5%. Key assumptions continue to include expected moderate growth above the housing market, a slightly lower overall gross margin based on the addition of new warehouses and modest increase in labor and factory and tooling as a percentage of net sales. Operating expenses at a level we believe are necessary to position the company to make continued meaningful share gains in our markets and growth initiatives and $4 million to $5 million in expected total cost to pursue synergies in Europe.

Next, interest expense on the outstanding revolving credit facility and term loans, which had borrowings of $75 million and $410.6 million as of December 31, 2023, respectively, is expected to be approximately $8 million, including the benefit from interest rate and cross-currency swaps, mitigating substantially all of the volatility from changes in interest rates. Interest on our cash and money markets is expected to offset this expense. Our effective tax rate is now estimated to be in the range of 24.5% to 25.5%, including both federal and state income tax rates based on current laws. And finally, we are updating our capital expenditures outlook to be approximately $185 million, which includes $105 million for the expansion of the Columbus, Ohio facility and the construction of the new fastener facility in Gallatin, Tennessee.

This amount is down slightly from our prior outlook due to the timing of the 2024 cash outlay on the real estate projects. In summary, the first quarter marked a solid start to the year as we furthered our growth strategy and continued traction against our core ambitions. While the market remains challenged, we were pleased with our continued strong performance enabled by our business model. Our financial position remains strong with a solid balance sheet that supports ongoing investments in our growth initiatives. These investments enable us to grow above the market, especially in the fast-growing market that we are anticipating in the coming years. I’d like to thank the entire Simpson team for a job well done. With that, I will now turn the call over to the operator to begin the Q&A session.

Operator: Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] And our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

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Q&A Session

Daniel Moore: Thank you. Good afternoon, Mike. Good afternoon, Brian. Thanks for the time and taking the questions. I’ll start with, North America volumes up very healthy, at 8%. Revenue closer to flat, as you described. Can you just give a little bit more detail regarding the timing of when volume discount estimates were applied? Kind of how that impacted this quarter? And more importantly, how much of a headwind do you expect that dynamic or pricing, in general, to be as we think about Q2 and balance of the year?

Brian Magstadt: Hi, Dan. Nice to talk to you today. It’s Brian. So, as noted in those — in the remarks, there were some timing issues related to rebates, which had impacted the net sales comparison with last year’s Q1. But just to reiterate, we believe we are still projecting to be in the 20% to 21.5% operating margin range for full year 2024. But a few points to touch on there. So, in general, there’s a lot of variability in the housing start forecasts throughout 2023. And so, total housing starts ultimately were down about 10%, but we saw larger production builders did better than that overall market. And we estimate our rebate expense based on market data and large builder data, but it’s still an estimate. And the actual expense is based on submissions for payment to us by the builders and those often come in after the end of the year.

So, going back to projecting those housing starts, as noted, we saw a lot of variability of those projections throughout last year, primarily increasing through the year. So, coupling that with the shift in starts to the bigger builders, those increase the complexity in making estimates for rebates that will ultimately be paid after the period. So, going forward, we also see increased rebates and other pricing impacts based on a couple of factors. So, new incremental revenues at new customers, new incremental revenues at existing customers who are experiencing higher revenues, getting into higher-tier rebates. So, often as customers buy more, the percentage rebated on those incremental revenues go up a little bit. Or they could be new product lines at those customers.

So, increased volumes lead to increased rebates by customers jumping tiers, rebates in competitive product buybacks associated with gaining new business are a couple other factors. Lastly, well, a couple of other points, terms and condition changes. So for example, sales price decreases when customers pay their own freight. So, that would be net neutral in gross profit, but it would impact net revenue, sorry. And then, lastly, product mix complicates the net revenue increases. So, on a go-forward basis, we believe the incremental revenues that we would expect would lead to the increased rebates. A lot of that we saw in the first quarter is the experience that we see after the year concludes and after those parties. So, we don’t sell directly to builders, but we do rebate out to builders based on product that goes into each of their starts.

So, our estimates are done in the period, the actuals that come in afterwards are basically true up in that period after it. So, we saw a bit of comparability in the quarter-over-quarter, Q1-over-Q1, but on a go-forward basis, we believe it would be primarily incremental revenues or additional volumes.

Daniel Moore: And on the margin front, obviously, didn’t change your guidance. Margin is a bit softer relative to our and/or Street expectations. I think you said in the prepared remarks they were as expected. How would you describe Q1 results relative to your internal expectations? And has your view changed at all regarding the likelihood of maybe the lower end or the higher end of the range now that we’ve got 60, 75 days further into the year?

Mike Olosky: Dan, it’s Mike. So, we’re still shooting for those three financial ambitions, above-market growth, profitability in the top quartile of our proxy peer group with operating income, and then ROIC in the top quartile of our proxy peer group. And for the ROIC, we need to return to get to that level, so — because of some of the investments we’ve made, we’ve got a plan behind that. But the operating margin guidance that we gave, we still believe we’re on track for.

Brian Magstadt: And Dan, I would add that as we’re a few weeks into — in April now, into the second quarter, we’re seeing North America volumes above the same period last year. And that’s also providing that additional — some additional data into the total outlook for the year. Again, it’s only a few weeks into the quarter, but the reason why we did not change our operating income guide is we do still feel comfortable that we’re in that range and still near the middle.

Daniel Moore: Very helpful. Maybe last one and I’ll jump back out. Just sort of grasping on one of the comments in the press release and the prepared remarks that the investments that you are making right now, you hope that they should help accelerate our average historical performance relative to North American housing starts, which was in the 250 basis point range. So, is the expectation that you hope to either 2025 or beyond accelerate that spread beyond the 250 basis points? Just making sure I’m reading that right. And any additional color you might want to provide would be very helpful. And appreciate it again.

Brian Magstadt: Yes. So, Dan, we, as you stated, last eight years, 250 basis points above market was our trend. The last two years is about 800 basis points above market. We want to try to continue to expand our performance versus U.S. housing starts, and we believe we’re on track to do that. And we’re assuming now that housing starts for the year is going to be low-single digits, which is up a little bit from where we were thinking we were going to be budget time, and we along with a lot of our customers and our peers in the market believe that sooner or later that housing shortage issue is going to kick in or we’re going to get mid-single digit growth and all the investments we’re making are going to help us provide great service when that market picks up, hopefully driving even more growth above market.

Daniel Moore: Very helpful. I’ll jump back with any follow-ups. Thank you.

Operator: Thank you. Our next question comes from the line of Tim Wojs with Baird. Please proceed with your question.

Tim Wojs: Hey, guys. Good afternoon. Maybe just to start on the rebate question, Brian, is there a way to kind of quantify what the deviation was relative to your expectations this quarter?

Brian Magstadt: It was about $6 million.

Tim Wojs: Okay. And then, I guess, obviously, there’s kind of mix and rebates and those types of things kind of happening. But has there been any sort of underlying structural change in the pricing environment in your mind, or is this all just kind of the puts and takes to volume growth and certain customers and certain product lines?

Mike Olosky: No. Tim, it’s Mike. I don’t think there’s anything that’s fundamentally changed. I mean, when we are going after new pieces of business, the contracts sometimes call for a rebate upfront, sometimes they call for buybacks, sometimes they call for different tier levels. I think Brian definitely pointed out that a lot of the go-forward was based off an incremental business. So, we do not believe anything is fundamentally changed from a pricing perspective.

Tim Wojs: Okay. Good. And then, I guess, from — as you guys think about kind of pricing in general, should — the 2023 decreases I think were effective about this time last year. So, are we kind of through that decline and then on a go-forward basis, it’s basically just kind of mix and then any sort of volume considerations?

Brian Magstadt: So, a little bit of mix and the volume implications on tiers, I did mention. Yeah, we had a little bit of pricing adjustments throughout last year, but the bulk of what we were talking about before was in the first quarter of 2023. But there were a little bit here and there in the balance of last year, or in the last three quarters of the year.

Tim Wojs: Okay. Maybe if I say it a different way, the gap between volume and revenue growth going forward, this should be kind of the peak gap and that should kind of narrow as you go through the year?

Brian Magstadt: Yes.

Tim Wojs: Okay. Got you. And then, just the last one on margins. So, you’re at kind of 18% or so in the first quarter and the guide is 20% to 21.5% for the year. It’s been a while since we’ve seen, I guess, normal seasonality. So, how would you think the margin cadence should kind of track through the year? How are you kind of expecting it to track through the year to get to that guided range?

Brian Magstadt: Okay. So, if we’re thinking kind of the middle quarters, the typical busier higher-margin quarters due to seasonality, I would say, they are maybe down a little bit from last year, but definitely higher than Q1, of course. So, based on our operating margin guide in the midpoint of the guide being down from where 2023 was, each of the quarters would be down just a little bit from the prior year comparable quarters. And let me just — yeah.

Tim Wojs: Okay. Very good. Thanks for the time. Good luck on the rest of the year.

Brian Magstadt: Thank you, Tim.

Brian Magstadt: Thanks, Tim.

Operator: Thank you. Our next question comes from the line of Kurt Yinger with D.A. Davidson. Please proceed with your question.

Kurt Yinger: Great. Thanks, and good afternoon, everyone. Is there a way to perhaps size the impact from some of the kind of inefficiencies related to the new warehouse facilities? And I guess, as we move through the remainder of the year, should some of that gross margin pressure subside or is that more of a 2025-type event with perhaps some better volume leverage on some of those additional fixed costs?

Mike Olosky: Yeah. So, Kurt, when we open up those new warehouses, that enables us to provide service to those end customers direct, thus the ability to move away from the two-step distribution. So, there’s a bit of a sales price increase associated with that, because we are going direct, but there’s some additional costs not only in the warehouse to run up, but also sales — inside sales some SG&A pieces to it. So that’s kind of how we think about it on an overall level. Brian, on a more detailed level?

Brian Magstadt: So, a lot of the costs that were associated with getting those operations up and running, the few that we opened up last year, mostly at 2023 expense. So, as we’re looking at this year and next year, to Mike’s point, part of — one of our — one of the reasons we really think that’s a — what we’ve experienced the benefits of doing that is that we can see more of the Simpson Strong-Tie product getting pulled through in addition to connectors, and we definitely see a lift over time with that. But that being said, I would say that any set of costs, primarily at 2023, now we’re going to get incrementally a little bit more from each of those, if being a big step function, I think — I don’t know that I’d call it a big step function, but nice incremental revenue and margin gains is what we would expect over the next coming years.

Kurt Yinger: Got it. And correct me if I’m wrong, but in terms of, I guess, gross margins being down a touch in ’24 versus ’23, was there something beyond kind of those additional warehouse costs factored in there or was that the primary driver of a bit of that compression?

Mike Olosky: So, Kurt, we have a big defensive synergy year in Europe. So, we’ve had some additional costs associated with that, that’s hit the gross margin line.

Brian Magstadt: Part of it also, too, Kurt, is one of the reasons why we’re using an adjusted EBITDA number in our external filings, as well as internally, as we’re making a lot of investments in new facilities and not necessarily the real estate part of the facility, but a lot of the equipment that goes into those facilities, new machinery, racking, everything that’s associated with that, that’s got to call it five to seven year life. Those have got accelerated depreciation in the first couple years of their lives. And part of the reason why that adjusted EBITDA number is now displayed is to show kind of the net of that. And adjusted EBITDA only being down 14%-ish I think is reflective of that implication. Part of the other element, too, a little bit, is increased freight.

Going from truckloads to less than truckloads or smaller parcels because of that path to market change is impacting that too. But again, we believe that gets made up for and then some in the long run — in the midterm, maybe in the long run there.

Kurt Yinger: Okay. That’s helpful. And then just on, I guess, the strength in kind of the national retail this quarter, Mike, I think in the prepared remarks, you talked about or you referenced some customer wins. I saw in January, it looked like there was some expanded partnership with [indiscernible]. Maybe that kind of plays into that a little bit. But can you just give us a little bit more color around what you’re executing on within that customer subset? And if we think about repair and remodel generally being kind of flat this year, do you think you can kind of replicate that type of double-digit growth over the balance of 2024, just given some of these changes?

Mike Olosky: Good question, Kurt. So, let me give you a little bit of background. So, in 2023, our national retail business was up low-single digits in volume, flattish in revenue for the whole 2023. Fourth quarter, we were down in the low-single digits volume, revenue was down mid-single digits for the fourth quarter. The businesses significantly picked up from there. So, here, we see double digits for volume as we’ve mentioned in prepared remarks. And revenue was up in the low-single digits, partly because of some of the reasons that Brian had mentioned. From a market perspective, Kurt, we came into the year thinking that the national retail market was going to be flattish, according to the firm that we follow. Latest estimates from that firm are that the market is going to grow roughly 5%.

So, we’re feeling pretty excited about the tailwind associated with that market. We think we’ve got a lot of things that are going on really well. We’re doing a lot of merchandising efforts, off-shelf merchandising efforts. We continue to see really good sell-through of our products, especially our fastener products. We’re pretty excited about that. And then, we’re working hard to increase the attachment rate of our fasteners to our connectors. We’re doing several things with our customers to help that as well. And then we’re also seeing a nice bump in the e-commerce area as well. So, a lot of things going on. And Kurt, we’ve invested in salespeople over the last couple of years in this segment. So now, we’re in those stores a lot more frequently.

We’re helping them with merchandising. We’re training them. We’re getting end caps. So, we just have a lot more presence in that segment as well, which is helping us a lot.

Kurt Yinger: Got it. And if I could just sneak one more in. In terms of that strength, I guess with some of those national retail customers is the growth in volume and sales pretty evenly split among kind of the two big home center guys and then the mix of other customers at this stage, or would one be, I guess, the primary driver of strength that you saw in the quarter?

Mike Olosky: Yeah. Kurt, we really, as you know, don’t comment on individual customers. I mean, we got a lot of positive things going on with all of our customers in that segment.

Kurt Yinger: Fair enough. All right. Thanks, guys. Appreciate it.

Mike Olosky: Thanks, Kurt.

Operator: Thank you. And we have reached the end of the question-and-answer session. And also, this does conclude today’s conference, and you may disconnect your lines at this time. Thank you for your participation.