Title

Presentation

Simpson Manufacturing Co., Inc. beats earnings expectations. Reported EPS is $1.31, expectations were $1.27.

Operator: Greetings, and welcome to the Simpson Manufacturing Company Fourth Quarter and Full Year 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] As a reminder, this conference is being recorded. It is now my pleasure to introduce Kim Orlando. Thank you. You may begin.

Kimberly Orlando: Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company’s Fourth Quarter and Full Year 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 p.m. Eastern Time. The earnings press release is available on the Investor Relations page of the company’s website @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 Michael Olosky, Simpson’s President and Chief Executive Officer.

Michael Olosky: Thanks, Kim. Good afternoon, everyone, and thank you for joining today’s call. With me today is Matt Dunn, our new Chief Financial Officer, effective at the start of this year. As many of you know, Matt has been with Simpson since last summer as our SVP of Finance, and worked very closely with Brian Magstadt, our former CFO, to ensure a smooth transition. We are excited to have Matt on board with Brian remaining on as an executive adviser through June. Today, my remarks will provide an overview of our 2024 performance, highlights from our key end markets and updates to our core company financial ambitions. Matt will then walk you through our fourth quarter financials and fiscal 2025 outlook in greater detail.

Before we jump in, I’d like to take a moment to express our heartfelt sympathy to those that were impacted by the California wildfires last month. The Simpson team and their families are safe and the fires did not impact our facilities or consolidated results. In line with one of our core values to give back, we donated to the American Red Cross. We have a long history in California, and our thoughts remain with our customers, our team, their families and friends and the affected communities. Now turning to our results. Our full year 2024, net sales were $2.23 billion, reflecting modest growth over 2023 levels in a year where housing markets in both the US. and Europe remain challenged. On a trailing 12-month basis, I’m pleased that our buyingvolume growth in North America exceeded US.

housing starts by approximately 600 basis points, in line with our ambition to continue growing above the market. Net sales in North America totaled $1.74 billion versus $1.72 billion in 2023 on higher sales volumes. This included approximately $12 million from our 2024 acquisitions. Our North American volume performance was broad-based in 2024 with sales to all end markets demonstrating above-market growth. The national retail market saw mid-single-digit increases despite a challenging repair and renovation market. Contributing to the above-market performance was our increased shelf space and enhanced share gains within our innovative high-quality fastener solutions. In the component manufacturing market, volumes improved in the high single-digit range versus last year.

Our enhanced suite of digital and equipment solutions contributed to increasing truss plate and connector sales. In the commercial market, we delivered modest volume growth over 2023 despite the significant downturn in the commercial market led by our cold-formed steel product line and the launch of several innovative new solutions. In residential, volume performance was down modestly. We are growing the market size and taking share through product line expansions, cross-selling of fasteners and anchors and new customer conversions. And finally, in OEM, we delivered high single-digit volume growth year-over-year, reflecting share gains as our solutions for mass timber construction gained momentum. However, OEM still remains a relatively small contributor to our overall revenues.

Turning to Europe. Our 2024 net sales of $479.2 million were relatively flat compared to the prior year and decreased by about 1% on a local currency basis. On a volume basis, our European business also outperformed the local market, driven by new applications and customer wins. Our ETANCO Facade connection products continue to drive solid growth. Through the execution of significant effective synergies this past year, we have made strides towards rightsizing our European footprint following 2022 ETANCO acquisition. On a consolidated basis, our 2024 gross margin declined to 46% from 47.1% in 2023, driven by higher input and labor costs, and investments in our footprint to provide even better service to our customers. Product and customer mix has and will continue to be a gross margin headwind going forward.

Our resulting operating margin declined by approximately 220 basis points and 19.3% versus last year, reflecting investments ahead of the anticipated market growth that did not materialize in 2024. Consolidated adjusted EBITDA totaled $520.1 million in 2024, a decline of 6.2% year-over-year, resulting in an adjusted EBITDA margin of 23.3%. In the first half of 2024, we continued investing in our people, engineering, equipment and digital solutions to better support our customers’ needs in anticipation of sustained market growth. In the second half of 2024, we slowed the rate of investments as the housing market outlook softened. We recognize our investments, have not been commensurate with volume growth now in year three of a down market. As such, we will continue to closely monitor the market in 2025, and will control costs accordingly to preserve our margins, while simultaneously ensuring we retain our workforce of highly skilled labor.

Next, I’d like to highlight some adjustments we’ve made to our core company financial ambitions, strengthening our values-based culture, being the business partner of choice, and striving to be an innovative leader in the markets we operate, all remain central to who we are as a company. As it pertains to our three financial ambitions, we are dedicated to continuing above-market growth relative to U.S. housing starts, maintaining an operating income margin at or above 20% and driving EPS growth ahead of net revenue growth. As we have stated previously, we believe our business is capable of achieving a 20% operating income margin in a growing market environment. For 2025, we expect U.S. housing starts will improve in the low single-digit range from 2024 levels with growth weighted towards the second half of the year.

In addition, we expect the European housing starts will remain relatively consistent with 2024 levels with more meaningful growth delayed further into 2026 and beyond. As the long-term oriented growth company with strong margins, we believe we can drive EPS growth ahead of net revenue growth. We remain committed to returning at least 35% of our free cash flow to our shareholders. In light of these new financial ambitions, we see ROIC being relatively flat in the near to mid-term and above our weighted average cost of capital. Despite market headwinds, we firmly believe we are entering into the next phase of Simpson’s growth from a position of strength. Since 2020, we have added approximately $1 billion in revenue and $200 million in operating profit.

We realigned our sales team by end market, significantly reduced 2-step distribution and made significant investments in our field sales and engineering teams. We made significant footprint investments in both production and warehouses. Our investment in Tennessee enables us to resource and fasten in anchor production, additional warehouse capabilities enhance next-day delivery for our North American customers. This, along with significant investments in digital solutions, have further strengthened our business model, thus driving hardware sales and creating value for our customers, making us the partner of choice. Additionally, we strengthened our senior leadership team through a combination of internal development and external experts, the result is we are now in an even stronger market leadership position in connectors with significant gains in both fasteners and anchors.

Before I conclude, I would like to touch on one of the corporate development with the appointment of Angela Drake as an independent nonemployee director for the company effective January 1, 2025. We are pleased to welcome Angela to our Board and look forward to benefiting from her wealth expertise through her extensive experience in financial leadership roles at leading manufacturing companies. In summary, we are pleased with our continued above-market growth in a declining housing starts market. We continue to believe in the mid- to long-term prospects of the housing market and are well positioned to take advantage of that growth when it does occur. We feel confident about our ability to continue outperforming US. housing starts. With that, I’d like to turn the call over to Matt, who will discuss our financial results and outlook in greater detail.

Matt Dunn: Thanks, Mike, for the kind words, and good afternoon, everyone. Thank you for joining us on our earnings call today. I’ve enjoyed being part of the Simpson team for the past 8 months, and I’m honored to now serve as the company’s CFO. Before I begin, I’d like to mention that unless otherwise stated, all financial measures discussed in my prepared remarks refer to the fourth quarter of 2024, and all comparisons will be year-over-year comparisons versus the fourth quarter of 2023. Now turning to our results. Our consolidated net sales increased 3.1% year-over-year to $517.4 million. Within the North America segment, net sales increased by 4.4% to $404.8 million. In Europe, net sales declined by 1.5% to $108.1 million, primarily due to lower sales volumes.

Globally, wood construction product sales were up 3.6% and concrete construction product sales were up 0.4%. Consolidated gross profit increased 3.3% to $227.7 million, resulting in a gross margin of 44% compared to 43.9%. On a segment basis, our gross margin in North America was 47%, consistent with the prior year as lower material costs offset higher labor, factory and warehouse costs as a percentage of net sales. Our gross margin in Europe decreased to 32.3% from 34.2%, primarily due to higher labor, warehouse and freight costs, which were partially offset by lower material costs all as a percentage of net sales. From a product perspective, our fourth quarter gross margin on wood products was 43.4% compared to 44% and was 45.8% for concrete products compared to 42.8%.

Now turning to expenses. Total Q4 operating expenses were $150 million, an increase of 1.1%, primarily due to increased personnel and professional fees which were partially offset by a reduction in variable incentive compensation. For the full year of 2024, total operating expenses were $590.5 million, an increase of 4.7%, primarily due to increased personnel, computer software and hardware costs and higher professional fees, which were partially offset by a reduction in variable incentive compensation. As a percentage of net sales, total 2024 operating expenses were 26.5% compared to 25.5%. We have experienced increases in all of our major input costs over the past several years with the exception of steel. As Mike alluded, we will continue to monitor the market in 2025 and incremental investments will be very limited until we see a more meaningful improvement in the housing market.

Further detail our fourth quarter SG&A, our research and development and engineering expenses increased 0.6% to $25.3 million, primarily due to an increase in personnel costs, partially offset by lower incentive comp. Selling expenses increased 3.6% to $54.4 million, primarily due to higher personnel costs. On a segment basis, selling expenses in North America were up 5.4%. And in Europe, they were down modestly. General and administrative expenses were essentially flat at $71 million as we grew our revenue and reduced our G&A as a percentage of sales. As a result, our fourth quarter consolidated income from operations totaled $76.8 million, an increase of 7.4% from $71.6 million. Our consolidated operating income margin was 14.9%, up from 14.3%.

In North America, income from operations increased 7% to $85.4 million, primarily due to higher gross profit, which was partially offset by increased personnel costs. In Europe, income from operations decreased 75.2% to $0.8 million due to a lower gross profit. As previously mentioned, we have been incurring costs this year to support the optimization of the European footprint, including the realization of defensive synergies from ETANCO, which resulted in $2 million and $5.7 million in restructuring and severance charges in the fourth quarter and full year of 2024, respectively. A 15% operating income margin in Europe remains our mid-term goal. As a reminder, our assumptions to achieve this target include improved economic conditions, the anticipated realization of our offensive synergies and broader secular trends, including the growing use of wood construction and increasingly stringent environmental regulations that drive new applications.

Our fourth quarter effective tax rate was 27.5% and approximately 110 basis points higher than the prior year period. Accordingly, net income totaled $55.4 million or $1.31 per fully diluted share compared to $54.8 million or $1.28 per fully diluted share. Adjusted EBITDA for the fourth quarter was $102 million, an increase of 9.9%. Now turning to our balance sheet and cash flow. Our balance sheet remained healthy with cash and cash equivalents totaling $239.4 million at December 31, 2024, down $100.1 million from our balance at September 30, 2024, due primarily to the paydown of $75 million of debt in December. Our debt balance was approximately $388.1 million, net of capitalized finance costs and our net debt position was $145.7 million. We have $450 million remaining available for borrowing on our primary line of credit.

Our inventory position as of December 31, 2024, was $593.2 million which was up $9.8 million compared to our balance as of September 30, 2024, on higher pounds. We generated strong cash flow from operations of $117.7 million in the fourth quarter and $339.8 million for the full year of 2024. With regard to capital allocation, our strategy remains duly focused on both growth and shareholder returns. In 2024, we invested $183 million for capital expenditures, including our investments for facility upgrades and expansions, $79 million for acquisitions, $46.5 million in dividends paid to our shareholders and $100 million in repurchases of our common stock. We also paid down $100.8 million in debt we incurred to finance the acquisition of ETANCO.

In 2024, we repurchased a total of 559,179 shares common stock at an average price of $178.83 per share for a total of $100 million. As previously announced in October, our Board authorized the repurchase of up to $100 million of our common stock effective January 1 through year-end 2025. The investments in our facilities to expand our operations and manufacturing capacity are driven by our relentless customer focus and commitment to providing world-class service. We are pleased with the progress made on the expansion of our facility in Columbus, Ohio, in our new fastener facility in Gallatin, Tennessee. Both projects remain on budget and are expected to open early in the second quarter and in the second half of 2025, respectively. As we have shared, we will concurrently evaluate and pursue M&A opportunities that accelerate progress on our key growth initiatives and improve our operating efficiencies.

Next, I’ll turn to our 2025 financial outlook. Based on business trends and conditions as of today, February 10, our guidance for the full year ending December 31, 2025, is as follows: We expect our operating margin to be in the range of 18.5% to 20.5%, while the midpoint of the range is below our stated ambition to maintain an operating margin at or greater than 20%, we are working hard to offset significant input cost increases over the past three years, and we’ll carefully evaluate avenues to preserve our profitability. Additional key assumptions include: US. housing starts to be up low single digits from 2024 levels. If housing starts are up low single digits, we’d expect to trend toward the higher end of the range. If the market growth is flat or slightly down, we would expect to be closer to the low end of the range.

Additionally, we are expecting a slightly lower overall gross margin based on the addition of new warehouses as well as increases in labor, factory and tooling as a percentage of net sales and an ongoing mix headwind from products and customers that have impacted our margins. As we stated, we are working to balance our growth-focused investments while ensuring we deliver a strong operating income margin in the current challenging housing market. Next, interest expense on our term loan, which had borrowings of $388.1 million as of December 31, 2024, expected to be approximately $6.3 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 estimated to be in the range of 25.5% to 26.5%, including both federal and state income tax rates based on current tax laws. And finally, our capital expenditures are estimated to be in the range of $150 million to $170 million, which includes approximately $75 million for the completion of both the Columbus facility expansion in the new Gallatin fastener facility. In closing, I’d echo Mike’s comments while we faced a challenging 2024 in the housing market, with the third consecutive year of a decline in starts. We were very pleased with our volume outperformance versus the market in the US. and Europe. While the investments we have made to support future growth in anticipation of an improved housing market resulted in lower-than-anticipated profitability, we will continue to be diligent with expense management and cautious on future investments.We believe we are well positioned to take share and drive further outperformance when the housing market ultimately rebounds.

With that, I will now turn the call over to the operator to begin the Q&A session.

Operator: [Operator Instructions] And our first question comes from Daniel Moore with CJS Securities. Please proceed with your question.

Daniel Moore: Good afternoon, Mike. Matt, thanks for taking the questions. Maybe start with — just trying to triangulate the outlook. You gave good detail, but you mentioned you believe the low to mid-single-digit recovery in U.S. housing starts as possible, although the margin guide contemplates flat to down at the lower end. So does that reflect a softer start to the year? And what are your expectations for starts in Q1 and H1? And maybe just talk about your ability to outpace the market if, in fact, we do end up flat to down for the next couple of quarters.

Michael Olosky: Dan, it’s Mike. Good question. So just a little bit of background. When we started to go into the budgeting season, we use a firm called Zonda because we can get a breakdown by region for our different businesses and original number kind of coming into the fall was a 3.7% combined growth year-over-year total housing starts for 2025. That number — the latest number came out 2.8. And our feeling is from an overall sentiment level that, that’s probably going to go down a little bit. We do think that the year is going to be second half weighted. I mean this is a really dynamic situation. As you can imagine, things are changing a little bit every day. But everything we’re hearing from our customers is going to be a stronger second half than first half. And our translation of that is we are assuming low single-digit starts for the year, and we’re going to watch it very closely, obviously.

Daniel Moore: Very helpful. And then, again, I think you described it well, but just talk about the — last quarter, you stated you remain committed to an operating margin of at least 20%. So in addition to maybe a slightly lower US. housing start growth, has your gross margin outlook changed? Or is simply just investments that you feel that you need to continue to make for longer-term growth regardless of the kind of short-term demand environment?

Matt Dunn: Yes, Dan, this is Matt. I think at the time we said that in the last quarter call, we were expecting, as Mike said, housing starts to be a little bit more favorable as the tailwind than they’re currently looking like they’re going to be on the overall year. And so that’s probably the single biggest factor on the market. Obviously, other things are changing by the minute on tariffs and related things. So, digesting that as it becomes news, but certainly plan to protect our margins and make the moves necessary as we alluded to. So, I think, there’s a couple of paths to get to that 20%. A lot of it just depends on what happens in the market from a tailwind standpoint. And then what happens with tariffs and related pricing. I would say we are confident that we can continue to outpace the market as we have done for the last number of years, even at an accelerated pace in the last two to three years.

Daniel Moore: Very helpful. One more, and I’ll jump back in queue. But just talk about your working capital and cash flow from operations expectations for ’25. And then looking out to ’26, where do you see CapEx kind of leveling off once we get through the build-out in Columbus and Gallatin?

Matt Dunn: I’ll start with CapEx first. So this year’s guide, $150 million to $170 million, about half of that is related to the completion of Gallatin and Columbus, which we’ve been talking for a number of quarters here. I think as we roll into 2026, and we’re not providing firm guidance there, but we do have a pretty sizable amount each year that’s kind of like base CapEx based on safety, capacity, additional warehouses, productivity improvement. So I think looking to make sure we’re rightsizing the investment with the growth that we’re seeing. And so finishing up those two projects that are completing this year, and then we’ll evaluate 2026 when we get there.

Operator: And our next question comes from Tim Wojs with Baird. Please proceed with your question.

Timothy Wojs: Hey. Hey guys. Good afternoon. So just on the guidance, I just want to make sure I understand it. So at the midpoint at 19.5% OM margin, what are you assuming for starts and your revenue growth?

Michael Olosky: Yes. I think if you pick the midpoint of the range, that pretty much represents a flat market, in my opinion. And then obviously, our continued outperformance. We don’t give specific guidance on revenue, but you kind of look at where we’ve been over the — a longer range of history in terms of outperforming versus the market. So I would say, up a couple of points versus the market for sure.

Timothy Wojs: Okay. Okay. So the midpoint would kind of be flattish market, you outperform a little bit and then you get very slight leverage on the operating margin line. Okay. And then I guess, tariffs, I guess where is the threshold for where you guys would kind of think about needing to take price for any sort of tariff or just, I guess, general inflationary kind of drivers because it does sound like based on your prepared comments that outside of the steel, you guys are actually seeing a fair amount of inflation, and you do have some — it sounds like some mix headwinds kind of happening in the business, too. So I guess what’s the threshold when you guys are thinking about pricing increases at this point?

Michael Olosky: Tim, let me give you a little bit of background. So obviously, all things tariffs, especially today is a pretty fluid situation. As a reminder, for a little context, can we purchase 150-plus variations of steel. And that steel is made specifically for us. So it’s not a direct correlation to some of the indices you see. And for the most part, Tim, all of the connectors that we produce in the US. are with US.-made steel. So we have seen some steel producers over the last 4 to 6 weeks, announced a couple of price increases based off of what happened today. We are expecting additional price increases coming. And from a Simpson perspective from a pricing view, Tim, last time we had a price increase was 2022. We had a price decrease in January of 2023.

And really, since then, we’ve seen significant inflation in all of our production and transportation costs, except for the steel raw materials side and obviously, the tariff story changed that. So we’re kind of looking at it in two buckets. There’s a tariff bucket and there’s all the other cost buckets. So if the tariffs remain, we believe we’ll have to preserve our margins and high level of service we’re going to need to pass some of that on. We’re also looking at the other cost buckets, doing everything we can to drive those down. But again, if we’re not able to offset some of those cost increases we see everywhere else, we may need to take action to preserve our margins and level of service again from that view. So that’s the way we’re thinking about the tariff bucket and all the other cost bucket.

Matt Dunn: Yes. Tim, this is Matt. I would just add, obviously, up until till today, the previous tariffs that have been announced or related to imports from China, Canada and Mexico. Canada and Mexico being put on pause. From a China standpoint, we import a relatively low number of our cost of goods from China. So less than a $10 million tariff impact there. The new one today on tariffs on non-US. steel, waiting to see what that drives in the market. But obviously, would — if steel costs go up from the domestic suppliers would have to price to recover that. And then the third bucket that’s sort of out there is related to some of the antidumping tariffs and related lawsuits that I believe have a kind of a day in court or whatever in early April. And so watching that one very closely to see what happens with that. But again, as Mike said, we source most of our steel from the US.

Timothy Wojs: Okay. Okay. That’s all really helpful. And then on the, I guess, share gains, historically, I think you’ve done 200 to 300 basis points above starts. It’s gotten better over the last — it’s improved a lot over the last couple of years. I guess as you walk into 2025, what is the visibility to those share gains relative to maybe your history or the past few years? Does it feel more like the past few years? Or does it feel more like the 250 basis points?

Michael Olosky: Good question. And as you know, Tim, we’re not guiding specifically on revenue. Last 8 years, 300 basis points above housing starts; last three years, about 700 basis points above US. housing starts. And we’re talking volume in pounds and last year, it was about 600 basis points. So we’re pleased with that. And the driver behind that Tim has really been the investment in the business. And despite a down market, we view that as an opportunity to make the market bigger through new products, new applications, and we’ve used that opportunity to take share. So when we’re going forward, we are certainly assuming that we are going to be over our long-term average. And after that, we need to see how the year develops.

We do have a pretty good sales force tool — CRM tool from Salesforce, Tim. So we do have some visibility into it. And we are obviously tracking a lot of jobs we’re quoting. Visibility in the building construction industry is not great, but we do have some moderate amount of visibility into the share gains.

Operator: And our next question comes from Kurt Yinger with D.A. Davidson. Please proceed.

Kurt Yinger: Great, thanks. And good afternoon, everyone. The commentary around higher input costs the last couple of years and the higher factory tooling and warehouse costs absorbed this year. How much of that would you say is a function of some of the investments you’ve made in the warehouse operations to kind of support the stronger growth or maybe just a function of under absorption versus more general inflationary pressures that you’ve kind of had to absorb? How would you kind of bucket that?

Michael Olosky: I think the answer to that curve really is all the above, as you mentioned. So there were some investments as we moved away from 2-step distribution, mostly in the Northwest, a little bit in the Midwest, Northeast. So there we needed to get some warehouses closer to our customer. Ideally, we want to be 1-day shipping with all of our customers. So that’s part of the investment. And that also sets us up to be able to cross-sell and help us drive organic growth. So we have some investment there. Certainly, the volume assumptions really driven by market, we’ve been off on. Again, we went into last year thinking it was going to be 3-ish percent market tailwind and it finished down 4%. So that’s a 600, 700 basis point swing from just a tailwind from a market perspective.

And then we see costs across the board going up. Freight electricity in California. We’ve got a new contract for electricity that’s hitting us, labor across the board is going up. And we’re working really hard by automating where we can by driving productivity improvements where we can to offset that, and we are still working through that as we speak, Kurt.

Matt Dunn: Yes. And I think, Kurt, Mike mentioned it earlier on the last time we took a price increase was in 2022, and then we actually took a decrease in 2023 and while steel has been consistent to maybe slightly down over that period. Everything else has gone up, and we’ve worked diligent to offset as much of that cost as we could through productivity, but haven’t been able to offset all of it. And I think that’s why we’re kind of out looking depending on what happens with tariffs and some of these other things, there’s definitely cost pressure that we’re going to have to address.

Kurt Yinger: Okay. Okay. That makes sense. And then maybe just thinking longer term in light of kind of what you talked about around financial ambitions and the 20% operating margin kind of threshold. If we were to think three to five years from now, how are you guys thinking about, I guess, the ceiling or maybe a more ambitious view of kind of margin expansion here versus continuing to reinvest pretty aggressively behind growth and any thoughts around the time line for when maybe those priorities shift at all?

Michael Olosky: Kurt, so our view on this is we want to be a growth company with strong profitability. So as long as we continue to have good visibility into growth opportunities, we will continue to reinvest back in the business. As you’ve heard me say it before, it is a people-intensive business. We need more salespeople out in the field, taking up new applications. We need more engineers developing new products. We want more people developing digital solutions. And we think there’s a lot of opportunity around there, that space. And that’s part of the reason why, again, we’ve done so well versus the market in the last couple of years because we’ve invested. So at this point, strong profitability means at or above 20% with a little bit of tail and a little bit of market growth to help us grow into that and then continue to drive above-market volume growth.

Matt Dunn: Yes. I think, Kurt, just to add to that, I think we believe the best return on this for shareholders is to continue to deliver above-market growth with a very strong operating margin. If that outlook changed in terms of what we can — what we see going forward on growth or how we think we’re going to perform then obviously, we might make some different choices on operating income and SG&A investments. But as long as we continue to grow and outpace the market, we think that’s the best mid-long-term approach.

Kurt Yinger: Okay. That makes sense. And then just last one. I think you had said that the operating margin outlook kind of contemplates some gain on sale related to the old Gallatin site. Would you be able to size that for us?

Matt Dunn: Yes. I think we — in the earnings release, I think we showed the contract sales price. The gain should be somewhere in the $10 million to $12 million range.

Operator: And that looks like that is the final question. And that also does conclude today’s teleconference. We thank you for your participation, and you may disconnect your lines at this time.