Greetings and welcome to the Simpson Manufacturing Company’s Second Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando with ADDO Investor Relations. Thank you, Kim. You may begin.

Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's Second 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. 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.

Thanks, Kim. Good afternoon, everyone, and thank you for joining today's call. With me today is Brian Magstadt, our Chief Financial Officer. My remarks today will provide an overview of our second quarter performance and updates on our end-markets and capital allocation priorities. Brian will then talk you through our second quarter financials and fiscal 2024 outlook in greater detail. Our second quarter net sales totaled $597 million, which was in line with the prior year quarter in housing markets that continue to be challenging in both the US and Europe. Nevertheless, execution against our growth strategy to drive new customer wins has enabled us to continue outperforming a declining US housing market, by mid-single digits on a year-to-date basis. While we remain optimistic about the longer-term growth prospects of the US housing market, our expectations for modest growth this year have been extended into 2025. I'll discuss our outlook in greater detail shortly. Turning to trends in our end-use markets, North American volumes for Q2 were relatively flat compared to last year, producing net sales of $463 million versus $465.5 million in the prior year. To further break down our North American volume performance, we achieved mid-single-digit growth year-over-year in both our OEM and component manufacturer markets. We have continued to identify new use cases and deepen our relationships with OEMs, so it remains a relatively small contributor to our revenues. Simpson is continually improving our software offerings to component manufacturers and leveraging growth from prior new business wins. We also modestly improved our volumes in the commercial market, while the residential market remained relatively flat as improvements in single-family were offset by double-digit declines in multifamily housing compared to the prior year quarter. The national retail market saw low single-digit declines due to a combination of weather, timing, and a challenging comp versus the second quarter of last year, which benefited from significant customer conversions. Turning to Europe, while the market in Europe remains under pressure due to weak economic growth and higher interest rates, reducing overall construction activity, our second-quarter net sales of $129.9 million increased by 1.6% or 2.5% on a local currency basis year-over-year. As anticipated, our business in Europe has also continued to outperform the local markets, given our solutions-based selling approach that drives new customer wins and product applications. 2024 continues to represent a big year for defensive synergies stemming from the ETANCO acquisition, as well as other moves we are making in Europe to optimize our footprint, which has resulted in further margin compression versus last year, as we incurred additional costs to support those synergies. These restructuring costs primarily impact 2024 and are necessary to attain our 15% operating income margin target in Europe. As a reminder, this target is also based on the eventual realization of offensive synergies and broader secular trends including the growing use of wood construction and increasingly stringent environmental regulations that drive new applications. On a consolidated basis, our second-quarter gross margin declined to 46.7% from 48.1% in the second quarter of last year, due primarily to changes in product mix, increases in path to market costs to better support our customers, and higher factory overhead costs, all of which were partially offset by productivity improvements. Our strong gross margins have enabled us to make significant investments in our people, engineering, equipment, and other capabilities to provide even better support to our customers and drive organic growth in the business over the last couple of years. As it pertains to future SG&A investments, we will continue to monitor the market and control costs accordingly. While our resultant operating margin declined by approximately 200 basis points to 22.1% versus last year, it remained approximately 400 basis points above the pre-COVID run rate. Consolidated adjusted EBITDA totaled $152.6 million for the quarter, a decline of 7.8% year-over-year. Our core company ambitions continue to be the guiding principles that drive all of our initiatives forward, such as strengthening our values-based culture, being the business partner of choice, striving to be an innovation leader in the markets we operate, continuing above-market growth relative to US housing starts, returning to the top quartile of our proxy peer groups for operating income margin, and longer-term returning to the top quartile of our proxy peers for return on invested capital. The primary element underscoring our ambitions is centered on providing exceptional customer service. This level of service is predicated on our high product availability and delivery standards to provide innovative and complete solutions for the markets we serve as well as empowering our customers to become more efficient. As proof points to our endeavors, I'd like to now spend some time highlighting some of the new business wins within our five end-use markets during the quarter, which stem from the investments we've been making to drive sustainable, long-term growth above the market. Beginning with the residential market, we continue to benefit from large share gains resulting from partnership agreements and large lumber yard conversions from last year which helped mitigate some of the challenging market conditions. Our focused efforts to expand our fastener, anchor, and Outdoor Accents lines with our existing lumber dealer partners resulted in multiple customer conversions throughout the quarter with our pro-supply business being up double digits. We've displaced competition and added displays, end caps, and additional shelf space in many locations across North America. Further, our long-standing relationship with national lumber yards and a relentless customer focus enabled us to spread awareness of our innovative fastening solutions through several key builder divisions via job site demos and trainings. In the commercial market, we continue to educate and partner with industry players to provide innovative solutions including the use of our fasteners, anchors, and cold-formed steel products on a charter school in Southern California, a hospital in the US Southeast, and a tilt-up warehouse project also in the southeast. By leveraging our manufacturing facility in Galveston, Tennessee, we were also able to supply fasteners for a large export container shed project on a terminal in Canada. In the OEM market, our dedicated sales team and innovative, high-quality products led to a fastener conversion of a prominent post-frame manufacturer, resulting in noteworthy success for future post-frame connection efforts. We also continued growth in mass timber, providing connector solutions on a large museum project in the southeast. We continue to believe there are opportunities to further develop this market segment. Within the national retail space, our team has been highly focused on home center merchandising efforts, including securing additional displays in many stores, generating incremental sales, and facilitating expanded product rollouts during the busier building season. These efforts have led to solid traction with our Outdoor Accents line, fastener products, and e-commerce sales in particular. And finally, in the component manufacturer market, our teams made progress on our long-term digital solutions roadmap to appeal to larger key component manufacturer customers. We continue to see this market as a significant opportunity and a good fit for our business model. Next, I'll turn to our discussion on capital allocation strategy which continues to prioritize both growth and stockholder returns. In the second quarter, we generated cash from operations of $119 million, which helped finance $79.6 million in capital expenditures, $16.8 million for an acquisition, $50 million in share repurchases, and $22.9 million of dividends. The M&A pipeline remains active as we continue to evaluate tuck-in opportunities within our core competencies that would help us accelerate traction on our growth initiatives. In June, we completed the acquisition of Calculated Structured Designs, or CSD for short. CSD is a software development company providing solutions for the engineered wood, engineering, design, and building industries in North America, Australia, and the UK. Opportunities such as CSD help us drive our digital solutions platform forward by increasing hardware sales and maximizing overall efficiencies for our customers. In addition to the aforementioned investments we are making in our people, engineering, equipment, and other capabilities, work is continued on the expansion of our Columbus, Ohio facility and the new construction of our fastener facility in Gallatin, Tennessee. These investments are on track to become fully operational in 2025 and help ensure Simpson remains well positioned to service our valued customers given the expected housing market recovery. For 2024, we expect US housing starts to be flat to slightly down and European housing starts to be below prior year. Whereas in 2025, we continue to expect mid-single-digit growth in US housing starts. While the market in Europe appears to have bottomed, we believe meaningful market growth there will be pushed out further into 2026 and beyond. Before I conclude, I'd like to highlight a few important corporate developments that transpired during the quarter. First, we announced the retirement of Roger Dankel as our Executive Vice President, North American Sales of Simpson Strong-Tie Company after three decades of service to the company. Roger will continue in his role through year-end 2024, after which he will remain employed as an executive advisor until his official retirement on June 30, 2025. We wish Roger all the best in his retirement. Second, we are excited to announce the hiring of Udit Mehta as our new Chief Technology Officer who will be reporting directly to me and overseeing our technology infrastructure and customer-facing digital offerings, as we seek to drive innovation, efficiency, and further software development at Simpson. Next, as part of our dedication to being the partner of choice for our suppliers, employees, and customers, as well as our commitment to give back and support the communities in which we live and work, we have been developing workforce development programs to help address the skilled trades labor gap in the construction industry in partnership with many of our industry partners. Additionally, based on the results of our annual customer satisfaction survey in April, we received overall positive feedback in the areas of customer service, field support, online ordering, product availability, delivery, and more. The survey results are a direct reflection of our dedicated employees, unique business model, and our continued investments to provide superior customer service. And lastly, in mid-June, we published our Fiscal 2023 Corporate Social Responsibility Report, highlighting our commitment to social responsibility and environmentally sustainable business practices to our employees and stakeholders at Simpson. For those that wish to view it, the report can be accessed on our website under the ESG tab. In summary, we remain optimistic in our ability to continue our outperformance versus a broader market despite persistent macroeconomic challenges. Execution against a growth strategy has resulted in various new customer wins and significant improvements to our overall offering as we strive to remain the supplier of choice. 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 volumes of approximately 250 basis points above the market over the mid to longer term while also returning to the top quartile of profitability. With that, I'd like to turn the call over to Brian who will discuss our second quarter financial results in greater detail.

Thanks, Mike, and good afternoon, everyone. Thank you for joining us on our second quarter earnings call today. Before I begin, I'd like to mention that unless otherwise stated, all financial measures discussed in my prepared remarks refer to the second quarter of 2024. And all comparisons will be year-over-year comparisons versus the second quarter of 2023. Now turning to our second quarter results. Our consolidated net sales remained relatively consistent at $597 million. Within the North America segment, net sales modestly declined by 0.5% to $463 million on relatively flat sales volume and pricing. In North America, wood construction product sales were down 1.6% and concrete construction product sales were up 6.3%. In Europe, net sales increased 1.6% to $129.9 million, primarily due to modestly higher sales volumes, particularly offset by the negative effect of $0.7 million in foreign currency translation. Consolidated gross profit decreased 3.1% to $278.5 million, resulting in a gross margin of 46.7% compared to 48.1%. This gross margin is approximately 70 basis points above our historical average Q2 gross margin since 2018. On a segment basis, our gross margin in North America decreased to 50% compared to 51.2% primarily due to changes in product mix in addition to higher warehouse and freight costs as a percentage of net sales, which were partially offset by productivity improvements. Our gross margin in Europe decreased to 35.4% from 37.4%, also primarily due to higher labor, factory, overhead, warehouse, and freight costs as a percentage of net sales. From a product perspective, our second quarter gross margin on wood products was 46.5% compared to 48.4% and was 47.5% for concrete products compared to 45.9%. Now turning to our second quarter costs and operating expenses. Total operating expenses were $145 million, an increase of $4.3 million or 3%, primarily due to increased personnel costs, including added headcount to drive our growth and higher professional fees. As a percentage of net sales, total operating expenses were 24.3% compared to 23.6%. To further detail our SG&A investments, our second quarter research and development and engineering expenses increased 5.4% to $22.7 million, primarily due to the higher personnel costs noted above. Selling expenses increased 10.9% to $55.9 million, primarily due also to the higher personnel costs. On a segment basis, selling expenses in North America were up 12.2% and in Europe they were up 6.7%. General and administrative expenses decreased 3.5% to $66.4 million, primarily due to lower variable compensation costs, partially offset by higher personnel costs. As a result, our consolidated income from operations totaled $132.2 million, a decline of 8.9% from $145 million. Our consolidated operating income margin was 22.1% down from 24.3%. In North America, income from operations decreased 7.9% to $132.1 million, primarily due to increased personnel costs and professional fees coupled with lower gross profit. In Europe, income from operations was $11.2 million, compared to $14 million due to lower gross profit and higher personnel costs. Our effective tax rate was 26.3%, approximately 40 basis points higher than the prior year period. Accordingly, net income totaled $97.8 million, or $2.31 per fully diluted share, compared to $107.2 million, or $2.50 per fully diluted share. For the second quarter, adjusted EBITDA of $152.6 million declined 7.8%. Now turning to our balance sheet and cash flow. Our balance sheet remained healthy with cash and cash equivalents totaling $354.9 million at June 30th, 2024, down $14.3 million from our balance at March 31st, 2024. Due primarily to share repurchases of $50 million, capital expenditures, acquisitions, as well as changes in working capital. Our debt balance was approximately $470.7 million net of capitalized finance costs. And our net debt position was $115.8 million. We have $381 million remaining available for borrowing on our primary line of credit. Our inventory position as of June 30th, 2024 was $533.6 million, which was down $22.1 million compared to our balance at March 31st, 2024 on slightly lower 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 second quarter, we generated cash flow from operations of approximately $119 million compared to $7.9 million. We invested $79.6 million for capital expenditures, including our facility investments made an acquisition, and paid $22.9 million in dividends to our stockholders. As noted previously, we also repurchased $50 million in our common stock was 283,273 shares in the open market at an average price of $176.51 per share. As of June 30, approximately $50 million remained available on our $100 million share repurchase authorization. Next, turning to our 2024 financial outlook. Based on business trends and conditions as of today, July 22, our guidance for the full year ending December 31, 2024 is as follows: we now expect our operating margin to be in the range of 20% to 21%. Key assumptions continue to include expected moderate volume growth on relatively flat US housing starts and stable pricing, a slightly lower overall gross margin based on the addition of new warehouses and a modest increase in labor and factory and tooling as a percentage of net sales. $4 million to $5 million in expected total costs to pursue defensive synergies in Europe as well as other acquisition opportunities. And 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. In the current challenging housing market, we are appropriately balancing our ability to control costs in the business with our growth-focused investments to ensure we can deliver a strong operating income margin within the top quartile of our proxy peers, in line with our core company ambition. Next, annual interest expense on the outstanding revolving credit facility in 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 estimated to continue to be in the range of 24.5% to 25.5% 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 $180 million to $190 million, which includes $90 million to $100 million for the Columbus facility expansion and the new Gallatin facility construction with the remaining spend carrying over into 2025. In summary, we have made tremendous strides in recent years to grow our share and enhance our performance throughout market cycles with our core company ambitions guiding us. Our overall financial position remains strong, with a solid balance sheet that supports ongoing investments in our growth that position us to capitalize on the eventual resurgence in residential housing. I would like to thank the entire Simpson team for their hard work and execution. With that, I will now turn the call over to the operator to begin the Q&A session.

Thank you. We will now be conducting a question-and-answer session. Our first question is from Daniel Moore with CJS Securities. Please proceed with your question.

Thank you. Mike, Brian, I appreciate the insights and your responses to my questions. I would like to revisit the discussion on national retail accounts. Can you elaborate on that? Additionally, was there any impact from inventory management or destocking in that area? Is this a challenge for the current quarter or for the next one or two quarters?

Yes. So good question, Dan. So we continue to be really pleased with the work that our national retail team is doing. Quarter-to-date volume was down 3.3%. Really the biggest driver in that was comps. Last quarter, we had picked up a whole bunch of business with some of our customers, and we were loading in the shelves last year. So that made the comp a little more challenging. Year-to-date, volume for national retail is up about 3%. We continue to be quite pleased with our Outdoor Accents growth there. So that's the black hardware that's used on decks and pergolas. We're also quite pleased with our growth of our fastener business in that segment as well.

Thank you for the helpful information. I appreciate it. You mentioned the updated outlook for US housing starts and where you see them coming in for the year. You continue to exceed the 250 basis point target by nearly mid-single digits. Do you expect to maintain this outperformance by at least low to mid-single digits for the remainder of the year? I believe you indicated that moderate volume growth is your expectation. I just want to confirm that I understood you correctly.

Yes. So as you know, Dan, the last eight years, we've outgrown the market by about 250 basis points. Clearly the market is not helping us a whole lot recently. So if you look at US housing starts, it's down six out of the last eight quarters. We had a really big swing from Q1 to Q2 of this year. Q1 was up a couple of percent, Q2 down 7%. If that kind of holds true, that forecasted level, Dan, the market will be down now basically down to flattish for three out of the last four years, and we'll finish the year with housing starts somewhat similar to what we had in 2020. Just to put that a little bit into context, if we finish this year with housing starts similar to what we had in 2020. Back in 2020, we had a $1.25 billion business with about a $250 million operating profit. With that same market size, 1.4 million housing starts, we will have added $1 billion onto it. So that $2.25 billion range. We will add an additional $200 million in operating profit basically with the same size market. So we are pleased with how we've developed things over the last four years. But clearly, that's been a headwind, and we want to continue to outgrow the market, and our target is to do that at least 250 basis points going forward.

That’s very helpful. At the beginning of this year, you mentioned that 2024 would be a year for investing in personnel and service capacity to maintain that outperformance in the future. Looking ahead to 2025, if the housing market does pick up towards mid-single-digit growth as you anticipate and you continue to outperform, how should we assess SG&A growth from the elevated level in 2024? In other words, what potential uplift can we expect in operating income margins in that scenario?

So Dan, we’ve been over the last couple of years because we've had strong gross margins, we've really been reinvesting back into the business. So warehouses to provide better service and be closer to our customers. SG&A in terms of software engineers, salespeople, a lot of investment into the digital tools. So we believe we've got a lot of that foundation set going forward. We do think there are a lot of additional growth opportunities to invest in, in the future. But as long as we see the short-term housing market, kind of be in this flattish range, we think we can dial back costs a little bit and be even more cost-conscious than we have been in the past.

Yes, it's Brian. As we look ahead to next year and assess opportunities, we aim to sustain our above-market growth outpacing housing. We're considering what it will take to develop our products and solutions while ensuring we have the necessary support for our customers through field salespeople and engineers. There's a lot involved in launching these products. We are closely monitoring our end-markets and making informed decisions about our spending and hiring. Although we are not yet ready to provide our operating margin guidance for 2025, we aspire to reach the top quartile of operating margin. This goal influences our decisions regarding the programs and investments we choose to pursue.

That's really helpful. Last one and I'll jump out. But you mentioned, in terms of capital allocation, you mentioned M&A opportunities. Are you looking mostly at tuck-in similar in that $10 million, $20 million-plus range, just kind of in terms of size of deals. That's one. And then two, you bought back $50 million worth of stock in the quarter, shares looking to open a little bit below the $176 average buyback price. Are you likely to continue to be opportunistic at a similar or even perhaps a higher rate in terms of buybacks as we look forward? Thanks, again for all the color and answering the questions.

You're welcome Dan. So from a capital allocation perspective, as we noted, we've got some big investments we are making in our business to support our manufacturing and distribution footprint. Now that being said, we did complete a transaction in the quarter. We are evaluating other opportunities that would be considered tuck-in type acquisitions that you mentioned. I won't comment on size of those, but it would definitely help us accelerate our strategic ambitions in going after some of those key markets. From a share repurchase perspective, we'll continue to look to be opportunistic. But with the capital allocation plans that we've got laid out, we are balancing all of those various uses of capital.

Thank you. Our next question is from Tim Wojs with Baird. Please proceed with your question.

Hey, everybody. Good afternoon.

Hi, Tim.

Hi, Tim.

Hi. To begin with, if your previous guidance indicated low single-digit growth for this year, and now you are suggesting it will be flat to declining, what has changed in the market for Simpson's business? Is it simply weaker multi-family demand, or is the single-family market also not performing as strongly as you had anticipated?

Yes. So Tim, when we came into 2024, we thought the market was going to be flattish from all of the indications we've had from our customers and the market analysts. When we got into the first quarter, we saw a 2% market growth in housing starts for the first quarter. We heard from our customers that things were going to be a little bit more optimistic. And then April was a pretty slow month. Then the second quarter came in, we started to see things really slow down. April had an initial indication of being pretty good and then it really slowed down. And so based on that and everything we are hearing from our market and the fact that the housing starts were down 7%. That's why we think best guess is flattish. We still think it is above what we are hearing from some of the market forecasters, but we do think things are going to pick up a little bit in the second half, and that's what's driving our guidance.

Okay. That's helpful. And then mix was – there were a bunch of mix issues that kind of created some headwinds last quarter to sales, especially in North America, but it doesn't seem like much of that has kind of impacted this quarter. Does that suggest some of the things that happened in the first quarter kind of went away? Or is that still kind of a lingering concern or issue?

Tim, it is Brian. No issue there in the second quarter. We were looking at volumes that were flattish as we called out. And as you see, the net sales similar. So the first quarter items that you noted did not repeat.

Okay. And then just another question just on the investments. I mean it sounds like you guys are pretty active in how you're thinking about making incremental investments relative to sales. I guess what are the biggest levers you could pull if the top-line did kind of come in below your expectations over the next, say, 18 months to 24 months?

Yes, so Tim, let's say we are assuming that the housing market is going to pick up because of the shortage that we all know. So if that is the case, we would really be focusing on things like T&E and travel, making sure any hires are critical to the current role and directly impact revenue in the short term. We've had a hard time finding people, both in our manufacturing facilities and our sales teams and our engineering teams. We want to make sure we keep the teams in place. And so when the market picks up, we are ready to take advantage of it. So that means anything in the short term of revenue comes in a little bit lower than we were hoping. It would be cost control, consulting, marketing, travel, that type of stuff.

Okay. Got you. And then I want to sneak one more in. So Brian, you said gross margins, I think as a percentage of sales, are supposed to be down a little bit this year. Does that bake in any sort of benefit in the back half of the year from potentially lower raw materials?

Not necessarily. It is pretty. No. It may get a little bit of help there offset by some of the higher costs that we are seeing in the warehouse, especially with freight cost increases. So there are various factors affecting the gross margin. I feel positive about our inventory position and the materials we have to meet our forecasted production and demand expectations. However, some of the challenges would primarily come from the freight and logistics areas impacting gross margin within the cost of sales.

Yeah, now I understand. Okay, good. Thanks for the time guys. Talk to you soon.

Thanks Tim.

Thank you. Our next question is from Kurt Yinger with D.A. Davidson. Please proceed with your question.

Great. Thanks and good afternoon everyone.

Hi, Kurt.

In terms of the gross margin on a year-over-year basis, I mean, how significant of a headwind would you kind of consider the new warehouses as part of the path to market initiative? And I guess as we look into 2025 and think about the Columbus expansion going live and Gallatin at some point as well. How would you have us think about kind of the cost implications of that whether it be on the COGS line or operating expenses and just some initial thoughts on how that might impact margins?

So as we are thinking about the new satellite warehouses that we've put in place and Kurt, I think as you know we've done select regional satellite warehouses throughout our operations. We really feel that is a competitive advantage for us, gets us closer to our customers and really helps us deliver on that value proposition of very high customer service from a getting product to a customer's location or to a job site. As we look at the warehousing costs, the freight costs relative to prior years from a dollar perspective, they are up a little bit. As we look at going forward, we feel we've pretty much fully absorbed those although we would expect to continue to drive additional revenues through those locations because we feel that, that customer service really does help us differentiate. Part two of your question would be on the additional expansion in Ohio. I'll pick the Gallatin in a moment. But with that one, we feel that for us to continue our above-market growth, that facility needs to be bigger because a lot of the growth that we have seen has been east of the Mississippi, and for us to be really effective in producing and then distributing out of that hub operation there for the Midwest and Northeast, we believe that will help us continue to grow. It will come online mid-to-late next year. So I wouldn't expect a huge dollar impact in that regard. From a Gallatin, the new fastener production that's more late '25 early '26. Yes, there will be additional depreciation associated with those facilities, especially as we are ramping up, getting Gallatin fully converted over from our current site and then adding in the additional activities that we'll do at that location, as we vertically integrate some of our processes there. So potentially a little bit of headwind for a year or so, but I wouldn't expect it to be a significant driver of reduced gross margins. If anything, it is going to take us a little bit of time to fully absorb all the operations, but we still feel really comfortable with the additional opportunities both of those facilities bring.

Got it. Okay. Thanks for that Brian. And then can you maybe just talk a little bit more about the Calculated Structure Design acquisition? I mean how might that integrate with some of the existing software offerings? And is that something that you'll go to market with on a stand-alone basis or wrap into what you are already offering? Any color there?

Yes. To provide a comprehensive solution for the component manufacturing industry, we need software that can design trusses, wall panels, and engineered wood products, essentially covering the truss, wall, and floor. The largest truss manufacturers typically produce all three types of products. Without that complete solution, we cannot effectively target those customers. The CSD component, which we have been licensing and using, will now be integrated vertically. It serves as our engineered wood product solution. Now that we own it, we will fully integrate it into a seamless design process for trusses, walls, and floors, enabling us to pursue some of the larger component manufacturers in the market.

Got it. Okay. And that kind of dovetails on my last question, which is I guess, just from a software offering perspective, do you feel like you are at that complete state to where you can service the largest of players and everything they're doing? Or is there still some work to go in that regard?

Still some work to go. We need to have the truss, the wall panels, and the floor panels all fully integrated into one seamless solution. We are working on that, but we are not there yet. We also need production management capabilities to run their manufacturing facilities. We have some solutions in that space, but we have a little bit more development to go there as well. We believe we are making good progress with the people that are a good fit for our software. We continue to emphasize the whole business model and surface aspect with those customers. So that's helping us quite a bit. But we still have some work to do to be able to go after the very largest component manufacturers.

Got it. Make sense, thanks for that Mike and good luck here in Q3 guys.

Thanks, Kurt.

If I could real quick, Mike. Tim was asking earlier about our flat-to-down guide on single-family multi-family housing. One thing I did want to add is July, what we are seeing from a billing perspective in July month to date versus last year. We are kind of mid-single digits company-wide in North America, up low double digits from a revenue perspective in July. So like Q2, the Q3 quarter is starting off relatively strong compared to July last year. So Tim, if you are still listening, I wanted to make sure I covered that as well.

Thank you. There are no further questions at this time. This does conclude our Q&A session and our call. You may disconnect your lines at this time. Thank you for your participation.