How Metal Brackets Built a Warren Buffett-Worthy Business

They make metal brackets that cost $5 but generated 19.3% operating margins. Here's how getting on architectural plans changed everything.

Author

Nick Horob
July 22, 2025

Today I'm looking at Simpson Manufacturing (SSD).

They make a variety of construction supplies. Specifically, connectors, fasteners, lateral systems and anchoring solutions.

What really stood out to me is their 45%+ gross margins on what I thought are relatively commodity products. How have they accomplished this?

Back in the 1950s, founder Barclay Simpson realized that instead of competing on price at the hardware store, he could bypass that whole game by getting engineers and architects to specify Simpson products right on the building plans. He did this by investing heavily in testing and code compliance - Simpson became the go-to source for load tables, seismic ratings, and building code documentation that engineers needed. Once "Simpson Strong-Tie" appears on the blueprints, contractors have a strong tendency to buy it regardless of price!

Some other things that caught my eye:

  • 19.3% operating margins on metal brackets (industry average is 16.3%)

  • They outperformed housing starts by 420 basis points through market share gains

  • Warren Buffett tried to buy them - that's always a good sign

  • October 2023 cybersecurity attack was a major wake-up call for the industry

  • Quarterly profit sharing for ALL employees creates serious buy-in

The company offers a case study in turning commodity products into premium branded solutions.

While their revenue has flat-lined due to the interest-rate-driven slow down in construction, they are also mostly insulated from any major AI disruptions. And there are also material opportunities to use AI to optimize design, logistics, and manufacturing processes.

Also loved their "no big shots" culture. It's first names only and promote from within. Also, the founder flew fighter planes in WWII and ran the company until age 91.

Thats it for today. I'll see you tomorrow!

Nick

The 30,000-Foot View

Simpson Manufacturing operates primarily through Simpson Strong-Tie, designing structural connectors, fasteners, and building solutions. Their products are the metal brackets connecting your deck to your house, clips holding roof trusses, and anchors securing buildings during earthquakes.

Business model: Get products specified on architectural plans, transforming commodity items into required branded solutions.

Revenue breakdown:

  • Wood Construction: 85.1% ($1.90B) - 15,000+ connectors, holddowns, truss plates

  • Concrete Construction: 14.8% ($331M) - 2,000+ anchors, adhesives, drill bits

Key stats:

  • Market cap: $6.5 billion

  • TTM revenue: $2.23 billion

  • Gross margin: ~47%

  • Operating margin: 19.3%

  • Net income: $322 million (14.49% margin)

  • Employees: 5,872 across 50 global locations

  • Industry: Building Products (Materials sector)

Company History

1956: Barclay Simpson starts company in Oakland garage after neighbor's Sunday night doorbell ring
1994: IPO on NYSE at $11.50/share with ~$150M annual sales
2011: Acquires Automatic Stamping ($41.4M) for truss connector capabilities
2022: Largest acquisition ever-ETANCO Group for $800M, expanding European presence
2023: Mike Olosky (former Henkel exec) becomes CEO as Barclay's successor retires
2024: Cybersecurity incident forces operational disruption
2025: New CFO Matt Dunn appointed; digital sales reach 60% of total

Show Me the Money

Stand-out financial features:

  • Flat revenue growth but expanding operating margins

  • 46% FCF returned to shareholders

  • $100M share buybacks

  • Volume growth exceeds housing starts

Financial Data

Metric

FY 2022

FY 2023

FY 2024

TTM

Revenue

$2.08B

$2.21B

$2.23B

$2.24B

Gross Profit

$976M

$1.04B

$1.03B

$1.03B

Gross Margin

46.9%

47.1%

46.0%

46.0%

Ops Profit

$376M

$425M

$435M

$440M

Ops Margin

18.1%

19.2%

19.5%

19.7%

CapEx

$62M

$89M

$180M

$191M

Net Debt

$115M

$126M

$149M

$149M

The N.O.O.B. Nine — Competitive Powers

Power

Score

Rationale

Branding

5/5

"Simpson Strong-Tie" synonymous with structural connectors after 67 years. Enables 20% pricing premium while growing share.

Data Flywheel

2/5

Traditional manufacturing with limited data advantages. Recent digital initiatives show potential but not core differentiator.

Process Power

4/5

Outperforms housing starts by 420 bps while maintaining 19.3% margins vs 16.3% industry average.

Scale Economies

4/5

33% market share enables cost advantages across 15,000+ SKUs. Can amortize R&D across 300+ engineers and 8 test labs.

Switching Costs

5/5

Engineers deeply embedded through training, CAD libraries, inspector relationships. Industry risk aversion makes switching extremely rare.

Cornered Resource

4/5

Only US manufacturer testing multi-story wall systems internally. 120+ code reports and 500+ patents create regulatory moat.

Network Economies

1/5

Products don't benefit from user growth-a connector works the same regardless of user base.

Counter-Positioning

3/5

Specification strategy disrupts commodity pricing model. Competitors struggle to replicate without decades of reputation building.

Distribution Advantage

4/5

50 global locations enable next-day delivery. Dominant retail presence from Home Depot to professional dealers.

Average Score: 3.6/5 - Simpson possesses formidable competitive moats through brand strength, switching costs, and regulatory barriers that would take competitors decades to replicate.

Memorable Marketing

Simpson transformed from traditional B2B manufacturer to digital leader with 60% of sales through digital channels, earning "Enterprise B2B Ecommerce Manufacturer of the Year" in 2024.

Key campaigns:

  • B2B Digital Transformation (2017-2024): Phased rollout of Customer Portal achieving $100M+ online sales

  • DIY Influencer Program: Partnered with 10 influencers including Jen Woodhouse, expanding beyond professional markets

  • WBSK Challenge: User-generated content campaign showcasing product versatility

Tactical takeaways:

  1. Specification beats selling—focus on getting required before bid stage

  2. Segment content by expertise level (pro specs vs DIY tutorials)

  3. Digital self-service can drive 60%+ of B2B sales with proper execution

  4. Partner with niche influencers for authentic category expansion

AI Uses & Opportunities

Current: Hired CTO Udit Mehta (May 2024) from Carrier Global. Digital tools include Pipeline LBM for lumber dealers and Cloud Director for manufacturers.

Future potential:

  • Manufacturing: Predictive maintenance, computer vision quality control, demand forecasting across 10,000+ SKUs

  • Customer experience: Generative design for custom solutions, AI-powered product recommendations based on building codes

  • Supply chain: Risk management, logistics optimization for next-day delivery promise

Bumps in the Road

  • October 2023 cybersecurity attack: Major operational disruption highlighting construction industry's new vulnerability

  • Market headwinds: European sales down 5.1% Q1 2025; weak housing markets pressure demand

  • Integration complexity: €725M ETANCO acquisition requires careful execution

  • Labor relations: Union negotiations at California facilities

  • Raw material volatility: Steel/aluminum costs impact margins

Your Swipe File

  • Profit sharing beats pure salary: Quarterly cash profit sharing creates ownership mentality across all employees

  • Specification strategy: Get on architectural plans to avoid commodity pricing-worth 20% premium

  • "No big shots" culture: First names only, promote from within, values-driven approach creates sustainable advantage

  • Small component, big impact: $400 of product in $400K house enables premium pricing through value creation

  • Brand building takes generations: 67 years to become synonymous with category-no shortcuts to reputation