Industry Overview - The Zacks Building Products - Miscellaneous industry is experiencing growth due to increased government infrastructure spending, which is driving demand for construction-related products and services [1] - Key players in the industry, such as United Rentals, Inc., Masco Corporation, Construction Partners, Inc., Hillman Solutions Corp., and Quanex Building Products Corporation, are well-positioned to capitalize on these trends [1] Current Challenges - The industry faces near-term challenges from high mortgage rates, affordability concerns, and inflation-related cost pressures, including tariffs on raw materials like iron, steel, and copper [2] - Despite these challenges, proactive cost management and pricing strategies are helping to mitigate headwinds [2] Industry Description - The industry comprises manufacturers, designers, and distributors of home improvement and building products, including ceiling systems, doors, windows, flooring, and metal products [3] - Companies also provide solutions for rehabilitating aging infrastructure and rent equipment to a diverse customer base [3] Future Trends - Strong global trends in infrastructure modernization and energy transition are expected to benefit industry players [4] - Improving residential construction markets are anticipated to drive growth, with builders cautiously optimistic for 2025 due to a lack of existing inventory [4] Operational Strategies - Industry participants are implementing cost-saving initiatives, including business consolidation and supply chain improvements, to boost profitability [5] - Strategic investments in new products and acquisitions are being pursued to supplement organic growth [5] Tariff Impact - U.S. tariff policies are increasing costs and disrupting supply chains, leading to heightened inflation [6] - Overall construction input prices were reported to be 1.1% higher in June compared to the previous year [6] Market Performance - The Zacks Building Products - Miscellaneous industry has underperformed the S&P 500 Composite and the broader Zacks Construction sector over the past year, losing 8.4% [12] - The industry is currently trading at a forward P/E ratio of 16.7X, lower than the S&P 500's 22.61X and the sector's 18.76X [15] Company Highlights - **Construction Partners**: Positioned for strong growth with a record project backlog of $2.84 billion and significant revenue growth from acquisitions [20][21] - **Quanex**: Benefiting from the acquisition of Tyman, contributing to a 67.3% year-over-year increase in consolidated sales [24][25] - **United Rentals**: Growth driven by strong demand in infrastructure projects and a stable customer sentiment, with a reaffirmed full-year guidance [27][28][29] - **Masco**: Facing a potential $400 million tariff headwind but expects to offset 50%-65% through pricing and cost reduction efforts [31][32] - **Hillman**: Aiming to reduce reliance on Chinese suppliers and maintain sales growth despite macroeconomic challenges [35][36]

Core Viewpoint - Hillman Solutions Corp. (HLMN) has seen a 13.1% increase in share price over the past four weeks, closing at $7.77, with a potential upside of 40.8% based on Wall Street analysts' mean price target of $10.94 [1] Price Targets and Analyst Estimates - The mean estimate consists of eight short-term price targets with a standard deviation of $2.54, indicating variability among analysts [2] - The lowest estimate is $8.00, suggesting a 3% increase, while the highest estimate is $15.00, indicating a potential surge of 93.1% [2] - A low standard deviation signifies greater agreement among analysts regarding price movement [2][9] Analyst Optimism and Earnings Estimates - Analysts show strong agreement in revising HLMN's earnings estimates upward, which is a positive indicator for potential stock upside [4][11] - Over the last 30 days, the Zacks Consensus Estimate for the current year has increased by 0.6%, with one estimate moving higher and no negative revisions [12] Zacks Rank and Investment Potential - HLMN holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors [13] - The combination of a positive earnings outlook and a strong Zacks Rank suggests a more conclusive indication of the stock's potential upside [13] Conclusion on Price Targets - While the consensus price target may not be a reliable measure of HLMN's potential gains, the direction indicated by these targets appears to be a useful guide for further research [14]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 totaled $359.3 million, an increase of 2.6% compared to Q1 2024, driven by the Intex acquisition and new business [16][21] - Adjusted EBITDA increased by 4.2% to $54.5 million, with adjusted EBITDA margins improving by 30 basis points to 15.2% [17][22] - Adjusted gross margins decreased to 46.9%, down from 47.6% in the prior year [17][22] Business Line Data and Key Metrics Changes - Hardware and Protective Solutions (HPS) segment net sales increased by 5.6%, with adjusted EBITDA rising by 15.8% to $37.4 million [18] - Robotics and Digital Solutions (RDS) net sales were up 1.9%, with adjusted gross margins and adjusted EBITDA margins slightly down [19] - Canadian business net sales decreased by 18.7% due to a 12% decline in existing home sales and economic uncertainty [20] Market Data and Key Metrics Changes - Approximately one-third of products are sourced from China, with plans to reduce this to about 20% by year-end 2025 [7][14] - The company anticipates a 17% decline in market volumes during the second half of 2025, which is considered a conservative estimate [10][46] Company Strategy and Development Direction - The company is implementing a dual faucet strategy to diversify its supply chain and reduce reliance on Chinese suppliers [14] - Focus on maintaining strong partnerships with customers and suppliers to navigate tariff impacts and optimize sourcing [11][32] - The company aims to manage through current challenges and believes it will emerge stronger [15][31] Management's Comments on Operating Environment and Future Outlook - Management reiterated full-year 2025 net sales and adjusted EBITDA guidance, citing ongoing monitoring of tariffs and economic conditions [6][25] - The company is confident in its ability to manage through tariff-related challenges and maintain service levels [62] - Future growth opportunities are anticipated as the home improvement market rebounds [65] Other Important Information - The estimated annualized impact of new tariffs is approximately $250 million, which the company plans to offset through price increases [7][26] - Free cash flow guidance has been withdrawn due to uncertainties surrounding tariffs [28] Q&A Session Summary Question: Impact of tariffs on RDS margins - Management acknowledged pressure on RDS margins due to the rollout and expects margins to improve to 30% EBITDA rate and 70% gross margins for the rest of the year [38] Question: Performance of Personal Protective business - No material pull forwards were noted, and promotional activity was strong, leading to better-than-expected performance [39] Question: Volume assumptions for the second half of the year - Initial guidance assumed a 1% decline in market volumes, but the current estimate is a conservative 17% decline [46] Question: Future sourcing strategy - The company is targeting a reduction in Chinese sourcing to 20% and is exploring opportunities in Southeast Asia and India [49] Question: Timing of price increases - Price increases are expected to be implemented by July 1, with a dollar-for-dollar approach to tariffs [54][56] Question: Comparison to COVID supply chain issues - Current supply chain performance is better than during COVID, with no significant disruptions reported [62] Question: M&A activity in the current environment - The M&A pipeline remains strong, but uncertainty around tariffs is impacting valuations [88]

Financial Performance - Net sales increased by 2.6% to $359.3 million compared to Q1 2024[8] - Adjusted EBITDA increased to $54.5 million, a 4.2% increase from $52.3 million in Q1 2024[8, 13] - Adjusted EBITDA margins were 15.2%, up from 14.9% in Q1 2024[8] - GAAP net loss totaled $(0.3) million, an improvement from $(1.5) million in Q1 2024[8] Segment Performance - Hardware and Protective Solutions (HPS) revenues increased by 5.6% to $274.4 million[8, 13] - Robotics and Digital Solutions (RDS) revenues increased by 1.9% to $56.5 million[8, 13] - Canada revenues decreased by 18.7% to $28.4 million[8, 13] Supply Chain and Strategy - The company has diversified its supply chain, reducing China exposure from 49% in 2018 to 33% in 2025[17] - The company aims to further reduce China-based supplier exposure to approximately 20% by the end of 2025[9, 18] Capital Structure and Guidance - Net Debt / Adjusted EBITDA (ttm) was 2.9x at quarter end[8, 20] - The company reiterated FY 2025 Net Sales and Adjusted EBITDA guidance[9, 24]

Company Performance - Hillman Solutions Corp. reported quarterly earnings of $0.10 per share, matching the Zacks Consensus Estimate and remaining unchanged from the previous year [1] - The company posted revenues of $359.34 million for the quarter ended March 2025, exceeding the Zacks Consensus Estimate by 0.22% and up from $350.31 million a year ago [2] - Over the last four quarters, Hillman has surpassed consensus revenue estimates two times [2] Stock Performance - Hillman Solutions Corp. shares have declined approximately 22.3% since the beginning of the year, compared to a 6% decline in the S&P 500 [3] - The current Zacks Rank for Hillman is 4 (Sell), indicating expected underperformance in the near future [6] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $0.17 on revenues of $394.6 million, and for the current fiscal year, it is $0.58 on revenues of $1.53 billion [7] - The trend for estimate revisions ahead of the earnings release has been unfavorable, which may impact future stock performance [6] Industry Context - The Building Products - Miscellaneous industry, to which Hillman belongs, is currently ranked in the bottom 36% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Data and Key Metrics Changes - Net sales in Q1 2025 totaled $359.3 million, an increase of 2.6% compared to Q1 2024, driven by the Intex acquisition and new business [16][17] - Adjusted EBITDA increased by 4.2% to $54.5 million, with adjusted EBITDA margins improving by 30 basis points to 15.2% [17][22] - Adjusted gross margins for the quarter were 46.9%, down from 47.6% in the prior year [17][22] Business Line Data and Key Metrics Changes - Net sales in the Hardware and Protective Solutions (HPS) segment increased by 5.6%, with adjusted EBITDA rising by 15.8% to $37.4 million [18] - Robotics and Digital Solutions (RDS) net sales were up 1.9%, with adjusted gross margins and adjusted EBITDA margins slightly down [19] - Canadian business net sales decreased by 18.7% due to a 12% decline in existing home sales and economic uncertainty [20] Market Data and Key Metrics Changes - The company expects market volumes to decline approximately 17% in the second half of 2025, which is a conservative estimate compared to historical performance [10][48] - The Canadian market is anticipated to return to profitable growth with the best retail partners and highest market share in hardware [20] Company Strategy and Development Direction - The company is implementing a dual faucet strategy to reduce reliance on Chinese suppliers from nearly 50% to approximately 20% by year-end 2025 [14] - The focus remains on optimizing the supply chain and maintaining strong partnerships with customers and suppliers [11][14] - The company is confident in navigating the current tariff environment and believes it will emerge stronger [15][32] Management's Comments on Operating Environment and Future Outlook - Management reiterated full-year 2025 net sales and adjusted EBITDA guidance, citing various external factors impacting the business [6][25] - The company is prepared for potential challenges and is optimistic about long-term demand in the home improvement market [67] Other Important Information - The estimated impact of new tariffs for 2025 is approximately $250 million on an annualized basis [8][27] - The company ended Q1 2025 with $703.7 million in total net debt and liquidity of $200.9 million [24] Q&A Session Summary Question: Impact of tariffs on RDS margins - Management acknowledged pressure on RDS margins due to the rollout and expects margins to improve to 30% EBITDA rate and 70% gross margins for the rest of the year [39] Question: Performance of Personal Protective segment - Management confirmed no material pull forwards in the Personal Protective segment and expressed satisfaction with its performance [40][41] Question: Volume assumptions for the second half of the year - Management stated that the current guidance assumes a conservative 17% decline in market volumes, which is unprecedented [48][49] Question: Future sourcing strategy - The company aims to diversify sourcing away from China, focusing on Southeast Asia and India for better supply chain flexibility [51][52] Question: Shipping container pricing and country of origin - Management confirmed that shipping container pricing is based on ports and country of origin, and they feel well-positioned for 2025 [69][70] Question: Pricing strategy in response to tariffs - Management indicated that price increases will be implemented to cover tariff costs, with ongoing discussions with customers [81][82] Question: M&A activity in the current environment - Management noted a strong M&A pipeline but indicated that uncertainty around tariffs makes it challenging to determine business valuations [90][91]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 totaled $359.3 million, an increase of 2.6% compared to Q1 2024, driven by the Intex acquisition and new business [15][16] - Adjusted EBITDA increased by 4.2% to $54.5 million, with adjusted EBITDA margins improving by 30 basis points to 15.2% [16][21] - Adjusted gross margins decreased to 46.9%, down from 47.6% in the prior year [16][21] Business Line Data and Key Metrics Changes - Hardware and Protective Solutions (HPS) segment net sales increased by 5.6%, with adjusted EBITDA rising by 15.8% to $37.4 million [17] - Robotics and Digital Solutions (RDS) net sales were up 1.9%, with adjusted gross margins and adjusted EBITDA margins slightly down [18] - Canadian business net sales decreased by 18.7% due to a 12% decline in existing home sales and economic uncertainty [19] Market Data and Key Metrics Changes - The company expects market volumes to decline approximately 17% in the second half of 2025, which is a conservative estimate given historical performance [9][45] - The impact of tariffs is estimated to be approximately $250 million on an annualized basis, with expectations to mitigate costs through price increases [7][25] Company Strategy and Development Direction - The company is implementing a dual faucet strategy to reduce reliance on Chinese suppliers from nearly 50% to approximately 20% by the end of 2025 [13] - Hillman aims to diversify its supply chain by sourcing from multiple countries, including Southeast Asia and India, to enhance flexibility and quality [48][49] - The company is focused on maintaining strong partnerships with customers and suppliers to navigate current challenges effectively [10][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in handling the tariff situation and believes the company is well-positioned to manage through current challenges [30] - The company anticipates a strong recovery in the home improvement market in the long term, despite short-term volume pressures [65] Other Important Information - The company has a strong M&A pipeline but is cautious about pursuing acquisitions due to current market uncertainties [87] - Free cash flow guidance has been withdrawn due to uncertainties surrounding tariffs and their impact on working capital [27] Q&A Session Summary Question: RDS business margins and future growth - Management acknowledged pressure on RDS margins due to the rollout but expects to return to a 30% EBITDA rate and 70% gross margins for the rest of the year [37] Question: Personal Protective business performance - Management confirmed no material pull forwards in the Personal Protective business and expressed satisfaction with its performance [38][39] Question: Volume assumptions for the full year - Management held guidance despite expecting a 17% decline in market volumes, emphasizing the unprecedented nature of the current tariff environment [45][46] Question: Future sourcing strategy - Management aims to reduce reliance on China and diversify sourcing to ensure quality and timely delivery [48][49] Question: Impact of tariffs on margins - Management indicated that pricing adjustments will be made dollar for dollar to cover tariff costs, which may impact long-term margin rates [55][56] Question: Comparison to COVID supply chain issues - Management noted that the current supply chain situation is better than during COVID, with strong service levels and supportive suppliers [63] Question: Shipping container pricing - Management confirmed that shipping container pricing is based on country of origin and expressed confidence in their contracts for 2025 [66][68]

Financial Performance - Net sales increased by 2.6% to $359.3 million compared to $350.3 million in the prior year quarter[6] - Net loss totaled $(0.3) million, or $(0.00) per diluted share, compared to $(1.5) million, or $(0.01) per diluted share, in the prior year quarter[6] - Adjusted EBITDA increased to $54.5 million compared to $52.3 million in the prior year quarter[6] - Net loss for the thirteen weeks ended March 29, 2025, was $317,000, a significant improvement from a net loss of $1,492,000 for the same period in 2024, representing a reduction of approximately 78.8%[20] - Adjusted EBITDA for the thirteen weeks ended March 29, 2025, was $54,526,000, compared to $52,322,000 for the same period in 2024, reflecting an increase of about 4.2%[24] - The company’s diluted earnings per share for the thirteen weeks ended March 29, 2025, was $0.10, unchanged from the same period in 2024, indicating stable performance in this metric[27] Cash Flow and Liquidity - Free Cash Flow totaled $(21.3) million compared to $(6.1) million in the prior year quarter[6] - Free cash flow for the thirteen weeks ended March 29, 2025, was $(21,313,000), a decline from $(6,083,000) in the same period of 2024, indicating a worsening cash generation situation[33] - Cash and cash equivalents at the end of the period were $36,309,000, up from $30,672,000 at the end of the same period in 2024, showing an increase of approximately 18.0%[20] - Net cash provided by financing activities for the thirteen weeks ended March 29, 2025, was $14,393,000, down from $20,411,000 in the same period of 2024, a decrease of about 29.5%[20] Debt and Capital Expenditures - Net debt as of March 29, 2025, was $703,663,000, an increase from $674,045,000 as of December 28, 2024, representing a rise of approximately 4.4%[31] - The company incurred capital expenditures of $20,658,000 for the thirteen weeks ended March 29, 2025, compared to $17,759,000 for the same period in 2024, reflecting an increase of approximately 10.7%[20] Guidance and Strategic Focus - Full Year 2025 guidance for Net Sales is reiterated at $1.495 to $1.575 billion[8] - Full Year 2025 guidance for Adjusted EBITDA is reiterated at $255 to $275 million[8] - The company plans to manage its business to end the year with a leverage ratio of around 2.5 times[8] - The acquisition of Intex DIY in August 2024 contributed to the growth in both top and bottom lines[5] - The company is focusing on diversifying its supply chain to mitigate the impact of tariffs[5] Adjusting Items and Expenses - Total adjusting items for Adjusted EBITDA in the thirteen weeks ended March 29, 2025, amounted to $5,607,000, compared to $7,434,000 in the same period of 2024, indicating a decrease of about 24.5%[24] - The company reported a stock-based compensation expense of $3,278,000 for the thirteen weeks ended March 29, 2025, compared to $2,829,000 for the same period in 2024, an increase of about 15.8%[24]

Core Viewpoint - Hillman Solutions Corp. reported financial results for the first quarter of 2025, showing growth in both net sales and adjusted EBITDA, while also addressing challenges related to tariffs and supply chain diversification [4][5][6]. Financial Performance - Net sales increased by 2.6% to $359.3 million compared to $350.3 million in the prior year quarter [7]. - Adjusted EBITDA rose to $54.5 million from $52.3 million in the prior year quarter [7]. - The company reported a net loss of $(0.3) million, or $(0.00) per diluted share, an improvement from a net loss of $(1.5) million, or $(0.01) per diluted share, in the prior year quarter [7][14]. Balance Sheet and Liquidity - As of March 29, 2025, total assets were $2.33 billion, slightly up from $2.33 billion on December 28, 2024 [15][16]. - Gross debt increased to $740.0 million from $718.6 million at the end of 2024, while net debt rose to $703.7 million from $674.0 million [7][30]. - Liquidity available totaled $200.9 million, consisting of $164.6 million in available borrowing under the revolving credit facility and $36.3 million in cash and equivalents [7]. Guidance and Outlook - The company reiterated its full-year guidance for net sales between $1.495 billion and $1.575 billion and adjusted EBITDA between $255 million and $275 million [6][5]. - Free cash flow guidance was withdrawn due to uncertainties around tariffs, but the company aims to manage its business to achieve a leverage ratio of around 2.5 times by year-end [6][5]. Management Commentary - The CEO highlighted the positive start to 2025, driven by contributions from the Intex DIY acquisition and new business wins, while emphasizing the importance of long-term partnerships and supply chain diversification [4].

Company Overview - Hillman Solutions Corp. (HLMN) shares increased by 6.9% to close at $7.89, following a notable trading volume and a 21.2% loss over the past four weeks [1] - The stock's surge is linked to President Trump's announcement to suspend U.S. tariffs for 90 days, which has renewed investor optimism [1] Earnings Expectations - The company is projected to report quarterly earnings of $0.10 per share, unchanged from the same quarter last year, with revenues expected to reach $358.57 million, reflecting a 2.4% increase year-over-year [2] - The consensus EPS estimate for the quarter has been revised 1.5% higher in the last 30 days, indicating a positive trend that may lead to price appreciation [3] Industry Context - Hillman Solutions Corp. operates within the Zacks Building Products - Miscellaneous industry, where another company, TopBuild (BLD), saw its shares rise by 7.7% to $297.13, despite a -7.2% return over the past month [3] - TopBuild's consensus EPS estimate has decreased by 2.2% to $4.42, representing an 8.1% decline compared to the previous year, and it currently holds a Zacks Rank of 4 (Sell) [4]