Start Time: 08:30 January 1, 0000 9:19 AM ET Hillman Solutions Corp. (NASDAQ:HLMN) Q1 2022 Earnings Conference Call May 03, 2022, 08:30 AM ET Company Participants Douglas Cahill - Chairman, President and CEO Robert Kraft - CFO Michael Koehler - VP, IR Conference Call Participants David Manthey - Robert W. Baird Brian Butler - Stifel Nicolaus Lee Jagoda - CJS Securities Ryan Merkel - William Blair Matthew Bouley - Barclays Reuben Garner - The Benchmark Company Operator Good morning, and welcome to the First ...

30 140 130 30 140 130 56 115 144 56 115 144 180 180 180 180 180 180 61 61 61 61 61 61 147 183 201 147 183 201 36 90 87 36 90 87 235 235 235 235 235 235 HILLMAN. Quarterly Earnings Presentation Q1 2022 PresBuilder Placeholder - Delete this box if you see it on a slide, but DO NOT REMOVE this box from the slide layout Forward Looking Statements 30 140 130 30 140 130 56 115 144 56 115 144 180 180 180 180 180 180 61 61 61 61 61 61 147 183 201 147 183 201 36 90 87 36 90 87 235 235 235 235 235 235 This presentati ...

```markdown Part I [Item 1. Business](index=2&type=section&id=Item%201.%20Business) Hillman Solutions Corp. is a leading North American hardware provider, publicly traded since 2021, with $1.426 billion in net sales - Hillman is a major provider of hardware products and services in North America, with **2021 net sales of approximately $1.426 billion**[14](index=14&type=chunk) - On July 14, 2021, the company completed a business combination with SPAC Landcadia Holdings III, Inc., becoming Hillman Solutions Corp. and trading on Nasdaq under "HLMN"[16](index=16&type=chunk) - In connection with the SPAC merger, Hillman entered into a new Term Credit Agreement for an **$835.0 million** term loan and a **$200.0 million** delayed draw facility, refinancing its existing debt[17](index=17&type=chunk) - The company acquired OZCO, a manufacturer of hardware for outdoor structures, for **$38.9 million** on April 16, 2021, financed by an incremental **$35.0 million** term loan[18](index=18&type=chunk) [Business Segments](index=3&type=section&id=Business%20Segments) The company operates three segments: Hardware and Protective Solutions, Robotics and Digital Solutions, and Canada, with Hardware as the largest revenue driver Segment Revenue (2019-2021) | Segment | 2021 Revenue (in millions) | 2020 Revenue (in millions) | 2019 Revenue (in millions) | | :--- | :--- | :--- | :--- | | Hardware and Protective Solutions | $1,025.0 | $1,024.4 | $853.0 | | Robotics and Digital Solutions | $249.5 | $209.3 | $236.1 | | Canada | $151.5 | $134.6 | $125.3 | - The Hardware and Protective Solutions segment includes fasteners (Hillman, PowerPro), builder's hardware (Hardware Essentials®), wall hanging (Ook®, High & Mighty®), metal shapes (SteelWorks®), LNS, and personal protective gear (Firm Grip®, AWP®)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - The Robotics and Digital Solutions segment features self-service key duplication (MinuteKey) and engraving (Quick-Tag®) kiosks, along with associate-assisted systems (KeyKrafter®)[37](index=37&type=chunk)[39](index=39&type=chunk)[44](index=44&type=chunk) [Markets and Customers](index=6&type=section&id=Markets%20and%20Customers) Hillman's sales are highly concentrated with Home Depot and Lowe's, which together accounted for approximately **48%** of total revenue in 2021 Top Customer Revenue Concentration (2021) | Customer | Revenue (in millions) | % of Total Revenue | | :--- | :--- | :--- | | Home Depot | $385.0 | 27.0% | | Lowe's | $294.1 | 20.6% | | **Total Top 2** | **$679.1** | **47.6%** | - The company serves national accounts including Home Depot, Lowe's, Menard's, PETCO, PetSmart, Tractor Supply, and Walmart[51](index=51&type=chunk) [Competition](index=8&type=section&id=Competition) Hillman faces competition in fasteners and personal protective equipment, leveraging product innovation and in-store merchandising for competitive advantage - Primary competitors for fasteners in national accounts are Primesource Building Products, Inc., Midwest Fastener Corporation, Illinois Tool Works Inc., and Spectrum Brands[58](index=58&type=chunk) - Competition for gloves and personal protective equipment includes West Chester Protective Gear, PIP, Iron Clad, and MidWest Quality Gloves, Inc[58](index=58&type=chunk) [Human Capital Resources](index=8&type=section&id=Human%20Capital%20Resources) As of December 25, 2021, Hillman employed **4,212** full-time and part-time employees, with a focus on health, safety, diversity, and inclusion - The company had **4,212** full and part-time employees as of December 25, 2021, with no union representation[61](index=61&type=chunk) - Hillman has implemented measures to protect its workforce in response to COVID-19, adhering to CDC and local health authority guidance[62](index=62&type=chunk) [Item 1A. Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from economic conditions, COVID-19, competition, customer concentration, and substantial debt - The business is sensitive to economic conditions, consumer confidence, and trends in home repair, remodeling, and new construction[69](index=69&type=chunk) - The COVID-19 pandemic poses ongoing risks to demand, the global supply chain, and supplier reliability, which could materially affect business operations[71](index=71&type=chunk)[74](index=74&type=chunk) - The company has **high customer concentration**, with its two largest customers accounting for approximately **48%** of net sales in 2021[81](index=81&type=chunk) - As of December 25, 2021, total indebtedness was **$945.8 million**. This **substantial debt** increases vulnerability to adverse economic conditions and limits operational flexibility[118](index=118&type=chunk)[119](index=119&type=chunk) - Credit agreements contain restrictive covenants that limit the company's ability to incur additional debt, pay dividends, make investments, and engage in other strategic activities[121](index=121&type=chunk)[126](index=126&type=chunk) [Item 1B. Unresolved Staff Comments](index=23&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[132](index=132&type=chunk) [Item 2. Properties](index=24&type=section&id=Item%202.%20Properties) Hillman operates numerous leased office, manufacturing, and distribution facilities across North America, all considered in good condition - All of the company's principal office, manufacturing, and distribution properties are leased[134](index=134&type=chunk) Key Leased Facilities | Location | Approx. Square Footage | Description | | :--- | :--- | :--- | | Cincinnati, Ohio | 270,000 | Office, Distribution | | Forest Park, Ohio | 385,000 | Office, Distribution | | Rialto, California | 402,000 | Distribution | | Tempe, Arizona | 184,000 | Office, Mfg., Distribution | | Toronto, Ontario | 453,000 | Office, Distribution | [Item 3. Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, including a patent infringement lawsuit regarding its key duplication machines, which management intends to defend vigorously - On June 1, 2021, Hy-Ko Products Company LLC filed a patent infringement complaint against Hillman Group regarding its key duplication machines[506](index=506&type=chunk) - Management and legal counsel believe Hy-Ko's claims are without merit and intend to defend the suit vigorously. An estimate of possible loss cannot be made at this stage[509](index=509&type=chunk) [Item 4. Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[136](index=136&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=25&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under 'HLMN', has never paid cash dividends, and completed warrant redemption in late 2021 - The company's common stock is traded on The Nasdaq Stock Market under the symbol 'HLMN'[138](index=138&type=chunk) - The company has never declared or paid cash dividends on its common stock and does not intend to in the foreseeable future[139](index=139&type=chunk) - On December 30, 2021, the company announced the completed redemption of its outstanding warrants[146](index=146&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2021 net sales reached **$1.426 billion**, but a **$38.3 million** net loss occurred due to inventory charges and higher SG&A, with liquidity from its ABL Revolver [Results of Operations](index=31&type=section&id=Results%20of%20Operations) For fiscal 2021, net sales grew to **$1.426 billion**, but net loss widened to **$38.3 million** due to a **$32.0 million** inventory write-down and increased SG&A expenses Consolidated Results of Operations (2020 vs 2021) | (dollars in thousands) | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net sales | $1,425,967 | $1,368,295 | +$57,672 | | Cost of sales | $859,557 | $781,815 | +$77,742 | | Gross Profit % | 39.7% | 42.9% | -3.2% | | Income from operations | $10,314 | $65,766 | -$55,452 | | Net loss | $(38,332) | $(24,499) | -$13,833 | | Adjusted EBITDA | $207,418 | $221,215 | -$13,797 | - The increase in cost of sales in 2021 was primarily due to a **$32.0 million** inventory valuation adjustment related to exiting certain COVID-19 product categories, plus inflation in commodities and transportation[169](index=169&type=chunk) - SG&A expenses increased by **$39.4 million** in 2021, driven by higher variable selling expenses, increased warehouse and delivery costs from volume and inflation, and higher G&A costs including stock compensation and legal fees related to the merger[170](index=170&type=chunk)[175](index=175&type=chunk) Consolidated Results of Operations (2019 vs 2020) | (dollars in thousands) | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Net sales | $1,368,295 | $1,214,362 | +$153,933 | | Cost of sales | $781,815 | $693,881 | +$87,934 | | Gross Profit % | 42.9% | 42.9% | 0.0% | | Income from operations | $65,766 | $7,695 | +$58,071 | | Net loss | $(24,499) | $(85,479) | +$60,980 | | Adjusted EBITDA | $221,215 | $178,658 | +$42,557 | [Non-GAAP Financial Measures](index=39&type=section&id=Non-GAAP%20Financial%20Measures) The company uses Adjusted EBITDA, a non-GAAP measure, which was **$207.4 million** in 2021, with significant add-backs for depreciation, stock compensation, and a one-time inventory revaluation charge Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Net loss** | **$(38,332)** | **$(24,499)** | **$(85,479)** | | Income tax benefit | (11,784) | (9,439) | (23,277) | | Interest expense, net | 68,779 | 99,103 | 113,843 | | Depreciation & Amortization | 120,729 | 126,915 | 124,568 | | EBITDA (Calculated) | $139,392 | $192,080 | $129,655 | | Stock compensation expense | 15,255 | 5,125 | 2,981 | | Litigation expense | 12,602 | 7,719 | 1,463 | | Acquisition and integration expense | 11,123 | 9,832 | 12,557 | | Inventory revaluation charges | 32,026 | — | — | | Other Adjustments | (3,000) | 6,459 | 22,002 | | **Adjusted EBITDA** | **$207,418** | **$221,215** | **$178,658** | [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) In 2021, operating activities used **$110.3 million** cash, while financing provided **$193.3 million** from the SPAC merger and PIPE investment, used to refinance debt, with **$124.1 million** available under the ABL Revolver Summary of Cash Flows (in millions) | Activity | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash (used for)/provided by operating activities | $(110.3) | $92.1 | $52.4 | | Net cash used for investing activities | $(90.5) | $(46.1) | $(53.5) | | Net cash provided by/(used for) financing activities | $193.3 | $(45.1) | $(7.1) | - In connection with its merger, the company refinanced its debt, entering a new term loan facility for **$835.0 million** and redeeming its **6.375%** Senior Notes and **11.6%** Junior Subordinated Debentures[215](index=215&type=chunk) - As of December 25, 2021, the company had **$124.1 million** of available borrowings under its ABL Revolver, which is a primary source of liquidity[220](index=220&type=chunk) [Critical Accounting Policies and Estimates](index=45&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management identifies critical accounting policies including revenue recognition, inventory realization, and goodwill impairment testing, which involve significant estimates and judgment - Inventory realization is a critical estimate. A **5% difference** in the actual excess and obsolete inventory reserve would have affected net earnings by approximately **$2.0 million** in fiscal 2021[231](index=231&type=chunk) - In the 2021 goodwill impairment test, the fair value of the Protective Solutions reporting unit exceeded its carrying value by approximately **5%**, and the Fastening and Hardware Solutions reporting unit exceeded its carrying value by approximately **23%**[234](index=234&type=chunk) - The carrying value of goodwill for the Protective Solutions and Fastening and Hardware reporting units was **$128.8 million** and **$424.1 million**, respectively, as of December 25, 2021[235](index=235&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rate fluctuations and foreign currency exchange rates, which it manages using interest rate swaps and foreign currency forward contracts - A **one percent (1%) change** in the weighted average interest rate for one year would change the annual interest expense by approximately **$5.2 million**[245](index=245&type=chunk) - The company is exposed to foreign exchange risk related to its Canadian and Mexican subsidiaries, which had a combined net asset value of **$169.9 million** as of December 25, 2021[246](index=246&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=49&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2021 and 2020, with an **unqualified auditor's opinion** and critical audit matters related to goodwill valuation and the SPAC merger accounting - The independent auditor's report from KPMG LLP expresses an **unqualified opinion** on the consolidated financial statements[259](index=259&type=chunk) - Critical audit matters identified were the valuation of goodwill for two reporting units and the determination of HMAN as the accounting acquirer in the reverse recapitalization with Landcadia[263](index=263&type=chunk)[268](index=268&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | | Dec 25, 2021 | Dec 26, 2020 | | :--- | :--- | :--- | | Total current assets | $668,309 | $553,707 | | Goodwill | $825,371 | $816,200 | | Total assets | $2,562,922 | $2,468,618 | | Total current liabilities | $277,296 | $311,911 | | Long-term debt | $906,531 | $1,535,508 | | Total liabilities | $1,412,827 | $2,104,031 | | Total stockholders' equity | $1,150,095 | $364,587 | Consolidated Statements of Comprehensive Loss Highlights (in thousands) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net sales | $1,425,967 | $1,368,295 | $1,214,362 | | Income from operations | $10,314 | $65,766 | $7,695 | | Net loss | $(38,332) | $(24,499) | $(85,479) | | Basic and diluted loss per share | $(0.28) | $(0.27) | $(0.96) | [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=100&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[526](index=526&type=chunk) [Item 9A. Controls and Procedures](index=100&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were **effective** as of December 25, 2021, having remediated a prior year **material weakness** related to deferred income taxes - Management concluded that disclosure controls and procedures were **effective** as of December 25, 2021[527](index=527&type=chunk) - A **material weakness** from the prior year related to the valuation allowance against deferred income taxes was remediated as of December 25, 2021[535](index=535&type=chunk)[536](index=536&type=chunk) - Remediation actions included engaging third-party tax consultants, creating a technical review committee, and hiring more tax staff[536](index=536&type=chunk) Part III [Item 10. Directors, Executive Officers, and Corporate Governance](index=102&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement, with a code of ethics available on the company's website - Information about directors, officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement[543](index=543&type=chunk) - A code of ethics has been adopted and is available on the company's website[544](index=544&type=chunk) [Item 11. Executive Compensation](index=102&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2022 Proxy Statement - Information regarding executive compensation is incorporated by reference from the 2022 Proxy Statement[545](index=545&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=102&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section provides equity compensation plan information, with **13,960,739 securities** to be issued at a weighted-average exercise price of **$8.15**, and additional details incorporated from the 2022 Proxy Statement Equity Compensation Plan Information | Plan Category | Number of securities to be issued upon exercise | Weighted-average exercise price | Number of securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity Compensation plans approved by shareholders | 13,960,739 | $8.15 | 7,713,585 | | Total | 13,960,739 | $8.15 | 7,713,585 | - Additional information on beneficial ownership is incorporated by reference from the 2022 Proxy Statement[547](index=547&type=chunk) [Item 13. Certain Relationships and Related Transactions](index=102&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions) Information concerning related person transactions and director independence is incorporated by reference from the company's 2022 Proxy Statement - Information regarding certain relationships and related transactions is incorporated by reference from the 2022 Proxy Statement[548](index=548&type=chunk) [Item 14. Principal Accounting Fees and Services](index=103&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The company's independent registered public accounting firm is KPMG, LLP, with information regarding their fees and services incorporated by reference from the 2022 Proxy Statement - The company's independent registered public accounting firm is KPMG, LLP[549](index=549&type=chunk) - Information regarding principal accounting fees and services is incorporated by reference from the 2022 Proxy Statement[549](index=549&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=103&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists documents filed as part of the Form 10-K, including financial statements and a comprehensive list of exhibits such as the Merger Agreement and credit agreements - This section contains the financial statements referenced in Item 8[552](index=552&type=chunk) - A list of exhibits is provided, including the Agreement and Plan of Merger, credit agreements, and various management and compensatory plan documents[552](index=552&type=chunk)[553](index=553&type=chunk) ```

Financial Data and Key Metrics Changes - In Q4 2021, net sales were $344.5 million, a 5.3% increase year-over-year [35] - For the full year, revenue grew 4.2% to $1.4 billion, with adjusted EBITDA decreasing 6.2% to $207.4 million [41][46] - Adjusted EBITDA in Q4 was $38.6 million, down 10.4% from $43.1 million in the prior year [40] Business Line Data and Key Metrics Changes - Hardware Solutions sales increased 11.8% in Q4, with a full-year growth of 4.7% [35][37] - RDS segment sales grew 15.9% in Q4 and 19.2% for the full year, driven by improved foot traffic and an increase in the installed base [36][37] - Protective Solutions saw a 14.4% decline in Q4, attributed to a reduction in COVID PPE sales [36] Market Data and Key Metrics Changes - Canadian sales increased 12.5% in 2021 to $151.5 million due to reduced COVID restrictions [37] - The company maintained an industry-leading fill rate of 90.3% for 2021, improving to 93.4% year-to-date in 2022 [18] Company Strategy and Development Direction - The company aims to grow revenue organically by mid to high single digits and adjusted EBITDA by 10% annually [46][55] - A focus on integrating Protective Solutions with Hardware Solutions to drive efficiencies and sales growth [22] - The company is evaluating several M&A opportunities to accelerate growth in low-risk categories [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term growth despite current inflation and supply chain challenges [57] - Anticipated inflationary pressures will continue in the first half of 2022, with expectations for moderation in the second half [47][50] - The company expects revenue for 2022 to be between $1.5 billion and $1.6 billion, with adjusted EBITDA ranging from $207 million to $227 million [50] Other Important Information - The company recapitalized its balance sheet, reducing total net debt from $1.6 billion to $931 million by the end of Q4 2021 [45] - Operating activities used $110 million of cash in 2021, compared to a $92 million source of cash in the prior year [43] Q&A Session Summary Question: Future inflation trends and pricing mechanisms - Management anticipates inflation costs to remain consistent throughout 2022, with mechanisms in place for potential additional price increases [60][61] Question: Impact of chip shortages on RDS growth - Management expects chip shortages to remain a headwind in 2022, but does not anticipate demand issues [74][75] Question: Guidance assumptions for revenue and EBITDA - Management provided insights on volume and price assumptions, indicating a conservative approach to revenue growth expectations [84][86] Question: Free cash flow conversion through the quarters - Free cash flow is expected to follow EBITDA trends, with the first quarter typically being a user of cash due to inventory build [105][106]

30 140 130 30 140 130 56 115 144 56 115 144 180 180 180 180 180 180 61 61 61 61 61 61 147 183 201 147 183 201 36 90 87 36 90 87 235 235 235 235 235 235 HILLMAN" Investor Presentation Fourth Quarter 2021 PresBuilder Placeholder - Delete this box if you see it on a slide, but DO NOT REMOVE this box from the slide layout 103 176 13 Safe Harbor Statement 12 63 19 199 204 199 0 0 0 199 199 199 2 Forward Looking Statements This presentation may contain "forward-looking statements" within the meaning of federal se ...

30 140 130 30 140 130 56 115 144 56 115 144 180 180 180 180 180 180 61 61 61 61 61 61 147 183 201 147 183 201 36 90 87 36 90 87 235 235 235 235 235 235 HILLMAN* Investor Presentation Third Quarter 2021 PresBuilder Placeholder - Delete this box if you see it on a slide, but DO NOT REMOVE this box from the slide layout 38 79 78 Safe Harbor Statement 57 118 116 76 158 155 199 243 239 56 115 144 214 220 229 191 191 191 38 79 78 FHS 254 180 38 PPS 193 207 51 CCS Forward Looking Statements This presentation may c ...

Landcadia Holdings III, Inc. (LCY) Q1 2021 Earnings Conference Call May 11, 2021 8:30 AM ET Company Participants Nick Ruffing - Vice President, Finance Doug Cahill - Chairman, President, and Chief Executive Officer Rocky Kraft - Chief Financial Officer Operator Good morning, ladies and gentlemen and welcome to The Hillman Companies Conference Call to discuss First Quarter 2021 Results. At this time, all participants are in a listen-only mode. Hillman will not be fielding any questions on today’s call in li ...