Financial Data and Key Metrics Changes - For 2025, net sales increased by 5.4% to $1.552 billion, and adjusted EBITDA increased by 13.9% to $275.3 million compared to 2024 [4][16] - The adjusted gross profit margin for the full year 2025 increased by 60 basis points to 48.7% from 48.1% in 2024 [16] - Free Cash Flow for 2025 totaled $35.1 million, down from $98.1 million in 2024, impacted by $65 million of tariff costs [17] Business Line Data and Key Metrics Changes - Hardware and Protective Solutions (HPS) net sales increased by 7.8% to $1.2 billion, with adjusted EBITDA rising by 26% to $196.3 million [10] - Robotics and Digital Solutions (RDS) net sales increased by 1.6% to $220.2 million, with nearly 3,500 MiniKey 3.5 machines installed [11][12] - Canadian business net sales decreased by 6.6% compared to the prior year, with adjusted EBITDA margins just shy of 10% [12] Market Data and Key Metrics Changes - Existing home sales remained soft at 4.06 million, unchanged from 30-year lows in 2024, impacting home improvement projects [8] - The company does not expect any meaningful changes in the macro environment that could provide tailwinds for growth in 2026 [7] Company Strategy and Development Direction - The company plans to focus on expanding its pro business, diversifying its customer base, and pursuing bolt-on acquisitions [14][13] - The M&A pipeline is healthy, with several exciting opportunities being explored [13] - The company aims to control costs and improve customer service while investing in growth opportunities [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving solid revenue and earnings gains throughout 2026, despite a challenging market environment [25] - The company anticipates full-year 2026 net sales between $1.6 billion and $1.7 billion, with adjusted EBITDA expected to grow by 1.7% [5][20] - Management highlighted the importance of new business wins and pricing strategies in driving growth [7][19] Other Important Information - The company expects to invest between $70 million and $75 million in capital expenditures in 2026, similar to 2025 [22] - The company plans to continue stock repurchases to offset dilution from employee equity grants [23] Q&A Session Summary Question: Can you walk through the cadence of the gross margins for Q1? - Management indicated that Q1 will likely be the low point for gross margins, with expectations slightly below the 46%-47% range due to high-cost inventory [29][30] Question: What gives you confidence in new business wins for 2026? - Management highlighted several initiatives and a strong sales team, along with participation in industry events to showcase new products [32][34] Question: What is the outlook for the Protective Solutions business? - Management noted near-term dynamics affecting sales but expressed confidence in new product launches and integration of the Intex DIY business [39][40] Question: How should we model expectations for RDS given the customer transition? - Management stated that the customer transition will continue into Q2, but they expect growth in RDS due to successful rollouts of new machines [43][45] Question: What are the long-term targets for organic revenue and EBITDA growth? - Management reaffirmed confidence in long-term targets of 6% and 10% organic growth, with an upcoming Investor Day to discuss these further [56][58] Question: How is the M&A environment compared to last year? - Management expressed optimism about the M&A environment, noting more opportunities are coming to the table and a busy M&A team [73]

Financial Data and Key Metrics Changes - For Q2 2025, net sales totaled $402.8 million, an increase of 6.2% compared to the same quarter last year [12][18] - Adjusted EBITDA increased by 10.1% to $75.2 million, with adjusted EBITDA margins improving by 70 basis points to 18.7% [13][18] - Adjusted gross margins for the quarter were 48.3%, down slightly from 48.7% year-over-year but improved sequentially from 46.9% [13][18] Business Line Data and Key Metrics Changes - The hardware and protective solutions (HPS) segment grew by 8.7% year-over-year, with adjusted EBITDA increasing by 14.7% to $51.5 million [14] - Robotics and digital solutions (RDS) saw a 2.3% increase in net sales, marking the second consecutive quarter of growth [14] - Canadian business net sales decreased by 5.6% compared to the prior year quarter, although sales volumes improved sequentially [15] Market Data and Key Metrics Changes - The company expects full-year 2025 net sales to be between $1.535 billion and $1.575 billion, reflecting a growth of 4% to 7% over 2024 [7] - Adjusted EBITDA guidance for 2025 is now between $265 million and $275 million, representing a growth of 10% to 14% over the previous year [7] Company Strategy and Development Direction - The company is focused on managing tariff-related cost increases and optimizing sourcing through a dual faucet strategy, reducing reliance on Chinese suppliers from nearly 50% in 2018 to approximately 20% by the end of 2025 [11] - Hillman aims to maintain a competitive edge through strong customer relationships and a flexible supply chain [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current economic environment while focusing on long-term growth [10][29] - The company anticipates that market volumes will remain flat in 2026, with expectations for net sales growth in the high single to low double digits [8][9] Other Important Information - The board approved a $100 million share repurchase program, marking the first such program since going public in 2021 [22] - The company maintains a long-term adjusted EBITDA to net debt leverage ratio target of 2.5 times or lower [21] Q&A Session Summary Question: Competitive advantages in the pro channel - Management highlighted that over 25% of business is pro-related, with successful product launches and support for customers serving the pro market [34][36] Question: Tariff impact and EBITDA cadence - Management indicated that tariff costs will start impacting in late Q3, with expectations for a strong Q3 due to pricing adjustments [38][39] Question: Guidance for next year and market conditions - Management expects to maintain new business wins at or above 2%, with a prudent outlook for flat market conditions in 2026 [45][46] Question: Pricing and volume outlook - Management confirmed that pricing is expected to be in the low teens for the hardware segment, with ongoing adjustments based on market conditions [100][101] Question: Mitigation efforts regarding sourcing - The company is on track to reduce sourcing from China to 20% by year-end, with alternative sourcing in countries like Thailand and Vietnam [104][105]