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but is cautious about pursuing acquisitions due to current market uncertainties [87] - Free cash flow guidance has been withdrawn due to uncertainties surrounding tariffs and their impact on working capital [27] Q&A Session Summary Question: RDS business margins and future growth -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]