Hillman Solutions (US:HLMN)2022-03-02 18:08Financial 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]