Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hillman Solutions Corp (HLMN, Financial) won the 2024 Divisional Vendor Partner of the Year in Hardlines at Lowe's and the 2024 Partner of the Year in Hardware at Home Depot, showcasing strong customer relationships.
- The company reported a 9% increase in adjusted EBITDA for the third quarter of 2024, reaching $72.6 million, with improved margins.
- Hillman Solutions Corp (HLMN) has structurally improved its gross margin profile, expecting it to remain above 47% for the foreseeable future.
- The acquisition of Intex is expected to expand product offerings and leverage cross-selling opportunities, contributing to future growth.
- Hillman Solutions Corp (HLMN) has reduced its net debt to trailing 12-month adjusted EBITDA ratio to 2.8 times, showing improved financial leverage.
Negative Points
- Net sales for the third quarter of 2024 decreased by 1.4% compared to the prior-year quarter, indicating a decline in top-line performance.
- The Robotics and Digital Solutions (RDS) segment experienced a 5.3% decline in net sales compared to the year-ago quarter.
- The Canadian business saw a 6.5% decrease in net sales due to a sluggish economy, impacting overall performance.
- Hillman Solutions Corp (HLMN) took a $7.8 million charge for receivables at risk from True Value's Chapter 11 filing, affecting financial results.
- Adjusted SG&A as a percentage of sales increased to 29.9% during the quarter, driven by standard employee bonus expenses, impacting profitability.
Q & A Highlights
Q: Can you provide insights on foot traffic and demand trends in October compared to September, and any early thoughts on R&R growth expectations for 2025?
A: Currently, the volume remains soft, but margins are strong with a good mix. Retailers are optimistic about 2025, especially with potential interest rate declines, which could unleash pent-up demand and existing home sales, benefiting our business. - Douglas Cahill, Chairman, President, CEO
Q: How is Hillman equipped to handle potential tariff increases, particularly with sourcing from China and Taiwan?
A: We source 1/3 from North America, 1/3 from Taiwan, and 1/3 from China. If tariffs increase, we plan to pass these costs onto our retailers, similar to our previous strategy. - John Michael Adinolfi, COO
Q: Can you discuss the current partners for Intex and any limitations on where it can be sold? Also, are the lower gross margins at Intex structural?
A: Intex sells to major customers like Depot, Lowe's, and Walmart, with no limitations on product distribution. While Intex's margins are structurally lower, we expect to improve them over time through efficiencies. - Douglas Cahill, Chairman, President, CEO & Robert Kraft, CFO
Q: What are the growth prospects for the RDS segment, particularly with MinuteKey 3.5 and Resharp?
A: MinuteKey 3.5 is just starting, with plans to expand and convert existing machines. We expect RDS to return to growth in 2025, supported by customer demand and potential pricing opportunities. - Douglas Cahill, Chairman, President, CEO
Q: How has the integration of Intex progressed, and what does the M&A pipeline look like?
A: The Intex integration is on track, with structural alignment achieved quickly. The M&A pipeline remains healthy, with plans for at least two acquisitions annually, leveraging Hillman's strengths. - Robert Kraft, CFO & John Michael Adinolfi, COO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
