Hillman Solutions Corp. Q4 FY2024 earnings call

Key Points

• Doug Cahill highlighted 2024 results including winning Vendor of the Year awards from Home Depot and Lowe's, acquisitions of Koch Industries and Intex DIY, and financial highlights like net sales, adjusted EBITDA, and gross margins.
• Jon Michael Adinolfi discussed strategy focusing on growing core business, strategic acquisitions, technology investment, and the Hillman moat which includes field sales/service, direct store shipping, 60 years of experience, company-owned brands, and long-term customer relationships.
• Robert Kraft provided financial results for Q4 2024 and full-year 2024, including net sales, adjusted EBITDA, cash flow, and balance sheet details.

Hardware and Protective Solutions (HPS) is the biggest business. HPS increased its adjusted EBITDA by 23% for the year with flat top line results. Robotics and Digital Solutions (RDS) has been a leader in adjusted EBITDA margins but had capital investment drag; expects growth with MinuteKey 3.5 rollout. In 2024, net sales totaled $1.473 billion. Adjusted EBITDA in the fourth quarter increased 3.5% to $56.3 million. Adjusted gross margins improved 390 basis points to 48.1% for 2024.

2025 Guidance

• Full-year net sales anticipated between $1.495 billion to $1.575 billion with a midpoint of $1.535 billion.
• Adjusted EBITDA expected to total between $255 million and $275 million, midpoint $265 million (10% increase from 2024).
• Free cash flow expected between $90 million to $110 million, midpoint $100 million.
• CapEx around $90 million, interest expense $45 million to $55 million, etc.

Risks

• Factors influencing results like market conditions, tariffs, inflation, supply chain issues, and potential impact of macroeconomic factors on home improvement activity.

Q: Brian McNamara asked about organic growth in Q4 by price and volume and about MinuteKey 3.5 driving sustainable growth in RDS.

A: Jon Michael Adinolfi said price was just over down 1% for the whole business and MinuteKey 3.5 opens up new opportunities with nice traction. Robert Kraft added RDS is set up to take advantage of tailwinds.

Q: Ryan Merkel asked about trends in December and tariffs.

A: Robert Kraft said Q4 December was pressured but Q1 is stabilizing. Jon Michael Adinolfi said tariffs are managed similarly to 2018 with teams readying and executing.

Q: Matthew Bouley asked about RDS growth and price.

A: Robert Kraft said RDS expects to return to growth with 3.5 rollout. Jon Michael Adinolfi said price expected to be positive in second half due to strategic categories and inflation management.

Q: Unidentified Analyst asked about Canadian business.

A: Jon Michael Adinolfi and Douglas Cahill said Canadian business has new wins offsetting pressure and is set up for profitability regardless of markets.

Q: Brian Butler asked about RDS rollout and new business.

A: Jon Michael Adinolfi said 3.5 rollout is steady, new business is across the board with exciting products and customer wins.

Q: David Manthey asked about RDS EBITDA margin expectations and returns on capital.

A: Robert Kraft said RDS aims to maintain margin rate and expects returns on capital to drift up gradually.

Q: Reuben Garner asked about new business and tariffs.

A: Robert Kraft said new business is committed but market volumes affect it. Jon Michael Adinolfi discussed cost of pricing changes and no inventory build for tariffs related to seasonal cash flow.