Hillman Solutions Corp. Q2 FY2026 earnings call

• Strategic Acquisition Announcement

  • Definitive agreement to acquire Cambridge Corporation, a leading U.S. master distributor of long-tail specialty fasteners for the industrial channel, for a purchase price of $315 million. The transaction is expected to close at the start of Q4 2026, subject to regulatory approval and customary closing conditions.
  • Cambridge generated ~$65 million in revenue and ~$30 million in adjusted EBITDA for the 12 months ending June 30, 2026, with robust margins, a light CapEx model, and healthy free cash flow conversion. The acquisition doubles Hillman's existing industrial business size (pre-acquisition industrial revenue is ~$65 million), expands Hillman's industrial addressable market by 50% to $3 billion, and is expected to be immediately accretive to Hillman's margin profile.
  • Expected synergies include ~$2 million in annual cost savings primarily from sourcing, and a one-time material cash tax benefit of $40-$45 million. The post-synergy purchase multiple is 8.4x-8.6x. Cross-selling opportunities exist to sell Hillman SKUs through Cambridge's channel and leverage Cambridge's FastNet digital ordering platform and expertise across Hillman's broader business.

• Overall Quarterly Financial Performance

  • Q2 2026 total net sales grew 10% YoY to $442.3 million, in line with Hillman's long-term 8-12% annual growth target. Growth composition: 200 bps from core performance, 450 bps from new business wins, and 350 bps from M&A.
  • Adjusted EBITDA grew 2.5% YoY to $77.1 million, with an adjusted EBITDA margin of 17.4% (down 130 bps YoY but up sharply from 13.5% in Q1 2026). Adjusted gross margin was 47.1% (down 120 bps YoY but up 150 bps sequentially from Q1 2026).
  • Free cash flow was a strong $70.2 million in the quarter, driven by conversion of 2025 inventory spending, net tariff refunds, and lower CapEx.
  • Net debt totaled $665 million at quarter-end, with a net debt-to-trailing 12-month adjusted EBITDA ratio of 2.4x, unchanged from end-2025. Hillman successfully refinanced its credit facilities post-quarter, extending maturities to 2031/2033 and creating a more flexible capital structure to support strategic growth.
  • 1.7 million shares were repurchased for $13.3 million in the quarter at an average price of $7.62 per share. Share repurchase activity will be reduced in the short term to focus on deleveraging after the Cambridge acquisition closes.

• Strategic Execution Alignment

  • This acquisition, plus the two smaller Q2 2026 acquisitions (Campbell Chain and Fittings, Delaney Hardware), advances the three-pronged long-term growth blueprint shared at the March 2026 Investor Day: 1) fortify and grow the core DIY business; 2) expand in the pro distribution, industrial, and LBM channels; 3) drive compound growth through strategic M&A. Management reaffirms the target of 8-12% annual growth through 2030, reaching $2.5 billion in net sales by 2030.
  • Pro channel growth contributed 100 bps of top-line growth in Q2 2026, with key wins including a regional Pacific Northwest LBM chain, a major national pro customer, and continued growth of the Canadian bulk fastener program. New pro channel wins are expected to contribute ~1% full-year 2026 top-line growth, rising to at least 2% in 2027.
  • Minikey 3.5 kiosk rollout is progressing on track, with improved per-machine economics as installed base scales. Management expects to end 2026 with over 5,000 Minikey 3.5 units deployed.
  • Tariff impact remained net neutral in Q2 2026 following recent regulatory changes, with modest tariff refunds offset by cost adjustments from new tariff applications. Hillman's diversified sourcing strategy prioritizes lowest total landed cost and allows flexibility to adapt to tariff and geopolitical changes.

1. Hardware and Protective Solutions (HPS): Net sales increased 10% year-over-year (YoY). Growth was driven by 4% core performance growth, 2% from new business wins, and 4% from M&A activity. It is the company's largest segment, contributing the majority of overall net sales of $442 million for Q2 2026.
2. Robotics and Digital Solutions (RDS): RDS is Hillman's highest margin segment. Net sales increased 11% YoY. Adjusted EBITDA increased 10.4% YoY to $19.6 million, with an adjusted gross margin of 77.4% and adjusted EBITDA margin of 31.9%. The rollout of the Minikey 3.5 kiosk platform is driving growth, with 4,500 units deployed as of Q2 2026, up 600 units from the prior quarter.
3. Canadian Business: Net sales increased 7.8% YoY. Growth was driven by a 14% increase from new business wins, offset by a 6% decline in core performance due to soft market conditions and foreign exchange headwinds. New business growth is split between the DIY and pro channels.

• Full-year 2026 net sales guidance is narrowed to $1.67 billion to $1.72 billion, with an increased midpoint of $1.695 billion, representing 9% YoY growth, in line with long-term targets. The midpoint increase reflects the expected contribution from the Cambridge acquisition, which is forecast to add ~$15 million in net sales to 2026 results if it closes on schedule.
• Full-year 2026 adjusted EBITDA guidance midpoint is increased by $5 million to $285 million, representing 3.5% YoY growth, driven by the expected ~$5 million adjusted EBITDA contribution from Cambridge. The range was not explicitly restated with the midpoint increase.
• Full-year 2026 free cash flow guidance midpoint is maintained at $110 million, with the range narrowed to $105 million to $115 million. No material 2026 free cash flow benefit from Cambridge is expected due to transaction-related expenses.
• Guidance assumes no meaningful change in tariffs for the remainder of 2026, continued execution of new business wins, and a modest improvement in market volumes in H2 2026 due to easier year-over-year comparisons from H2 2025.
• Assuming the Cambridge acquisition closes as planned and no additional large M&A is completed, net leverage is expected to peak at ~3.4x immediately after closing and decline to ~2.5x (the high end of Hillman's long-term leverage target) by the end of 2027.

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from projections, including changes in geopolitical conditions and tariff policy, which can impact sourcing costs.
• The Cambridge acquisition is subject to regulatory approval and customary closing conditions, and there is risk that it will not close on the expected timeline or at all.
• Soft core market performance and foreign exchange headwinds in Canada currently pressure core segment results in the region.
• Increased leverage immediately after the Cambridge acquisition requires near-term focus on deleveraging, necessitating a reduction in near-term share repurchase activity.
• Growth in the pro channel is still in early stages, and there is no guarantee that early traction will translate to sustained long-term growth.

Q: How did the Cambridge acquisition opportunity come together, and what cross-selling and platform synergies are available? / A: Management had admired Cambridge for a long time and participated in a competitive bid process for the privately owned business, which already had an existing supplier relationship with Hillman. There is clear cross-synergy: Hillman can leverage its global sourcing network to help Cambridge get better pricing on existing products, and Hillman can add its existing SKUs to Cambridge's selection to sell through Cambridge's industrial customer base. While the Cambridge business, including its proprietary FastNet digital ordering platform, will be operated standalone initially, Hillman can leverage Cambridge's service model to improve its own special order capabilities across the business.

Q: How does the Cambridge acquisition fit into Hillman's broader strategic priorities for pro and industrial expansion, and what is driving new business momentum in Canada? / A: The acquisition is directly aligned with the pro and industrial expansion strategy laid out at Investor Day, doubling Hillman's U.S. industrial presence and building on the existing Canadian industrial business. Hillman has already achieved 1% organic pro channel growth this year, with a dedicated team driving traction in both the U.S. and Canada. In Canada, the team has delivered solid new business wins across retail and pro despite a challenging market, driven by Hillman's strong brand, product breadth, and focus on customer service, with momentum expected to continue in H2 2026.

Q: Why was Q2 2026 M&A revenue contribution higher than expected, and what is Cambridge's customer base and business model? / A: The two smaller Q2 2026 acquisitions (Campbell Chain and Delaney Hardware) performed stronger than expected out of the gate, leading to higher M&A contribution, with overall Q2 growth hitting the 8-12% long-term target. Cambridge is a national U.S. master distributor with thousands of customers across nearly all industrial end markets (including manufacturing, construction, data centers, and infrastructure), most of which are entirely incremental to Hillman's existing customer base. As a master distributor, Cambridge sells primarily through downstream distribution and can drop-ship orders same-day to end customers on behalf of distributors, filling demand for hard-to-source long-tail specialty fasteners.

Q: What is the current M&A market environment, and what can we expect for Cambridge's growth trajectory and inventory needs? / A: M&A market activity has increased notably over the past year, with attractive opportunities across both smaller tuck-in deals and larger strategic transactions like Cambridge. Cambridge has very low seasonality relative to Hillman's core business, with steady historical growth, and Hillman expects to accelerate growth with additional capital investment. Cambridge's inventory turns are slower than Hillman's core retail business, similar to Hillman's existing specialty long-tail SKU business, and commands higher margins as a result. The existing Cambridge inventory is already well-positioned, so no large incremental inventory investment is required at close, and management expects no negative initial synergies. The 2026 contribution estimates are intentionally conservative, and the business' trailing run rate revenue and EBITDA are expected to be maintained or grown going forward.