Hillman Solutions Corp.

Good morning and welcome to the fourth quarter 2024 results in full year 2025 guidance presentation for Hillman Solutions Corp. My name is Shannon and I'll be your conference call operator today. Before we begin, I would like to remind our listeners that today's presentation is being recorded and simultaneously webcast. The company's earnings release and earnings presentation were issued this morning. These documents and a replay of today's presentation can be accessed on Hillman's Investor Relations website at ir.hillmangroup.com. I would now like to turn the call over to Michael Kaler with Hillman.

Thank you, Shannon. Good morning, everyone, and thank you for joining us. I'm Michael Kaler, Vice President of Investor Relations and Treasury. Joining me on today's call are our newly appointed President and Chief Executive Officer, John Michael Adonofi, or JMA as we call him. Rocky Kraft, our Chief Financial Officer, and Doug Cahill, our Executive Chairman. Before we begin, I would like to remind our audience that certain statements made on today's call may be considered forward-looking and are subject to the safe harbor provisions of applicable securities laws. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, assumptions, and other factors, many of which are beyond the company's control and may cause actual results to differ materially from those projected in such statements. Some of the factors that could influence our results are contained in our periodic and annual reports filed with the SEC. For more information regarding these risks and uncertainties, please see slide two in our earnings call slide presentation, which is available on our website. In addition, on today's call, we will refer to certain non-GAAP financial measures. Information regarding our use of and reconciliations of these measures to our GAAP results are available in our earnings call slide presentation. Please note that Hillman expects its 10K to be filed with the SEC on Thursday of this week. With that, Doug will begin today's call with a recap of Hillman's 2024 results and highlights. We will then turn the call over to JMA, who will give a brief overview of his perspective on Hillman and what makes this company so special, provide some market commentary, and talk about our outlook for 2025. Rocky will then go through our 2024 financial results before giving a detailed walk through our 2025 guidance. Jayme will then give some closing comments before we open things up for your questions. With that, it's my pleasure to turn the call over to our Executive Chairman, Doug Cahill. Doug?

Thanks, Michael. Good morning, everyone, and thank you for joining us. During 2024, our team's dedication to our customers and our commitment to driving strong financial results for our investors came together to deliver an exceptional year for Hillman. Last January, Hillman celebrated its 60th anniversary, marking six decades of taking great care of our customers and building on our robust legacy of service, a legacy that still drives how Hillman does business today. Hillman has differentiated itself from competitors by providing unparalleled service building deep supplier and industry relationships, and providing innovative solutions for our world-class customers. This has been a key driver of Hillman's track record of growth and why we believe we are in a great position with our company and our customers as we look to the future. During 2024, Hillman accomplished something it has never done before. The Hillman team won Vendor of the Year awards in the same year from both Home Depot and Lowe's are two biggest customers. We couldn't be more proud. This recognition is not just a reflection of what we've achieved, it's an indication of how deeply embedded we are with our customers. We believe that our customers view us as trusted partners and solution providers. Our teams have done a phenomenal job managing these relationships and they are working hard to ensure that we deliver value each and every day at each and every store. These awards highlight a year where we saw the highest EBITDA in our company's history as we continue to run our business well and take great care of our customers. Our record bottom line proves that our unique business model can produce healthy profits, even with market conditions like we saw last year. On the M&A front, we made two accretive bolt-on acquisitions. In January 2024, we acquired Cook Industries, a provider of rope and chain-related hardware products. And in August 2024, we acquired Intex DIY, a supplier of wiping cloths, consumable rags, and cleaning textiles. These acquisitions complement Hillman perfectly. They're in adjacent aisles to what we sell today, and our teams can service these products at the shelves of our customers. Both acquisitions offer organic growth opportunities as we put more stuff on the truck while providing a new white space for Hillman to grow. We can now offer our customers even more solutions. What a competitive advantage it is to buy a company and on day one open new growth opportunities for those companies as they now have the Hillman moat behind them. In-store service, direct ship capabilities, and deep relationships at all levels of the best retailers in the industry. We become really the preferred buyer of those assets from both the seller and our customer's perspective. Now let's turn to our financial highlights for the year. For 60 years, Hillman has provided products used in repair, maintenance, and remodel projects done by DIYers and pros. Despite market softness during 2024, net sales totaled 1.473 billion, which is just shy of our 23 results and just above the midpoint of our most recent guidance. For the year, our top line was obviously impacted as foot traffic, and our retail customers declined nearly 6% compared to the prior year. Existing home sales, again, fell to 30-year lows, totaling just 4.06 million, and remodel spending declined year over year. This led to a five-point reduction in our market volume in 2024. Offsetting the markets was a four-point contribution from Cook and Intex, two great acquisitions we made during the year, and two-point contribution from new business wins as we continue to win market share. Price was a 1% headwind for the year. For the fourth quarter, our adjusted EBIT increased 3.5% to 56.3 million, which was right in line with our expectations. Adjusted gross margins improved 390 basis points to 48.1% for 2024, compared to 44.2 during 2023 and 43% during 2022. Driving our improved bottom line and gross margins were sustained operating efficiencies, lower cost of goods sold, and a shift in selling a higher margin mix of products. As JMA will expand on in a few minutes, I believe we are running the business as well as we have at any time in my tenure at Hillman. Additionally, in 2025, we're implementing performance-based equity compensation for our top executives using a return on invested capital metric. This links 50 percent of their annual equity grants to return on invested capital going forward. Now let me give you a few comments on the performance of our two largest businesses. Hardware and Protective Solutions, or HPS, is our biggest business. HPS increased its adjusted EBITDA by 23 percent for the year with flat top line results. and continues to be the poster child for the Hillman moat and the value we bring to our customers that others don't. Our robotics and digital solutions business will be a great example of both our shareholders and top customers benefiting from the new strategy we successfully launched during 2024. RDS has always been the leader for Hillman in adjusted EBITDA margins and gross margins. But the capital we have invested and the returns on that capital have been a drag on our performance. JMA will expand on our strategy and share why this business will become a great contributor of not only adjusted EBITDA and gross margin, but cash flow too, which will drive healthy return on invested capital as our strategy plays out. I love this company and I'm honored to have turned the CEO reins over to JMA. He is the perfect fit. for this experienced team and customer first culture that we have built over many years at Hillman. I'm proud of the great job we do for our customers, our track record for bottom line growth, and how we have strengthened the balance sheet and paid down over $900 million of debt in the past four years. I will continue to support this company any way that I can. And with that, it is my pleasure to turn it over to JMA.