Hillman Solutions Corp.

everyone and thank you for joining us for Hillman's third quarter 2025 results presentation. I'm Michael Kaler, Vice President of Investor Relations and Treasury. Joining me on today's call are Hillman's President and Chief Executive Officer, John Michael Adinolfi, or JMA as we call him, and our Chief Financial Officer, Rocky Kraft. I would like to remind our audience that certain statements made today 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. JMA will begin today's call by providing some commentary on our record third quarter results, briefly hit on our guidance, and discuss our performance by business segment. Rocky will then give a more detailed walk through our financial results and guidance before turning the call back over to JMA for some closing comments. Then we will open up the call for your questions. It's now my pleasure to turn the call over to our president and CEO, John Michael Adenolfi. JMA?

Thanks, Michael. Good morning, everyone, and thank you for joining us. The third quarter of 2025 was a record quarter for Hillman. We recognize the highest net sales and adjusted EBITDA of any quarter in our company's 61-year history. Net sales for the quarter increased 8%, adjusted EBITDA increased 36%, and our leverage improved to 2.5 times versus 2.7 times a quarter ago. These outstanding results were driven by our team's commitment to taking great care of our customers, successfully navigating the current tariff environment, and operating efficiently across our global supply chain. I'm especially proud of this team because we accomplished these great results despite market volume headwinds and tariff volatility. Our results for the year-to-date period have been thorough. We are positioned well to build off this strength and expect to see continued growth for the remainder of 2025 and for 2026. For the first time in a long time, we are encouraged with some of the leading macro indicators. For example, 30-year mortgages are down 50 basis points lower since last quarter. We are hopeful that lower rates coupled with the elevated level of existing homes currently for sale will help drive existing home sales in the near future. Based on our performance so far this year and our expectations for the rest of the year, we are reiterating our full year 2025 net sales guidance and increasing the midpoint of our full year 2025 adjusted EBITDA guidance. We maintain our expectation that our full year 2025 net sales will be between 1.535 to 1.575 billion. with a midpoint of 1.555 billion. The low end of our net sales guidance represents 4% growth over 2024, and the high end of our guidance represents 7% growth over 2024. As for our bottom line, we are increasing the low end of our guidance and now expect full year 2025 adjusted EBITDA to be between 270 to 275 million, with a midpoint of 272.5 million. The low end of our 2025 adjusted EBITDA guidance represents 12.7% growth over 2024, and the high end of our guidance represents 14% growth over last year. These numbers are very consistent with our long-term algorithm, and as we have said many times, we get there many different ways, but this business delivers in just about any environment. Since our founding in 1964, Hillman has built a long and consistent track record. Over the decades, we have proven our ability to perform through every kind of economic cycle, from periods of expansion to times of uncertainty. The durability of our business model comes from the essential nature of our products. Our 112,000 SKUs are generally tied to everyday repair, maintenance, and home improvement projects. These projects need to be done during good times and difficult times. As a result, we have delivered steady, resilient performance for more than 60 years. Many would argue that the last three years have been a difficult market in our space, with existing home sales hovering around 4 million annually. This is about 20% below the 10-year average of over 5 million single-family existing homes sold in the U.S. How has Hillman performed during this time? Compared to where we were just three years ago, we have increased our trailing 12-month adjusted EBITDA at a 10% CAGR, totaling over 70 million, paid down over $240 million of debt while reducing our leverage over two full turns, and successfully executed and integrated two acquisitions. These outstanding results demonstrate the resilience of Hillman's model and the ability of this team to execute well in any environment. You've heard us say that we are a good business when things are good and a surprisingly good business when things have been challenging. The last three years have proved this. Hillman is a great company with a long track record of success. We have an experienced team that has been battle tested, great relations with our customers who are the best in the business at what they do in a world-class distribution network. We believe when the market turns, we will be positioned for outsized growth at both the top and bottom line. Our growth and performance have been powered by our competitive moat and the long-term customer relationships that are unmatched in our space. The Hillman mode includes our secret sauce of 1,200 dedicated sales and service reps working directly in our customer stores, our best-in-class direct-to-store delivery capabilities, category management expertise, and retail partnerships that are embedded and strategic. These make Hillman an indispensable partner to our customers. To date, we have successfully managed the current tariff environment, which continues to evolve. Thanks to our team's hard work, we have fully covered the increased costs associated with higher tariffs. We continue to execute our dual faucet strategy where we buy products from multiple suppliers in multiple countries. At the end of the quarter, we held our annual supplier conference in Vietnam. Our sourcing team and I met with many of our top suppliers. This annual event serves as an important in-person touchpoint to strengthen relationships with our supplier partners, which is especially important given the environment. Meeting face-to-face offers our long-term and new supplier partners a fresh view of Hillman's near-term objectives and how we can work together to achieve our long-term goals. As we have seen throughout this year, changes in tariff policy can shift the market rapidly. The flexible supply chain we have built allows us to react to these changes so that we can always deliver high quality products to our customers at the best value. Managing tariffs has been a big effort for our team but we have not lost focus on taking great care of our customers, winning new business, and consistently striving to make our operations more efficient. We continue to deliver orders on time and in full to our customers, which have been demonstrated by excellent fill rates, which have been above 95% this year. Now let's turn to results for our quarter. Net sales in the third quarter of 2025 totaled $424.9 million, which increased 8% versus the third quarter of last year. Driving our robust top line was a 10-point increase from price, two points from Intex, which we acquired during August of 2024, and two points from new business wins. These were partially offset by a six-point headwind from market volumes, which was consistent with our expectations. For the quarter, adjusted EBITDA increased 36% to $88 million, compared to $64.8 million last year. Adjusted EBITDA margins improved by 420 basis points, to 20.7%. Adjusted gross margin for the quarter totaled 51.7%. This marks a 350 basis point improvement from 48.2% during the year-ago quarter and a 340 basis point improvement from 48.3% last quarter. Driving our year-over-year sequential margin performance, we both improved contributions from RDS and benefit from price-cost timing. Our biggest segment, hardware and protective solutions, or HPS, had a great quarter with 10% growth versus the comparable period. Adjusted EBITDA increased by 57.3% to 65.8 million. Our results were driven by contributions from Intex, new business wins, and price costs, partially offset by a 5.5% decline in HPS market volume. Net sales in robotics and digital solutions, or RDFs, or up 3.3% versus the year-ago quarter. This is our third consecutive growth quarter for RDS, and again illustrated the successful rollout of our Mini-Key 3.5 strategy. Adjusted gross margins and adjusted EBITDA margins were both near their historic norms, totaling 74.2% and 31.4% respectively. As of today, we have over 3,000 Mini-Key 3.5 machines in the field, an increase of over 800 during the last three months. We remain on track to finalize the rollout of these kiosks to our two largest customers by the end of 2026. Turning to Canada, net sales in our Canadian business were nearly flat, down just 0.2% compared to the prior year quarter. New business wins were partially offset by another quarter of soft market volumes, and FX remained a headwind. We continue to expect that adjusted EBITDA margins will remain above 10% in Canada. Overall, this is a great quarter. Hillman's disciplined operations, strong execution, and healthy customer relationships position us to continue delivering consistent results in this or just about any environment. With that, let me turn it over to Rocky to talk financials and guidance. Rocky? Thanks, JMA.

Let's get right to our results, then we'll review our guidance. Net sales in the third quarter of 2025 totaled $424.9 million, an increase of 8% versus the prior year quarter. Our top line results were a record for Hillman, marking the highest net sales of any quarter in our 61-year history. Third quarter adjusted gross margin increased by 350 basis points to 51.7% versus the prior year quarter and improved 340 basis points sequentially. Adjusted SG&A as a percentage of sales decreased to 31% during the quarter from 32% in the year-ago quarter. Adjusted EBITDA in the third quarter totaled $88 million, improving 36% versus the year-ago quarter. This also marked the highest adjusted EBITDA of any quarter in our 61-year history. Recall that last year we revised our presentation of adjusted EBITDA to include a $7.8 million write-off of receivables from True Value during Q3. Even excluding the revision, adjusted EBITDA still increased over 21%. Adjusted EBITDA net sales margin during the quarter improved by 420 basis points to 20.7%. We saw price increases read through our income statement throughout the quarter, while tariffs began to burden our cost of goods sold toward the end of the quarter. This price-cost timing dynamic drove record results for Hillman and should begin to normalize next quarter. Now let me spend a minute on cash flows. For the quarter, net cash provided by operating activities was $26.2 million, and we generated $9.1 million of free cash flow. Impacting our free cash flow for the quarter was about $30 million of tariff-related costs. At the end of the third quarter, we had about $60 million of new tariffs in our inventory. Turning to leverage and liquidity, we ended the third quarter of 2025 with $672 million of total net debt outstanding, which decreased by $3 million from the end of the second quarter. Liquidity available totaled $277 million, consisting of $239 million of availability on our credit facility and $38 million of cash and cash equivalents. At the quarter end, our net debt to trailing 12 months adjusted EBITDA ratio improved to 2.5 times versus 2.7 times a quarter ago and 2.8 times at the end of 2024. We have now reached our long-term adjusted EBITDA to net leverage ratio target, which is at or below 2.5 times. We will continue to pay down debt while we evaluate M&A opportunities and use our improved financial strength to play offense. As we announced last quarter, our board approved a $100 million share repurchase program. This marks the first time Hillman has an active SRP in place since coming public in 2021. During the third quarter of 2025, we deployed $3.2 million to buy back 326,000 shares at an average price of $9.72 per share. We continue to be in the market buying stock. Our SRP activity during Q3 and since falls in line with our anticipated $20 to $25 million annual spend buying back stock. Our objective here is to offset any dilution caused by employee equity grants and opportunistically buy stock should we feel there is a meaningful discount between the value of Hillman and where our stock is trading. We believe these repurchases will be accretive turnings per share, drive shareholder value, and are an attractive place to deploy capital. Now to our guidance. We are reiterating our top line guidance of 1.535 to 1.575 billion, with a midpoint of 1.555 billion reflecting 5.6% growth over last year. For the full year, the growth at the midpoint of our guide is driven by about six points of price, three points from Intex, and two points from new business wins, which are partially offset by a six-point headwind from market values. For the second half of the year, we anticipate about 11 points of price, one point from Intex, and two points from new business wins, which are partially offset by a seven-point headwind from market values. For the bottom line, we are increasing the low end of our adjusted EBITDA guidance by $5 million. This raises the midpoint as the top end remains unchanged. Our increased adjusted EBITDA guidance is now between $270 and $275 million, with a midpoint of $272.5 million, reflecting 12.7% growth over last year and a $2.5 million increase from our previous guide. Our expectation remains that we will end the year around 2.4 times leverage. As we discussed, the price-cost timing dynamic drove record results for Hillman during the third quarter. Now, during the fourth quarter, we will see price increases fully reflected while tariffs burden our cost of goods sold. The result of this will be a step down in adjusted gross margin rate which will look similar to our gross margins during the second quarter of this year. Before I turn it back to JMA, I want to thank the whole team for delivering such a strong quarter with solid growth on both the top and bottom line. We are confident we can keep this momentum going through 2026 by staying disciplined and focused on our key priorities. That said, with flat market volumes, we expect full year 2026 net sales to grow in the high single to low double digits. The increase will be driven by rollover price and new business wins. However, the price cost timing dynamic we are benefiting from now presents a difficult margin comp next year. Further, we expect adjusted EBITDA to grow next year in the low to mid single digit range, assuming no change to the current tariff environment. We will give our detailed full year 2026 guidance during our Q4 earnings call next February. The numbers I just provided are directional as we are not predicting what market volumes will be next year at this time. Hillman is in a great position to build on this success, continue growing with our customers, and drive long-term value for our shareholders through the rest of this year and beyond. Jamie, back to you.