Hillman Solutions Corp.

Good morning and welcome to the second quarter 2026 results presentation for Hillman Solutions Corp. My name is Amber and I will 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 presentation were issued yesterday and 10Q was 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 Koehler with Hillman. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us for Hillman's second quarter 2026 results presentation. I'm Michael Koehler, Vice President of Corporate Development, Investor Relations, and Treasuries. Joining me on today's call are Hillman's President and Chief Executive Officer, Jon Michael Adinolfi, or JMA, 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 guaranteed for future performance and are subject to 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 2 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 gap results are available in our earnings call slide presentation. Jay May will begin today's call by discussing the recently announced agreement to acquire Cambridge Corporation, a master distributor serving the industrial channel. Then he will provide commentary on our quarterly results and guidance, followed by a discussion on our performance by business. Rocky will then walk through our financial results Balance Sheet, and Guidance before turning the call back over to Jay May for some closing comments. We will then open up the call for your questions. It's now my pleasure to turn the call over to our President and CEO, Jon Michael Adinolfi. Jay May?

Thanks, Michael. Good morning, everyone, and thank you for joining us. The second quarter was a great quarter for Helmut, which I'll get to in a moment. Yesterday, after the market closed, We announced that we entered into a definitive agreement to acquire Cambridge Corporation, a leading master distributor of fasteners in the industrial channel. Like Hillman, Cambridge has a specialized business model with a moat built around skew complexity and service. They provide a long tail of unique specialty fastener skews, and they have decades of product experience providing unique service to their long-term customers. This is a very exciting and strategic step in the evolution of Hillman. Let me tell you why Cambridge is a great fit for Hillman. Cambridge is a family-owned, privately held business that has over 50 years of expertise. The Cambridge Moat is built on their long-standing customer relationships, proprietary digital ordering platform, FastNet, and their ability to stock unique specialty SKUs and ship them out in custom pack sizes on the same day. Let me outline some of the similarities between Cambridge and Hillman. Today Hillman serves as the long tail specialty master fastener distributor for our customers. These are hard to find fasteners that the end user must have to do a project. This is where Hillman provides unparalleled value for our customers. Cambridge does the same thing in the industrial channel. They serve as the long tail master fastener distributor for their customers. These are hard to find fasteners required to do the job in a timely manner. Cambridge Stock Seeds Fasteners, and can meet the urgent demands of their customers by shipping out the same day. In March, we outlined the three channels we serve today, DIY, pro-distribution, and industrial. As you know, Hillman is a strong presence in DIY, which has been our focus for nearly 30 years. We also serve the pro-distribution channel, which is nearly a $10 billion market opportunity. Today, we believe we have about 3% market share in this space, and it is a key focus of our organic growth Industrial is the third channel we serve. We love this channel because it touches so many parts of the economy, including factories of all sizes, infrastructure projects, and data centers. This is the channel Cambridge is in, and this is why this acquisition presents such a strong opportunity for Helm. This business is not tied to just one market. And many of these specialty fasteners are needed urgently. For example, machine repair or project completion, that is the Cambridge model. Today in Canada, we currently distribute fasteners to the industrial channel with our Pauline brand. And recently we entered into this channel in the US with our acquisition of Campbell chain. Altogether, our industrial business today is approximately $65 million. The acquisition of Cambridge doubles the size of our industrial business and establishes a fastener distribution presence in the US serving the same industrial channel. As I've explained, The Cambridge Playbook is very similar in what makes it successful, and a big reason why we think this will be an outstanding fit for us. This acquisition gives us an immediate presence to serve and grow in the industrial channel, a channel that we've identified as a meaningful opportunity where we have minimal share today. This deal expands our industrial addressable market by 50%, increasing to $3 billion in total, of which we serve just 3%. For the 12 months ending June 30th, Cambridge generated approximately $65 million in revenue and $30 million in adjusted EBITDA. These robust margins will be accretive to Hillman's margin profile, and given Cambridge's light capex model, we expect very healthy free cash flow conversion. Because of Hillman's scale, we expect to realize about $2 million of cost energies, particularly in sourcing. Over time, this represents the opportunity for even more cost savings. Additionally, we expect to realize a material cash tax benefit of between $40 and $45 million from this transaction. Given this tax benefit and the cost synergies, the $315 million purchase price represents a post-synergy multiple of 8.4 to 8.6 times. Further, we are confident there is meaningful organic growth in cross-selling opportunities that will drive top-line growth and make this acquisition even more attractive. The transaction is expected to close around the start of the fourth quarter. Assuming this deal closes in line with our expectations, Cambridge should contribute approximately 15 million of net sales and roughly 5 million of adjusted EBITDA to Hillman's overall 2026 results. The transaction is subject to regulatory approval and customary closing conditions. We can't wait to welcome the Cambridge team to Hillman. Interestingly, this acquisition takes Hillman back to its roots. During the late 90s, Hillman distributed fasteners to industrial customers. It was around that time the company made the decision to divest their industrial fastener business in order to make a critical investment to expand their distribution network to serve their retail hardware customers on a national level. Looking back, we have grown to become the leading massive distributor of fasteners at retail and now that strategy has come full circle. Accretive acquisitions like Cambridge and the two deals we closed earlier during the second quarter Campbell Chain and Fittings, and Delaney Hartler reflect the ongoing execution of our long-term strategic initiatives we shared in March of this year during our investor day, of which M&A is a meaningful part. Here we outlined our blueprint, which consists of three catalysts for creating long-term shareholder value. One, fortify and grow our core DIY business. Two, win the pro across industrial, specialty distribution, and LVM. and three, compound our growth through a creative M&A. As we said at Investor Day, over the next five years, we believe we can grow this business between eight and 12% per year. By 2030, we expect to reach 2.5 billion in net sales. Now let's talk about our performance during the quarter. Net sales for the second quarter of 2026 increased 10% to 442 million. This performance is right in line with our long-term growth targets we just discussed. For the quarter, adjusted EBITDA increased 2.5% to $77.1 million, compared to $75.2 million during the year-ago quarter. Free cash flow during the quarter totaled a very healthy $70.2 million. Driving the top-line 10% growth were two points of growth from core performance, 4.5 points of growth from New Business Winds, and about three and a half points of growth from M&A. Of the four and a half points of New Business Winds, we are really excited that approximately one point of growth came from our wind of pro focus. This is a channel we didn't focus on until this year. Driving our pro growth during the quarter were a new fastener wind with a regional LVM chain in the Pacific Northwest, becoming a preferred supplier of fasteners and cleaning products for a major pro customer and our bulk faster program in Canada that continues to grow well and will contribute to our new business revenue. These three recent fruit points show that we have the right to win in the pro space. Looking to 2027, we plan to further scale our bulk and pro specific offerings. We plan to win the pro as we leverage our distribution capabilities, product breadth and innovation with customer service to be a preferred supplier in this channel. All together, we believe that these new business wins will generate about 1% top line growth for Hillman this year and are confident that that will grow to at least 2% growth next year. Given that our year-to-date performance has been in line with our expectations, we are increasing the midpoint of our full year 2026 outlook for the contribution from the Cambridge acquisition. This assumes the transaction closes around the start of the fourth quarter. We now anticipate that our full year net sales will be between the narrowed range of $1.67 billion to $1.72 billion. Our increased midpoint of $1.695 billion now represents 9% growth over last year, which again is in line with our long-term growth target. Similarly, we anticipate that our full year adjusted EBITDA will be around $285 million, an increase of $5 million over the previous midpoint given the contribution from Cambridge. This marks an increase of 3.5% over last year. Our guidance assumes that the continued execution of new business wins in our core performance growth, along with a modest improvement in market volumes during the second half, given the softer comps we saw during the second half of last year. Lastly, we are narrowing the range of our full year free cash flow while keeping the midpoint the same. We now anticipate 105 to 115 million of free cash flow with a midpoint of 110 million. Transaction related expenses flow through the operating income line, so we do not expect a material free cash flow benefit from Cambridge in 2026. Note that our guidance assumes no meaningful change in tariffs throughout the rest of the year. Speaking of, now for a quick update on tariffs. The net impact of tariffs was relatively consistent this quarter, like it was in the previous. Recently, we saw the expiration of Section 122 tariffs and the implementation of Section 301 tariffs, of which the net impact was neutral. Following the ruling that certain IEPA tariffs were deemed illegal earlier this year, new tariffs were quickly put in place, and as they were recently renewed, so is the total net impact to Hillman's neutral. More recently, we received a modest amount of tariff-related refunds, We expect this benefit to be generally offset by cost increases and payback resulting from the adjustment in how Section 232 tariffs were being applied. Our dual faucet is not a responsive tariff. It is the business model we operate. The flexibility afforded to us by this strategy allows us to react to changes in the geopolitical tariff landscape. We always strive to have our actual sourcing mix to be determined by the lowest total landed cost. Should we see these elevated costs continue, we will price for these costs. Now let's turn to our results by business for the quarter. Our biggest segment, Hardware and Protective Solutions, or HPS, increased 10% versus Q2 of 2025. HPS had a solid quarter driven by a 4% lift in core performance growth, a 2% lift from new business wins, and a 4% from M&A. and Digital Solutions or RDS, which is our highest margin segment, had a great quarter. RDS saw healthy top line growth and meaningful growth in its bottom line performance. RDS is our high margin technology enabled business. Our over 31,000 kiosks are destinations that solve a critical need for our customers. Net sales in RDS were up 11% versus the year ago quarter and adjusted EBITDA increased by 10.4% to 19.6 million. Adjusted gross margins and adjusted EBITDA margins were both healthy, totaling 77.4% and 31.9% respectively. Driving our performance during the quarter was our Minikey 3.5 roll-up as we continued to execute. Minikey 3.5 is a platform upgrade, not just a product refresh. Since we began rolling out this new platform to our top two customers, we have seen demonstrable improved growth in our overall Minikey business. The economics per machine improved as these installed base scales and the customer awareness of our new machines and new offerings increases. Today we have approximately 4,500 Mini-Key 3-5 machines in the field, an increase of over 600 machines since our last earnings call in April. We expect to end 2026 with over 5,000 Mini-Key 3-5 machines in the field and are on track to finish the rollout of these kiosks. Turning to Canada, net sales in our Canadian business during the quarter increased 7.8% compared to the prior year quarter. We continue to benefit from new business momentum in Canada and are following the same playbook that we are in the U.S. Our goal is to be a leader at retail in Canada while we win the Canadian Pro and LVM specialty distribution and industrial. Driving the increase was a 14% increase in new business wins, with core performance down 6% due to soft market and FX headwinds. New business wins were split between DIY and pro, driving this growth with a successful expansion into new PS categories with an existing customer retail and the expansion of pro spec fasteners and anchors with a top customer in Canada. Our Canadian team has done a great job this year with two solid quarters and we expect the momentum to continue throughout the year. We are pleased with our performance during the quarter and are very excited to have the M&A machine running. The three transactions we have done this year are great fits for this organization and open us up to opportunities for future growth. Hillman continues to perform. The way we serve our customers, the products we offer, and the consistency of demand for our products make Hillman a special company. We are an essential operating infrastructure of the North American hardware aisle. We are embedded in more than 29,000 retail locations, servicing over 31,000 kiosks, managing over 111,000 SKUs all with our own people. This depth of integration creates switching costs that we believe the market underestimates and our competitors do not replicate. Our core hardware business generates steady, resilient cash flows driven by repair, maintenance, and remodeling activity. Demand that persists across economic side of both as we have seen for over 60 years. Layered on top of this durable core hardware are three accelerating growth drivers. are technology-enabled, high-margin RDS business that is growing at low double digits and accelerating, pro-distribution in industrial channels with meaningful white space that expands our addressable market by over $13 billion, and an M&A playbook that adds capabilities, categories, and channel diversification with attractive returns. As we look ahead, our focus remains squarely on execution, discipline, and prudent allocation of resources and capital. all while deepening the customer relationships that have made us successful and staying nimble as conditions evolve. Hillman is in a great spot and I am optimistic about our future. With that, I'll now hand it over to Rocky to take you through the numbers.

Thanks, JMA. Let's get to our results, then we'll review guidance. Net sales in the second quarter of 2026 totaled $442.3 million, an increase of 10% versus the prior year quarter. Our strong top line performance was right in line with our long-term growth expectations. Driving this growth were approximately two points of growth in core performance, four and a half points growth from new business wins, and three and a half points growth from M&A. Second quarter adjusted gross margin totaled 47.1%, down 120 basis points over a year ago, but improving 150 basis points from the first quarter and consistent with our expectations. Adjusted SG&A as a percentage of sales was 29.6% during the quarter, relatively consistent with a year ago. Adjusted EBITDA in the second quarter totaled 77.1 million, increasing 2.5% versus the year-ago quarter. Adjusted EBITDA to net sales margin during the quarter totaled 17.4%. Down 130 basis points from a year ago, but improving meaningfully from 13.5% in the first quarter. Margins improved sequentially, driven by our highest margin business, RDS, experiencing outsized growth and the impact of tariff-related COGS flowing through our income statement, lessening throughout the year. Now turning to cash flow. For the quarter, net cash generated by operating activities was 88 million and free cash flow increased to a very strong 70.2 million. During the quarter, our healthy free cash flow was in line with our expectations. The main driver was the 2025 inventory spend, which included tariffs, now turning to cash. Also contributing were net tariff refunds and a nearly $6 million reduction in CapEx. Let me now turn to leverage and liquidity. We ended the second quarter of 2026 with $665 million of total net debt outstanding. which improved by 45 million from the first quarter and in line with how we ended 2025. At quarter end, our net debt to trailing 12-month adjusted EBITDA ratio was 2.4 times, which is unchanged versus the end of 2025. Immediately at the close of Cambridge, we expect leverage will increase approximately one full term. Assuming we do not do any other meaningful M&A, we should end 2027 at approximately two and a half times, which is the high end of our long-term leverage target. That said, we continue to evaluate the market for accretive acquisition opportunities. Shortly after the end of Q2, we successfully refinanced our credit facilities. We put in place a new $735 million term loan fee and $375 million ABL revolver, which extended our maturity to 2033 and 2031 respectively. Pricing on these were consistent with our prior facilities, with the term loan B pricing at SOFR plus 200 and the ABL pricing at SOFR plus 125. We used the proceeds from the term loan B refinancing to pay off the previous note and pay down our revolver, which is currently undrawn. The refinancing gives us a stronger, more flexible capital structure to support our long-term strategic priorities, including our ability to pursue acquisitions like Cambridge. As JMA mentioned, we are acquiring Cambridge for $315 million. We plan to finance the acquisition with a combination of cash on hand, a draw on the ABL, and the issuance of an add-on term loan fee. During the quarter, we deployed $13.3 million to buy back 1.7 million shares at an average price of $7.62 per share. Our repurchase activity during the quarter accelerated when compared to the first quarter as we opportunistically bought more stock back given the valuation and share price. Our objective remains to offset dilution resulting from employee equity grants and opportunistically buy back stock if there is a meaningful discount between the value of Hillman and where the stock is trading. However, given the increase in leverage resulting from the Cambridge acquisition, we plan to reduce our SRP spending and focus on net leverage in the short term. All right, let me now turn to our guidance. As JMA mentioned, we are raising the midpoint of our full year net sales guidance by $15 million, which is the result of the expected contribution from Cambridge, which we expect to close around the start of the fourth quarter. We are also narrowing the range given we are seven months into the year. We now anticipate 2026 net sales to be between $1.67 billion to $1.72 billion with a midpoint of $1.695 billion. We now expect our full year 2026 adjusted EBITDA to be approximately $285 million, which is a $5 million increase from our previous midpoint of $280 million. Driving the increase is the expected EBITDA contribution from Cambridge assuming closing on our anticipated timeline. Lastly, we are reiterating the midpoint of our free cash flow guide while narrowing the range a bit. Our full year 2026 free cash flow range is between 105 and 115 million with the same 110 million midpoint. Put simply, this was a quarter of proof points. Margins are moving in the right direction. Cash conversion remains strong, and we've extended our capital structure runway to 2033. We did this all while adding a high quality strategic acquisition in Cambridge, which opens up new market growth opportunities for us. We're growing the top line, expanding the bottom line, and doing it while investing in our future growth. That's what we're focused on delivering, and today's RAISE guidance reflects our confidence in the path ahead. With that, I'll turn it back to JMA.

Thanks, Rocky. Before we open it up for Q&A, I want to thank our associates across Hillman for their continued hard work and dedication. What you bring to the table is the reason we keep delivering for our customers every day. For our customers, partners, and stakeholders, thank you for your trust and partnership as we continue to grow together. We're proud of the execution this quarter and even more excited about what's ahead with Cambridge and a clear path to continued growth. We look forward to updating you on our progress in the near future. Operator, please open the call for questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question with one follow-up and hop back into the queue. Please stand by while we compile the Q&A roster. Our first question comes from Lee Jagada of CJS Securities. Your line is open. Hey, good morning, guys.

Morning, Lee. Morning, Lee.

So congrats on the deal. I guess to start, can you just give us some color around how the deal came together, how long you were talking to these guys, and whether it was privately negotiated or through an auction?

Yeah, Lee, this is a business that we've admired from afar for quite some time. So we're excited when there was an opportunity to join a process. So this was a competitive bid. It's a business that we spent quite a bit of time on the due diligence side. We have some familiarity. We buy some products from them today. They are a leading provider, as I shared earlier. especially long tail SKUs especially in the screw portion of the business it's amazing what they've compiled great service and when we looked at the compelling value we just felt like it needed to be a part of Hillman and it just fits the business so well when you think about this we don't do anything in their space in the U.S. we do in Canada we got a great Canadian business our Poland business is having a strong year and it just was the right fit so as we went through the process met the owners the leadership team were quite impressed with the Cambridge team Having seen them from afar and then getting to know them, it really became clear that it was meant to be for these two companies to come together.

It's interesting. You mentioned that you buy some things from them today, but I guess turning it around, of the 100,000 or so SKUs that you sell today, is there anything or any meaningful amount of those SKUs that you could see kind of joining the Cambridge selection and then selling through their current channels?

Absolutely. Yeah, that's actually one of the more exciting pieces of it. We believe that we can bring them some product. And as I mentioned, I touched on it, the sourcing capability. We have some of the best vendors and manufacturing partners across the globe. We think between what we can help them get from our network plus what we can help them buy at a better rate, we think there's some real synergies. And like I said, they touch customers all through the value chain and in certain parts of the economy that we think are quite compelling. So yeah, it's a really exciting opportunity for us. and we can't wait to be able to welcome them to the team.

If I can just sneak one more in, the Fastnet software platform seems like it's a nice competitive advantage. Is there an opportunity for you to leverage that across your network? I mean, obviously on the industrial MRO side, it seems like it would be obvious, but even more towards the retailer hardware channels, is that something that your customers might want to leverage?

You know, today, I would say we're going to operate Cambridge as it is today, a platform that our customers want to make sure we take great care of them. We do believe we can learn from their service model and their opportunities that they create. What I will say is, you know, we already, I mean, just even this morning had a chat with our John Gilman who runs our special orders desk. We buy tons of great products from them. We think they can help us be even better. with that partnership. So we'll report on more of those opportunities in the future, but there are clearly synergies between these two companies.

Great. I'll hop back into the queue.

Thanks, Lisa.

Thank you. Our next question comes from Ruben Gardner of Benchmark. Your line is open.

Thank you. Good morning, guys, and congrats on the deal.

Thanks.

Good morning. A couple questions about that. Sorry for harping on it. But I guess first, how national is their business? And if it's not and still regional, are there investments that can be made to expand it? Or is there more M&A? I guess talk about their market share is probably the easiest way to do it.

Yeah, Ruben, they are, I would say, very national. So they do cover all of the U.S. So today we feel like they have a nice footprint. They are certainly the long tail, I'll say, supplier of choice, I would call it. So we think there is opportunity to grow that. We know that they have a great product line, great service. They drop orders and turn them very quickly for their customers when needed. And we can add some additional capability there. They operate in two locations today. We in the management team will evaluate what we can do in the future, but we think there's clearly an opportunity to grow this business, especially that long tail skew portion of the opportunity. So yeah, there is definitely quite a bit of growth that we think we can help fuel with some investments.

Okay, and then I'm going to shift gears a little bit. There's been a couple of companies talking about some acceleration in the consumer in recent weeks, the last kind of six, eight, Weeks, especially at kind of the entry level. Have you guys seen any signs of that in your business? Is any of that kind of baked into the outlook or would that be upside if it does indeed start to inflect?

Yeah, I would say in general, we've seen more of the same from a market perspective. Our focus has really been on supporting our customers, making sure we continue to drive high service levels, keep the products in stock. I can't sit here and say that we've seen any outsized change in demand in recent weeks. So we will be ready when it comes. Great.

Congrats again, guys. Good luck.

Thanks, Ruben. Thanks, Ruben.

Thank you. Our next question comes from Matthew Boulay of Barclays. Your line is open.

Good morning. You have Elizabeth Langan on for a map this morning. I'll continue on with the Cambridge congratulations on the acquisition. I think maybe stepping back a little bit, I was wondering if you could talk about, you know, obviously this expands your industrial MRO pretty meaningfully. You know, how are you thinking about your, you know, other strategic priorities with the pro, you know, expanding through specialty distribution on LBM?

Yeah, good morning, Elizabeth. Yeah, we actually feel like this fits directly and is right down the fairway of what we talked about when we, during Investor Day, we shared, you know, publicly that we will continue to Grow Our Core, Grow Our Pro distribution channel as well as industrial. I mean, this business clearly fits that narrative and strategy, doubles our industrial business, and we feel like it's a great fit, complements what we do in Canada. So for us, we're really excited about the fact that we've actually been able to grow our pro initiatives organically by 1%. That was one thing I highlighted. earlier in the presentation because we're really excited. We've got traction. We've got a team dedicated who's going after the pro. We've got the industrial team now with this business in the U.S. because we didn't have a foundation to start. So we believe and we're really excited. We've got nice pro distribution start in both the U.S. and Canada. In Mexico, we have the same in the industrial side now that we have this U.S. business. So we feel like this fits really well in where we're going. We feel like we have proof points to prove that this is where we should continue to put our energy. So We can't wait to get started with Cambridge Business and welcome it to the team.

No, that makes a lot of sense. And then on Canada, you mentioned obviously you saw some really nice growth with the new business ones there. Could you talk a little bit more about that, kind of like what the process has been like going into market there, launching new things and just any detail around that?

Yeah, I mean, I would say our Canadian team on the retail and the pro side have had a great year. I think it's one where they've demonstrated when you've got one good brand name, for instance, Pollen, you've got great products, you've got great service and delivery, you take care of your customers, you're able to win new business. So I'm excited about what that team has done, both the retail and the pro side. So that's an example where you see Canada in total is clicking nicely. and they're battling a challenging market. So it's one where I think the Hillman value proposition overall taking care of its customers comes to fruition and they've done a nice job and I cited a few of those wins. We expect more of those to continue in the back half of the year and that team is just going to continue to focus on taking care of their customers.

All right, thank you very much.

You're welcome. Thanks, Elizabeth.

Thank you. As a reminder, to ask a question during your session, you will please press star 11 on your telephone and wait for a name to be announced. To withdraw your question, please press star 11 again. Our next question comes from David Manthe of Baird. Your line is now open.

Thank you. Good morning, everyone. Yeah, first question, Rocky, I think you said 3.5% contribution from acquisitions. That was a little higher than we thought based on the revenues of the two companies coming in. So that would calculate to, I think, $14 million. We were looking for like $10. I'm just wondering... if there was anything unusual there that made the revenues come in stronger than expected. And then related to that, as we're looking at the core business and stripping out Campbell and Delaney and looking strictly at HPS segment contribution margin, X those acquisitions, what was the sort of organic growth and contribution margin on the core business excluding acquisitions?

Yeah, so lots of questions there, Dave. Campbell and Delaney did come out of the gates a little stronger than we anticipated. So they performed very nicely in the quarter and we were pleased with that. Secondarily, I just think as you think about the whole business and what we said at Investor Day is we expected the core to grow above zero. We grew it two. We expect over the long term new business to be four plus. It was four four. and then we expect M&A to get us between eight and 12, which we did nine eight for the quarter. So we feel like we were kind of clicking on all cylinders. Now obviously that's not gonna happen every quarter, it's not a straight line, but Q2 looked a lot like what we've set out to achieve from a longer term perspective. When you think about just the HPS business kind of on a standalone basis, good top line results in the quarter, and from a contribution perspective, the business performed as we expected in the quarter, about 15, sorry, about 16% EBITDA, which again, kind of in line with what we expect. When you look at the contribution across all of our businesses in the quarter, while we had a really nice improvement sequentially, when you look year over year down a bit, that was planned and anticipated because of what we're seeing from a cost perspective on inventory. We expect the second half actually contribution to be better than we saw in the first half and that's what we've talked about in prior calls.

Got it. Next, yeah, congrats on the Cambridge deal. Could you talk about the customer base there, like number of customers? Are these mostly fastener specialists? Are they generalists? What sort of end markets do they serve? Any sort of context there would be helpful. Yeah, excellent.

Yeah, so we're excited about their customer base. They have thousands of customers. They are the long tail, so they are supporting customers. all different parts of the economy, candidly. So you've got everything from, you know, manufacturing to, you know, they do provide some products into the construction channels. But think about industrial and commercial really outside of the core of what we do in the US. That's what's exciting about. They are the ones where they can ship on demand. They can drop orders in minutes and literally turn them out. So they are, you know, very good and very good at getting orders out the same day when needed. So they are touching, you know, David, many, many different customers across the spectrum. And these are mostly folks that we don't touch at all. So it's truly incremental. So we think about all the different verticals in industrial. They're touching the different areas. I mean, they have everything from military grade screws to things that could go into a construction environment and commercial building to maintenance and repair in a small, medium or large factory. We commented on data centers. I mean, they are serving all parts of the, I'll say, economy outside of retail. and hopefully that gives you kind of a broad spectrum of what they are doing today and why we're so excited about the business.

Yeah, and if I could get one more here. It sounds like you're referring to shipping direct to customer and I'm wondering if If that's the primary model here where, as you said, there's a long tail here, other distributors are procuring these for their customers, you're direct shipping those to end customers, is that the model here?

So I want to be clear. Part of the reason we put in master distributor, just like we are in retail, they are master distributors. So while they can drop to an end user, they are selling through distribution. I want to be perfectly clear that everybody understands that is an important part of our business model, why we think why Hillman could be the best fastener company in the world is the fact that we will go out there and be able to continue to support our customers as they support the end users. So I want to be clear there that we are selling through distribution. Well, they can dropship, yes.

Okay, that's what I was asking. Yeah, I didn't mean you're selling to end users. I meant you're sending to end users in a dropship on behalf of the other distributors. So, okay. Very good.

Thank you. Thank you very much. Appreciate it.

Thank you. Our next question comes from Brian McNamara from Mechanicord. Your line is now open.

Hey, good morning, guys. Congrats on the acquisition and the strong results. Two quick ones for me. First, Rocky, just a clarification on leverage. Did I hear you correctly? You said you expect this acquisition to take it up a turn, but you expect to be at 2.5 at the year end?

Did I mishear that? At the end of 27, Brian. We expect to be back at or below two and a half turns. That would assume we don't do any other M&A between now and then.

Understood. Thank you. JMA on new business wins. Can you talk about your progress there? I think you mentioned a win, particularly obviously in pro in the Pacific Northwest. How are those sales discussions overall going, particularly with current customers who maybe didn't know you had that capability, but also the new ones too? Any thoughts or comments on progress there would be helpful. Thank you.

Yeah, absolutely. So yeah, new business as we shared, you know, four and a half percent. So, you know, a bit above where we were expecting to be. So really pleased with overall new business. And it was across, I would say, DIY, pro and industrial. So all three channels had some nice wins for the period. I think on the pro side is where you're going. The one point that we're really excited about, because those are truly new opportunities that we've been working on for, you know, better part of, I guess, this year. We're starting to see where you bring in good solid value, you take care of the customer, you make sure you get the product through, which we do really well in retail. And when we're able to demonstrate that on the pro side, we started to see the wins that gave you a couple of proof points in the prepared comment. So I think it's really that on the boots, on the ground, if you will, boots on the ground, being with the customer, making sure you get them what they need. and we are, I'll say, changing and adapting our model to be able to do that. We actually just had a new business pro review yesterday and we were hearing a number of different stories of where you got the right products, you were able to take care of the customer and turn them, you can actually get that business that we weren't getting before. So that, I'll say, flywheel is starting to turn and we're really excited about the early results and I think when you get good people, you got great products and you take care of the customer, good things happen and we're seeing that.

If I can just squeeze one last one on M&A, it sounds like there's still opportunities out there. Like we had thought you'd do three deals this year. We didn't expect a deal of this size, but how does the market look overall? It seems like it's a lot more active than this time last year.

Yeah, there's definitely some more activity out in the marketplace now. We see, you know, and I think it comes down to, you know, depending on which bucket they fall in, right, whether it's a tuck-in or smaller deal and then some of the strategic, which is what we just did with Cambridge. We think there's nice opportunities on both sides of that, I'll say, equation. And yeah, we're seeing more things come to market and we're seeing more interesting deals. So I'd say the market is warming up, if you will.

Very helpful. Best of luck, guys.

Thanks. Appreciate it.

Thank you. Our next question comes from Lee Jagada of CJS Securities. Your line is open.

Hey, I'm back. So just in case, I don't think I missed it, but can you talk to the seasonality if any around Cambridge versus the core business and also maybe touch on like the inventory needs compared to your core business just because they're going to be shipping some more proprietary SKUs and then lastly, just maybe a look back on the trajectory of that business the last couple of years in terms of the growth rate.

Yeah, so from a seasonality perspective, much less than our core business. I know we don't have a major seasonality, but we do have a curve. So I would say flattish to small seasonality, they do a nice steady business. If you look back over time, Cambridge has not had a nice We're on COVID and long tail filled in very nicely. They've had, you know, over the last five years, there's been modest growth, but we think we can actually really turn that and move it forward. So we're really excited about what we can do with it and focusing on that growth. That team's done a great job taking care of their customers. We need to give them a little bit more, I'll say, firepower to go after some new business and we will do that with that team.

Yeah, I think Lee, when you think about inventory, clearly a slower turning business than kind of the core of Hillman, but the business looks a lot like our specialty business. So think of the drawers that you see inside traditional hardware stores, slower turning inventory, but also command a much higher rate because of that. And you can obviously see that in the Cambridge results.

So I guess based on that, you're assuming some dis-synergies in the first quarter out of the box then, just given that the EBITDA you're including is below the run rate?

Yeah. Again, we're assuming that this is bought kind of Lee around the beginning of the fourth quarter. So we're just being conservative around what the number will look like. And I don't expect to see any negative synergies associated with it. We're buying the inventory of a business that's in good shape, that's serving their customers very well. So there's not like a need to buy a bunch of inventory to get this up to standard. They're there. They're performing very well as we sit today.

Okay, so then the run rates that you kind of list, the trailing revenue and EBITDA of that business, that should be the same or greater going forward, not anything different than that?

Correctly, yeah, yeah.

We're going to grow into this.

Thank you.

Thanks.

This concludes the question and answer session. I would now like to turn it back over to Mr. Adinolfi for closing remarks.

Thanks again everyone for joining us this morning. We look forward to updating you on our progress in the near future. Have a great day.

Thank you for your participation in today's conference. This does conclude the program and you may now disconnect.