• Net Sales: $359.3 million, increased 2.6% versus Q1 2024.
• Adjusted EBITDA: $54.5 million, up 4.2% from last year.
• Adjusted EBITDA Margin: Improved by 30 basis points to 15.2%.
• Adjusted Gross Margin: 46.9%, down from 47.6% in the prior year quarter.
• Hardware and Protective Solutions Sales: Increased by 5.6%.
• Robotics and Digital Solutions Sales: Up 1.9% year-over-year.
• Canadian Business Sales: Down 18.7% compared to the prior year quarter.
• Net Cash Used by Operating Activities: $0.7 million.
• Capital Expenditures: $20.7 million for the quarter.
• Free Cash Flow: Negative $21.3 million.
• Total Net Debt: $703.7 million.
• Liquidity Available: $200.9 million.
• Net Debt to Adjusted EBITDA Ratio: 2.9 times.
• Full Year Net Sales Guidance: $1.495 billion to $1.575 billion.
• Full Year Adjusted EBITDA Guidance: $255 million to $275 million.

• Warning! GuruFocus has detected 4 Warning Signs with HLMN.

Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hillman Solutions Corp (NASDAQ:HLMN) delivered top and bottom line results in line with expectations for the first quarter of 2025.
• The company reiterated its full year 2025 net sales and adjusted EBITDA guidance, showing confidence in its financial outlook.
• Net sales increased by 2.6% compared to the first quarter of 2024, driven by the Intex acquisition and new business wins.
• Adjusted EBITDA increased by 4.2% to $54.5 million, with margins improving by 30 basis points to 15.2%.
• Hillman Solutions Corp (NASDAQ:HLMN) has a strong competitive moat and resilient demand for repair and maintenance products, making it less susceptible to economic swings.

Negative Points

• The company faces a significant impact from new tariffs, estimated at $250 million annually, which could affect costs and pricing strategies.
• Adjusted gross margins decreased slightly to 46.9% from 47.6% in the previous year, impacted by product mix changes.
• Net sales in the Canadian business declined by 18.7% due to a challenging retail environment and economic uncertainty.
• Free cash flow was negative $21.3 million for the quarter, driven by inventory build and capital expenditures.
• The company's net debt to trailing 12-month adjusted EBITDA ratio increased to 2.9 times, slightly higher than the previous year.

Q & A Highlights

Q: Can you discuss the impact of the RDS business rollout on margins and what incremental margins look like as sales grow? A: Robert Kraft, CFO, explained that the first quarter saw pressure due to the incremental rollout and other moves. However, they expect to return to a 30-plus EBITDA rate and in the 70s for gross margins for the rest of the year.

Q: Was there any prebuying in the personal protective segment ahead of tariffs, and how should we think about the rest of the year? A: CEO John Michael Adinolfi stated there were no material pull-forwards. Promotional activity was strong and planned, and the team outperformed expectations. They feel good about the business's positioning for the rest of the year.

Q: How does the current volume guidance compare to prior assumptions, and what could offset this volume weakness? A: Robert Kraft noted that the initial guidance assumed a 1% decline in market volumes, but they now assume a 17% decline, which is conservative. They hope market volumes won't be impacted as much, but they are being prudent given the situation.

Q: How are you planning to adjust your geographic supplier breakdown in response to tariffs? A: CEO John Michael Adinolfi mentioned they aim to reduce exposure to China to about 20% by year-end. They are exploring opportunities in Southeast Asia and India to diversify their supply chain while maintaining quality and delivery standards.

Q: What is the timeline for implementing price increases due to tariffs, and how will this affect margins? A: Robert Kraft stated that they expect to implement all price increases by July 1. Margins will be impacted, with a long-term rate reduction of about 300 basis points if tariffs remain, but they aim to maintain strong partnerships with customers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.