D-Wave Quantum falls nearly 3% as earnings miss overshadows revenue beat
Hillman Solutions Corp reported its Q2 2025 earnings, surpassing market expectations with an EPS of $0.17, exceeding the forecast of $0.14 by 21.43%. Revenue also beat projections, reaching $402.8 million against an anticipated $390.34 million. Following the earnings announcement, Hillman Solutions’ stock rose significantly, climbing 15.87% in pre-market trading, reflecting investor optimism. According to InvestingPro analysis, the company maintains a FAIR financial health score of 2.3, with strong liquidity metrics showing current assets more than double its short-term obligations.
Key Takeaways
- Hillman Solutions reported a strong Q2 2025, with both EPS and revenue exceeding forecasts.
- The company’s stock surged 15.87% in pre-market trading following the earnings release.
- Key growth drivers included acquisitions, new business wins, and pricing strategies.
- Full-year 2025 net sales guidance has been raised.
Company Performance
Hillman Solutions demonstrated robust performance in Q2 2025, with net sales increasing by 6.2% year-over-year to $402.8 million. The company’s strategic initiatives, including the acquisition of Intex and new business wins, contributed to this growth. The Hardware and Protective Solutions segment led the way with an 8.7% increase, while the Robotics and Digital Solutions segment grew by 2.3%. InvestingPro data shows the company has maintained a steady 5-year revenue CAGR of 4%, though it currently trades at a relatively high P/E ratio of 100.75.
Financial Highlights
- Revenue: $402.8 million, up 6.2% YoY
- Adjusted EBITDA: $75.2 million, up 10.1% YoY
- Adjusted EBITDA margin: 18.7%, up 70 basis points
- Adjusted gross margins: 48.3%, slightly down from 48.7% YoY
Earnings vs. Forecast
Hillman Solutions exceeded expectations with an EPS of $0.17, compared to the forecasted $0.14, marking a 21.43% surprise. Revenue also surpassed projections, reaching $402.8 million against the expected $390.34 million, a 3.19% surprise. This performance reflects the company’s effective execution of its growth strategies.
Market Reaction
Following the earnings release, Hillman Solutions’ stock surged by 15.87% in pre-market trading, reaching $9.20. This movement is significant, especially compared to the stock’s 52-week range of $6.55 to $12.08. The positive market reaction underscores investor confidence in the company’s future prospects. With a beta of 1.65, InvestingPro indicates the stock typically experiences higher volatility than the broader market. Subscribers to InvestingPro gain access to 8 additional key ProTips and comprehensive valuation metrics through the Pro Research Report, helping investors make more informed decisions.
Outlook & Guidance
Hillman Solutions has raised its full-year 2025 net sales guidance to a range of $1.535 to $1.575 billion, reflecting strong performance and strategic growth initiatives. The company also increased its adjusted EBITDA guidance to $265 to $275 million. For 2026, Hillman anticipates net sales growth in the high single to low double digits, with adjusted EBITDA expected to grow in the low to mid-single digits.
Executive Commentary
CEO John Michael Adinolfi expressed confidence in the company’s ability to navigate economic challenges, stating, "We have a long track record of performing through all kinds of economic environments." CFO Rocky Kraft added, "We feel like we’re running this business better than we ever have," highlighting the company’s operational improvements.
Risks and Challenges
- Tariff impacts are estimated at $150 million annually, which could affect profitability.
- The company faces potential supply chain disruptions, despite efforts to reduce reliance on China.
- Market volumes are expected to remain flat, posing challenges for growth.
- Economic uncertainties could impact consumer spending and demand.
For a deeper understanding of Hillman Solutions’ financial position and growth prospects, access the detailed Pro Research Report available exclusively on InvestingPro. This comprehensive analysis includes Fair Value estimates, financial health scores, and expert insights that go beyond traditional metrics.
Q&A
During the earnings call, analysts inquired about the company’s pricing strategy and its impact on margins. Executives emphasized their careful implementation of pricing with retail partners and expressed confidence in managing pricing and volume challenges. The focus on expanding the pro channel was also highlighted as a key growth area.
Full transcript - Hillman Solutions Corp (HLMN) Q2 2025:
Towanda, Conference Call Operator, Hillman Solutions Corp: Good morning, and welcome to the Second Quarter twenty twenty five Results Presentation for Hillman Solutions Corp. My name is Towanda, 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 presentation and 10 Q were issued this morning. These documents and a replay of today’s presentation can be accessed on the Hillman’s Investor Relations website at ir.hillmangroup.com.
I would now like to turn the call over to Michael Koehler with Hillman.
Michael Koehler, Vice President of Investor Relations and Treasury, Hillman Solutions Corp: Thank you, Tawanda. Good morning, everyone, and thank you for joining us. I’m Michael Kahler, 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 Hillman’s Chief Financial Officer, Rocky Kraft. Before we get into today’s call, 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 those 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, ir.hillmangroup.com. 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 strong second quarter results and then give an update on our guidance. Following JMA’s comments, Rocky will give a more detailed walk through our financials and guidance before turning the call back over to JMA for some closing comments. Then we will open the call up for your questions. It’s now my pleasure to turn the call over to our President and CEO, John Michael Adonolfi. JMA?
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: Thanks, Michael. Good morning, everyone, and thank you for joining us. We executed well and took great care of our customers during the 2025, driving strong results on both the top and bottom line. We are pleased with our results for the first half of the year and are positioned well for continued top and bottom line growth in the second half of the year. Let me take a moment to provide an update on some topics we discussed last quarter.
We told you that our business is well positioned to operate in any environment, and we delivered solid results during both quarters this year. We told you that we would cover tariff related cost increases, and we have. We told you that the resilience of Hillman’s business should prove volumes to be better than our guide, and they were. We told you that we would optimize the country of origin where we source our products with our dual faucet strategy, and we have. The Hillman team did a fantastic job during the quarter.
I am proud of how we work together to navigate this dynamic environment while not losing sight of our long term goals. Based on our performance so far this year, the excellent job this team has done, we are raising the midpoint of both of our full year 2025 net sales and our full year 2025 adjusted EBITDA guidance. We now expect our full year 2025 net sales to be between $1,535,000,000 to $1,575,000,000 with a midpoint of 1,555,000,000.000 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 now expect our full year 2025 adjusted EBITDA to be between $265,000,000 to $275,000,000 with a midpoint of $270,000,000 The low end of our 2025 adjusted EBITDA guidance represents 10 growth over 2024, And the high end of our guidance represents 14% growth over last year.
Let me spend one minute on how we’re thinking about 2026 based on what we know today. We expect full year 2026 net sales to grow in the high single to low double digits and adjusted EBITDA to grow in the low to mid single digits, both in an environment where we are assuming market volumes are flat. Rollover price in our typical new business wins will drive our top line in 2026. Considering the tariff comp next year, we will remain focused on managing margins, operating efficiently and controlling costs. Rocky will share more details on our guidance and outlook for the remainder of the year in a bit.
Hillman has a long track record of performing through all kinds of economic environments since we were founded over sixty years ago. Historically, our consistent growth and solid performance has been driven by our competitive moat, steady demand for our products tied to everyday repair and maintenance projects, and great long term relationships with our customers. Hillman’s value added moat, which consists of over 1,200 sales and service reps in our customer stores, direct to store delivery capability, category management and deeply integrated retail partnerships unlike any company in our space. Today, we are successfully managing the current tariff environment while not losing sight of 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 has been demonstrated by our excellent fill rates for the first half of the year.
From a supply chain and operations standpoint, we continue to execute our dual faucet strategy. We’ve made progress reducing our exposure to suppliers based in China, where we are confident that we can end 2025 with the ability to source approximately 20% of our products from China. This compares to 2018 when we sourced nearly 50% of our products from China. The dual faucet strategy is the concept of buying product not only from multiple suppliers, which has always been our strategy, but from multiple suppliers in multiple countries. We know tariffs can change the market quickly.
We are prepared for this and have built a flexible supply chain that allows us to deliver quality products at the best overall value for our customers. We are confidently navigating the tariff situation and executing our plan to set Hillman up for long term success with our customers and long term growth. Now let’s turn our results to our results for the second quarter. Net sales in the 2025 totaled $402,800,000 which increased 6.2% versus the second quarter of last year. Driving our top line growth was a four point increase from Intex, which we acquired in 2024, two points from new business wins and two points from price.
These were partially offset by a two point headwind from market volumes. For the quarter, adjusted EBITDA increased 10.1% to $75,200,000 compared to $68,400,000 last year. Adjusted EBITDA margins improved by 70 basis points to 18.7%. Adjusted gross margins for the quarter totaled 48.3%, which were down slightly from 48.7% during the year ago quarter, but improved sequentially from 46.9% for the 2025. Driving our sequential margin performance for the quarter was improved margins in RDS and a modest amount of tariff related price.
Our biggest segment, hardware and protective solutions, or HPS, had a great quarter with 8.7 growth versus the comparable period. Adjusted EBITDA increased by 14.7% to $51,500,000 Our results were driven by contributions from Intech’s acquisition, new business wins and price, offset by just 1% decline in HPS market volume. Net sales in robotics and digital solutions or RDS were up 2.3% versus the year ago quarter. This is our second consecutive quarter of growth for RDS, which confirms our MiniKey 3.5 strategy is working. Adjusted gross margins and adjusted EBITDA margins both improved sequentially, totaling 73.1 percent and 32 percent respectively.
As of today, we have over 2,200 minutei key 3.5 machines in the field. We remain on track to finalize the rollout of these kiosks to our two largest customers by the 2026. Now turning to Canada. Net sales in our Canadian business were down 5.6% compared to the prior year quarter. Sales volumes and adjusted EBITDA improved sequentially as we moved from winter into the spring selling season.
Market volumes improved but remained soft and FX headwinds weighed on our Canada’s results. For the second half of the year, we expect Canada to return to top line growth. And for the full year, we continue to expect that adjusted EBITDA margins will remain above 10% in Canada. Overall, Hillman is in a great position with our customers and will continue to successfully execute in this environment. With that, let me turn it over to Rocky to talk financials and guidance.
Rocky? Thanks, JMA.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Let me dive right into our results and then I’ll get to our guidance. Net sales in the 2025 totaled $402,800,000 an increase of 6.2% versus the prior year quarter. Second quarter adjusted gross margins decreased by 40 basis points to 48.3% versus the prior year quarter, but improved 140 basis points sequentially. The Intex acquisition we made in August 2024 has gross margins below our fleet. This drove the step down in margins versus last year.
Additionally, we saw a modest amount of tariff related price during the quarter, which helped our margins improve sequentially while entering into our busier spring selling season where we leverage more of our fixed costs. Adjusted SG and A as a percentage of sales decreased to 29.7% during the quarter from 30.7% from the year ago quarter. Adjusted EBITDA in the second quarter totaled 75,200,000.0 improving 10% versus the year ago quarter. Our adjusted EBITDA to net sales margin during the quarter improved by 70 basis points to 18.7% from a year ago. Let me now turn to cash flows.
For the quarter, net cash provided by operating activities was $48,700,000 and we generated $31,200,000 of free cash flow, even with a $32,500,000 cash headwind from tariffs. Turning to leverage and liquidity, we ended the 2025 with 674,700,000 of total net debt outstanding, which decreased by $29,000,000 from the end of the first quarter. Liquidity available totaled $246,900,000 consisting of $212,700,000 of availability on our credit facility and $34,200,000 of cash and equivalents. At quarter end, our net debt to trailing twelve month adjusted EBITDA ratio improved to 2.7 times versus 2.9 times a quarter ago and 2.8 times at the 2024. We maintain that our long term adjusted EBITDA to net debt leverage ratio target remains at or below 2.5 times.
This will give us the flexibility to grow via M and A and use our improved financial strength to play offense. Last week, our board approved a $100,000,000 share repurchase program. This is the first time Hillman has had an SRP in place since coming public in 2021. We are comfortable with our leverage ratio and feel it prudent to have an active plan in place. We intend to buy stock back to offset dilution resulting from employee stock awards.
Doing so will have a minimal impact on our leverage. We will also seek to buy stock back when we believe there is a disconnect between the value of our company and the value of where the stock is trading. We anticipate deploying between 20,000,000 and $25,000,000 annually, depending on the market. We believe these repurchases will be accretive to earnings per share, drive shareholder value, and will be an attractive place to invest capital. Similar to the SRP, our board also approved a shelf registration statement.
Similar to the SRP, we felt it’s good public company governance to have a shelf on file. To be clear, we do not intend to use this shelf to raise capital of any kind in the foreseeable future. We are simply putting the mechanism in place now. Now let me turn to our guidance. While Hillman’s business is generally resilient because of the demand for our products used for repair and maintenance projects around the home, we are not immune to declining foot traffic at our retail partners and a consumer watching their spending.
Our top and bottom line guides contemplate a volume decline, which we believe is a prudent outlook for the year considering existing home sales are projected to remain flat. On our last call, we told you that our guidance was conservative and our volumes would be better than our guide. So far, that’s proven to be the case. Now we have more clarity on how tariffs will impact our business and there is less uncertainty around our expectations for the year. As such, we have increased the low end of our net sales guidance by $40,000,000.
This raises the midpoint as the top end remains unchanged. Our updated net sales guidance is now between 1,535,000,000.000 to $1,575,000,000 with a midpoint of $1,555,000,000 reflecting 5.6% growth over last year and a 20,000,000 increase from our previous guide. We are also increasing the low end of our adjusted EBITDA guidance by $10,000,000 This raises the midpoint as the top end remains unchanged. Our updated adjusted EBITDA guidance is now between $2.65 and $275,000,000, with a midpoint of $270,000,000 reflecting 11.7% growth over last year and a $5,000,000 increase from our previous guide. In addition, we calculate the annualized run rate for tariffs to be approximately $150,000,000 The team has done a great job working with our customers to get price.
We are confident we will end the year around 2.4 times leverage, assuming we hit the midpoint of our guidance, even after deploying some cash to execute a modest share repurchase. Before I turn it back to JMA, I wanted to thank the Hillman team who has worked extremely hard to deliver such a strong quarter with healthy growth on both the top and bottom line. As we look ahead, we are confident in our ability to carry this momentum forward with disciplined execution and a focus on our strategic priorities. We are well positioned to build on this foundation and expect to see sustained growth throughout the remainder of the year while we focus on growing with our customers and driving shareholder value. JMae, back to you.
Thanks, Rocky.
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: As Rocky said, the team has done a great job this year. I am confident Hillman is positioned for long term success and long term growth. To our 1,200 plus frontline sales and service folks, our operations team, product team and all the support functions across the organization, I am so proud of how the entire Hillman team continues to execute and win. I’d also like to extend my appreciation to our customers, vendors, partners and shareholders for their ongoing trust and support. We’re proud of the growth we delivered this quarter and remain confident in our ability to execute and build on the momentum throughout the year and beyond.
With that, I’ll turn it back to Wanda for the Q and A portion of our call. Wanda, please open the call for questions.
Towanda, Conference Call Operator, Hillman Solutions Corp: Thank Our first question comes from the line of Lee Jagoda with CJS Securities. Your line is open.
Lee Jagoda, Analyst, CJS Securities: Hi, good morning.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Good morning, Lee.
Lee Jagoda, Analyst, CJS Securities: Just two questions. One, kind of bigger picture and one more numbers related. Just on the bigger picture stuff, in the recent past, you’ve talked about focusing a little more on the pro channel. And I’d love to understand how your competitive advantages in the retail channel would translate to the pro channel and kind of give you the right to win? Any examples of recent success would be great.
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: Lee, thanks. I’ll take that one. So, the pro perspective, today 25% plus of our business is pro related. So, to me, especially in areas like fasteners, we have the permission to play. We have the products.
We’ve got brands like PowerPro, for instance, where we just launched a full range of structural products. We’ve got a full range of products in a number of different areas in fastening. And today those pros are using our products. We have focused in supporting our customers where they support the pro. As our customers continue to expand and we have other opportunities and channels like LBM that we’re customers are serving the pro.
We’re going to continue to lead in there. So we’re very excited about the I’ll say the opportunity as we go forward. At this point, we’ve got success in the fact that that area continues to grow for us. I won’t go into great detail on this call, but we’ll have some future updates where we’ll talk about some of the things we’re doing in Pro and how we’ll continue to lead in. So thanks for the question.
Lee Jagoda, Analyst, CJS Securities: Sure. And then, Rocky, just one for you on numbers. Now that we have that clarity on the tariff impact, I know last quarter you were able to give us some guidance in terms of the cadence for EBITDA and how price rolls in versus when costs hit the P and L. Can you give us an update on what the back half cadence should look like?
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Yes, Lee. Mean, as you know, it depends on the product. But given what we have from an inventory perspective, we’ll start feeling the cost from tariffs late in the third quarter. That said, every product tends to be different and there are a lot of moving parts as you think about it. But that means that we’ll have a we believe we’ll have a very strong third quarter because most of the price, if not all will be in place.
We’ll begin to feel the tariff cost. And then as we go into the fourth quarter, we should see tariff cost and price both fully in the run rate. The only other thing I would say, as you heard during our prepared remarks, the cash hits us right away. So it was a cash drain in the second quarter. It’ll be a little bit of a cash negative in the third quarter, but we still feel really good about where we’re taking the business and really, really happy with how the team has done working with our customers to, in some cases, products and other cases get price where we need to cover them.
We feel like we’re in really good shape for the rest of the year.
Lee Jagoda, Analyst, CJS Securities: Okay, great. I will let others hop in the queue. Thanks.
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: Thanks, Lee. Thanks, Lee.
Towanda, Conference Call Operator, Hillman Solutions Corp: Please stand by for our next question. Our next question comes from the line of William Carter with Stifel. Your line is open.
William Carter, Analyst, Stifel: Hey, thank you. Good morning. Question I have for next year around the guidance. You said rollover pricing and new business wins against a flat market. Does that assume is that clarity does that assume just new business wins you did this year?
Or does that assume you go back to steady state next year? And on that note, business wins have kind of cooled this year. Do you have confidence that you’re able to fully accelerate and get back to that lever of growth Thanks.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Hey, Will, there are two things I would say there. This is Rocky. First off, we still expect that we’ll be at or above slightly above our 2% new business wins, which we’ve done for many years in a row. As we look to 2026, yeah, we have pretty good clarity around that. If you assume we do our 2% to 3%.
And again, to be clear, we’re not giving a guide that we think the markets are flat in ’26. What we’re saying is if you assume the markets are flat, and if you think about our implied guide in the back half, it would suggest that volumes are down nine in the back half. It would assume that that’s down 6% for the full year in 2025. That gets us to some really interesting levels. That level of being down this year, quite frankly, if you take COVID out, will be the worst market year we’ve seen in Hillman since 2008 or 02/2009.
So again, we think we’re being prudent because we are putting a lot of price in market. Everybody’s putting a lot of price in market. And clearly there will be some impact on volumes. But I think while not a guide, assuming markets are flat next year, I think is prudent at this point in time. I mean, it’s the August.
William Carter, Analyst, Stifel: Thanks for that. Second question, you did say, correct me if I’m wrong, annualized impact is now $150,000,000 regarding tariffs. I guess as you think about that impact and we’ve had a lot of fluidity, things change, I guess we had some certainty at the July. Do you have kind of full visibility of that number, all the nuances? I know steel went from 25,000,000 to $50 but that’s on the components.
Do you have full visibility into that? And is there any fluidity or risk in your pricing, I. E. Things could change, somebody saying, hey, let’s wait six weeks, etcetera? Just I’ll stop there.
Thanks.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Yeah, again, this is Rocky. I mean, as you can imagine, the 150 is a very round number. There’s a ton of fluidity in that. And there’s a lot of reasons, not only what the administration might do, but there’s also fluidity around what volumes do in the And that clearly impacts that number.
And so as we think about it, we’ve covered our net tariff exposure. We’re confident that anything that happens going forward, particularly as you start thinking about how it rolls through our inventory, will most likely not impact ’twenty five as much as it will 2026. But I have to tell you, our customers have been great. And we have spent a lot of time making sure that we work with our customers to get the right amount of tariff price. They understand that we’re just covering the tariff prices.
If it were a tax, we’re not trying to maintain our margins and they understand that. And I think that’s a positive. So far, everything we’ve done with our customers has been executed very well. We thank our customers. And as we think about the future, if there is fluidity to your point and it changes, which it’s likely to, we will be changing what our pricing is with our customers, either up or down.
William Carter, Analyst, Stifel: Thanks. I’ll pass it on.
Towanda, Conference Call Operator, Hillman Solutions Corp: Thank you. Please stand by for our next question. Our next question comes from the line of Michael Francis with William Blair. Your line is open.
Michael Francis, Analyst, William Blair: Hi, guys. Nice quarter.
Brian McNamara, Analyst, Canaccord: I wanted to go back to the back half cadence question that Lee asked. More pointedly, I think last time you mentioned you’re expecting about 300 basis points of gross margin give back from tariff prices. Is that still accurate? And is there anything you can kind of do to level set us on how we should think about gross margins 3Q and 4Q?
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Yes. I’d like to not get into specifics around gross margin. What I
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: would tell you is the
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: 300 basis point degradation was in the face of $250,000,000 of tariff price. And so, we’ve said that we believe that number has come down to 150. So it’s a safe assumption that that impact has come down relative to how we think about the future. I think, as you think about the I would go more to kind of the rest of the year. And as we think about our EBITDA margin for the full year, I think you can probably safely assume we’ll be up about 100 basis points year over year, is probably a safe way to think about it.
Now, to remind everyone, there’s a little bit of a tariff windfall in that because of the timing of pricing. But again, we’ve been paying those tariffs now for forty five to ninety days, depending on the tariff. And so it is a cash drain to the company. And so rightfully so that that price has been put in place.
Brian McNamara, Analyst, Canaccord: Okay. And then I know it doesn’t seem like demand has deteriorated much, if at all. And you talked about volumes implied in the back half of 9%. So I just wanted to see what you’re seeing on R and R and if that 9% number is just sort of a conservative approach to market or if there’s some deterioration happening right now that you’re seeing?
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: Yeah, right now we feel that is the right guide. So, that’s why we’re sticking with the We do feel like there will be some pressure in the back half of the year. But overall, we were actually pleased with what we did in Q2 as we came out and we called our sales number and actually hit it and exceeded it. So we feel good about where we’re positioned.
Until price is fully right into the marketplace, it’s hard to really change that view. We’ll give you an update when we come back and deliver our Q3 earnings. But we feel good about where we are right now. We feel like we’re being prudent, as Rocky said earlier in his prepared remarks.
Brian McNamara, Analyst, Canaccord: Appreciate the color. I’ll pass it on. Thanks.
Towanda, Conference Call Operator, Hillman Solutions Corp: Next question comes from the line of Matthew Bouley with Barclays. Your line is open.
Matthew Bouley, Analyst, Barclays: Good morning, everyone. Thanks for taking the questions. I guess I wanted to ask around elasticity. Just very helpful color there around the volumes down 9% in the second half. I think in Q2 here, you had price up 2% and volume down 2%.
But thinking about that 2026 up high singles to low doubles on price, I guess I just wanted to double check on the assumption that you’re not expecting to have sort of an offsetting volume impact in 2026, sort of, I guess, mirroring price. So just kind of, I guess, on that and sort of help us understand the conviction around kind of minimizing that elasticity? Thank you.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Yeah, Matt, I think we would start by telling you that when you think about repair and maintenance, if somebody needs to fix something and we spent a lot of time talking about this on the last quarterly call, They’re going to fix it. And so there’s not a lot of elasticity in price for a lot of our products. Clearly, we’re not going to say there’s no elasticity. And so that’s one of the reasons that we’ve guided for the market to be down in the back half. As we think about next year, again, I want to be clear that a flat market was not our guidance.
Our guidance for what we said our comments, because it’s not really guidance just directionally around 2026 is that was that in the situation where the market is flat. Now, again, if you start to compound what our markets have done over the last several years, you have to go back many years to find levels where we would be going into 2026. If you assume that our markets are down 9% in the back half. And so I would say we have do we have a lot of conviction that the markets will be flat right now. It’s August, whatever, third, fourth, fifth.
So your guess is as good as ours. Do we expect that markets will be down, say something like mid single digits? I think we have a of conviction that that will not be the case, that these markets will be around flat next year. Are they up a couple? Are they down a couple?
Hard telling and will depend upon a lot of factors that are really hard to predict when you are in the August.
Michael Francis, Analyst, William Blair: Okay,
Matthew Bouley, Analyst, Barclays: got it. No, that’s super helpful. Secondly, on the margin side, I guess two parter. One is if you could just clarify that short period where the tariffs on China were at 145%. I’m just curious if there’s any kind of small temporary impact from that.
So if you could just clarify that. But then secondly, if I do the back of the envelope on 2026, it seems like you’re suggesting maybe the EBITDA margin down about 100 basis points next year. So if you could just kind of speak to is that simply the pricing cost, the math around how that impacts the rate? Or is there anything else that’s kind of impacting that EBITDA margin in 2026? Thank you.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Let me try to do that in two pieces. So first on your first question, I think we paid the 145,000,000 And honestly, I’m looking at my team right now for about two weeks. So it’s not material to anything that we would be disclosing or talking about. As you think about the rate, the ballpark, you’re in the ballpark around what we think about rate for next year. Again, during the third quarter of this year, there will be a bit of timing around a windfall around tariffs.
That said, we will hang on to full price as we think about going into the fourth quarter and into next year, pending the fluidity that we answered in an earlier question. And so, again, having to laugh that, I’ll call it slight period of windfall and tariffs is what is what’s driving the lack of leverage between the top line and the EBITDA rate. But again, the one thing I would say, JMA, you may want to comment here, but we’re running this business, I think better than we ever have. And I’ve been here for seven or eight years. And so, as the numbers move around, we’re highly confident that we can do the right things to create the right type of profitability in this business in any environment.
Rocky is right.
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: I mean, we’ve set up the global supply chain, which just in our prepared remarks. And I think you guys have seen what we’ve done over the last several quarters and actually a couple of years where we’ve built more resiliency in their supply chain. We’ve improved our cost position and now we actually have multiple countries of origin, you know, to be able to diversify our supply base. So we feel like our input costs are in good shape. We’re running our business from a freight perspective, pleased with where we are there.
Obviously, everybody’s dealing with some level of inflation, which we’re managing, and we’re going to continue to manage the business as we go forward. So we do feel like we’re positioned well to deal with the back half and into 2026.
Matthew Bouley, Analyst, Barclays: All right. Well, thanks, guys. Good luck.
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: You’re welcome. Thanks, Matt.
Towanda, Conference Call Operator, Hillman Solutions Corp: Our next question comes from the line of Brian McNamara with Canaccord. Your line is open.
Michael Francis, Analyst, William Blair: Thanks, guys. Thanks for taking the question. Good morning, and I’ve been working So with strong first on pricing. We haven’t seen much pricing on the shelves based on our work, and I’m curious when you would expect that to hit the shelves retailer level, understanding that obviously each retailer will do things differently? And then secondly, for Rocky maybe, I know in May you called out for H2 pricing of plus 17% offset by similar volume decline.
And I think you mentioned in one of the answers to the questions that H2 guide calls for 9% volume declines, and I don’t think I heard what’s built in for H2 pricing component.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Yes. Maybe let me go first, J. M. And then you cannot answer
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: So, you for answering my question.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Yeah, the guide would assume that in the second half, we have about 6.5% total price in the business.
Michael Francis, Analyst, William Blair: Okay. And then
Ruben Gardner, Analyst, Benchmark: Jay, you want
Michael Francis, Analyst, William Blair: add to that?
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: Brian, you guys do quite a bit of work, we appreciate your focus on our company and the work that you do at the shelf. Mean, there’s price has been going into the marketplace at different times. So we’re watching it like you are. Really to Rocky’s point, it’s not my place to be commenting on what our retailers will do in the back half of the year. So I think we’ll have to stay posted for what we see.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Yeah. Hey, Brian, just to clarify, when I said 6.5 price, that’s full year price, not the second half.
Michael Francis, Analyst, William Blair: Understood. Okay. And then secondly, looking, existing home sales appear to be hopefully bumping along the bottom here on 4,000,000 units. What where does that number need to go for you to see a material impact on your business and market volumes overall?
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: It’s a great question. We feel like we believe getting back to a $5,000,000 number is where we would like to see it in the future. We don’t have it perfectly correlated to what that growth would be, if that’s your follow on question. But we feel like a $4,500,000.05000000 unit number is more in line with where we’d expect the business to be and see some of our categories that have been negatively impacted by the decline in existing home sales improved. So that’s we’re hoping for as we go forward.
But also in our guide, know where the business is today and we feel confident with it running at 4,000,000 ish for what we talked about in 2025.
Michael Francis, Analyst, William Blair: Got it. Thanks, guys. I’ll pass it on.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Thanks, Brian. Thank you.
Towanda, Conference Call Operator, Hillman Solutions Corp: Our next question comes from the line of David Manthey with Baird. Your line is open.
Michael Koehler, Vice President of Investor Relations and Treasury, Hillman Solutions Corp0: Thank you. Good morning, guys. First question is on the change in tariff expectations. So you went to a $37,500,000 per quarter run rate assumption and you were at $52,500,000 previously. So in the second half, that would be like $50,000,000 upside.
I think you said you raised the guidance by 40 Is that just reflective of the tariffs kind of rolling in through the third quarter?
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Yeah, the only thing I would say about the math that you just did, Dave, is remember, it’s not going to the tariff cost isn’t going to hit us till late in the third quarter. It’s going to begin hitting us. So I think your run rate numbers are right. But again, it’s just a period of time where we have a price and not tariff cost. It’s not like a whole quarter or a big period of time.
Not sure if that answers your question. But again, remember that tariff cost isn’t going to start hitting us until well into the third quarter.
Michael Koehler, Vice President of Investor Relations and Treasury, Hillman Solutions Corp0: I assumed it was a timing issue. And then to the previous question on shelf prices, and you talked about prices to your customers. Is there a disconnect between those things? Are you able to go and raise price to the retailer and then they don’t change shelf price for a time? Or are those more in lockstep?
And then I guess if all goes well, based on the timing you just discussed, do you expect to be ahead of tariffs in the third quarter, meaning you’ll over earn? I think you’ve kind of implied that. But then you’ll hit sort of price cost neutrality as the tariffs fully flow in and the price changes fully flow in. But by the time you get to the 2025, those will be matched up as well as you can based on what you know currently about tariff pricing?
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: Yeah, so Dave, the last question that you asked there, that is accurate. That’s the way to look at the benefit in Q3 and then we’re at parity, if you will, or alignment in Q4. So, that’s the right way to think about it. As far as pricing and retailers, I mean, retailer is going to be different depending on their accounting and how they operate. So in fairness, I don’t think it’s my place to comment on how and when you’ll see that the pricing at the shelf.
But we partner with our customers. They are fair and balanced and not easy conversations for any of the companies or our sales teams that are having the conversations with our customers. But we’re aligned with them and we’re working with them to either deal with price or mitigate cost through country of origin changes. So that’s how we’re running the business. So that’s about as far as I can go.
Ruben Gardner, Analyst, Benchmark: Very good. Thank you.
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Thanks. Thank you. Take care.
Towanda, Conference Call Operator, Hillman Solutions Corp: Our next question comes from the line of Ruben Gardner with Benchmark. Your line is open.
Ruben Gardner, Analyst, Benchmark: Thank you. Good morning, guys. Congrats on the strong results and outlook. I guess, let’s see. I had some technical difficulties, so sorry if I repeat any questions.
But on so the pricing and volume outlook for the back half, is it right to assume that the pricing is probably more like in the low teens within the hardware section and that’s where you’re implying you’re going to see most of the excuse me, hardware and protective section and that’s where you’re going to see most of the declines in volume or at least that’s what you’re implying? And then can you tell us when the pricing actually went into place and what you’ve seen from a volume standpoint since then?
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: Yes, let me take the first part and I’ll let JMA take the second part, Ruben. Yes, I mean, there is more pricing in HPS than there would be in, as an example, RDS or Canada. And that reason is because there are more tariff direct impact on those businesses. And then I’ll start, JMA. But the pricing, some is in place, some is going in place, some went
Ruben Gardner, Analyst, Benchmark: in place last week, some
Rocky Kraft, Chief Financial Officer, Hillman Solutions Corp: is going in place as we speak. But basically, every customer, every product is different. And so we deal with it on a case by case basis. But as we sit today, we’re confident that we have our tariff exposure covered. I don’t have anything to add.
Thanks, Rocky.
Ruben Gardner, Analyst, Benchmark: Got it. And then I know you’ve been working on mitigation efforts. Can you give any update or details there? Still on track to get it down, at least get China down to 20%. What kind of markets are you taking it to?
And what are the tariff implications in those markets based on what you know today? I know it’s fluid, but.
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: Yeah, it’s fluid. I’ll give you a couple of nuggets, Ruben. From our perspective, we feel like we’re in very good shape with our movement of product out of China and our dual faucet strategy. So we do still have we have confidence that we have the ability to be approximately 20% out of China by year end. We are moving it to pick a name of the country.
I mean, these are not in volume order, but places like Thailand, Vietnam, India are a few that would benefit from the moves that we’re making right now. Our product and our operation teams are doing a great job. Our sourcing team is doing a great job working with those suppliers. We’ve had opportunities that we’ve been developing over the last several years that now we’re going to start moving volume to. We have other new opportunities that we’ll be moving to.
It is fluid like you said, as things settle down and we see where the best place for us to have the most competitive product for our customers and the best value and the right quality is what will end up making a determination of where we’ll round out. So Ruben, we’ll have a lot to update you and everyone else on in future quarters. But it is fluid and I’m actually really proud of what the team’s doing and the partnership with our customers to make sure that we can take care of our customers and ultimately our end users. A lot of moving pieces.
Ruben Gardner, Analyst, Benchmark: Great. Thanks, guys. Good luck.
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: Welcome. Thanks a lot.
Towanda, Conference Call Operator, Hillman Solutions Corp: Thank you. Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back over to Mr. Al Dinolfi for closing remarks.
John Michael Adinolfi (JMA), President and Chief Executive Officer, Hillman Solutions Corp: Thank you, everyone, for joining us this morning. We look forward to updating you on our progress soon. Hope everybody has a great day. Take care. Operator disconnect.
Towanda, Conference Call Operator, Hillman Solutions Corp: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.
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