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Hillman Solutions Corp. (HLMN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered modest top-line growth and slightly stronger profitability: Net sales rose 2.6% to $359.3M; Adjusted EBITDA increased 4.2% to $54.5M; adjusted EBITDA margin expanded 30 bps to 15.2% .
  • Management reiterated full-year 2025 net sales ($1.495–$1.575B) and adjusted EBITDA ($255–$275M) guidance, but withdrew free cash flow guidance due to tariff uncertainty; new year-end leverage target ~2.5x replaces FCF guide .
  • Tariffs are the dominant narrative: ~$250M annualized tariff cost expected; Hillman plans dollar-for-dollar pricing offsets while accelerating “Dual Faucet” supply diversification (target China exposure ~20% by year-end) .
  • Canada remained a headwind with net sales down 18.7% YoY, while HPS was supported by Intex DIY and new business; RDS returned to modest growth on MinuteKey 3.5 rollout .
  • Potential stock catalysts: clarity and execution on tariff pass-through timing; noticeable progress in supply chain diversification; and segment margin trajectory (particularly RDS) .

What Went Well and What Went Wrong

What Went Well

  • HPS growth and margin expansion: HPS revenue +5.6% and adj. EBITDA +15.8% YoY on Intex DIY and new wins; adj. EBITDA margin +120 bps to 13.6% .
  • RDS returned to growth: Revenue +1.9% YoY supported by MinuteKey 3.5 rollout; management expects “30+% EBITDA rate and in the 70s for gross margins for the rest of the year” .
  • Operational execution and moat: “We delivered both top and bottom line results… Our 1,200 folks in the field… pick, pack and ship products directly to the customer,” reinforcing competitive moat and service model .

What Went Wrong

  • Canada softness: Net sales down 18.7% YoY with adj. EBITDA down 43.1%; macro uncertainty and FX headwinds cited; full-year Canada margins expected >10% but pressured .
  • Adjusted gross margin ticked down: 46.9% vs 47.6% YoY and down sequentially vs Q4 2024 (47.7%) due to mix (Koch & Intex slightly below HPS average) .
  • Working capital and cash flow: Free cash flow was -$21.3M vs -$6.1M YoY; management withdrew FCF guidance given tariff timing and magnitude uncertainty .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$350.3 $349.6 $359.3
GAAP Diluted EPS ($USD)$(0.01) $(0.01) $(0.00)
Adjusted Diluted EPS ($USD)$0.10 $0.10 $0.10
Net Income (Loss) ($USD Millions)$(1.5) $(1.2) $(0.3)
Adjusted EBITDA ($USD Millions)$52.3 $56.3 $54.5
Adjusted Gross Margin %47.6% 47.7% 46.9%
Adjusted EBITDA Margin %14.9% 16.1% 15.2%

Segment performance (QTD; $USD Thousands):

SegmentQ1 2024 RevenueQ1 2025 RevenueQ1 2024 Adj. EBITDAQ1 2025 Adj. EBITDA
Hardware & Protective Solutions (HPS)$259,874 $274,407 $32,266 $37,380
Robotics & Digital Solutions (RDS)$55,472 $56,512 $17,013 $15,416
Canada$34,959 $28,424 $3,043 $1,730
Consolidated$350,305 $359,343 $52,322 $54,526

Cash flow KPIs (QTD):

MetricQ1 2024Q1 2025
Cash from Operations ($USD Millions)$11.7 $(0.7)
Free Cash Flow ($USD Millions)$(6.1) $(21.3)
Liquidity ($USD Millions)—$200.9
Net Debt ($USD Millions)$674.0 (Dec 28, 2024) $703.7 (Mar 29, 2025)
Net Debt / TTM Adj. EBITDA (x)2.8x (Dec 28, 2024) 2.9x (Mar 29, 2025)

KPIs and operational data:

  • YTD fill rates averaged 96% .
  • MinuteKey 3.5 machines in field: >1,700; rollout expected to finalize with top two customers by end of 2026 .
  • Supplier country-of-origin mix: ~33% China / 33% North America / 34% Rest of World, with path to ~20% China by year-end 2025 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance (Q1 2025)Change
Net SalesFY 2025$1.495–$1.575B Reiterated $1.495–$1.575B Maintained
Adjusted EBITDAFY 2025$255–$275M Reiterated $255–$275M Maintained
Free Cash FlowFY 2025$90–$110M Withdrawn; replaced with leverage target ~2.5x at year end Withdrawn / Replaced
Year-end Net LeverageFY 20252.2x (assumption at Feb guide) ~2.5x (target) Raised leverage target

Note: Subsequent Q2 2025 update raised midpoints to net sales $1.535–$1.575B and adj. EBITDA $265–$275M; year-end leverage to ~2.4x (post-Q1 period context) .

Earnings Call Themes & Trends

TopicQ3 2024 (Prev-2)Q4 2024 (Prev-1)Q1 2025 (Current)Trend
Tariffs & pricingNo major tariff commentary; margin expansion as COGS peaked in May 2023 2025 guide introduced; focus on disciplined execution ~$250M annualized tariff cost; dollar-for-dollar price; working capital use expected; price largely in place by July 1 Elevated focus; timing and pass-through in progress
Supply chain diversificationIntex acquisition; operations efficient Continued measured investment; strong operations “Dual Faucet” acceleration; target China exposure ~20% by YE25 Accelerating diversification
RDS MinuteKey rolloutSequential decline narrowing; adj. EBITDA 32.2% Continued investment; record bottom line Growth resumed; mgmt expects 30%+ EBITDA and 70s GM for rest of year; >1,700 machines deployed Improving trajectory
Canada macroSoft market; -6.5% revenue YoY Modest improvement in margins -18.7% revenue YoY; macro and FX headwinds; FY margins >10% expected Weaker near-term; cautious
M&A pipelineIntex DIY acquired; tuck-ins targeted Koch and Intex as examples; tuck-in focus Pipeline strong but harder to value amid tariffs; more inbound expected; pause on acquisitions until tariffs settle Opportunistic but cautious

Management Commentary

  • “We are reiterating our full year 2025 net sales and adjusted EBITDA guidance… We estimate the impact of all new 2025 tariffs will be approximately $250 million on an annualized basis. We expect to cover higher costs on a dollar-for-dollar basis like we did during the first Trump administration.” — CEO Jon Michael Adinolfi .
  • “We are accelerating our Dual Faucet strategy and believe we can reduce our exposure to suppliers based in China to approximately 20% by the end of the year.” — CEO Jon Michael Adinolfi .
  • “At the end of the quarter, our net debt to trailing 12-month adjusted EBITDA ratio was 2.9x… We are withdrawing our free cash flow guidance… confident we can end the year around 2.5x leverage.” — CFO Robert Kraft .
  • “Adjusted EBITDA increased 4.2% to $54.5 million… Adjusted gross margins totaled 46.9%, down slightly… mixing in more Koch and Intex.” — CEO Jon Michael Adinolfi .

Q&A Highlights

  • RDS margin trajectory: Management expects to be “back at 30-plus% EBITDA rate and in the 70s for gross margins for the rest of the year,” as rollout timing and seasonality improve .
  • Personal Protective strength: Outperformance driven by planned promotions and traction on newer products; no material pull-forward ahead of tariffs .
  • Tariff pass-through timing: Price largely in place by July 1; long-term margin rate impact ~300 bps if tariffs persist and pricing is dollar-for-dollar .
  • Logistics costs and contracts: Container pricing well positioned under contracts; port and country-of-origin basis confirmed; disruption risk more for spot buyers .
  • M&A: Strong pipeline but valuation difficult amid tariff uncertainty; pause on deals until pricing dynamics settle .

Estimates Context

  • S&P Global consensus estimates for Q1 2025 and near-term quarters were unavailable at the time of query; as a result, a beat/miss vs consensus could not be determined. Values would be retrieved from S&P Global when accessible.

Key Takeaways for Investors

  • Tariffs are the central 2025 driver: Hillman intends to offset ~$250M tariff costs via price, but expects temporary working capital usage and a ~300 bps long-term margin rate headwind if tariffs persist; watch pace of pass-through and H2 volume sensitivity .
  • Resilient core and moat: Low-ticket, repair/maintenance products and embedded service model support stable demand and customer relationships during macro stress; continued new business wins in HPS .
  • Supply chain diversification could mitigate tariff impact: Execution on “Dual Faucet” and reduction of China exposure toward ~20% by YE25 reduces risk concentration; track quarterly progress .
  • Segment lens for margin trajectory: RDS set to regain margin profile post-rollout; HPS seeing synergy lift from Intex; Canada remains macro-sensitive with FX headwinds .
  • Cash flow watch: Q1 FCF was negative amid inventory build and MinuteKey investments; FCF guide withdrawn; monitor working capital cadence into Q3/Q4 (price benefits first, COGS tariff effects lag) .
  • Leverage path: Targeting ~2.5x year-end leverage despite FCF uncertainty; later raised to ~2.4x post-Q2, supported by execution and potential repurchases; deleveraging remains a strategic focus .
  • Near-term trading implications: Stock likely sensitive to updates on tariff pass-through timing, H2 volume elasticity, and RDS margin realization; medium-term thesis hinges on moat-driven share gains and supply chain flexibility .

Additional Context from Prior Two Quarters

  • Q4 2024: Record adjusted EBITDA ($56.3M) and steady adj. EPS ($0.10); FY 2025 initial guide introduced; leverage improved to 2.8x .
  • Q3 2024: Adj. EBITDA up to $72.6M; adj. gross margin at 48.2%; Intex acquisition closed; vendor-of-the-year awards at Lowe’s and Home Depot .

Notable Q1 2025 Press Releases

  • Term loan repricing lowered margin by 25 bps to SOFR+200 bps; ~$1.6M annual interest savings expected (before ~$1.0M one-time fees) .

All figures and statements are sourced from Hillman’s filings and earnings materials with citations provided.