Executive Summary

Record quarter: Net sales rose 8.0% YoY to $424.9M and Adjusted EBITDA increased 35.8% YoY to $88.0M, both all‑time highs; Adjusted EBITDA margin expanded 420 bps to 20.7% on price realization and price‑cost timing tailwinds .
Guidance: FY25 Net Sales reiterated at $1.535–$1.575B; FY25 Adjusted EBITDA raised to $270–$275M (low end +$5M; midpoint +$2.5M); year‑end leverage still targeted ~2.4x .
Cash/FCF: Operating cash flow of $26.2M and FCF of $9.1M; working capital absorbed tariff costs with ~$60M of new tariffs embedded in inventory at quarter‑end, pressuring near‑term FCF .
Capital allocation: Repurchased ~326K shares for $3.2M; reached 2.5x net leverage and reiterated balanced approach between deleveraging, buybacks, and M&A .
Stock reaction catalyst: Management flagged a Q4 gross margin step‑down back toward Q2 levels as price‑cost timing normalizes; 2026 preliminary view: HSD–LDD revenue growth with low–mid single‑digit EBITDA growth assuming tariffs unchanged—both key narrative drivers near term .

What Went Well and What Went Wrong

What Went Well
- Record revenue ($424.9M) and Adjusted EBITDA ($88.0M); adjusted gross margin improved to 51.7% (+350 bps YoY; +340 bps seq) on pricing and timing benefits .
- HPS strength: +10.0% revenue to $329.1M; Adjusted EBITDA +57.3% to $65.8M; margin +600 bps YoY to 20.0% (aided by price, new wins, and lapping True Value write‑off) .
- RDS momentum: Third consecutive growth quarter; +3.3% revenue; 31.4% adj. EBITDA margin; ~3,000+ MinuteKey 3.5 kiosks in field (+800 seq), supporting mix and profitability .
What Went Wrong
- Volumes: Market volumes remained a headwind (implied ~-6% in Q3; H2 guide implies ~-7%), tempering organic top‑line despite pricing and wins .
- Cash conversion: FCF fell YoY ($9.1M vs $39.6M) as tariff‑related costs (~$30M) and ~$60M of tariff inventory absorbed cash; working capital elevated .
- Canada softness: Canada revenue declined slightly (-0.2%) with FX headwinds; adj. EBITDA fell 15.8% YoY and margin contracted 190 bps to 10.2% .

Financial Results

Headline metrics vs prior periods (YoY and sequential)

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($M)	$393.3	$359.3	$402.8	$424.9
Adjusted EBITDA ($M)	$64.8	$54.5	$75.2	$88.0
GAAP Diluted EPS ($)	$0.04	$(0.00)	$0.08	$0.12
Adjusted Diluted EPS ($)	$0.13	$0.10	$0.17	$0.22

Margins

Metric	Q3 2024	Q3 2025
Adjusted Gross Margin %	48.2%	51.7%
Adjusted EBITDA Margin %	16.5%	20.7%

Segment breakdown (Q3 2025 vs Q3 2024)

Segment	Revenue Q3’24 ($M)	Revenue Q3’25 ($M)	YoY	Adj. EBITDA Q3’24 ($M)	Adj. EBITDA Q3’25 ($M)	Margin Q3’24	Margin Q3’25
Hardware & Protective (HPS)	$299.3	$329.1	+10.0%	$41.9	$65.8	14.0%	20.0%
Robotics & Digital (RDS)	$56.7	$58.6	+3.3%	$18.4	$18.4	32.5%	31.4%
Canada	$37.3	$37.2	(0.2)%	$4.5	$3.8	12.1%	10.2%
Consolidated	$393.3	$424.9	+8.0%	$64.8	$88.0	16.5%	20.7%

KPIs and balance sheet

KPI	Q3 2025
YTD fill rates	97%
MinuteKey 3.5 kiosks in field	3,000+; +800 in last 3 months
Net Debt	$671.8M
Net Debt / TTM Adj. EBITDA	2.5x
Shares repurchased	~325.6K for $3.2M at $9.72 avg
Tariffs embedded in inventory (end Q3)	~$60M

Non‑GAAP adjustments (Q3 2025): Adjusted EPS of $0.22 reflects $0.08 add‑back for amortization and $0.03 for adjusting items, partially offset by ($0.01) tax effect .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales	FY 2025	$1.535–$1.575B	$1.535–$1.575B	Maintained
Adjusted EBITDA	FY 2025	$265–$275M	$270–$275M	Raised low end by $5M; midpoint +$2.5M
Year‑end leverage	FY 2025	~2.4x	~2.4x	Maintained

Color from call: Expect Q4 gross margin rate to step down (similar to Q2) as tariffs fully burden COGS while price fully flows through; directional 2026 view (flat market assumption) calls for HSD–LDD revenue growth and low–mid single‑digit EBITDA growth given tough margin comp from 2025 price‑cost timing .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2025)	Trend
Tariffs & price‑cost	Q1: Reiterated FY guide; withdrew FCF guide due to tariff uncertainty . Q2: Raised midpoints; “clarity around tariffs” improved H2 outlook .	Record margins aided by price‑cost timing; ~$60M tariffs in inventory; Q4 gross margin to normalize to Q2‑like level .	Price realization in Q3; normalization into Q4.
Supply chain diversification (“dual faucet”)	Ongoing diversification mentioned .	Accelerating multi‑country sourcing; target ability to source ~20% from China by end of 2025 to mitigate tariffs .	Reduced China exposure; flexibility rising.
RDS (MinuteKey 3.5) rollout	—	Third straight growth quarter; 3,000+ kiosks in field (+800 seq); margins near historical norms (31.4%) .	Continued rollout; supportive mix.
Market volumes/home improvement demand	Q1/Q2: Resilience; cautious on volumes .	H2 implied volumes ~-7%; Q3 ~-6%; October “slightly better” with green shoots; optimism for cycle turn .	Volumes still headwind; tentative improvement signs.
Capital allocation	Q2: Authorized $100M SRP .	Repurchased ~$3.2M; leverage 2.5x; plan to balance deleveraging, buybacks, M&A .	Active SRP; capacity for M&A.
2026 outlook	—	Flat market assumption: HSD–LDD revenue growth; low–mid single‑digit EBITDA growth due to tough comp on 2025 price‑cost tailwind .	Constructive top‑line; margin comp headwind.

Management Commentary

CEO (press release): “We generated the highest Net Sales and Adjusted EBITDA in the 61‑year history of Hillman… despite market volume headwinds and tariff volatility… positioned us to finish the year strong.”
CEO (call): “We recognized the highest net sales and adjusted EBITDA of any quarter… leverage improved to 2.5x… encouraged with some leading macro indicators… reiterating FY net sales and increasing the midpoint of adjusted EBITDA guidance.”
CFO: “Price‑cost timing drove record results… should begin to normalize next quarter… tariff‑related costs impacted FCF by about $30M; ~$60M of new tariffs in inventory.”
CFO on 2026: “Assuming flat markets, top line up high single to low double digits; EBITDA growth low to mid single digits given tough margin comp.”

Q&A Highlights

Competitive landscape/order patterns: Seeing opportunities as some competitors struggle; order patterns at largest retailers “very consistent” .
Tariffs: Approx. $150M total tariff exposure unchanged; effects flow through with inventory timing; recent small reciprocal changes noted .
Volumes and pricing: H2 implied volumes ~-7% at midpoint; difficult to isolate price elasticity vs macro; cautiously optimistic volumes may be slightly better than guide .
Margin cadence: Q3 gross margin uplift mainly price‑cost; RDS contributed ~100 bps; Q4 margins expected to resemble Q2 as timing normalizes .
SG&A: Elevated in Q3 due to bonus accrual; normalizes thereafter .

Estimates Context

S&P Global consensus estimates for Q1–Q3 2025 EPS/Revenue were unavailable at the time of query, so we cannot assess beat/miss versus Street for Q3 2025. Values retrieved from S&P Global.*

Key Takeaways for Investors

Core earnings power inflected: Record revenue/EBITDA and 420 bps margin expansion driven by pricing and timing; sustainability moderates in Q4 as tariffs fully burden COGS .
Guidance quality improved: FY25 Adjusted EBITDA range raised with leverage trending toward ~2.4x, supporting optionality for buybacks and tuck‑in M&A .
Mix/innovation tailwinds: RDS 3.5 rollout scaling (3,000+ kiosks), sustaining high segment margins and mix benefits into 2026 .
Working capital/tariffs are near‑term cash headwinds: ~$60M tariff inventory and ~$30M tariff cash impact in Q3 pressure FCF; watch Q4 cash conversion .
Demand backdrop: Volumes remain a headwind (H2 ~-7% implied), but October trends “slightly better” with green shoots; a housing turnover recovery is a key upside catalyst .
Supply chain resilience: Accelerating “dual faucet” strategy reduces China reliance toward ~20% capability, mitigating tariff/macro shocks .
2026 setup: Directional outlook calls for HSD–LDD sales growth but muted EBITDA growth (low–mid single digits) as price‑cost tailwind laps—key narrative for multiple and revisions .

Hillman Solutions Corp. (HLMN)·Q3 2025 Earnings Summary