Summary of HLMN Q4 2025 Earnings Call

1Key Financial Results and Metrics

Full Year 2025 Results::

Net Sales:: Increased by 5.4% to $1.552 billion.

Adjusted EBITDA:: Rose by 13.9% to $275.3 million.

Adjusted Gross Profit Margin:: Improved to 48.7%, up 60 basis points from 2024.

Free Cash Flow:: Totaled $35.1 million, down from $98.1 million in 2024, impacted by $65 million in tariff costs.

Net Debt:: Decreased to $665.8 million from $674 million in 2024, with a net debt to trailing 12-month adjusted EBITDA ratio of 2.4x.

Q4 2025 Results::

Net Sales:: Increased by 4.5% to $365.1 million.

Adjusted EBITDA:: Increased by 2.3% to $57.5 million.

Adjusted EBITDA Margin:: 15.8%, down from 16.1% year-over-year.

2Strategic Updates and Business Highlights

Business Segments::

Hardware and Protective Solutions (HPS):: Strong performance with net sales up 7.8% to $1.2 billion and adjusted EBITDA up 26% to $196.3 million.

Robotics and Digital Solutions (RDS):: Returned to growth with a 1.6% increase in net sales to $220.2 million, driven by the rollout of new MinuteKey 3.5 kiosks.

Canadian Operations:: Experienced a decline in net sales by 6.6%, attributed to soft market volumes and currency headwinds, with adjusted EBITDA margins just under 10%.

Strategic Focus:: Continued investment in customer care, expansion into the Pro market, and a healthy M&A pipeline with potential bolt-on acquisitions.

3Forward Guidance and Outlook

2026 Guidance::

Net Sales:: Expected to be between $1.6 billion and $1.7 billion, with a midpoint of $1.65 billion (6.3% growth).

Adjusted EBITDA:: Forecasted between $275 million and $285 million, with a midpoint of $280 million (1.7% growth).

Free Cash Flow:: Projected between $100 million and $120 million, with a midpoint of $110 million.

Adjusted Gross Margins:: Expected to normalize between 46% and 47% due to the full realization of tariff costs.

4Bad News, Challenges, or Points of Concern

Market Conditions:: Existing home sales remain low at 4.06 million, impacting home improvement projects and overall sales.

Volume Declines:: Market volumes were down about 5% in 2025, with expectations that this trend may continue into 2026.

Soft Q4 Performance:: The fourth quarter showed softer sales than anticipated, leading to conservative guidance for 2026.

Tariff Impact:: Continued tariff costs have pressured margins and cash flow, with expectations for normalization in 2026.

5Notable Q&A Insights

Gross Margin Expectations:: Q1 2026 is expected to be the low point for gross margins due to high-cost inventory and seasonal volume declines.

New Business Wins:: Confidence in higher new business wins in 2026, supported by ongoing initiatives and product launches.

RDS Transition:: Customer transitions in the RDS segment will continue into Q1 and Q2 but are expected to stabilize thereafter.

M&A Outlook:: The M&A environment is improving, with expectations for 1-2 deals in 2026 as previously paused opportunities resurface. This summary encapsulates the key financial metrics, strategic initiatives, guidance, challenges, and insights from the Q&A session, providing a comprehensive overview of Hillman Solutions Corp's performance and outlook.