Hillman (HLMN) Q3 2024 Earnings Call Transcript

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DATE

Tuesday, November 5, 2024 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chairman, President, and Chief Executive Officer — Doug Cahill
• Chief Operating Officer — Jon Michael Adinolfi
• Chief Financial Officer — Rocky Kraft
• Vice President, Investor Relations and Treasury — Michael Koehler

TAKEAWAYS

• Net Sales — $393.3 million, a decrease of 1.4% driven by a roughly 4% market volume decline and a 1% price headwind, offset by a 4-point lift from Koch and Intex acquisitions; slight FX headwind disclosed.
• Adjusted EBITDA — $72.6 million for the quarter, up 9%, yielding an 18.4% adjusted EBITDA margin compared to 16.7% in the prior-year period.
• Adjusted Gross Margin — 48.2%, representing a 400-basis-point improvement over the previous year’s 44.2%; down sequentially from 48.7% due to product mix.
• Adjusted SG&A — Increased to 29.9% of sales from 27.5%, mainly due to higher employee bonus expense resulting from improved bottom-line performance.
• Segment Performance (HPS) — Hardware and Protective Solutions (HPS) net sales up 0.1%; adjusted EBITDA rose 19.8% with contributions from acquisitions partially offset by market softness and pricing pressure.
• Segment Performance (RDS) — Robotics and Digital Solutions (RDS) net sales declined 5.3%, trending better than the sequential Q2 decline; adjusted gross margin in RDS at 72.3% and adjusted EBITDA margin at 32.2%, both sequentially higher.
• MinuteKey 3.5 Rollout — 900 MinuteKey 3.5 kiosks deployed, aiming for over 1,200 by year-end; deployment expected to accelerate into 2025 based on retailer demand.
• Canada Segment — Canadian net sales down 6.5%, offset by new business rollouts; adjusted EBITDA margin for Canada expected to remain at 10% for the year.
• Intex Acquisition — Acquired in the quarter; expected to add approximately $55 million annualized revenue, broaden category exposure, and generate low double-digit EBITDA margins; integration is proceeding on schedule.
• Full-Year 2024 Guidance — Raised net sales guidance to $1.455 billion to $1.485 billion (midpoint $1.47 billion), a 4% increase in midpoint over prior year; raised adjusted EBITDA guidance to approximately $250 million, a 14% increase.
• Adjusted Gross Margin Outlook — Management expects to maintain adjusted gross margins above 47% into next year despite expected short-term dilution from the Intex acquisition.
• Free Cash Flow Guidance — 2024 full-year free cash flow outlook revised to $100 million to $115 million (midpoint $107.5 million) due to higher anticipated capital expenditures in the $80 million to $85 million range.
• Net Debt and Leverage — Net debt at quarter-end was $698.7 million, with a net debt to trailing-12-month adjusted EBITDA ratio of 2.8x, down from 3.3x at prior-year end; target remains at or below 2.5x long-term.
• Receivable Write-Down — $7.8 million charge recognized for at-risk True Value receivables following True Value’s Chapter 11 filing, backed out of adjusted results; at-risk net receivables…