Q1 2025 Hillman Solutions Corp Earnings Call
Operator: and simultaneously Webcast.
Operator: The company's earnings release, presentation, and 10-Q were issued this morning. These documents and a replay of today's presentation can be assessed on Hillman's Investor Relations website at ir.hillmangroup.com.
Honestly webcast the company's arlene's release presentation, and 10-Q were issued this morning. These documents and a replay of today's presentation can be assessed on humans Investor Relations website at IR Dot Hillman group Dot Com I would now like to turn the call over.
Michael Koehler: I would now like to turn the call over to Michael Koehler with Hillman. Thank you, Gigi. Good morning, everyone, and thank you for joining us.
Michael Caylor with Hillman. Thanks.
Michael Taylor: Thank you Gigi good morning, everyone and thank you for joining us I'm, Michael Taylor, Vice President of Investor Relations and Treasury. Joining me on today's call are <unk>, President and Chief Executive Officer, John Michel Adenopathy or <unk> as we call them in humans, Chief Financial Officer Rocky Kraft.
Michael Koehler: I'm Michael Koehler, Vice President of Investor Relations and Treasury.
Michael Koehler: 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.
Michael Koehler: 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 the factors that could influence our results are contained in our periodic and annual reports filed with the SEC.
Michael Taylor: 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 the applicable securities laws.
Michael Taylor: These forward looking statements are not guarantees of future performance and are subject to certain risks uncertainties assumptions 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.
Michael Taylor: The 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 a slide presentation, which is available on our website IR Dot Hillman group Dot com.
Michael Koehler: 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.
Michael Koehler: 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.
Michael Taylor: 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 a slide presentation.
John Adinolfi: JMA will begin today's call by providing some commentary on tariffs and our guidance. He will then get into our first quarter highlight.
Speaker Change: <unk> will begin today's call by providing some commentary on tariffs and our guidance. He will then get into our first quarter highlights. Following his comments Rocky will give a more detailed walk through our financials and guidance before turning the call back over to Jamie for some closing comments. We will then open up the call for your questions. It's my pleasure to turn the.
John Adinolfi: Following his comments, Rocky will give a more detailed walkthrough of our financials and guidance before turning the call back over to Jaymay for some closing comments. We will then open up the call for your questions.
Michael Koehler: It's my pleasure to turn the call over to our President and CEO, John Michael Adinolfi. JMA.
Michael Taylor: Call over to our President and CEO, John Michael Adenopathy Jamie.
John Adinolfi: Thanks, Michael. Good morning, everyone. And thank you for joining us.
Jamie: Thanks, Michael Good morning, everyone and thank you for joining us the first quarter of 2025 was a very good quarter for helmet.
John Adinolfi: The first quarter of 2025 was a very good quarter for Hillman. We delivered both top and bottom line results that were in line with our expectations, and we took great care of our customers. We continue to operate well and believe our business is well positioned.
Jamie: We delivered both top and bottom line results that were in line with our expectations and we took great care of our customers.
Jamie: We continue to operate well and believe our business is well positioned given the current environment I wanted to touch on our top and bottom line guidance before going further.
John Adinolfi: Given the current environment, I wanted to touch on our top and bottom line guidance before going Based on our first quarter results and the progress we've made since the end of the quarter, we are reiterating our full year 2025 net sales and adjusted EBITDA guidance. Since the end of the quarter, several things have changed. Tariffs, the geopolitical environment, expectations about economic growth, and the health of the consumer, to name a few. Our team has been monitoring and addressing the impacts of tariffs on our costs and how they will impact our overall business.
Jamie: On our first quarter results and the progress we've made since the end of the quarter. We are reiterating our full year 2025, net sales and adjusted EBITDA guidance.
Jamie: At the end of the quarter several things have changed tariffs.
Jamie: Geopolitical environment expectations about economic growth and the health of the consumer to name a few.
Jamie: Our team has been monitoring and addressing the impact of tariffs on our cost and how they will impact our overall business.
John Adinolfi: Let me share some of the math that has gone into our top line assumptions. Today, a third of our products come from suppliers based in China. A third comes from suppliers based in North America, and a third comes from suppliers from the rest of the world. Depending on the product type and the country it is sourced from, the amount of these new tariffs vary greatly.
Jamie: Let me share some of the math that has gone into our top line assumptions.
Jamie: Today, a third of our products come from suppliers based in China.
Jamie: Third come from suppliers based in North America, and a third comes from suppliers from the rest of the world.
Jamie: Depending on the product type in the country. It is sourced from the amount of these new tariffs vary greatly.
John Adinolfi: Altogether, based upon what we know today, we estimate the impact of all new 2025 tariffs will be approximately $250 million on an annualized basis. We believe we can mitigate the additional tariff-related costs through price increases. At the same time, we are working together with our customers and suppliers to optimize the country of origin where we source our products. Conversations with our customers have been ongoing, and we are gaining clarity.
Jamie: Altogether based upon what we know today, we estimate the impact of all new 2025 tariffs will be approximately $250 million on an annualized basis.
Jamie: We believe we can mitigate the additional tariff related costs through price increases.
Jamie: At the same time, we are working together with our customers and suppliers to optimize the country of origin, where we source our products.
Jamie: Conversations with our customers have been ongoing and we are gaining clarity we are executing our plan we.
John Adinolfi: We are executing our plan. We expect to cover higher costs on a dollar for dollar basis, like we did during the first Trump administration.
Jamie: We expect to cover higher costs on a dollar for dollar basis like we did during the first Trump administration.
John Adinolfi: The midpoint of our top-line guidance assumes that the lift we get from price will be offset by volume. This assumes market volumes are down approximately 17% during the second half.
Jamie: The midpoint of our topline guidance assumes that the lift we get from price will be offset by volumes.
Jamie: This assumes the market volumes are down approximately 17% during the second half.
John Adinolfi: For context, the worst year in the history of Hillman saw volumes down 10%. While the resilience of our Hillman business should prove our volumes will be better than our guide, we are holding our guidance to be prudent and conservative as we are clearly in uncharted waters.
Jamie: For context, the worst year in the history of Hillman saw volumes down 10%.
Jamie: While the resilience of our helmet business should prove our volumes will be better than our guide we are holding our guidance to be prudent and conservative as we are clearly in unchartered waters.
Rocky Kraft: Rocky will provide a deeper dive into these numbers and our guidance ranges in a bit.
Speaker Change: Rocky will provide a deeper dive into these numbers and our guidance ranges and a bit.
John Adinolfi: Having been in business for over 60 years, Hillman has successfully managed through multiple market cycles, and this business has proven resilient time and time again. We are confident that we can manage through this current set of challenges. What differentiates Hillman is the strength of our competitive mode, the resilience of repair and maintenance demand, and the healthy, long-term partnerships we have with our top customers. Hillman products tend to be small ticket items that are critical parts of home improvement jobs done by both pros and DIYers. This makes our business less susceptible to the swings in economy.
Speaker Change: Having been in business for over 60 years.
Speaker Change: <unk> has successfully managed through multiple market cycles, and this business has proven resilient and time and time again.
Speaker Change: We are confident that we can manage through this current set of challenges.
Speaker Change: With differentiate Hillman as the strength of our competitive moat, the resilience of repair and maintenance demand and a healthy long term partnerships, we have with our top customers.
Speaker Change: Hillman products tend to be small ticket items that are critical parts of home improvement jobs done by both pros and DIY Ers. This.
Speaker Change: This makes our business less susceptible to swings in the economy.
John Adinolfi: Whether the pack of fasteners cost 50 cents or $2, it's relatively small versus the cost of most everyday items, and it enables you to complete a project, and in many times, fix a problem.
Speaker Change: Whether the pack of fasteners cost 50 sensor to dollars, it's relatively small versus the cost in most everyday items and it enables you to complete a project and in many times fixed the problem.
John Adinolfi: What I love about Hillman is that we bring so much more to the table than a typical vendor or distributor. We have 1,200 folks in the field managing the aisles for our customers. We have the ability to pick, pack, and ship products directly to the customer. And we have over 60 years of experience and relationships throughout our customers' organizations. The MOOC has been built over the past six decades has allowed us to become a trusted partner and become being a trusted partner helps when you're dealing with some of the world's largest retailers.
Speaker Change: What I love about hill of minutes that we bring so much more to the table in a typical vendor a distributor we had 1200 folks in the field managing the aisles for our customers we have the ability to pick pack and ship products directly to the customer and we have over 60 years of experience and relationships throughout our customers' organizations.
Speaker Change: The moat.
Speaker Change: Has been built over the past six decades has allowed us to become a trusted partner and become being a trusted partner helps when you're dealing with some of the world's largest retailers.
John Adinolfi: On the other side of the equation, we have our long-term supplier partners. In 2018, we sourced nearly 50% of our products from China. Since then we've worked hard to diversify our global supply chain, including working with new suppliers who source throughout the world. Given the current environment, 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. 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.
Speaker Change: On the other side of the equation, we have our long term supplier partners in 2018, we sourced nearly 50% of our products from China.
Speaker Change: Since then we've worked hard to diversify our global supply chain, including working with new suppliers, who sorts throughout the world.
Speaker Change: Given the current environment, we are accelerating our dual faucet strategy and believe we can reduce our exposure suppliers based in China to approximately 20% by the end of the year.
Speaker Change: Dual thoughts and strategy is the concept of buying product not only from multiple suppliers, which has always been our strategy bought from multiple suppliers in multiple countries. Our goal is to have a flexible supply chain that allows us to deliver quality products at the best overall value for our customers.
John Adinolfi: Our goal is to have a flexible supply chain that allows us to deliver quality products at the best overall value for our customers. Our world-class logistics and operations team will continue bringing best-in-class products to our customers and, importantly, deliver orders on time and in full. The core team at Hillman has worked side by side with very little turnover over the past several years. We've been battle-tested. COVID, rampant inflation, supply chain disruption. We have seen our challenges and our results prove that we can actually do it.
Speaker Change: Our World Class logistics and operations team will continue bringing best in class products to our customers and importantly deliver orders on time and in full.
Speaker Change: The core team at helmet has worked side by side with very little turnover over the past several years.
Speaker Change: We've been battle tested COVID-19 ramping inflation supply chain disruptions, we have seen our challenges and our results prove that we can execute.
John Adinolfi: Our approach to these tariffs will be straightforward. Our customers understand what is going on. Our suppliers do too. We are confident we will manage through this and believe we will come out a stronger company on the other side.
Speaker Change: Our approach to these tariffs will be straightforward our customers understand what is going on our suppliers due to we are confident we will manage through this and believe we will come out a stronger company on the other side.
John Adinolfi: Now let's jump into a more detailed look at the quarter. Net sales in the first quarter of 2025 totaled $359.3 million, which increased 2.6% versus the first quarter of 2024. driving our top line sales from the in-tax acquisition, which closed at the end of 2024. This added about four points of growth versus last year. Also contributing to our net sales during the quarter was two points of growth from new business, a three-point headwind from market volumes, and a neutral impact from price and FX.
Speaker Change: Now, let's jump into a more detailed look at the quarter.
Speaker Change: Net sales in the first quarter of 2025, total $359 3 million, which increased two 6% versus the first quarter of 2024.
Speaker Change: Driving our top line sales.
Speaker Change: The <unk> acquisition, which closed at the end of 2024. This added about four points of growth versus last year.
Speaker Change: Also contributing to our net sales during the quarter was two points of growth from new business, a three point headwind from market volumes and a neutral impact from price and FX.
Rocky Kraft: For the quarter, Adjusted EBITDA increased 4.2% to $54.5 million, compared to $52.3 million last year, and our Adjusted EBITDA margins improved by 30 basis points to 15.2%. Adjusted gross margins for the quarter totaled 46.9%, which were down slightly from 47.6% during the year-ago quarter, and sequentially from 47.7% during the fourth quarter of 2024. Weighing on margins for the quarter was mixing in more Cook and Intex, which have margin rates slightly below our overall hardware and protective solution segment.
Speaker Change: For the quarter adjusted EBITDA increased four 2% to $54 5 million compared to $52 3 million last year and our adjusted EBITDA margins improved by 30 basis points to 15, 2%.
Speaker Change: Adjusted gross margins for the quarter totaled 46, 9%, which were down slightly from 47, 6% during the year ago quarter and sequentially from 47, 7% during the fourth quarter of 2024.
Speaker Change: Weighing on margins for the quarter was mixing in more Cook and index, which have margin rate slightly below our overall hardware and protective solutions segment.
Rocky Kraft: We continue to grow and integrate these businesses and expect to see margin improvement in both as we continue to realize synergy.
Speaker Change: We continue to grow and integrate these businesses and expect to see margin improvement in both as we continue to realize synergies.
Rocky Kraft: Net sales in Hardware and Protective Solutions, or HPS, which is our biggest segment, increased by 5.6% over the comparable period, while our adjusted EBITDA increased by 15.8% to $37.4 million. Our results were driven by contributions from the Intex Acquisition and New Business Wins. Net sales in Robotics and Digital Solutions, or RDS, were up 1.9% versus the year-ago quarter. We are pleased to see RDS return to growth during the quarter, which is a positive reflection of our Minikey 3.5 rollout. Adjusted gross margins and adjusted EBITDA margins were down slightly, totaling 70.9% and 27.3% respectively.
Speaker Change: Net sales in hardware and protective solutions or <unk>, which is our biggest segment increased by five 6% over the comparable period, while our adjusted EBITDA increased by 15, 8% to $37 4 million. Our results were driven by contributions from the <unk> acquisition and new business wins.
Speaker Change: Net sales in robotics, and digital solutions or Rds were up one 9% versus the year ago quarter. We are pleased to see Rds returned to growth during the quarter, which is a positive reflection of our many key three five rollout.
Speaker Change: Adjusted gross margins and adjusted EBIT margins were down slightly totaling 79% and 27, 3% respectively.
Rocky Kraft: As of today, we have over 1,700 Minikey 3-5 machines in the field, and we expect to finalize our rollout to our two largest customers by the end of 2020.
Speaker Change: As of today, we have over 1700, many key three five machines in the field and we expect to finalize our rollout to our two largest customers by the end of 2026.
Rocky Kraft: Turning to Canada. Net sales in our Canadian business was down 18.7% compared to the prior year quarter. Driving our results was the 12% decline in existing home sales during the quarter, political and economic uncertainty, and a challenging retail environment. FX headwinds weighed on Canada's results as well.
Speaker Change: Turning to Canada.
Speaker Change: Net sales in our Canadian business was down 18, 7% compared to the prior year quarter driving our results was a 12% decline in existing home sales during the quarter political and economic uncertainty and a challenging retail environment.
Speaker Change: <unk> headwinds weighed on Canada's results as well for the full year, we expect adjusted EBIT margins to remain above 10%.
Rocky Kraft: For the full year, we expect adjusted EBITDA margins to remain above 10%. We have the best retail partners and the highest market share in hardware in Canada. And we are confident this business will return to profitable growth when we get help from the macro. As we look at Hillman overall, we believe we are in a great position with our customers and can successfully execute in this environment.
Speaker Change: We have the best retail partners and the highest market share in hardware in Canada, and we are confident this business will return to profitable growth, we get help from the macro.
Speaker Change: As we look at him and overall.
Speaker Change: We believe we are in great position with our customers and can successfully execute in this environment with that let me turn it over to rocky to talk financials and guidance Rocky. Thanks, Jamie let's dive right into our results and then we'll get to our guidance net sales in the first quarter of 2025 totaled $359 3 million.
Rocky Kraft: With that, let me turn it over to Rocky to talk financials and guidance. Thanks, JMA. Let's dive right into our results and then we'll get to our guidance. Net sales in the first quarter of 2025 totaled $359.3 million, an increase of 2.6% versus the prior year quarter. First quarter adjusted gross margin decreased by 70 basis points to 46.9% versus the prior year quarter, and we're in line with our expectations. Adjusted SG&A as a percentage of sales decreased to 31.7% during the quarter from 32.7% from the year-ago quarter, which was also in line with our expectations.
Rocky: An increase of two 6% versus the prior year quarter first quarter adjusted gross margin decreased by 70 basis points to 46, 9% versus the prior year quarter and were in line with our expectations.
Rocky: Adjusted SG&A as a percentage of sales decreased to 31, 7% during the quarter from 32, 7% from the year ago quarter, which was also in line with our expectations adjusted.
Rocky Kraft: Adjusted EBITDA in the first quarter was $54.5 million, which grew 4% versus the year-ago quarter. Our adjusted EBITDA to net sales ratio during the quarter was 15.2%, which compares favorably to 14.9% a year ago. Contributing to our healthy adjusted EBITDA margin was our positive mix of price, cost and efficient operation.
Rocky: Adjusted EBITDA in the first quarter was $54 $5 million, which grew 4% versus the year ago quarter.
Rocky: Our adjusted EBITDA to net sales ratio during the quarter was 15, 2%, which compares favorably to 14, 9% a year ago.
Rocky: Contributing to our healthy adjusted EBITDA margin was our positive mix or price cost and efficient operations.
Rocky Kraft: Now let me talk about cash flow. For the 13 weeks ended March 29, 2025, net cash used by operating activities was $0.7 million, compared to cash flow provided by operating activities of $11.7 million in the year ago period. Capital expenditures totaled $20.7 million for the quarter, this compared to $17.8 million in the prior year.
Rocky: Now, let me talk about cash flow for the 13 weeks ended March 29, 2025, net cash used by operating activities was <unk> 7 million compared to cash flow provided by operating activities of $11 7 million in the year ago period.
Rocky: Capital expenditures totaled $20 7 million for the quarter this compared to $17 8 million in the prior year.
Rocky Kraft: For the first quarter of 2025, free cash flow of negative $21.3 million was consistent with our expectation compared to negative free cash flow of $6.1 million in the year-ago quarter. Our spend was driven by our inventory build for our spring and summer busy season, as well as building Minikeet 3-5 machines and related retrofits.
Rocky: For the first quarter of 2025 free cash flow of negative $21 3 million was consistent with our expectation compared to negative free cash flow of $6. One in the year ago quarter, our spend was driven by our inventory build for our spring and summer busy season as well as building many key refis machines and related retrofits.
Rocky Kraft: Next, let me turn to leverage and liquidity. We ended the first quarter of 2025 with $703.7 million of total net debt outstanding. Liquidity available totaled $200.9 million, consisting of $164.6 million of availability on our credit facility and $36.3 million of cash and equipment.
Rocky: Yes.
Rocky: Next let me turn to leverage and liquidity.
Rocky: We ended the first quarter of 2025 was $703 $7 million of total net debt outstanding.
Rocky: Liquidity available totaled $209 million, consisting of $164 6 million of availability on our credit facility and $36 $3 million of cash and equivalents.
Rocky Kraft: At the end of the quarter, our net debt to trailing 12 month adjusted EBITDA ratio was 2.9 times compared to 2.8 times at the end of 2024 and 3.2 times a year ago. Our long-term adjusted EBITDA to Net Debt Leverage Ratio target remains at below two and a half times.
Rocky: At the end of the quarter, our net debt to trailing 12 month adjusted EBITDA ratio was two nine times compared to two eight times at the end of 2024 and three two times a year ago.
Rocky: Our long term adjusted EBITDA to net debt leverage ratio remains target remains at below two five times.
Rocky Kraft: This will give us the flexibility to grow via M&A and potentially use our improved financial strength in different ways to add stockholder value.
Rocky: This will give us the flexibility to grow via M&A and potentially use our improved financial strength and different ways that stockholder value.
Rocky Kraft: Now let me turn to our guidance. Note that all of these guidance numbers include tariffs, and assume the current tariff environment remains unchanged throughout the rest of 2025. We are reiterating our net sales guidance to be between 1.495 to 1.575 billion with a midpoint of 1.535 billion, reflecting 4% growth over last year. We are also reiterating our adjusted EBITDA guidance to be between $255 million and $275 million with a midpoint of $265 million reflecting 10% growth over last year.
Rocky: Now, let me turn to our guidance note that all of these guidance numbers include tariffs and assumed the current tariff environment remains unchanged throughout the rest of 2025.
Rocky: We are reiterating our net sales guidance to be between $1 $4 95 to $1 $5 75 billion with a midpoint of 153 5 billion, reflecting 4% growth over last year.
Rocky: We are also reiterating our adjusted EBITDA guidance to be between 255 at $275 million with a midpoint of $265 million, reflecting 10% growth over last year.
Rocky Kraft: Our top line midpoint makes the following Full Year Assumption. Approximately a 2% lift from new business wins. A 2% lift from intact. and a neutral impact from tariffs, meaning our pricing for tariffs will be offset by volume. As JMA mentioned, we calculate the annualized run rate for these new tariffs will be approximately $250 million. To the extent we pay for these tariffs, we expect to price for them dollar for dollar. For the top line, we believe that we will be successful in getting price increases done. which will positively impact us.
Rocky: Our topline midpoint makes the following full year assumptions, approximately a 2% lift from new business wins.
Rocky: A 2% lift from index and a neutral impact from tariffs, meaning our pricing for tariffs will be offset by volumes.
Rocky: As Jamie mentioned, we calculate the annualized run rate for these new tariffs will be approximately $250 million.
Rocky: To the extent, we pay for these tariffs we expect to price for them dollar for dollar.
For the top line, we believe that we believe will be successful in getting price increases done which.
Rocky: Which will positively impact us. However, we expect that the consumer will be under pressure with higher prices and that will be a headwind to market volumes.
Rocky Kraft: However, we expect that the consumer will be under pressure with higher prices and that will be a headwind to market value. As for new business wins, there are some opportunities for us to win new business in this tariff environment. For example, we are already talking to our customers about product categories where we source from low tariff countries and the incumbent sources from China.
Rocky: As for new business wins, there are some opportunities for us to win new business in this tariff environment.
Rocky: For example, we are already talking to our customers about product categories, where we source from low tariff countries and the incumbent sources from China.
Rocky Kraft: For the bottom line. Holding our top line plus the timing of how COGS and price flow through our income statement give us confidence to hold our EBITDA guide. Today, tariffs are being charged when imported products hit U.S. ports, yet our price increases do not immediately go into effect. It is customary for us to give retailers time to adjust their retail.
Speaker Change: For the Bottomline colder.
Speaker Change: Holding our topline plus the timing of how Cogs implied price flow through our income statement give us confidence to hold our EBITDA guidance.
Speaker Change: Today tariffs are being charged with imported products hit U S ports, yet our price increases do not immediately go into effect.
Speaker Change: It is customary for us to get retailers time to adjust their retail prices.
Rocky Kraft: Because of this, we are now expecting a working capital use for the year resulting directly from tariffs.
Speaker Change: Of this we are now expecting a working capital use for the year, resulting directly from tariffs.
Rocky Kraft: Because of the uncertainties around the timing and magnitude of tariffs, we are withdrawing our free cash flow guidance. However, there are many variables that impact leverage. We will manage those variables and we are confident we can end the year around two and a half times leverage, slightly elevated from our prior expectations.
Speaker Change: Because of the uncertainties around the timing and magnitude of tariffs we are withdrawing our free cash flow guidance.
Speaker Change: However, there are many variables that impact leverage.
Speaker Change: We will manage those variables and we are confident we could end the year around two five times leverage slightly elevated from our prior expectations.
Rocky Kraft: Now let me spend a minute talking about the timing of how COGs flow through our income statement and its impact on our bottom line. Typically, Hillman has about four to six months worth of inventory in the channel. That means the products that arrive at the port today that are subject to tariffs will not show up and are cost of goods sold until September, October, November time. And we don't expect to see the full impact from price increases till the third. During the second quarter, net sales will not see a material benefit from price. and Cogs will not yet increase from tariffs.
Speaker Change: Now, let me spend a minute talking about the timing of how costs flowed through our income statement and its impact on our bottom line.
Speaker Change: Typically hillman has about four to six months worth of inventory in the channel that means the products that arrive at the port today that are subject to tariffs will not show up in our cost of goods sold until September October November timeframe.
Speaker Change: And we don't expect to see the full impact from price increases until the third quarter.
Speaker Change: During the second quarters second quarter net sales will not see a material benefit for price and Cogs will not yet increase from tariffs. However in the third quarter net sales will benefit from price and Cogs will not yet fully increase from tariffs.
Rocky Kraft: However, in the third quarter, net sales will benefit from price and Cogs will not yet fully increase. And then during the fourth quarter, net sales will benefit from price and COGS will have increased from tariff.
Speaker Change: And then during the fourth quarter net sales will benefit from price and we will have increased from tariffs.
Rocky Kraft: Our focus remains controlling the controllables, and we believe we have done a great job doing that. The midpoint of our updated guidance for both of those metrics puts us relatively in line with our historic growth.
Speaker Change: Our focus remains controlling the controllable and we believe we have done a great job doing that.
Speaker Change: Midpoint of our updated guidance for both of those metrics puts us relatively in line with our historic growth algorithm.
John Adinolfi: With that, let me turn it back to JMA. Thanks, Rocky. As we laid out in our prepared remarks, we are confident we can handle this tariff situation.
Speaker Change: With that let me turn it back to <unk>.
Speaker Change: Thanks, Rocky as we laid out in our prepared remarks, we are confident we can handle this tariff situation. Let me summarize our sourcing team has been in Asia for the last several weeks meeting with current potential suppliers to continue implementing our global supply chain strategy. Our sales teams are working with our customers to make sure. They are taking care of it while we get price.
John Adinolfi: Let me summarize. Our sourcing team has been in Asia for the last several weeks, meeting with current potential suppliers to continue implementing our global supply chain strategy. Our sales teams are working with our customers to make sure they are taken care of while we get prices to cover our tariff exposure. Remember, most of our products are for repair and maintenance projects. You can't do a project without them. In addition, our products are typically inexpensive. have very little elasticity and are not a large portion of the cost of the project. I'm confident we will successfully navigate tariffs with our strategic partners on both the supplier and customer side of the business.
Speaker Change: To cover our tariff exposure remember most of our project products are for repair and maintenance projects you can't do a project without them. In addition, our products are typically inexpensive has very little elasticity and are not a large portion of the cost of the projects I am confident we will successfully navigate tariffs with.
Our strategic partners on both the supplier and customer side of the business.
John Adinolfi: Our outstanding teams at Hillman have dealt with challenges successfully in the past, and we will do it again.
Speaker Change: Our outstanding teams of Hillman have dealt with challenges successfully in the past and we will do it again with that I will turn it back to the TG for the Q&A portion of the call.
Operator: With that, I'll turn it back to Gigi for the Q&A portion of the call. J.D., please open the call for questions. Thank you.
Speaker Change: Gigi Please open the call for questions.
Operator: As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please limit yourself to one question with one follow up and hot.
Operator: Please limit yourself to one question with one follow-up and hop back in the queue. Please stand by while we compile the Q&A roster.
Speaker Change: Back in the queue. Please standby, while we compile the Q&A roster.
Lee Jagoda: Our first question comes from the line of Lee Jagoda from CJS Securities.
Speaker Change: Our first question comes from the line of Lee Jagoda from CJS Securities.
Lee Jagoda: Hi, good morning. Morning, Lee. Thanks for all of the quantifications around the tariffs and the timing, so I'll switch to other topics for now.
Speaker Change: Hi, good morning.
Speaker Change: Okay.
Speaker Change: So thanks for all of the quantification around the tariffs and the timing so I'll switch to other topics for now.
Lee Jagoda: I guess starting with the RDS business, it looks like the margins had a pretty negative incremental margin impact, I would assume partially as a result of the rollout.
Speaker Change: I guess, starting with the Rds business.
Speaker Change: It looks like the <unk>.
Speaker Change: Margins at a pretty negative incremental margin impact I would assume partially as a result of the rollout.
Rocky Kraft: Given we're expected to see some growth for the balance of the year, what do incremental margins look like either year over year or off of the Q1 base as we go forward? Yeah. What happened in the first quarter, when you think about RDS, is we did see, because of the incremental rollout, plus some of the moves that are happening at non-incremental rollout customer, we did see some pressure. Again, you also have to remember that Q1 is a light revenue month relative to the other quarters during the year.
Speaker Change: Given we're expected to see some growth for the balance of the year, what incremental margins look like either year over year off of the Q1 base as we go forward and grow sales.
Speaker Change: Yes.
Speaker Change: What happened in the first quarter. When you think about Rds is we did see because of the incremental rollout plus some of the moves that are happening at non incremental rollout customer.
Speaker Change: We did see some pressure again you also have to remember that Q1 is a light revenue months relative to the other.
Lee Jagoda: And so we would expect that incrementally and even overall, we'll be back at 30, 30 plus EBITDA rate and in the 70s for gross margins for the rest of the year. Got it. That's great.
Speaker Change: Orders during the year and so we would expect that incrementally and even overall will be back at 30, 30, plus EBITDA rate.
Speaker Change: In the seventies for gross margins for the rest of the year.
Rocky Kraft: And then just shifting over to personal protective for for the follow up. It outperformed our estimate by quite a bit. Was there any pre buying, you know, ahead in terms of the tariff impact or promotional related activities? And how do we think about the balance of the year given that I think the team, first off, no material pull forwards in that business, you know, promo activity was strong, was planned to be strong. And Lee, we, the team actually outperformed, we were really pleased with how the PS business performed. Some of the products that we mixed in last year, some of the new products have actually gotten some really good traction.
Speaker Change: Got it that's great and then just shifting over to personal protective for for the follow up.
Speaker Change: It outperformed our estimate by quite a bit was there any pre buying ahead in terms of the tariff impact or promotional related activities and how do we think about the balance of the year given that dynamic.
Speaker Change: Yes, I think the team first off no material pull forward in that business.
Speaker Change: Activity was strong was planned to be strong and lead the team actually outperformed we were really pleased with how the business performed.
Speaker Change: Some of the products that we mixed in last year. Some of the new products are actually gotten some really good traction. So we're proud of what the PFS team has delivered.
Rocky Kraft: So we're proud of what the PS team has delivered. And then for the balance of the year, I know we reiterated the four-year guidance, but in promotional or in personal protective... In particular, how does that look relative to the expectations you had starting? Yeah, I would say generally and widely. I mean, right now, we're not changing guidance. And at this point, we're in a bit of a wait and see, but we feel well, we feel really good about where that business is.
Speaker Change: And then for the balance of there I know you reiterated the full year guidance, but in promotional are in personal protective and.
Speaker Change: In particular, how does that look relative to the expectations you had starting the year.
Speaker Change: Yes, I would say generally inline Lee I mean, right now we're not changing guidance.
Speaker Change: At.
Speaker Change: At this point, we're in a bit of a wait and see but we feel well we feel really good about where that business is positioned.
Lee Jagoda: Okay, great, I'll hop back in queue.
Operator: Thanks.
Speaker Change: Okay, Great I'll hop back in queue. Thanks, Thanks Lee.
Operator: Thank you.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Matthew Bouley: Our next question comes from the line of Matthew Bouley from Barclays Investment Bank.
Speaker Change: Our next question comes from the line of Matthew Bouley from Barclays Investment Bank.
Matthew Bouley: Good morning, you have Anika DeLafayette on for Matt today. Thank you for taking the questions. First off, morning. So first off, I wanted to speak on the Foliar Guidance. So you guys spoke to volumes down 17% in the second half, wondering how this compares to your prior volume assumptions. I'm just wondering, more broadly, what points of incremental upside could be offsetting this volume weakness that's leading you guys to holding the guide. Thanks.
Matt Bouley: Good morning, you have any good dockyard for Matt today, Thank you for taking the questions.
Speaker Change: First off good morning.
Speaker Change: First off wanted to speak on that full year guidance. So you guys spoke to volumes down 17% in the second half wondering how this compares to your prior volume assumptions.
Speaker Change: I'm, just wondering more broadly what points of incremental upside could be offsetting this volume weakness, that's leading you guys to holding the guidance. Thanks.
Rocky Kraft: This is Rocky. Let me take that. Our initial guide when we thought about the full year, the midpoint was down about 1 percent market volumes, which compared, I would say, was below where our big retailers were. They were probably up a point or two. As we said in our prepared remarks, we've held the guidance. and that assumes down 17% market. This business has never seen that before. The worst year in the history of Hillman, which was 2009, volumes were down 10. And so we do believe that this down 17 is a pretty conservative view of the back half.
Rocky: So this is rocky let me let me take that our initial guide when we thought about the full year, the midpoint was down about 1% market volumes, which compared.
Rocky: I'd say its below where our big retailers, where they were probably up a point or two as we said in our prepared remarks.
Rocky: We've held the guidance and that assumes down 17% market. This business has never seen that before the worst year in the history of Hillman, which was 2009 volumes were down 10, and so we do believe that this down 17 is a pretty conservative view of the back half now having said that as we said in our prepared remarks.
Rocky Kraft: Now, having said that, as we said in our prepared remarks, no one's lived through tariffs like this, at least in our lifetimes, that we've had to deal with from a business perspective. And so it's uncharted territory. And saying that we're going to go get all the price, and volumes aren't going to be impacted relatively significantly, we think would not be prudent given the situation we're in. So that's kind of where we landed on the numbers. Again, we would tell you we hope we're wrong, and we hope that market volumes aren't impacted that much. But again, being where we are, we thought it was prudent to hold and not change anything, at least in Got it.
Rocky: No one's lift through tariffs like this at least in our lifetimes that we've had to deal with from a business perspective, and so it's uncharted territory.
Rocky: And saying that we're going to go get all of the price and volumes aren't going to be impacted relatively significantly we think would not be prudent given the situation brands. So that's kind of where we landed on the numbers.
Rocky: Again, we would tell you we hope were wrong and we hope that market volumes arent impacted that much but but again being where we are we thought it was prudent to hold that not not change anything at least at this point.
Matthew Bouley: That's very helpful. Thank you.
Speaker Change: Got it that's very helpful. Thank you and then my second question.
John Adinolfi: And then on my second question, you know, looking at tariffs longer term, I appreciate your details on the geographic supplier breakdown in 2025, but how does this translate to maybe how are you thinking about this breakdown in the future? And then if there's any other region that you'd like to drive higher exposure, lower exposure. Yeah, good question. We did share in the prepared remarks that we targeting to be about 20% by year-end in China. But to answer your question more detailed, you know, we really want to continue to find the best place as a source for our customers.
Speaker Change: Looking at tariffs longer term I appreciate your details on the geographic breakdown in 2025, but how does this translate to maybe how are you thinking about this breakdown in the future and then if there is any other region that you'd like to drive higher exposure lower exposure.
Speaker Change: Yes. Good question, what we did share in the prepared remarks that we are targeting to be about 20% by year end in China, but to answer your question more detail, we really want to continue to find the best places to source for our customers. We actually are very excited about.
John Adinolfi: We actually are very excited about opportunities that our teams have been actually working on for years. So the, you know, when this, I'll say, crisis or change in tariff strategy came into place, we're already moving down the road to move into other areas of Southeast Asia and India, for example. So we'll continue to extend and drive volume into those areas. And we're excited about some of the opportunities that are in front of us. So you'll see us continue to diversify our portfolio, but make, at the same time, we'll make sure that we have the right quality products for our customers, they can deliver on time and in full.
Speaker Change: Opportunities that our teams have been actually working on for years. So the.
Speaker Change: I will say crisis or change in care strategy came into place. We already are moving down the road to move into other areas of Southeast Asia and India. For example, so we will continue to extend and drive volume into those areas and we're excited about some of the opportunities there in front of us. So youll see us continue to diversify our portfolio, but at the same time.
Speaker Change: We'll make sure that we have the right quality products for our customers. They can deliver on time and in full so we feel good about our strategy and what we talked about in the prepared remarks. So we'll continue to update you on future quarters, but youll see us diversify our base.
John Adinolfi: So we feel good about our strategy and what we talked about in the prepared remarks. So we'll continue to update you on future quarters, but you'll see us diversify our base.
Matthew Bouley: Great.
Matthew Bouley: Thanks.
Operator: Good luck.
Operator: Thank you.
Speaker Change: Great. Thanks, Good luck.
Speaker Change: Thank you.
Stephen Volkmann: One moment for our next question. Our next question comes from the line of Stephen Volkmann from Jeff. Hi, good morning, guys. Maybe just one more tug on the thread here around tariffs, Rocky. So we're sort of talking about 17% price in the second half. Is it all in the second half? Or is it more in the fourth quarter than the third?
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Stephen Volkmann from Jefferies.
Stephen Volkmann: Hi, good morning, guys.
Speaker Change: Maybe just.
Speaker Change: One more tug on the thread here around tariffs Rockies, so were sort of talking about 17% price in the second half is it all in the second half or is it more in the fourth quarter than the third.
Rocky Kraft: Stephen, you're asking about when we take price. We expect all of the prices to be in place by July 1st. Okay, great. And then you talk about this being dollar for dollar. So I guess the implication is that margins are a little lower as we go through this process. Yeah, they are. If you think longer term, Stephen, you know, we've said we believe we kind of structurally change the margins in this business to 47%. Assuming the tariffs stay where they are, and we price dollar for dollar for tariffs, this will impact that rate by about 300 basis points, you know, on a long term once they're all in place, and we fully lap them.
Speaker Change: Steven you're asking about when we take price we expect all over the place by July one.
Speaker Change: Okay great.
Speaker Change: And then you.
Speaker Change: Talk about this being dollar for dollar so I guess the implication is that margins are a little lower as we go through this process.
Speaker Change: Yes. They are if you think longer term.
Speaker Change: Stephen and you know we've said, we believe we kind of structurally change the margins in this business to 47% assuming the tariffs stay where they are and we price dollar for dollar for tariffs. This will impact that rate by about 300 basis points on a long term once they are all in place and we fully lap so.
Rocky Kraft: So it is a margin rate impact. But again, we're going to be good partners with our customers, we're going to price dollar for dollar. So far, those conversations are going very well. And again, we think we can come out of this a stronger company on the backside. Got it.
Speaker Change: It is a margin rate impact, but again, we're going to be good partners with our customers, we're going to price dollar for dollar.
Speaker Change: So far those conversations are going very well.
Speaker Change: And again, we think we can come out of this a stronger company on the back side.
Rocky Kraft: And then is there an opportunity maybe over some longer period to get back to that previous target over time? You know, it's challenging. When you think about $250 million of cost, even the way to get back to those rates is going to be if tariffs come down, if they come down substantially, if they stay at those levels, we, you know, our goal will be to grow our margin rate and our EBITDA rate like we have in the business over time, but it's going to be, you know, incremental, it's not going to be a big numbers like that, unless the tariff .
Speaker Change: Got it and then is there an opportunity maybe over some longer period to get back to that previous target overtime.
Speaker Change: Yes.
Speaker Change: It's challenging.
Speaker Change: When you think about $250 million of cost Steven.
Speaker Change: The way to get back to those rates is going to be if tariffs come down they come down substantially if they stay at those levels. Our goal will be to grow our margin rate and our EBITDA rate like we have in the business over time, but it's going to be incremental it's not going to be a big numbers like that unless the tariffs come off.
Stephen Volkmann: Got it, okay, makes sense. Thank you, I'll pass it on. Thanks.
Speaker Change: Got it Okay makes sense. Thank you I'll pass it on.
Speaker Change: Thanks.
David Manthey: One moment for our next question. Our next question comes from the line of David Manthey from Bayer. Yeah, hi, good morning, everyone.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of David Manthey from Baird.
David Manthey: Yes, hi, good morning, everyone.
David Manthey: First question is on, could you talk about the similarities and differences of the current environment versus what you experienced during the COVID supply chain issues? And I guess you've outlined 2025 pretty well.
Speaker Change: First question is on the.
Speaker Change: Could you talk about the similarities and differences of the current environment versus what you experienced during the COVID-19 supply chain issues and I guess, you've outlined 2025 pretty well I'm wondering if you can conceptually at least look forward and say what happens in 'twenty six kind of good case versus bad case scenario.
John Adinolfi: I'm wondering if you can conceptually at least look forward and say, what happens in 26 kind of good case versus bad case scenario? Yes, I'll start, Dave, good morning with the supply chain side of it. So, it is a different scenario that right now, actually, we feel really good about our service levels. The company is performing better, candidly, than we ever have on a service level, taking care of our customers in aggregate. And just like anyone, there's going to be some disruptions here and there, but we haven't seen anything material. Our supplier base has been supportive during these challenges, and we've continued to flow products.
Speaker Change: Yes, I'll start Dave good morning, with the supply chain side of it. So it is a different scenario right now actually we feel really good about our service levels. The company is performing better.
Speaker Change: Candidly than we ever have on a service level, taking care of our customers in aggregate and just like anyone there's going be some disruptions here and there, but we haven't seen anything material.
Speaker Change: Our supplier base has been supportive during these challenges and we've continued to flow product. So hopefully that answers. Your question. We don't see the disruption that we saw before that said, we're planning and believe that some of the moves we are going to make are going to help us smooth out some of those challenges that we see coming down the road. So at this point supply chain is in good shape.
John Adinolfi: So, hopefully, that answers your question. We don't see the disruptions that we saw before. That said, we're planning and believe that some of the moves we're going to make are going to help us smooth out some of those challenges that we see coming down the road. So, at this point, supply chain's in good shape. From a 2026 perspective, you know, I think that what we look at our business, we're operating well, we're going to continue to perform well. We started the year, or I should say last year, when we planned 25, we felt like it was going to be a tale of two halves.
Speaker Change: From a 2026 perspective, I think what we look at our business. We're operating well we're going to continue to perform well we started the year or I should say last year. We play in 'twenty five we felt like it was really a tale of two halves questions out now second half of year is it going to be challenging as you heard rocky and I volt framed we expect volumes to be down.
Speaker Change: One <unk>.
Speaker Change: We still believe there is a tremendous amount of opportunity to pent up demand longer term just like you hear a lot of our partners talk about the marketplace that the home improvement market has been under pressure for the last several years and we believe when it turns it will be a strong run so too early for us to factor in any guide from a percentage or numbers perspective for 'twenty six, but we're going to do.
John Adinolfi: So, too early for us to factor in any guide from a percentage or numbers perspective for 26, but we're going to still take care of our customers and make sure we're ready when it comes. Okay, thank you.
Speaker Change: We'll take care of our customers and make sure we're ready when it comes.
David Manthey: And second question, are your shipping container price contracts related to the mix of countries on slide eight? Or is it more of an open concept? And what I'm wondering is, if there's a shift in volumes, like, let's say the China tariffs are reduced, and there's a an influx of container demand coming from China, does that, is there a disconnect there? Or does it not matter? I won't say it doesn't matter. We actually don't believe there's a disconnect. What I would say is we actually just had this conversation yesterday at length. I mean, we feel very good about where our container costs, and I'll say pricing is for 2025.
Speaker Change: Okay. Thank you and the second question.
Speaker Change: Are you shipping container price contracts related to the mix of countries on slide eight or is it more of an open concept.
Speaker Change: What I'm wondering is if there is a shift in volumes like let's say the China tariffs are reduced and there is a.
Speaker Change: Influx of container demand coming from China does that.
Is there a disconnect there or does it not matter.
Speaker Change: I won't say it doesn't matter, we actually don't believe there is a disconnect. What I would say is we actually just had this conversation yesterday at length. I mean, we feel very good about where our container cost.
Rocky Kraft: It is going to be, even though it is inflation, it can be better than we initiated. And with where we're looking to move products, we're actually really well positioned. We believe there will be some disruptions in the marketplace. For those of those that will go out there and float on spot. Since we have contracts in place, we believe we've got enough of that. It's a nice supply chain, again, depending on what demand does. But assuming what we have in our guide, and what we think the year could be, we feel like we're well positioned, Dave.
Speaker Change: I would say pricing is for 2025, it is going to be even though it is inflation it can be better than we initiated and with where we're looking to move products. We're actually really well positioned we believe there will be some disruptions in the marketplace for those those that will go out there to flow on spot since we have contracts in place. We believe we've got a nice supply chain again.
Speaker Change: Pending on what demand does but assuming what we have in our guide and what we think the year could be we feel like we're well positioned Dave so it will be interesting to see what happens, but we feel like we've got the right steps.
Rocky Kraft: So it will be interesting to see what happens, but we feel like we got the right step. Contracts in place.
Rocky Kraft: And just to clarify, is it based on country of origin or not? It is based on ports, so yes, it is based on country of origin. All right.
Speaker Change: And contracts in place.
Speaker Change: And just to clarify is it based on country of origin or not.
Speaker Change: It is based on ports. So yes. It is based on country of origin correct.
David Manthey: Thanks very much. You're welcome.
Speaker Change: Okay, alright, thanks, very much Youre welcome. Thank you.
Operator: As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced towards draw. Your question. Please press star one one again please.
Reuben Garner: Please limit yourself to one question with one follow-up and hop back in the queue. One moment for our next question.
Speaker Change: Limit yourself to one question with one follow up and hop back in the queue.
Speaker Change: One moment for our next question.
Reuben Garner: Our next question comes from the line of Reuben Garner from Benchmark. Thank you. Good morning, guys. Morning, Reuben.
Speaker Change: Our next question comes from the line of Reuben Garner from benchmark.
Speaker Change: Thank you good morning, guys good morning Reuben.
John Adinolfi: Sorry to harp on the tariff thing, but a couple of follow-ups. So, first of all, what is left in China from a product perspective? And, you know, those categories, I guess, can you talk about the price elasticity you've seen in them historically relative to some of your other products? So what's left? I mean, to Reuben, to your point, you know, I'll say core fastening, for instance, nuts and bolts, regular core fastening, some hardware products. We do buy dip gloves out of China today and some other products like that. So there is a mix in the HPS business that is there.
Speaker Change: Sorry to harp on the tariff thing, but a couple of follow ups.
Speaker Change: So first of all what what is left in China from a product perspective.
Speaker Change: Those categories I guess can you talk about the price elasticity, you've seen in them historically relative to some of your other products.
Speaker Change: So what's left I mean to Rubin to your point.
Speaker Change: I'll say core fastening for instance, nuts and bolts regulator core fascinating some hardware products, we do buy dip gloves out of China today, and some other products like that so there is a mix in the hps business that is there we have been developing sources outside of that region for those product lines for a while as I mentioned earlier and we will continue to move those we have the right.
John Adinolfi: We have been developing sources outside of that region for those product lines for a while, as I mentioned earlier, and we'll continue to move those when we have the right overall cost and quality. So that is something the teams are working hard on that, you know, and we'll continue to do that. So those are some of the products that are there. You know, elasticity, you know, we believe based on the increase in the percentages, as you know, they vary greatly in those products, not as concerned on the fastening side as we would be in something like gloves.
Speaker Change: Raul cost and quality.
Speaker Change: That is something the teams are working hard on that.
Speaker Change: We will continue to do so so those are some of the products that are there.
Speaker Change: Elasticity.
Speaker Change: We believe that based on the increase in the percentages as you know they vary greatly in those products.
Speaker Change: Not as concerned on the fastening side as we would be in something like clubs. So there is definitely elasticity.
John Adinolfi: So there's definitely elasticity. You know, we don't have numbers to share with the broader audience, but we're working those activities now. We'll make sure that we're continuing to move those products out of those countries. So they're less impacted than they would be today. Got it.
Speaker Change: Don't have numbers to share with the broader audience, but we're working those activities now we will make sure that we're continuing to move those products out of those countries that are less impacted than they would be today.
John Adinolfi: And then on the pricing side, are these Price increases already announced and in place. Are they Quote-unquote permanent or are you using, have you or the industry ever used surcharges before? I know this is kind of unusual, but just trying to get some, some context if this were to kind of go away in three months, like what it would look like. Yeah, so I mean, as the price increases, you know, won't go into great detail, ongoing conversation with our customers and they're progressing, you know, how we're going to do it surcharges, the way our pricing is set up with you can imagine the number of SKUs, the number of customers, that's typically not how our customers like to operate.
Speaker Change: Got it and then on the pricing side are these.
Speaker Change: Price increases already announced and then placed are they.
Speaker Change: Quote unquote permanent or are you using have you or the industry ever use surcharges before I know this is kind of unusual but just trying to get some some context. If this were to kind of go away and three months like what it would look like.
Speaker Change: Yes, so I mean as the.
Speaker Change: The price increases we wont go into deep great detail ongoing conversation with our customers and they are progressing.
Speaker Change: How we're going to do it surcharges the way our pricing is set up with you could imagine with the number of Skus. The number of customers that typically not how our customers like to operate so they would be price increases and then just like we always weighted in the extreme times, especially where we're able to move out of tariff related areas, we're going to work with our customers to make sure that we have the right cost position over the right time.
John Adinolfi: So they would be price increases. And then just like we always would in the extreme times, especially where we're able to move out of tariff related areas, we're going to work with our customers to make sure that we have the right cost position over the right time. Perfect. Thank you, guys, and good luck. You're welcome. Thank you.
Speaker Change: Yeah.
Speaker Change: Perfect. Thank you guys and good luck. Thank.
Speaker Change: Thanks, Rick.
Operator: One moment for our next question.
Speaker Change: Thank you one moment for our next question.
Madison Counton: Our next question comes from the line of Brian McNamara from Canaccord Genuity. Good morning, this is Madison Counton on for Brian, thanks for taking our questions. I'm not going to beat the dead horse on price increases. But when do you expect those to hit the shelves of retailers and like if competitors preemptively taken price? Yeah, I mean, so I can't speak for what the retailers are going to do. They are obviously managing their P&L. So Madison, we are working with them on our cost side and being transparent. And you know, you'll start seeing some of that flow through when they feel the right time.
Speaker Change: Our next question comes from the line of Brian Macnamara from Canaccord Genuity.
Speaker Change: Good morning. This is Madison on for Brian Thanks for taking our questions.
Speaker Change: Just wanted to beat the dead horse on price increases but.
Speaker Change: When do you expect those to hit the shelves of retailers and like our competitors.
Speaker Change: Really taken price thanks.
Speaker Change: Yes, I mean, so I can't speak for what the retailers are going to do they are obviously managing their P&L. So Madison, we are working with them on our cost side and being transparent and youll start seeing some of that flow through when they feel it's the right time, so sorry to be vague, but I can't go any deeper than that at this point.
Rocky Kraft: So sorry to be vague, but I can't go any deeper than that.
Madison Counton: That's OK.
Rocky Kraft: And then secondly, how is the current macro uncertainty impacting M&A? Like presumably isn't helping, but maybe it's pushing some operators to throw in the towel. Yeah, I think what we would tell you, Madison, is that the M&A pipeline is strong. I do think, like you said, we're going to have more inbound than we probably had previously because the tariff challenges for a smaller company who's like one product and not a strategic partner is going to be tough for a lot of these large retailers. That being said, as you think about valuation today, we would tell you it's virtually impossible to determine what the value of a business is with all of the tariff uncertainty.
Speaker Change: That's okay and then secondly, how is the current macro uncertainty impacting M&A, presumably isn't helping but maybe it's pushing some operators throwing the towel.
Speaker Change: Yes, I think what we would tell you Madison.
Speaker Change: The M&A pipeline is strong.
Speaker Change: I do think like you said, we're going to have more inbound then we probably had previously because the tariff challenges for a smaller company, who is like one product and not a strategic partner is going to be tough a lot of these large retailers that being said as you think about valuation today.
Speaker Change: We would tell you it's virtually impossible to determine what the value of the business is with all of the tariff uncertainty and so.
Rocky Kraft: And so, you know, while we're talking to a lot of people and we'll continue to and we'll continue to build our pipeline until tariffs settle down and we've kind of gotten through the first cycle of understanding pricing and how that plays out, you're not going to see us actively doing any acquisitions.
Speaker Change: While we are talking to a lot of people and will continue to and will continue to build our pipeline until tariffs settled down and we've kind of gotten through the first cycle of understanding pricing and how that plays out youre not going to see us actively doing any acquisitions.
Madison Counton: Thank you. You're welcome. Thanks, Ben. Thank you.
Speaker Change: Sure.
Speaker Change: Thank you guys.
Speaker Change: Youre welcome Thanks Benson.
John Adinolfi: This concludes the Q&A portion of today's call.
Adam: Thank you. This concludes the Q&A portion of today's call I would like to turn the call back over to Mr. Adam <unk>.
John Adinolfi: I would like to turn the call back over to Mr. Adinolfi for some closing comments. Well, thank you, everyone, for joining. We appreciate you taking the time to listen to our call today on Q1. We look forward to coming back to you next quarter and talking about the progress we continue to make at Hillman.
Speaker Change: <unk> for some closing comments.
Speaker Change: Well. Thank you everyone for joining we appreciate you taking the time to listen to our call today in Q1, we look forward to coming back to you next quarter and talking about the progress we continue to make a helmet, thanks and have a great day.
Operator: Thanks and have a great day.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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Operator: Thanks for watching!
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