Q2 2025 Hillman Solutions Corp Earnings Call
Good morning and welcome to the second quarter, 2025 results, presentation for Hillman Solutions, Court.
My name is Towanda and I will be your conference call Operator today.
Before we begin, I would like to remind our listeners that today's presentation is being recorded and simultaneously webcast.
The company's earnings release presentation and 10. Q were issued this morning,
These documents and a replay of today's presentation can be accessed on the hillmans. Investor relations website at irman group.com.
I will now like to turn the call over to Michael Kaylor with Hillman.
Thank you to Wanda. Good morning, everyone, and thank you for joining us. I'm Michael Kaylor, vice president of investor relations and treasury joining me on today's call are helman's president, and chief executive officer. John Michael at anafi or JMA as we call them and Hillman's Chief Financial Officer. Rocky craft.
Before we get into today's call, I would like to remind our audience that certain statements made today may be considered forward-looking at our subject, to the safe harbor, provisions of applicable, Securities laws. These forward-looking statements are not guarantees the future performance and our 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 those factors that could influence our results are contained, in our periodic and annual reports filed with the SEC.
See for more information regarding these risks and uncertainties, please see slide 2 in our earnings. Call slide presentation which is available on our website. Ir.com. 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,
JMA will begin today's call by providing some commentary on our strong, second quarter results and then give an update on our guidance.
Following jma's comments, Rocky will give a more detailed walk through our financials and guidance before, turning the call back over to JMA for some closing.
Then we will open the call up for your questions.
It's now my pleasure to turn the call over to our president and CEO John Michael at an offi JMA. Thanks Michael. Good morning, everyone and thank you for joining us.
Second quarter of 2025.
Driving strong results on both the top and bottom line.
We are pleased with our results for the first half of the year and are positioned well for continued top and bottom line growth in the second half of the year.
Let me take a moment to provide an update on some topics. We discussed last quarter.
We told you that our business is well positioned to operate in any environment.
And we delivered solid results during both quarters this year.
We told you that we would cover terrifying costing and we have
we told you that the resilience of Hillman's business, should prove volumes to be better than our guide, and they were
We told you that we would optimize the country of origin, where we Source our products, with our dual faucet strategy. And we have
The Helman team. Did a fantastic job during the quarter. I am proud of how we work together to navigate this Dynamic environment, while not losing sight of our long-term goals.
Based on our performance so far. This year, the excellent job. This team is done. We are raising the midpoint of both of our full year, 2025 net sales, and our full year, 2025 adjusted Eva guidance
We now expect our full year. 2025 net sales to be between 1.535, to 1.575 billion with a midpoint of 1.555 billion.
the low end of our net sales guidance represents 4% growth over 2024 and the high end of our guidance represents 7% growth over 2024
As for our bottom line, we now expect our full year 2025 adjusted to be between 265 to 275 million with a midpoint of 270 million.
The low end of our 2025 adjusted EVA guidance represents 10% growth over 2024, and the high end of our guidance represents 14% growth over last year.
Let me spend 1 minute on how we're thinking about 2026.
Based on what we know today.
We expect full-year 2026 net sales to grow in the high single to low double digits.
And adjusted, even to grow in the low to mid single digits.
both in an environment where we are assuming Market volumes are flat,
Rollover price in our typical new business wins will drive our Top Line in 2026.
Considering the Tariff cop. Next year, we will remain focused on managing margins operating efficiently and controlling costs.
Rocky will share more details on our guidance and outlook for the remainder of the year in a bit.
Hillman is a long track record of Performing through all kinds of economic environments, since we were founded over 60 years ago.
Historically our consistent growth and solid. Performance has been driven by our competitive mode.
Steady demand for our products, tied to every day for repair and maintenance projects in great long-term relationships with our customers.
Hillman's value-added model, which consists of over 1,200 sales and service reps in our customer stores.
Direct to store delivery capability, category management and deeply integrated retail Partnerships unlike any company in our space.
Today, we are successfully managing the current tariff environment while, not losing sight of taking great care of our customers, winning new business, and consistently striving to make our operations more efficient.
We continue to deliver orders on time and in full of our customers, which has been demonstrated by our excellent fill rates for the first half of the year.
From a supply chain in operation standpoint. We continue to execute our dual faucet strategy.
We've made progress reducing our exposure to suppliers based in China, where we are confident that we can end 2025 with the ability to source approximately 20% of our products from China.
This compares to 2018, when we sourced nearly 50% of our products from China.
The Dual faucet strategies, the concept of buying product not only for multiple suppliers, which is always been our strategy, but from multiple suppliers in multiple countries.
We know, tariffs can change the market quickly.
We are prepared for this and have built a flexible supply chain that allows us to deliver quality products at the best overall value for our customers.
We are confidently navigating the Tariff situation in executing, our plan to set Helman up for long-term success with our customers and long-term growth.
Now, let's turn our results to our results for the second quarter.
Net sales in the second quarter of 2025 total of 402.8 million.
Which increased 6.2% versus the second quarter of last year.
2 points from new business wins and 2 points from price.
These were partially offset by a 2-point headwind from Market volumes.
For the quarter adjusted Eva that increased 10.1% to 75.2 million compared to 6 8. 4 0.
Margins improved by 70 basis points to 18.7%.
Adjusted gross margins for the quarter total of 48.3% which were down slightly from 48.7%. During the year ago quarter, but improved sequentially from 46.9%. For the first quarter of 2025,
Driving. Our sequential margin performance for the quarter was improved margins in RDS and a modest amount of Terror related price.
Our biggest segment hardware and protective Solutions or HPS, had a great quarter with 8.7% growth versus the comparable period.
Adjusted e, but an increase by 14.7% to 51.5 million.
Our results were driven by contributions from Intex acquisition new business wins and price offset by just 1% decline in HPS market value.
Net sales and Robotics and digital Solutions or RDS.
Or up 2.3% versus the year, go quarter.
This is our second consecutive quarter of growth for RDS which confirms our mini key 3.5 strategy is working.
Adjusted gross margins and adjusted ebit margins, both improve sequentially, totaling 73.1% and 32% respectively.
As of today, we have over 2,200 mini, 35 machines in the field, we remain on track to finalize. A roll out of these kiosks to our 2, largest customers, by the end of 2026,
Now, turning to Canada.
Net sales and our Canadian business were down, 5.6% compared to the prior year quarter.
Sales volumes and adjusted. Evida improved sequentially as we move from Winter into the spring selling season.
Market volumes improved, but remains soft and FX headwinds weighed on our Canada's results.
For the second half of the year. We expect candidates to return to Topline growth and for the full year, we continue to expect the E. The adjusted ebit of margins will remain about 10% in Canada.
Overall, Helman is a great position with our customers and will continue to successfully execute in this environment.
With that, let me turn it over to Rocky to talk. Financials and guidance, Rocky, thanks JMA. Um, let me Dive Right into our results, and then I'll get to our guidance.
net sales in the second quarter of 2025 totaled, 402.8 million an increase of 6.2% versus the prior year quarter
Second quarter adjusted growth margins, decrease by 4 basis points to 48.3% versus the prior year quarter but improved 140 basis points sequentially.
The Intex acquisition, we made in August of 2024 has gross margins below. Our Fleet
this drove the step down in margins versus last year.
Additionally we saw a modest amount of tariff related price during the quarter which helped our margins improve sequentially while entering into our busier spring, selling season where we leverage more of our fixed costs,
adjusted as
a 29.7 during the quarter from 30.7% from the year ago quarter.
Adjusted ibaon. The second quarter total of 75.2 million improving 10% versus the year ago quarter.
Our adjusted IBA dots and net sales margin during the quarter. Improved by 70 basis points to 18.7% from a year ago.
Let me now turn to cash flows for the quarter. Net cash provided by operating activities. Was 48.7 million and we generated 31.2 million of free cash flow, even with a 32.5 million cash headwind from tariffs.
Turning to leverage and liquidity, we ended the second quarter of 2025 with $674.7 million of total net debt outstanding, which decreased by $29 million from the end of the first quarter.
Liquidity available totaled. 246.9 million consisting of 212.7 million of availability on our credit facility and 34.2 million of cash and equivalents
2024.
We maintain that our long-term adjusted Eva dots and that debt, leverage ratio, Target, remains at or below 2 and a half times.
This will give us the flexibility to grow via m&a and use our improved Financial strength to play offense.
Last week, our board approved a 100 million share repurchase program.
This is the first time Hillman has had an SRP in place. Since coming. Public in 2021 we are comfortable with our leverage ratio and feel it. Prudent to have an active plan in place.
We intend to buy stock, back to offset dilution resulting from Employee Stock Awards.
Doing so will have a minimal impact on our Leverage.
We will also seek to buy stock back when we believe there's a disconnect between the value of our company and the value of where the stock is Trading.
We anticipate anticipate deploying between 20 and 25 million annually depending on the market.
We believe these repurchases will be accretive turnings per share Drive, shareholder value, and will be an attractive place to invest capital.
Similar to the SRP. Our board, also approved a shelf registration statement.
Similar to the SRP, we felt at good public company governance to have a shelf on file.
To be clear, we do not intend to use this shelf to raise capital of any kind in the foreseeable future. We are simply putting the mechanism in place now.
Now, let me turn to our guidance.
While Hillman's business is generally resilient because of the demand for our products used for repair and maintenance projects around the home.
We are not immune to the declining foot traffic at our Retail Partners and a consumer watching their spending.
Our top and bottom line guides contemplate of volume decline, which we believe is approved and outlook. For the year, considering existing home sales are projected to remain flat.
On our last call we told you that our guidance was conservative and our volumes would be better than our guide.
So far that has proven to be the case.
Now, we have more clarity on how terrorists will impact our business. And there's less uncertainty around our expectations for the year.
As such we have increased, the low end of our net sales, guidance by $40 million.
This raises the midpoint, as the top end remains unchanged.
Our updated, net sales guidance is now between 1.535 to 1.575 billion with a midpoint of 1.555 billion reflecting 5.6% growth over last year and a 20 million dollar increase from our previous guide.
We are also increasing the low end of our adjusted. Eva dog guidance by 10 million.
This raises the midpoint as the top end remains unchanged.
Our updated adjusted ebit, dog. Guidance is now between 265 and 275 million with a midpoint of 270 million reflecting 11.7% growth over last year.
And a $5 million increase from our previous guide.
In addition, we calculate the annualized Run rate for tariffs to be approximately 150 million.
The team has done a great job working with our customers to get price.
We are confident, we will end the year around 2.4 times, leverage, assuming we hit the midpoint of our guidance. Even after deploying some cash to execute, a modest share with purchase.
Before I turn it back to JMA, I wanted to thank the Hillman team, who has worked extremely hard to deliver such a strong quarter with healthy growth on both the top and bottom line.
As we look ahead, we are confident in our ability to carry this momentum forward with disciplined execution and a focus on a strategic priorities.
We are well positioned to build on this foundation and expect to see sustained growth throughout the remainder of the Year while we focus on growing with our customers and driving shareholder value.
Jmag back to you.
Thanks Rocky.
As Rocky said, the team has done a great job this year.
I am confident Hillman is positioned for long-term, success. And long-term growth.
To our 1200 plus Frontline Sales, and Service. Folks, our operations team product team and all the support functions across the organization. I am so proud of how the entire Helman team continues to execute and win.
I'd also like to extend my appreciation to our customers vendors partners, and shareholders for their ongoing, trust and support.
We're proud of the growth. We delivered this quarter and remain confident in our ability to execute and build on the momentum throughout the year and Beyond
with that, I'll turn it back to to Wanda for the Q&A portion of our call.
Thank you, ladies and gentlemen. I asked the question, please. Press star, 1 1 on your telephone, then wait, for your name to be announced.
To withdraw your question, please press star 1 again.
Please stand by while we compile the Q&A roster.
Our first question comes from the line of lead jagata with CGS, CJs Securities, your line is open.
Hi. Good morning morning. Um so just 2, 2 questions 1 kind of bigger picture and 1 more numbers related to the problem on the bigger picture stuff.
You know in in the recent past you've talked about um focusing a little more on the pro Channel and I'd love to understand how your competitive advantages in the retail channel uh would translate to the pro Channel and kind of give you the right to win and any any examples of you know, recent success would be great.
Lie. Thanks I'll uh, I'll take that 1. So, from the pro perspective, you know, today, 25% plus of of our businesses Pro related. So to me, uh, especially in areas like Fasteners, uh, we have the permission to play, we have the products. Uh, we've got Brands, like powerpro for instance, where we just, uh, launched a full range of structural products. We've got a full range of products with a number of different areas in fastening. And today, those approvals are using our products. Um, we have focused and supporting our customers, where they support the pro, as our customers, continue to expand, and we have other opportunities and channels, uh, like lb,
Again, um, you know, that we're our Pro our customers are server. The pro we're going to continue to lean in there. So we're very excited about the um, I'll say the opportunity as we go forward. Um, at this point, we've got success in the fact that that area continues to grow for us. Uh, I won't go into great detail on this call, but we'll have some future updates where we'll talk about some of the things we're doing in Pro and how we'll continue to lead in. So, thanks for the question.
Sure. And then Rocky just 1 for you, on, um, numbers. Now that we have that Clarity on the, the Tariff impact, um, I know last quarter, you, you were able to give us, you know, some guidance in terms of the Cadence for ebita and how how price rolls in versus when costs hit the p&l, can you give us an update on what the back half? Cadence should look like.
Yeah, lie. I mean, as you know, um, it depends on the product, but, you know, given what we have from an inventory perspective, um, we'll start feeling the cost from tariffs late in the third quarter. Um, you know, that said, every product, uh, tends to be different, and there are a lot of moving Parts as you think about it. But that, that means that, you know, we'll, we'll have a, we, we believe we'll have a very strong, uh, third quarter because most of the price. Uh, if not all will be in place, we'll begin to feel the Tariff cost. And then as we go into the fourth quarter, we should see tariff cost and price. Uh, both fully in the Run rate. The only other thing I would say, you know, as as you heard during our prepared remarks
Uh, you know, the cache hits is right away. So so it was a cash drain in the second quarter, um, it'll be a little bit of a, a cash negative in the third quarter. But we, we still feel really good about where we're taking the business. And, uh, uh, really, really happy with how the team has done working with our customers to, you know, in some cases move products, and other cases get priced where we need to cover. And we feel like we're in really good shape for the rest of the year.
Okay, great. I will let others, uh, hop in the queue. Thanks. Thanks, thanks.
Please stand by for our next question.
Our next question comes from the line of William Carter, with stifel your line is open.
Hey, thank you. Good morning. Uh, question. I have for next year around the guidance, you said, roll over pricing and new business wins against the flat Market. Uh, does that assume is that clear Clarity is that assume just new business wins? You did this year or does that assume you go back to steady state next year and on that note?
Business wins have kind of cooled this year. Do you have confidence that you that you're able to fully accelerate and get back to that level of growth next year? Thanks.
Hey, well, there, there are 2 things I would say there. This is Rocky. Um, first off, you know, we still expect that we'll be at or above slightly above our 2% new business wins, which we've done, you know, for, for many years in a row. Um, as we look to 20206, yeah, we have pretty good Clarity around that. Um, if you assume we do our our 2 to 3%, and again,
Were to be clear. We're not giving a guide that that we think the markets are flat in 26. What we're saying is if you assume the markets are flat,
Being down this year, quite frankly, if you take, uh, Co out.
Is will be the worst Market year we've seen in Hillman since 2008 or 2009. So again, uh, we think we're being prudent because we are putting a lot of price in Market, everybody's putting a lot of price in market and clearly, there will be some impact on volumes, but I I think, you know, while not a guy assuming markets are flat next year. I, I think is, is proven at this point in time. I mean, it's, you know, the beginning of August.
Thanks for that. Second question. You did say correct me if I'm wrong. Annualized impacts now 150 million dollars uh regarding tariffs I guess as you think about that impact and we've had a lot of fluidity things change. I guess we had some certainty at the end of July. Do you have kind of full visibility of that number all the nuances and no steel went from 25 to to 50 but that's on the components. Do you have full visibility into that? And is there any fluidity or risk in your pricing? IE, things could change. Somebody's saying hey let's wait, 6 weeks, Etc. Just I'll stop there. Thanks.
Yeah, again this is this is Rocky. I mean, you know as you can imagine the 150 is a very round number. There's a ton of fluidity in that and there's a lot of reasons, not only um what the administration might do, but there's also fluidity around, you know, what volumes do in the back half and that clearly impacts that number. Um, and so, you know, as we think about it, we've covered our net, tariff exposure.
We're confident that anything that happens going forward, particularly as you start thinking, about how it rolls through our inventory. Um, will most likely not impact 25 as much as it will 2026, but I have to tell you, our customers have been great and, and, you know, we have spent a lot of time making sure that we work with our customers to get the right amount of tariff price. They understand that we're just covering the Tariff price as if it were a tax. Uh, we're not trying to maintain our margins and they understand that and I think that's a positive so far, everything we've done with our customers has been, uh, executed very well. We, thank our customers and as we think about the future, if there is fluidity to your point and it changes which it's likely to we will be changing, you know what? Our pricing is with our customers either up or down.
Thanks, I'll pass it on.
Thank you.
Please stand by for our next question.
Our next question comes from the line of Michael Francis with William Blair. Your line is open.
Hey guys, nice quarter. Um,
wanted to, to go back to, to the, um,
The the back half, Cadence question that that we asked and more pointedly. I think last time you mentioned, you're expecting about 300 basis points of gross margin. Um, give back from tariff prices. Is that still accurate and is there anything you can kind of do to to level set us on how we should think about gross margins 3 q and and 4 q?
Yeah, I'd like to not get into specifics around gross margin. What I would tell you, is the 300 basis, point degradation was in, in the face of 250 million of tariff price. And so, uh, you know, we we've said that, we believe that number has come down to 150. So it it's a safe assumption that that impact uh has come down um relative to how we think about the future. I think, you know, as you think about the uh I would I would go more to kind of the rest of the year and as we think about our I margin for the full year, I think you can probably safely assume. We'll be up about a 100 basis points year-over-year. Um, is probably a safe way to think about it. Now, again there to to remind everyone, there's a little bit of uh, a tariff windfall in that because of the timing of pricing. But again, we've been paying those tariffs now for you know, 45 to 90 days depending on the tariffs. And so uh it it is a cash uh uh drain to the company and so rightfully so that you know, that that price has been
Put in place.
Okay. And then um I know it doesn't seem like demand is is deteriorated much if at all. Um and you talked about volumes implied in the back half of 9%. Um, so we just wanted to see what you're seeing on on RNR and, um, if that that 9% number is just sort of a, a conservative, uh, approach to the market or if there's, there's some deterioration happening right now that you're seeing,
being prudent as Rocky said earlier, in his prepared remarks
Appreciate the color. I'll pass it on. Thanks. Thanks.
Our next question comes from the line of Matthew bully with Barclays. Your line is open.
Uh, morning everyone, thanks for taking the questions. Um, I guess, uh, I wanted to ask around uh, elasticity, um, you know, just very helpful color there around the the volumes down 9 in the second half. I think, in Q2 here you had price up 2 and volume down 2. Um, but thinking about that 2026, uh, up, high singles to low doubles on on price. I, I guess I just wanted to double check on the assumption that, um, you, you're not expecting to have, um, sort of an offsetting volume impact, in, in 2026, uh, you know, sort of, uh, I guess mirroring, uh, price. So just kind of, you know, I, I guess expand on that and sort of, um, you know, help us understand the uh, conviction around um, kind of minimizing that elasticity. Thank you.
Yeah. Matt, I think we would start by telling you that, you know, when you think about, you know, repair and maintenance. Um, if somebody needs to fix something and and we spend a lot of time talking about this on the last quarterly call, um, they're going to fix it. And so there's not a lot of elasticity in price for a lot of our products. Clearly, we're not going to say there's no elasticity. And so, that's 1 of the reasons that we've, you know, guided for the market to be down in the back half. As we think about next year. Again, I want to be clear that that a
Flat Market was not our guidance, our guidance. For what, what we said our comments because it's not really Guidance just directionally around 2026. Is that, was that in the situation where the market is flat? Now, again, if you start to compound what our markets have done, over the last several years, you have to go back many years to find levels where we would be, uh, going into 2026. If you assume that our markets are down, you know, 9% in the back half. And so, I, I would say we have, do we have a lot of conviction that the markets will be flat right now. It's August, whatever, third, fourth, fifth. So, um, your guess is as good as ours. Do we expect that markets will be down. Say something like mid single digits. I think we have a lot of a lot of conviction that that will not be the case that that these markets will be around flat next year. Are they up a couple or are they down a couple hard telling and will depend upon a lot of factors that are really hard to predict? When you are in the first week of August,
I don't know that that's super helpful. Um,
Secondly on uh the margin side, I guess a 2-part or 1 is if you could just clarify that that short period period where the the tariffs on China were at 145%. I'm just curious if there's any kind of small temporary impact from that. So if you could just clarify that, but then, secondly, if I, if I do the back of the envelope on 2026,
Seems like you're suggesting maybe the EBA margin down about 100 basis points next year. Um, so if if you could just kind of speak to is that, you know, simply the the price and cost, uh, you know, the math around, how that impacts the rate, or, is there anything else? That's kind of impacting that margin in 2026? Thank you. Let me try to do that in 2594 about 2 weeks. So it's not Material uh, to anything that that, you know, that we would be disclosing or talking about. Um, as you think about the rate, the ballpark you're in the ballpark around, what we think about rate for next year. Again, during the third quarter of this year, there will be a bit of timing around a windfall around tariffs that said, um, you know, we will hang out on the full price as we think about going into the fourth quarter, and then the next year, pending the fluidity that we answered in a, an earlier question. And so, um, again having to laugh that, uh, I'll call it slight.
Period of windfall and tariffs is what is what's driving? The lack of Leverage between the top line and the evit that rate. But again I the 1 thing, I would say and JMA you may want to comment here but we're running this business. I think better than we ever have and I've been here for 7 or 8 years and so um, you know a as the numbers move around, we're highly confident that we can do the right things to create the right type of profitability, in this business in any environment.
To deal with the back half and into 2026.
All right. Well, thanks guys. Good luck. You're awesome. Thanks man.
Our next question comes from the line of Bryant mcnamera with canaccord. Your line is open.
Hey, thanks guys. Uh, thanks for taking the question, good morning and strong results. So, first on, uh, pricing, we haven't seen much pricing on the Shelf, based on our work and I'm curious when you would expect that to hit the shelves, on the retailer level, understanding that obviously, each retailer will do things differently. And then, secondly,
Offer Rocky. Maybe I know what may you called out for H2 pricing of of plus 17% off, by similar volume Decline. And I think you mentioned in 1 of the answers to the questions that H2 guy calls for 9% volume declines. And I don't think I heard what's built in for H2 pricing component.
Yeah, maybe maybe let me go first J. Then you cannot answer the question about retailers, right? Thank you for answering my question. Yeah. The the guide would assume um, that in the second half, we have about 6 and a half percent total price in the business.
Okay. And then JMA, right? And you yeah, as you guys do quite a bit of work, we appreciate your focus on our company and and the deals and work that you do at the Shelf. I mean, there's prices been going into the marketplace um at different times. So we're watching it like you are
I really the Rocky's point, it's not my place to be commenting on what our retailers will do in the back half of the year. So I think we'll also stay posted for what we see.
Yeah. And hey Brian, just to clarify when I said 6 and a half price, that's full year price, not the second half.
Understood. Okay and then secondly um look an existing home sales appear to be bumping along the bottom here on 4 million units.
What where does that number need to go for you to see a material impact on your business and Market volumes overall?
It's a great question. We feel like, you know, we believe getting back to a 5 million uh number is was is where we would like to see it in the future. We don't have it perfectly correlated to what that growth would be. If that's your follow-on question but we feel like a 4 and a half 5 million dollar, our 5 million unit number is more in line with where we'd expect the business to be and see some of our categories that have been negatively impacted by the decline.
In sales and proof. So we're that's what we're hoping for as we go forward. But also in our guide, where we know whether the business is today and we feel confident with with it running at 4 million, is for what we've talked about in 2025,
Got it. Thanks, guys. I'll pass it on. Thank you.
Our next question comes from the line of David Matthew with Bear. Your line is open.
Thank you. Good morning guys. First question is on the, the, the change in tariff. Expectations. So you you went to a 37 and a half million per quarter, run rate, assumption and you were at 62 and a half million previously. So in the second half that would be like 50 million upside. I think you said you raised the guidance by 40 is that just reflective of the tariffs kind of rolling in through the third quarter.
Yeah, the only thing I would say about the math that you just did. Dave is remember, it's not going to the Tariff cost isn't going to hit us till late in the third quarter. It's going to begin hitting us so um, you I think your run rate numbers are right. But um again it's just a period of time where we have uh uh price and not tariff costs. It's not like a whole quarter or a big period of time. I'm not sure if that answers your question but, um, again, remember that tariff cost isn't going to hit start hitting us until
Well, into the third quarter.
I assumed it was, it was a timing issue. Yeah. And and then to the previous question on shelf prices and you you talked about, uh, prices to your customers, is there a, a disconnect between those things? Are you able to go and raise price to the retailer and then they don't change shelf price for a time? Or are those more in locked? Step? And then
I guess if all goes well, based on the the timing you just discussed. Do you expect to be ahead of tariffs in the third quarter? Meaning you you over earn? I think you've kind of implied that. But then, you'll hit sort of price cost neutrality as the tariffs fully flow in and and the price change is fully flow in. But by the time you get to the fourth quarter of 25, those will be matched up as well as you can based on what you know, currently about tariff pricing.
Place to comment on how and when you'll see that the pricing at the Shelf but we partner with our customers. Um they are fair and balanced and not easy conversations for any of the companies or our sales teams that they're having the conversations with our customers, but we're aligned with them and we're working with them to either, you know, deal with price or mitigate cost, um, through country of origin changes. So that's how we're running the business. So it's about as far as I can go.
Very good. Thank you. Thank you. Take care.
All right, next question comes from the line of Ruben Gardner with Benchmark. Your line is open.
Thank you. Good morning, guys. Congrats on the strong, uh, strong results and Outlook. Um, I guess, let's see, the I had some technical difficulties, so, sorry if I repeat, uh, any questions but on, so, so the pricing, uh, and volume outlook for the back half. Am I, is it right to assume that the pricing is probably more like in the low teens within the hardware section? And that's where you're implying. You're going to see most of the, um, excuse me, hardware, and protective section. And that's where you're going to see most of the, the declines in volume or at least that's what what you're implying and then can you tell us when the pricing actually went into place and what you've seen from a volume standpoint, uh, since then,
Yeah, let me take the first part and then I'll let JMA take a second part ribbon. Yeah, I mean, the, the there is more pricing in HPS than there would be in as an example, RDS or Canada in that reason is because there are more tariff, uh, direct impact on those businesses. Um, and then I, I'll start JMA but the, the pricing, uh, you know, some is in place, some is going in place, some went in place last week, something's going in place as we speak. But basically, um, it, you know, every customer every product is different. Um, and so we deal with it on a Case by case basis. But as we sit today, we're confident that we have, uh, our tariff exposure coverage.
For that, thanks.
Got it and then um I I know you've been working on mitigation efforts. Can you give any update or details there still on track to get it down? At least, get China down to 20%. What kind of markets are you taking it to? And uh you know what are the Tariff implications in those? Um in those markets based on what what, you know today. I know it's fluid but yeah it is fluid, you know, I'll give you a couple of nuggets. Um Ruben, you know from our perspective you know, we feel like we're in very good shape with our movement of product out of China and our dual faucet strategy. So we do still have the, we have confidence that we have the ability to be, you know, approximately 20% out of China. By year end, we are moving into, you know, pick a name of the country. I mean, you know, these are all not in volume order but you know, places like Thailand.
Um, you know, Vietnam India or a few that would benefit from, you know, the moves that we're making right now, our products and our operations teams are doing a great job, sourcing teams doing a great job working with those suppliers. You know we've had you know opportunities that we've been developing over the last several years that now we're going to start moving volume to, we have other new opportunities that will be moving to. It is fluid. Like you said as things settle down and we see where the best place for us to have the most competitive, um, product for our customers and the best value and the right quality is what will end up making the determination of where we'll we'll round out. So, Ruben will have a lot to update you and everyone else on in future quarters, but, uh, it is fluid. Um, and I'm actually really proud of what the team's doing and the partnership with our customers to make sure that we can take care of our customers and ultimately, our end users. So, um,
A lot of moving pieces.
Great. Thanks, guys. Good luck, welcome. Thanks a lot.
Thank you.
Ladies and gentlemen, I'm Sean. No further questions in the queue. I will now like to turn the call back over to Mr. Allen Ally for closing remarks.
Thank you everyone, for joining us this morning. We look forward to updating you on our progress. Soon. Hope everybody has a great day. Take care.
Already have disconnect ladies and gentlemen. That concludes today's conference call. Thank you for your participation. You may now disconnect
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