David Manthe of Baird, your line is now open.

Thank you. Yeah, good morning, everyone. Yeah, first question, Rocky, I think you said 3.5% contribution from acquisitions. That was a little higher than we thought based on the revenues of the two companies coming in. So that would calculate to, I think, $14 million. We were looking for like $10 million. I'm just wondering if there was anything unusual there that made the revenues come in stronger than expected. And then related to that, as we're looking at the core business and stripping out Campbell and Delaney and looking strictly at HPS segment contribution margin, X those acquisitions, what was the sort of organic growth and contribution margin on the core business, excluding acquisitions?

Yeah, so lots of questions there, Dave. Campbell and Delaney did come out of the gates a little stronger than we anticipated, so they performed very nicely in the quarter, and we were pleased with that. Secondarily, I just think as you think about the whole business and what we said at Investor Day is we expected the quarter to grow above zero. We grew at two. We expect over the long term new business to be four plus. It was four, four. And then we expect M&A to get us between 8 and 12, which, you know, we did 9-8 for the quarter. So we feel like we were kind of clicking on all cylinders. Now, obviously, that's not going to happen every quarter. It's not a straight line. But Q2 looks a lot like what we've set out to achieve from a longer-term perspective. When you think about just the HPS business kind of on a standalone basis, you know, good top line results in the quarter. And from a contribution perspective, you know, the business performed as we expected in the quarter about 15, sorry, about 16 percent EBITDA, which, again, kind of in line with what we expect. you know when you when you look at the contribution across all of our businesses in the quarter while we had a really nice improvement sequentially when you look year over year down a bit that was planned and anticipated because of what we're seeing from a cost perspective on inventory we expect the second half actually you know contribution to be better than we saw in the first half and that's what we've talked about in prior calls got it and next yeah

congrats on the Cambridge deal. Could you talk about the customer base there, like number of customers? Are these mostly fastener specialists? Are they generalists? What sort of end markets do they serve? Any sort of contacts there would be helpful. Yeah, excellent.

Yeah, so we're excited about their customer base. They have thousands of customers. They are the long tail, so they are supporting all different parts of the economy, candidly. So, you've got everything from, you know manufacturing to you know they do provide some products into the construction channels but think about industrial and commercial really outside of the core of what we do in the u.s that's what's exciting about they are the ones where they can ship on demand they can drop orders in minutes and literally turn them out so they are you know very good and uh very good at getting orders out the same day when needed so they are touching you know they have many many different customers across the spectrum. And these are mostly folks that we don't touch at all. So it's truly incremental. So we think about all the different verticals in industrial, they're touching the different areas. I mean, they have everything from, you know, military grade, you know, screws to, you know, things that could go into a construction environment, a commercial building to maintenance and repair in a small, medium or large factory. You know, we commented on data centers. I mean, they are serving all parts of the, I'll say, economy outside of retail. So hopefully that gives you kind of a broad spectrum of what they are doing today and why we're so excited about the business.

Yeah, and if I could get one more here, it sounds like you're referring to shipping direct to customer. And I'm wondering if that's the primary model here where, as you said, there's a long tail here. Other distributors are procuring these for their customers. You're direct shipping those to end customers. Is that the model here?

So I want to be clear. Part of the reason we put in master distributor, just like we are in retail, they are a master distributor. So while they can drop to an end user, they are selling through distribution. I want to be perfectly clear that everybody understands, you know, that is an important part of our business model. Why we think, why Hillman could be, you know, the best fastener company in the world is the fact that we will go out there and be able to continue to support our customers as they support the end user. So I want to be clear there that we are selling through distribution while they can drop ship, yes.

Okay, that's what I was asking. Yeah, I didn't mean you're selling to end users. I meant you're sending to end users in a drop ship on behalf of the other distributor. So, okay, very good.

Thank you very much. Appreciate it.

Thank you. Our next question comes from Brian McNamara from Mechanicord. Your line is now open.

Hey, good morning, guys. Congrats on the acquisition and the strong results. Two quick ones from me. First, Rocky, just a clarification on leverage. Did I hear you correctly? You said you expect this acquisition to take it up a turn, but you expect to be at 2.5 at the year end? Did I mishear that?

At the end of 27. At the end of 27, Brian. I expect to be back at or below two and a half turns, assuming, you know, that would assume we don't do any other M&A between now and then.

Understood. Thank you. JMA on new business wins. Can you talk about your progress there? And I think you mentioned a win, particularly, obviously, in pro in the Pacific Northwest.

Like, how are those sales discussions overall going, particularly with current customers who maybe didn't know you had that capability, but also the new ones, too? like any thoughts or comments on progress there would be helpful thank you yeah absolutely uh so yeah new business as we shared you know four and a half percent so you know a bit above where we were expecting to be so really pleased with overall new business and it was across i would say diy pro and industrial so all three channels had some nice wins for the period i think on the pro side is where you're going the one point that we're really excited about because those are truly new opportunities that we've been working on for you know better part of i guess this year you know We're starting to see where you bring them good, solid value, you take care of the customer, you make sure you get the product through, which we do really well in retail. And when we're able to demonstrate that on the pro side, we started to see the wins that gave you a couple of proof points in the prepared comment. So I think it's really that on the boots, on the ground, if you will, boots on the ground, being with the customer, making sure you get them what they need. And we are, I'll say, changing and adapting our model to be able to do that. We actually just had a new business pro review yesterday, and we were hearing a number of different stories of where you got the right products, you're able to take care of the customer and turn them, you can actually get that business that we weren't getting before. So that, I'll say, flywheel is starting to turn, and we're really excited about the early results. And I think when you get good people, you got great products, and you take care of the customer, good things happen, and we're seeing that.

And if I could just squeeze one last one on M&A, it sounds like there's still opportunities out there. Like we had thought you'd do three deals this year. We didn't expect a deal of this size, but how does the market look overall? It seems like it's a lot more active than this time last year.

Yeah, there's definitely some more activity out in the marketplace now. We see, you know, and I think it comes down to, you know, depending on which bucket they fall in, right, whether it's a tuck-in or smaller deal and then some of the strategic, which is what we just did with Cambridge. We think there's nice opportunities on both sides of that, I'll say, equation. And, yeah, we're seeing more things come to market, and we're seeing more interesting deals. So I'd say the market is warming up, if you will.

Very helpful. Best of luck, guys.

Appreciate it.

Thank you. Our next question comes from Lee Jagata of CJS Securities. Your line is open.

Hey, I'm back. So just in case – I don't think I missed it, but can you talk to the seasonality, if any, around Cambridge versus the core business, and also maybe touch on like the inventory needs compared to your core business, just because they're going to be shipping some more proprietary SKUs, and then lastly, just maybe a look back on the trajectory of that business the last couple of years in terms of the growth rate.

Yeah, so from a seasonality perspective, much less than our core business. I know you know we don't have a major seasonality, but we do have a curve. So I would say flattish to small seasonality. They do a nice steady business. You know, if you look back over time, Cambridge has not had a, you know, had a nice run, COVID long tail filled in very nicely. They've had, you know, over the last five years, there's been modest growth, but we think we can actually really turn that and move it forwardly. So we're really excited about what we can do with it and focusing on that growth. That team's done a great job taking care of their customers. We need to give them a little bit more, I'll say, firepower to go after some new business, and we will do that with that team.

Yeah, I think, Lee, when you think about inventory, clearly a slower turning business than kind of the core of Hillman, but the business looks a lot like our specialty business. So think of the drawers that you see inside traditional hardware stores, slower turning inventory, but also command a much higher rate because of that. And you can obviously see that in the Cambridge results.

So I guess based on that, you're assuming some dis-synergies in the first quarter out of the box then, just given that the EBITDA you're including is below the run rate?

No, we're just, again, we're assuming that this is bought kind of Lee around, you know, the beginning of the fourth quarter. So we're just being conservative around what the number will look like. And I don't expect to see any negative synergies associated with it. We're buying the inventory of a business that's in good shape, that's serving their customers very well. So there's not like a need to buy a bunch of inventory to get this up to standard. They're there. They're performing very well as we sit today.

Okay. So then the run rates that you kind of list, the trailing revenue and EBITDA of that business, That should be the same or greater going forward, not anything different than that. Correctly. We're going to grow into this.

Thank you. This concludes the question and answer session. I would now like to turn it back over to Mr. Adonalfi for closing remarks.

Thanks again, everyone, for joining us this morning. We look forward to updating you on our progress in the near future. Have a great day.

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Founded in 1964 and headquartered in Cincinnati, Hillman is a leading provider of hardware and related products serving retail, pro-distribution, and industrial MRO customers. Over the last six decades, Hillman has built a legacy of service and growth by forming strategic partnerships with North America's leading home improvement, hardware, and farm and fleet retailers. Hillman differentiates itself from the competition with its dedicated field sales team of 1,200 associates, direct-to-store distribution capabilities, and world-class global sourcing and supply chain expertise. Hillman offers an extensive product portfolio of more than 111,000 SKUs, including fasteners, hardware, project gear and supplies, and keys and engraving services.