8-K
Hillman Solutions Corp. (HLMN)
8K UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2023
Hillman Solutions Corp.
(Exact name of registrant as specified in its charter)
| Delaware | 001-39609 | 85-2096734 |
|---|---|---|
| (State or other jurisdiction | (Commission File No.) | (I.R.S. Employer |
| of incorporation) | Identification No.) |
1280 Kemper Meadows Drive
Cincinnati, Ohio 45240
(Address of principal executive offices)
Registrant’s telephone number, including area code: (513) 851-4900
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.0001 per share | HLMN | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On May 9, 2023, Hillman Solutions Corp. (the “Company”) issued a press release, furnished as Exhibit 99.1 and incorporated herein by reference, announcing the Company's selected summary financial results for its thirteen weeks ended April 1, 2023.
The information provided pursuant to Item 2.02, including the exhibit attached hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press Release, datedMay 9, 2023, announcing the financial results ofHillman Solutions Corp.for itsthirteen weeks ended April 1, 2023.
99.2 Supplemental slides provided in connection with thefirstquarter2023earnings call of Hillman Solutions Corp.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: May 9, 2023 | Hillman Solutions Corp. | |
|---|---|---|
| By: | /s/ Robert O. Kraft | |
| Name: | Robert O. Kraft | |
| Title: | Chief Financial Officer |
Document
Hillman Reports First Quarter 2023 Results
CINCINNATI, May 9, 2023 -- Hillman Solutions Corp. (Nasdaq: HLMN) (the “Company” or “Hillman”), a leading provider of hardware products and merchandising solutions, reported financial results for the thirteen weeks ended April 1, 2023.
First Quarter 2023 Highlights Thirteen weeks ended April 1, 2023
•Net sales decreased (3.7)% to $349.7 million compared to $363.0 million in the prior year quarter
•Net loss totaled $(9.1) million, or $(0.05) per diluted share, compared to net loss of $(1.9) million, or $(0.01) per diluted share, in the prior year quarter
•Adjusted diluted EPS1 was $0.06 per diluted share compared to $0.09 per diluted share in the prior year quarter
•Adjusted EBITDA1 totaled $40.2 million compared to $44.0 million in the prior year quarter
•Net cash provided by operating activities totaled $31.5 million compared to cash used for operating activities of $(3.5) million in the prior year quarter
•Free Cash Flow1 totaled $13.4 million compared to $(16.1) million in the prior year quarter
Management Commentary
"First quarter 2023 results represent a solid start to the year during which we produced strong Adjusted EBITDA and free cash flow,” commented Doug Cahill, Chairman, President and Chief Executive Officer of Hillman. “While severe weather conditions in certain parts of the West impacted a portion of volume, our sales performed well in our other markets and we saw the benefit of our multiple price actions flow through our top line results. Free cash flow came in strong as we worked down inventory levels ahead of schedule while maintaining excellent fill rates of 97% at the shelf.”
“In our largest category, Hardware Solutions, our hardware products are used for small-ticket repair, remodel and maintenance projects and have negligible exposure to new housing starts, which drives consistent results and positions us to perform well throughout the year. Our moat, which consists of direct-to-store shipping model and our 1,100-memeber field sales and service teams, continues to deliver best-in-class service and solutions to our customers, and we are proud of our team's relentless efforts to drive our business forward. We are confident that our differentiated strategy, experienced team, and our ability to execute will drive strong results in 2023 and beyond.”
Balance Sheet and Liquidity at April 1, 2023
•Gross debt was $911.6 million, compared to $918.8 million at the end of 2022; net debt1 outstanding was $876.9 million, compared to $887.7 million at the end of 2022
1) Denotes Non-GAAP metric. For additional information, including our definitions, use of, and reconciliations of these metrics to the most directly comparable financial measures under GAAP, please see the reconciliations toward the end of the press release.
•Liquidity available totaled approximately $243.6 million, consisting of $208.9 million of available borrowing under the revolving credit facility and $34.8 million of cash and equivalents
•Net debt1 to trailing twelve month Adjusted EBITDA1 was 4.2x times, unchanged from December 31, 2022
Full Year 2023 Guidance - Reiterated
Hillman reiterated the following guidance based on its current view of the market and its performance expectations for the fifty-two weeks ended December 30, 2023. This guidance was originally provided on February 23, 2023 with Hillman's fourth quarter 2022 results.
| Full Year 2023 Guidance | |
|---|---|
| Net Sales | $1.45 to $1.55 billion |
| Adjusted EBITDA1 | $215 to $235 million |
| Free Cash Flow1 | $125 to $145 million |
First Quarter 2023 Results Presentation
Hillman plans to host a conference call and webcast presentation today, May 9, 2022, at 8:30 a.m. Eastern Time to discuss its results. Chairman, President, and Chief Executive Officer Doug Cahill and Chief Financial Officer Rocky Kraft will host the results presentation.
Date: Tuesday, May 9, 2023
Time: 8:30 a.m. Eastern Time
Listen-Only Webcast: https://edge.media-server.com/mmc/p/38jr8v7z
A webcast replay will be available approximately one hour after the conclusion of the call using the link above.
Hillman’s quarterly presentation and Form 10-Q are expected to be filed with the SEC and posted to its Investor Relations website, https://ir.hillmangroup.com, before the webcast presentation begins.
About Hillman
Founded in 1964 and headquartered in Cincinnati, Ohio, Hillman is a leading North American provider of complete hardware solutions, delivered with industry best customer service to over 40,000 locations. Hillman designs innovative product and merchandising solutions for complex categories that deliver an outstanding customer experience to home improvement centers, mass merchants, national and regional hardware stores, pet supply stores, and OEM & Industrial customers. Leveraging a world-class distribution and sales network, Hillman delivers a “small business” experience with “big business” efficiency. For more information on Hillman, visit www.hillmangroup.com.
Forward Looking Statements
All statements made in this press release that are consider to be forward-looking are made in good faith by the Company and are intended to qualify for the safe harbor from liability established by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. You should not
rely on these forward-looking statements as predictions of future events. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," “target”, “goal”, "may," "will," "could," "should," "believes," "predicts," "potential," "continue," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, the Company’s expectations with respect to future performance. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside the Company's control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) unfavorable economic conditions that may affect operations, financial condition and cash flows including spending on home renovation or construction projects, inflation, recessions, instability in the financial markets or credit markets; (2) increased supply chain costs, including raw materials, sourcing, transportation and energy; (3) the highly competitive nature of the markets that we serve; (4) the ability to continue to innovate with new products and services; (5) seasonality; (6) large customer concentration; (7) the ability to recruit and retain qualified employees; (8) the outcome of any legal proceedings that may be instituted against the Company; (9) adverse changes in currency exchange rates; (10) the impact of COVID-19 on the Company’s business; or (11) regulatory changes and potential legislation that could adversely impact financial results. The foregoing list of factors is not exclusive, and readers should also refer to those risks that are included in the Company’s filings with the Securities and Exchange Commission (“SEC”), including this Annual Report on Form 10-K filed on February 27, 2023. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward looking statements.
Except as required by applicable law, the Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this communication to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.
Contact:
Michael Koehler
Vice President of Investor Relations & Treasury
513-826-5495
IR@hillmangroup.com
HILLMAN SOLUTIONS CORP.
Condensed Consolidated Statement of Net Income, GAAP Basis
(dollars in thousands) Unaudited
| Thirteen weeks ended April 1, 2023 | Thirteen weeks ended March 26, 2022 | |||
|---|---|---|---|---|
| Net sales | $ | 349,707 | $ | 363,013 |
| Cost of sales (exclusive of depreciation and amortization shown separately below) | 204,509 | 213,273 | ||
| Selling, warehouse, general and administrative expenses | 111,065 | 114,538 | ||
| Depreciation | 16,705 | 13,254 | ||
| Amortization | 15,572 | 15,521 | ||
| Other expense (income), net | 767 | (2,422) | ||
| Income from operations | 1,089 | 8,849 | ||
| Interest expense, net | 18,077 | 11,628 | ||
| Loss before income taxes | (16,988) | (2,779) | ||
| Income tax benefit | (7,856) | (892) | ||
| Net loss | $ | (9,132) | $ | (1,887) |
| Basic and diluted loss per share | $ | (0.05) | $ | (0.01) |
| Weighted average basic and diluted shares outstanding | 194,548 | 194,007 |
HILLMAN SOLUTIONS CORP.
Condensed Consolidated Balance Sheets
(dollars in thousands)
Unaudited
| April 1, 2023 | December 31, 2022 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 34,750 | $ | 31,081 |
| Accounts receivable, net of allowances of $2,303 ($2,405 - 2022) | 121,148 | 86,985 | ||
| Inventories, net | 450,899 | 489,326 | ||
| Other current assets | 30,095 | 24,227 | ||
| Total current assets | 636,892 | 631,619 | ||
| Property and equipment, net of accumulated depreciation of $343,269 ($333,452 - 2022) | 191,933 | 190,258 | ||
| Goodwill | 824,139 | 823,812 | ||
| Other intangibles, net of accumulated amortization of $430,005 ($414,275 - 2022) | 719,268 | 734,460 | ||
| Operating lease right of use assets | 95,788 | 66,955 | ||
| Other assets | 18,766 | 23,586 | ||
| Total assets | $ | 2,486,786 | $ | 2,470,690 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 143,230 | $ | 131,751 |
| Current portion of debt and financing lease liabilities | 10,884 | 10,570 | ||
| Current portion of operating lease liabilities | 13,448 | 12,285 | ||
| Accrued expenses: | ||||
| Salaries and wages | 13,719 | 15,709 | ||
| Pricing allowances | 9,967 | 9,246 | ||
| Income and other taxes | 5,208 | 5,300 | ||
| Interest | 480 | 697 | ||
| Other accrued liabilities | 24,670 | 29,854 | ||
| Total current liabilities | 221,606 | 215,412 | ||
| Long-term debt | 878,224 | 884,636 | ||
| Deferred tax liabilities | 137,558 | 140,091 | ||
| Operating lease liabilities | 89,486 | 61,356 | ||
| Other non-current liabilities | 13,780 | 12,456 | ||
| Total liabilities | $ | 1,340,654 | $ | 1,313,951 |
| Commitments and contingencies (Note 6) | ||||
| Stockholders' equity: | ||||
| Common stock, $0.0001 par, 500,000,000 shares authorized, 194,548,420 issued and outstanding at April 1, 2023 and 194,548,411 issued and outstanding at December 31, 2022 | 20 | 20 | ||
| Additional paid-in capital | 1,407,068 | 1,404,360 | ||
| Accumulated deficit | (235,749) | (226,617) | ||
| Accumulated other comprehensive loss | (25,207) | (21,024) | ||
| Total stockholders' equity | 1,146,132 | 1,156,739 | ||
| Total liabilities and stockholders' equity | $ | 2,486,786 | $ | 2,470,690 |
HILLMAN SOLUTIONS CORP.
Condensed Consolidated Statement of Cash Flows
(dollars in thousands)
Unaudited
| Thirteen Weeks Ended <br>April 1, 2023 | Thirteen Weeks Ended<br>March 26, 2022 | |||
|---|---|---|---|---|
| Cash flows from operating activities: | ||||
| Net loss | $ | (9,132) | $ | (1,887) |
| Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | ||||
| Depreciation and amortization | 32,277 | 28,775 | ||
| Deferred income taxes | (2,594) | 1,293 | ||
| Deferred financing and original issue discount amortization | 1,332 | 1,299 | ||
| Stock-based compensation expense | 2,637 | 6,018 | ||
| Loss on disposal of property and equipment | 82 | — | ||
| Change in fair value of contingent consideration | 1,715 | (1,470) | ||
| Changes in operating items: | ||||
| Accounts receivable, net | (33,963) | (22,304) | ||
| Inventories, net | 38,871 | (29,529) | ||
| Other assets | (5,934) | (3,854) | ||
| Accounts payable | 11,406 | 9,910 | ||
| Other accrued liabilities | (5,190) | 8,207 | ||
| Net cash provided by (used for) operating activities | 31,507 | (3,542) | ||
| Net cash used for investing activities | ||||
| Acquisition of business, net of cash received | (300) | (2,500) | ||
| Capital expenditures | (18,111) | (12,541) | ||
| Other investing activities | (113) | — | ||
| Net cash used for investing activities | (18,524) | (15,041) | ||
| Cash flows from financing activities: | ||||
| Repayments of senior term loans | (2,128) | (2,128) | ||
| Borrowings on revolving credit loans | 39,000 | 70,000 | ||
| Repayments of revolving credit loans | (44,000) | (43,000) | ||
| Principal payments under finance lease obligations | (494) | (259) | ||
| Proceeds from exercise of stock options | — | 328 | ||
| Payments of contingent consideration | (1,079) | (38) | ||
| Other financing activities | (58) | — | ||
| Cash payments related to hedging activities | — | (467) | ||
| Net cash (used for) provided by financing activities | (8,759) | 24,436 | ||
| Effect of exchange rate changes on cash | (555) | (1,083) | ||
| Net increase in cash and cash equivalents | 3,669 | 4,770 | ||
| Cash and cash equivalents at beginning of period | 31,081 | 14,605 | ||
| Cash and cash equivalents at end of period | $ | 34,750 | $ | 19,375 |
Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
The Company uses non-GAAP financial measures to analyze underlying business performance and trends. The Company believes that providing these non-GAAP financial measures enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance. These non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP. The Company’s definitions of its non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, reconciliations to GAAP financial measures are not provided for forward-looking non-GAAP measures. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.
Non-GAAP financial measures such as consolidated adjusted EBITDA and Adjusted Diluted Earnings per Share (EPS) exclude from the relevant GAAP metrics items that neither relate to the ordinary course of the Company’s business, nor reflect the Company’s underlying business performance.
Reconciliation of Adjusted EBITDA (Unaudited)
(dollars in thousands)
Adjusted EBITDA is a non-GAAP financial measure and is the primary basis used to measure the operational strength and performance of our businesses as well as to assist in the evaluation of underlying trends in our businesses. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of our businesses and from intangible assets recognized in business combinations. It is also unaffected by our capital and tax structures, as our management excludes these results when evaluating our operating performance. Our management use this financial measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. Additionally, we believe that Adjusted EBITDA is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure of Adjusted EBITDA may not be directly comparable to similar measures used by other companies.
| Thirteen Weeks Ended <br>April 1, 2023 | Thirteen Weeks Ended<br>March 26, 2022 | |||
|---|---|---|---|---|
| Net loss | $ | (9,132) | $ | (1,887) |
| Income tax benefit | (7,856) | (892) | ||
| Interest expense, net | 18,077 | 11,628 | ||
| Depreciation | 16,705 | 13,254 | ||
| Amortization | 15,572 | 15,521 | ||
| EBITDA | $ | 33,366 | $ | 37,624 |
| Stock compensation expense | 2,637 | 6,018 | ||
| Restructuring (1) | 1,408 | 52 | ||
| Litigation expense (2) | 260 | 1,010 | ||
| Acquisition and integration expense (3) | 800 | 777 | ||
| Change in fair value of contingent consideration | 1,715 | (1,470) | ||
| Total adjusting items | 6,820 | 6,387 | ||
| Adjusted EBITDA | $ | 40,186 | $ | 44,011 |
(1)Includes consulting and other costs associated with distribution center relocations and corporate restructuring activities.
(2)Litigation expense includes legal fees associated with our litigation with Hy-Ko Products Company LLC.
(3)Acquisition and integration expense includes professional fees and other costs related to the secondary offerings in 2022 and 2023.
Reconciliation of Adjusted Diluted Earnings Per Share
(in thousands, except per share data)
Unaudited
We define Adjusted Diluted EPS as reported diluted EPS excluding the effect of one-time, non-recurring activity and volatility associated with our income tax expense. The Company believes that Adjusted Diluted EPS provides further insight and comparability in operating performance as it eliminates the effects of certain items that are not comparable from one period to the next. The following is a reconciliation of reported diluted EPS from continuing operations to Adjusted Diluted EPS from continuing operations:
| Thirteen Weeks Ended<br>April 1, 2023 | Thirteen Weeks Ended<br>March 26, 2022 | |||
|---|---|---|---|---|
| Reconciliation to Adjusted Net Income | ||||
| Net Income | $ | (9,132) | $ | (1,887) |
| Remove adjusting items (1) | 6,820 | 6,387 | ||
| Remove amortization expense | 15,572 | 15,521 | ||
| Remove tax benefit on adjusting items and amortization expense (2) | (1,661) | (1,505) | ||
| Adjusted Net Income | $ | 11,599 | $ | 18,516 |
| Reconciliation to Adjusted Diluted Earnings per Share | ||||
| Diluted Earnings per Share | $ | (0.05) | $ | (0.01) |
| Remove adjusting items (1) | 0.03 | 0.03 | ||
| Remove amortization expense | 0.08 | 0.08 | ||
| Remove tax benefit on adjusting items and amortization expense (2) | (0.01) | (0.01) | ||
| Adjusted Diluted Earnings per Share | $ | 0.06 | $ | 0.09 |
| Reconciliation to Adjusted Diluted Shares Outstanding | ||||
| Diluted Shares, as reported | 194,548 | 194,007 | ||
| Non-GAAP dilution adjustments | ||||
| Dilutive effect of stock options and awards | 845 | 1,171 | ||
| Adjusted Diluted Shares | 195,394 | 195,178 |
Note: Adjusted EPS may not add due to rounding.
(1)Please refer to "Reconciliation of Adjusted EBITDA" table above for additional information on adjusting items. See "Per share impact of Adjusting Items" table below for the per share impact of each adjustment.
(2)We have calculated the income tax effect of the non-GAAP adjustments shown above at the applicable statutory rate of 25.1% for the U.S. and 26.2% for Canada except for the following items:
a.The tax impact of stock compensation expense was calculated using the statutory rate of 25.1%, excluding certain awards that are non-deductible.
b.The tax impact of acquisition and integration expense was calculated using the statutory rate of 25.1%, excluding certain charges that were non-deductible.
c.Amortization expense for financial accounting purposes was offset by the tax benefit of deductible amortization expense using the statutory rate of 25.1%.
Per Share Impact of Adjusting Items
| Thirteen Weeks Ended <br>April 1, 2023 | Thirteen Weeks Ended<br>March 26, 2022 | |||
|---|---|---|---|---|
| Stock compensation expense | $ | 0.01 | $ | 0.03 |
| Restructuring | 0.01 | — | ||
| Litigation expense | — | 0.01 | ||
| Acquisition and integration expense | — | — | ||
| Change in fair value of contingent consideration | 0.01 | (0.01) | ||
| Total adjusting items | $ | 0.03 | $ | 0.03 |
Note: Adjusting items may not add due to rounding.
Reconciliation of Net Debt
We define Net Debt as reported gross debt less cash on hand. Net debt is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. The Company believes that Net Debt provides further insight and comparability into liquidity and capital structure. The following is a the calculation of Net Debt:
| April 1, 2023 | December 31, 2022 | |||
|---|---|---|---|---|
| Revolving loans | $ | 67,000 | $ | 72,000 |
| Senior term loan, due 2028 | 838,235 | 840,363 | ||
| Finance leases and other obligations | 6,367 | 6,406 | ||
| Gross debt | $ | 911,602 | $ | 918,769 |
| Less cash | 34,750 | 31,081 | ||
| Net debt | $ | 876,852 | $ | 887,688 |
Reconciliation of Free Cash Flow
We calculate free cash flow as cash flows from operating activities less capital expenditures. Free cash flow is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. We believe free cash flow is an important indicator of how much cash is generated by our business operations and is a measure of incremental cash available to invest in our business and meet our debt obligations.
| Thirteen Weeks Ended <br>April 1, 2023 | Thirteen Weeks Ended<br>March 26, 2022 | |||
|---|---|---|---|---|
| Net cash provided by (used for) operating activities | $ | 31,507 | $ | (3,542) |
| Capital expenditures | (18,111) | (12,541) | ||
| Free cash flow | $ | 13,396 | $ | (16,083) |
Source: Hillman Solutions Corp.
10
hillmanq12023earningscal
Quarterly Earnings Presentation Q1 2023 May 9, 2023
2Earnings Presentation Q1 2023 PresBuilder Placeholder - Delete this box if you see it on a slide, but DO NOT REMOVE this box from the slide layout All statements made in this presentation that are consider to be forward-looking are made in good faith by the Company and are intended to qualify for the safe harbor from liability established by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. You should not rely on these forward-looking statements as predictions of future events. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," “target”, “goal”, "may," "will," "could," "should," "believes," "predicts," "potential," "continue," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, the Company’s expectations with respect to future performance. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside the Company's control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) unfavorable economic conditions that may affect operations, financial condition and cash flows including spending on home renovation or construction projects, inflation, recessions, instability in the financial markets or credit markets; (2) increased supply chain costs, including raw materials, sourcing, transportation and energy; (3) the highly competitive nature of the markets that we serve; (4) the ability to continue to innovate with new products and services; (5) seasonality; (6) large customer concentration; (7) the ability to recruit and retain qualified employees; (8) the outcome of any legal proceedings that may be instituted against the Company; (9) adverse changes in currency exchange rates; (10) the impact of COVID-19 on the Company’s business; or (11) regulatory changes and potential legislation that could adversely impact financial results. The foregoing list of factors is not exclusive, and readers should also refer to those risks that are included in the Company’s filings with the Securities and Exchange Commission (“SEC”), including the Annual Report on Form 10-K filed February 27, 2023. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward looking statements. Except as required by applicable law, the Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this communication to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Presentation of Non-GAAP Financial Measures In addition to the results provided in accordance with U.S. generally accepted accounting principles (“GAAP”) throughout this presentation the company has provided non-GAAP financial measures, which present results on a basis adjusted for certain items. The company uses these non-GAAP financial measures for business planning purposes and in measuring its performance relative to that of its competitors. The company believes that these non- GAAP financial measures are useful financial metrics to assess its operating performance from period-to-period by excluding certain items that the company believes are not representative of its core business. These non-GAAP financial measures are not intended to replace, and should not be considered superior to, the presentation of the company’s financial results in accordance with GAAP. The use of the non-GAAP financial measures terms may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures. These non-GAAP financial measures are reconciled from the respective measures under GAAP in the appendix below. The company is not able to provide a reconciliation of the company’s non-GAAP financial guidance to the corresponding GAAP measures without unreasonable effort because of the inherent difficulty in forecasting and quantifying certain amounts necessary for such a reconciliation such as certain non-cash, nonrecurring or other items that are included in net income and EBITDA as well as the related tax impacts of these items and asset dispositions / acquisitions and changes in foreign currency exchange rates that are included in cash flow, due to the uncertainty and variability of the nature and amount of these future charges and costs. Forward Looking Statements
3Earnings Presentation Q1 2023 • Net sales decreased (3.7)% to $349.7 million versus Q1 2022 ◦ Hardware Solutions +7.8% ◦ Robotics and Digital Solutions ("RDS") +0.1% ◦ Canada (5.1)% ◦ Protective Solutions (21.1)% (excl. COVID sales) • GAAP net loss totaled $(9.1) million, or $(0.05) per diluted share, compared $(1.9) million, or $(0.01) per diluted share, in Q1 2022 • Adjusted EBITDA totaled $40.2 million compared to $44.0 million in the prior year quarter • Free Cash Flow totaled $13.4 million compared to $(16.1) million in the prior year quarter • Adjusted EBITDA (ttm) / Net Debt: 4.2x at quarter end, unchanged from December 31, 2022 Q1 2023 Financial Review Please see reconciliation tables in the Appendix of this presentation for non-GAAP metrics. Highlights for the 13 Weeks Ended April 1, 2023
4Earnings Presentation Q1 2023 Q1 2023 Operational Review Highlights for the 13 Weeks Ended April 1, 2023 • Reiterated guidance • Inventory reduced by $38 million during the quarter; reduced by a total of $124 million from the peak during June of 2022 • Fill rates averaged approximately 97% year to date • New business (with existing and new customers) secured across multiple business segments • Strong performance and customer service positions Hillman for continued new business wins and momentum
5Earnings Presentation Q1 2023 Quarterly Financial Performance Adjusted EBITDA (millions $ and % of Net Sales) Please see reconciliation of Adjusted EBITDA and Adjusted Gross Margin in the Appendix of this presentation. Not to scale. Top & Bottom Line Net Sales (millions $) Adjusted Gross Margin (millions $ and % of Net Sales) $44.0 $40.2 Q1 2022 Q1 2023 11.5%12.1% $149.7 $145.2 Q1 2022 Q1 2023 $363.0 $349.7 Q1 2022 Q1 2023 41.5%41.2%
6Earnings Presentation Q1 2023 Hardware & Protective Q1 2022 Q1 2023 Δ For Thirteen Weeks Ended 3/26/2022 4/1/2023 Comments Revenues $265,377 $253,851 (4.3)% Excluding COVID sales, revenues were flat Adjusted EBITDA $21,033 $18,879 (10.2)% Inflation from 2022 flowing through income statement Margin 7.9% 7.4% (50) bps Margin pressure from higher COGS and inflation Robotics & Digital Q1 2022 Q1 2023 Δ For Thirteen Weeks Ended 3/26/2022 4/1/2023 Comments Revenues $60,977 $61,066 0.1% Increase in MinuteKey sales; decline in other offerings Adjusted EBITDA $18,349 $19,524 6.4% Higher margin MinuteKey sales increased Margin 30.1% 32.0% 190 bps Near historical EBITDA margins of 32% to 33% Canada Q1 2022 Q1 2023 Δ For Thirteen Weeks Ended 3/26/2022 4/1/2023 Comments Revenues $36,659 $34,790 (5.1)% Volumes up slightly, FX headwind, no pricing impact Adjusted EBITDA $4,629 $1,783 (61.5)% Inflation from 2022 flowing through income statement Margin 12.6% 5.1% (750) bps Margin pressure from higher COGS and inflation Consolidated Q1 2022 Q1 2023 Δ For Thirteen Weeks Ended 3/26/2022 4/1/2023 Revenues $363,013 $349,707 (3.7)% Adjusted EBITDA $44,011 $40,186 (8.7)% Margin (Rev/Adj. EBITDA) 12.1% 11.5% (60) bps Performance by Segment (Q1) Please see reconciliation of Adjusted EBITDA to Net Income in the Appendix of this presentation. Figures in Thousands of USD unless otherwise noted..
7Earnings Presentation Q1 2023 Hardware & Protective Robotics & Digital Canada Revenue (QTD) Thirteen Weeks Ended April 1, 2023 Fastening and Hardware $204,974 $— $31,221 $236,195 Personal Protective 48,877 — 1,613 50,490 Keys and Key Accessories — 48,548 1,941 50,489 Engraving and Resharp — 12,518 15 12,533 Consolidated $253,851 $61,066 $34,790 $349,707 Revenue by Product Category (Q1) Hardware & Protective Robotics & Digital Canada Revenue (QTD) Thirteen Weeks Ended March 26, 2022 Fastening and Hardware $190,063 $— $32,913 $222,976 Personal Protective 75,314 — 2,228 77,542 Keys and Key Accessories — 47,537 1,504 49,041 Engraving and Resharp — 13,440 14 13,454 Consolidated $265,377 $60,977 $36,659 $363,013 Figures in Thousands of USD unless otherwise noted.
8Earnings Presentation Q1 2023 Capital Structure April 1, 2023 ABL Revolver ($209 million capacity) $67.0 Term Note $838.2 Finance Leases and Other Obligations $6.4 Total Debt $911.6 Cash $34.8 Net Debt $876.9 TTM Adjusted EBITDA $206.4 Net Debt/ TTM Adjusted EBITDA 4.2 x Current Effective Interest Rate* 4.9% Committed to Improving Leverage as Inventory Converts to Cash Total Net Leverage (Net Debt / TTM Adj. EBITDA) 2023 Y/E Estimate 4.7x 4.5x 4.2x 4.2x 3.5x 6/ 25 /2 02 2 09 /2 4/ 20 22 12 /3 1/2 02 2 04 /0 1/2 02 3 12 /3 1/2 02 3 1.0x 2.0x 3.0x 4.0x 5.0x Please see reconciliation of Adjusted EBITDA to Net Income and Net Debt in the Appendix of this presentation. Figures in Millions of USD unless otherwise noted. *Current Effective Interest Rate as of May 8, 2023. ~
9Earnings Presentation Q1 2023 2023 Outlook & Guidance (in millions USD) Full Year 2023 Guidance Range Revenues $1.45 to $1.55 billion Adjusted EBITDA $215 to $235 million Free Cash Flow $125 to $145 million Assumptions • 1H-23 Adj. EBITDA down in the "high single digit" percent range vs. 1H-22 • 2H-23 Adj. EBITDA up in the "low 20" percent range vs. 2H-22 • Net Debt / Adj. EBITDA leverage ratio will be approximately 3.5x at the end of 2023 • Interest Expense: $60-$70 million • Cash Interest: $55-$65 million • Cash Tax Expense: $5-$10 million • Capital expenditures: $65-$75 million • Fully diluted shares outstanding: ~198 million On May 9, 2023, Hillman reiterated the following guidance (originally given on February 23, 2023) based on its current view of the market and its performance expectations for the fifty-two weeks ended December 30, 2023. 2023 Full Year Guidance - Reiterated Please see reconciliation of Adjusted EBITDA to Net Income and Free Cash Flow in the Appendix of this presentation.
10Earnings Presentation Q1 2023 Key Takeaways Inventory Turning to Cash; Focused on Delivering; Expected to Benefit from Price / Cost in 2H 2023 Long-term Annual Growth Targets (Organic): Revenue Growth: +6% & Adj. EBITDA Growth: +10% Long-term Annual Growth Targets (incl. Acquisitions): Revenue Growth: +10% & Adj. EBITDA Growth: +15% • Business has 59-year track record of success; proven to be resilient through multiple economic cycles • Repair, Remodel and Maintenance industry has meaningful long-term tailwinds; record level of U.S. home equity driving investment in the home1 • 1,100-member distribution (sales and service) team and direct-to-store fulfillment continue to provide competitive advantages and strengthen competitive moat - drives new business wins • Benefit from price/cost dynamic expected to flow through income statement in 2H 2023 • Inventory reduced by $124 million since mid-2022 peak; will continue to improve and reduce debt with free cash flow 1) U.S. Home Equity Hits Highest Level on Record—$27.8 Trillion.
11 Appendix
12Earnings Presentation Q1 2023 Investment Highlights Significant runway for incremental growth: Organic + M&A Management team with proven operational and M&A expertise Strong financial profile with 59-year track record Market and innovation leader across multiple categories Indispensable partner embedded with winning retailers Customers love us, trust us and rely on us Large, predictable, growing and resilient end markets
13Earnings Presentation Q1 2023 Hillman: Overview Who We Are *Third-party market study - 2019 Adjusted EBITDA is a non-GAAP measure. Please see Appendix for a reconciliation of Adjusted EBITDA to Net Income ~20 billion Fasteners Sold ~400 million Pairs of Gloves Sold ~120 million Keys Duplicated ~112,000 SKUs Managed ~40,000 Store Direct Locations ~35,000 Kiosks in Retail Locations #1 Position Across Core Categories 10% Long-Term Historical Sales CAGR 58 Years of Sales Growth in 59-Year History $1.5 billion 2022 Sales 11.6% CAGR 2017-2022 Adj. EBITDA Growth 14.1% 2022 Adj. EBITDA Margin 2022: By The Numbers • We are a leading North American provider of hardware products and solutions, including; ◦ Hardware and home improvement products ◦ Protective and job site gear – including work gloves and job site storage ◦ Robotic kiosk technologies (“RDS”): Key duplication, engraving & knife sharpening • Our differentiated service model provides direct to-store shipping, in-store service, and category management solutions • We have long-standing strategic partnerships with leading retailers across North America: ◦ Home Depot, Lowes, Walmart, Tractor Supply, and ACE Hardware • Founded in 1964; HQ in Cincinnati, Ohio
14Earnings Presentation Q1 2023 Primary Product Categories #1 in Segment Representative Top Customers #1 in Segment #1 in Segment Key and Fob Duplication Personalized Tags Knife Sharpening Fasteners & Specialty Gloves Builders Hardware & Metal Shapes Safety / PPE Construction Fasteners Work Gear Picture Hanging Source: Third party industry report. Hardware Solutions Protective Solutions Robotics & Digital Solutions
15Earnings Presentation Q1 2023 Thirteen weeks ended March 26, 2022 April 1, 2023 Net loss $(1,887) $(9,132) Income tax benefit (892) (7,856) Interest expense, net 11,628 18,077 Depreciation 13,254 16,705 Amortization 15,521 15,572 EBITDA $37,624 $33,366 Stock compensation expense 6,018 2,637 Restructuring (1) 52 1,408 Litigation expense (2) 1,010 260 Acquisition and integration expense (3) 777 800 Change in fair value of contingent consideration (1,470) 1,715 Adjusted EBITDA $44,011 $40,186 Adjusted EBITDA Reconciliation Footnotes: 1. Includes consulting and other costs associated with distribution center relocations and corporate restructuring activities. 2. Litigation expense includes legal fees associated with our litigation with Hy-Ko Products Company LLC. 3. Acquisition and integration expense includes professional fees and other costs related to the secondary offerings in 2022 and 2023.
16Earnings Presentation Q1 2023 Thirteen weeks ended March 26, 2022 April 1, 2023 Net Sales $363,013 $349,707 Cost of sales (exclusive of depreciation and amortization) 213,273 204,509 Gross margin exclusive of depreciation and amortization $149,740 $145,198 Gross margin exclusive of depreciation and amortization % 41.2 % 41.5 % Adjusted Gross Margin Reconciliation
17Earnings Presentation Q1 2023 Thirteen weeks ended March 26, 2022 April 1, 2023 Selling, general and administrative expenses $114,538 $111,065 SG&A Adjusting Items (1): Stock compensation expense 6,018 2,637 Restructuring 52 1,408 Litigation expense 1,010 260 Acquisition and integration expense 777 800 Adjusted SG&A $106,681 $105,960 Adjusted SG&A as a % of Net Sales 29.4 % 30.3 % Adjusted SG&A Expense Reconciliation 1. See adjusted EBITDA Reconciliation for details of adjusting items
18Earnings Presentation Q1 2023 As of December 31, 2022 April 1, 2023 Revolving loans $72,000 $67,000 Senior term loan 840,363 838,235 Finance leases and other obligations 6,406 6,367 Gross debt $918,769 $911,602 Less cash 31,081 34,750 Net debt $887,688 $876,852 Net Debt & Free Cash Flow Reconciliations March 26, 2022 April 1, 2023 Net cash provided by (used for) operating activities $(3,542) $31,507 Capital expenditures (12,541) (18,111) Free cash flow $(16,083) $13,396 Reconciliation of Net Debt Reconciliation of Free Cash Flow
19Earnings Presentation Q1 2023 Thirteen weeks ended April 1, 2023 HPS RDS Canada Consolidated Operating (loss) income $(3,836) $4,462 $463 $1,089 Depreciation & amortization 18,543 12,564 1,170 32,277 Stock compensation expense 2,205 282 150 2,637 Restructuring 1,257 151 — 1,408 Litigation expense — 260 — 260 Acquisition and integration expense 710 90 — 800 Change in fair value of contingent consideration — 1,715 — 1,715 Adjusted EBITDA $18,879 $19,524 $1,783 $40,186 Thirteen weeks ended March 26, 2022 HPS RDS Canada Consolidated Operating (loss) income $(1,947) $7,402 $3,394 $8,849 Depreciation & amortization 17,057 10,483 1,235 28,775 Stock compensation expense 5,188 830 — 6,018 Restructuring 47 5 — 52 Litigation expense — 1,010 — 1,010 Acquisition and integration expense 688 89 — 777 Change in fair value of contingent consideration — (1,470) — (1,470) Adjusted EBITDA $21,033 $18,349 $4,629 $44,011 Segment Adjusted EBITDA Reconciliations