0001822492false00018224922023-08-082023-08-08

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): August 8, 2023
hillmanlogo.jpg 
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 classTrading SymbolsName of each exchange on which registered
Common Stock, par value $0.0001 per shareHLMNThe 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 August 8, 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 and twenty-six weeks ended July 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.






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: August 8, 2023
Hillman Solutions Corp.


By:
/s/ Robert O. Kraft
Name:
Robert O. Kraft
Title:
Chief Financial Officer




hillmanlogo.jpg
Hillman Reports Second Quarter 2023 Results
CINCINNATI, August 8, 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 and twenty-six weeks ended July 1, 2023.

Second Quarter 2023 Highlights (Thirteen weeks ended July 1, 2023)
•Net sales decreased (3.6)% to $380.0 million compared to $394.1 million in the prior year quarter
•Net income totaled $4.5 million, or $0.02 per diluted share, compared to $8.8 million, or $0.04 per diluted share, in the prior year quarter
•Adjusted diluted EPS1 was $0.13 per diluted share compared to $0.14 per diluted share in the prior year quarter
•Adjusted EBITDA1 totaled $58.0 million compared to $62.3 million in the prior year quarter

Second Quarter YTD 2023 Highlights (Twenty-six weeks ended July 1, 2023)
•Net sales decreased (3.6)% to $729.7 million compared to $757.1 million in the prior year period
•Net loss totaled $(4.6) million, or $(0.02) per diluted share, compared to net income of $6.9 million, or $0.04 per diluted share, in the prior year period
•Adjusted diluted EPS1 was $0.19 per diluted share compared to $0.24 per diluted share in the prior year period
•Adjusted EBITDA1 totaled $98.2 million compared to $106.3 million in the prior year period
•Net cash provided by operating activities totaled $115.0 million compared to $14.8 million in the prior year period
•Free Cash Flow1 totaled $78.0 million compared to $(14.1) million in the prior year period

Balance Sheet and Liquidity at July 1, 2023
•Gross debt was $851.5 million, compared to $918.8 million on December 31, 2022; net debt1 outstanding was $813.8 million, compared to $887.7 million on December 31, 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.
1

•Liquidity available totaled approximately $320.7 million, consisting of $283.1 million of available borrowing under the revolving credit facility and $37.7 million of cash and equivalents
•Net debt1 to trailing twelve month Adjusted EBITDA1 was 4.0x times as compared to 4.2x on December 31, 2022

Management Commentary
“Our strong second quarter results reflect the dedicated efforts of our associates and the resiliency of the competitive moat we have created here at Hillman,” commented Doug Cahill, chairman, president and chief executive officer of Hillman. “We have navigated a complex market environment, carefully controlling our costs to produce strong bottom line results with gross margins that came in line with our expectations. We effectively worked down inventory levels, which translated into exceptional free cash flow of $78 million for the year-to-date. We further improved our leverage profile with a net debt to adjusted EBITDA ratio of 4.0 times as of the quarter end, which we expect will continue to improve in the second half of 2023.”
“While sales volume on existing products was lower than expected during the quarter, our business remains on sound footing and we expect to reap the benefits of several new business wins in the months ahead. We expect to continue generating healthy free cash flow in the second half of the year while margins expand sequentially during the third and fourth quarter. We believe we have the right strategy and a talented team in place to continue taking care of our customers across North America and believe we are on track to achieve our reiterated full year financial outlook.”

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 ending December 30, 2023. This guidance was originally provided on February 27, 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

Second Quarter 2023 Results Presentation
Hillman plans to host a conference call and webcast presentation today, August 8, 2023, 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, August 8, 2023
Time: 8:30 a.m. Eastern Time
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.
2

Listen-Only Webcast: https://edge.media-server.com/mmc/p/ymk8yo34
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 Solutions Corp.
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) direct and indirect costs associated with the May 2023 ransomware attack, and our receipt of expected insurance receivables associated with that cybersecurity incident; (6) seasonality; (7) large customer concentration; (8) the ability to recruit and retain qualified employees; (9) the outcome of any legal proceedings that may be instituted against the Company; (10) adverse changes in currency exchange rates; (11) the impact of COVID-19 on the Company’s business; or (12) 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
3

(“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

4

HILLMAN SOLUTIONS CORP.
Condensed Consolidated Statement of Net Income, GAAP Basis
(dollars in thousands) Unaudited

Thirteen Weeks Ended
July 1, 2023		Thirteen Weeks Ended
June 25, 2022		Twenty-six Weeks Ended
July 1, 2023		Twenty-six Weeks Ended
June 25, 2022
Net sales$380,019 $394,114 $729,726 $757,127 
Cost of sales (exclusive of depreciation and amortization shown separately below)216,499 220,146 421,008 433,419 
Selling, warehouse, general and administrative expenses111,452 118,229 222,517 232,767 
Depreciation13,800 14,172 30,505 27,426 
Amortization15,578 15,566 31,150 31,087 
Other expense (income), net1,893 (1,772)2,660 (4,194)
Income from operations20,797 27,773 21,886 36,622 
Interest expense, net18,075 12,533 36,152 24,161 
Income (loss) before income taxes2,722 15,240 (14,266)12,461 
Income tax (benefit) expense(1,823)6,424 (9,679)5,532 
Net income (loss)$4,545 $8,816 $(4,587)$6,929 
Basic income (loss) per share$0.02 $0.05 $(0.02)$0.04 
Weighted average basic shares outstanding194,644 194,135 194,596 194,071 
Diluted income (loss) per share$0.02 $0.04 $(0.02)$0.04 
Weighted average diluted shares outstanding195,528 196,686 194,596 195,932 



















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HILLMAN SOLUTIONS CORP.
Condensed Consolidated Balance Sheets
(dollars in thousands)
Unaudited
 July 1, 2023December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents$37,656 $31,081 
Accounts receivable, net of allowances of $2,211 ($2,405 - 2022)
130,276 86,985 
Inventories, net430,013 489,326 
Other current assets39,285 24,227 
Total current assets637,230 631,619 
Property and equipment, net of accumulated depreciation of $351,482 ($333,452 - 2022)
192,451 190,258 
Goodwill824,973 823,812 
Other intangibles, net of accumulated amortization of $445,984 ($414,275 - 2022)
704,466 734,460 
Operating lease right of use assets89,861 66,955 
Other assets21,355 23,586 
Total assets$2,470,336 $2,470,690 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$176,802 $131,751 
Current portion of debt and financing lease liabilities11,240 10,570 
Current portion of operating lease liabilities13,211 12,285 
Accrued expenses:
Salaries and wages12,333 15,709 
Pricing allowances8,100 9,246 
Income and other taxes6,292 5,300 
Interest397 697 
Other accrued liabilities25,232 29,854 
Total current liabilities253,607 215,412 
Long-term debt818,798 884,636 
Deferred tax liabilities139,822 140,091 
Operating lease liabilities84,206 61,356 
Other non-current liabilities16,088 12,456 
Total liabilities$1,312,521 $1,313,951 
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, $0.0001 par, 500,000,000 shares authorized, 194,707,000 issued and outstanding at July 1, 2023 and 194,548,411 issued and outstanding at December 31, 2022
20 20 
Additional paid-in capital1,411,080 1,404,360 
Accumulated deficit(231,204)(226,617)
Accumulated other comprehensive loss(22,081)(21,024)
Total stockholders' equity1,157,815 1,156,739 
Total liabilities and stockholders' equity$2,470,336 $2,470,690 



6


HILLMAN SOLUTIONS CORP.
Condensed Consolidated Statement of Cash Flows
(dollars in thousands)
Unaudited

 Twenty-six Weeks Ended
July 1, 2023		Twenty-six Weeks Ended
June 25, 2022
Cash flows from operating activities:
Net (loss) income$(4,587)$6,929 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization61,655 58,513 
Deferred income taxes(5,232)8,230 
Deferred financing and original issue discount amortization2,663 2,598 
Stock-based compensation expense6,044 8,304 
Loss on disposal of property and equipment123 — 
Change in fair value of contingent consideration4,167 (3,645)
Changes in operating items:
Accounts receivable, net(43,458)(25,163)
Inventories, net62,208 (42,973)
Other assets(4,514)(4,125)
Accounts payable43,845 1,502 
Other accrued liabilities(7,868)4,603 
Net cash provided by operating activities115,046 14,773 
Net cash from investing activities
Acquisition of business, net of cash received(300)(2,500)
Capital expenditures(37,029)(28,921)
Other investing activities(225)— 
Net cash used for investing activities(37,554)(31,421)
Cash flows from financing activities:
Repayments of senior term loans(4,255)(4,256)
Borrowings on revolving credit loans58,000 121,000 
Repayments of revolving credit loans(122,000)(97,000)
Principal payments under finance lease obligations(1,039)(556)
Proceeds from exercise of stock options611 1,149 
Payments of contingent consideration (1,125)(103)
Other financing activities(155)— 
Cash payments related to hedging activities— (944)
Net cash (used for) provided by financing activities(69,963)19,290 
Effect of exchange rate changes on cash(954)476 
Net increase in cash and cash equivalents6,575 3,118 
Cash and cash equivalents at beginning of period31,081 14,605 
Cash and cash equivalents at end of period$37,656 $17,723 

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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.

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Thirteen Weeks Ended
July 1, 2023		Thirteen Weeks Ended
June 25, 2022		Twenty-six Weeks Ended
July 1, 2023		Twenty-six Weeks Ended
June 25, 2022
Net income (loss)$4,545 $8,816 $(4,587)$6,929 
Income tax (benefit) expense(1,823)6,424 (9,679)5,532 
Interest expense, net18,075 12,533 36,152 24,161 
Depreciation13,800 14,172 30,505 27,426 
Amortization15,578 15,566 31,150 31,087 
EBITDA$50,175 $57,511 $83,541 $95,135 
Stock compensation expense3,405 2,286 6,042 8,304 
Restructuring and other (1)
1,440 513 2,848 565 
Litigation expense (2)
— 2,703 260 3,713 
Transaction and integration expense (3)
510 1,438 1,310 2,215 
Change in fair value of contingent consideration2,452 (2,175)4,167 (3,645)
Total adjusting items 7,807 4,765 14,627 11,152 
Adjusted EBITDA$57,982 $62,276 $98,168 $106,287 
(1)Includes consulting and other costs associated with distribution center relocations and corporate restructuring activities. 2023 includes costs associated with the cybersecurity event that occurred in May 2023.
(2)Litigation expense includes legal fees associated with our litigation with Hy-Ko Products Company LLC.
(3)Transaction and integration expense includes professional fees and other costs related to the CCMP 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:

9



Thirteen Weeks Ended
July 1, 2023		Thirteen Weeks Ended
June 25, 2022		Twenty-six Weeks Ended
July 1, 2023		Twenty-six Weeks Ended
June 25, 2022
Reconciliation to Adjusted Net Income
Net Income (Loss)$4,545 $8,816 $(4,587)$6,929 
Remove adjusting items (1)
7,807 4,765 14,627 11,152 
Remove amortization expense15,578 15,566 31,150 31,087 
Remove tax benefit on adjusting items and amortization expense (2)
(2,190)(1,529)(3,851.19)(3,035)
Adjusted Net Income$25,740 $27,618 $37,339 $46,133 
Reconciliation to Adjusted Diluted Earnings per Share
Diluted Earnings per Share $0.02 $0.04 $(0.02)$0.04 
Remove adjusting items (1)
0.04 0.02 0.07 0.06 
Remove amortization expense0.08 0.08 0.16 0.16 
Remove tax benefit on adjusting items and amortization expense (2)
(0.01)(0.01)(0.02)(0.02)
Adjusted Diluted Earnings per Share $0.13 $0.14 $0.19 $0.24 
Reconciliation to Adjusted Diluted Shares Outstanding (3)
Diluted Shares, as reported195,528 196,686 194,596 195,932 
Non-GAAP dilution adjustments:
Dilutive effect of stock options and awards— — 865 — 
Adjusted Diluted Shares195,528 196,686 195,461 195,932 
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.
i.Amortization expense for financial accounting purposes was offset by the tax benefit of deductible amortization expense using the statutory rate of 25.1%.
(3)Diluted shares on a GAAP basis for the thirteen weeks ended July 1, 2023 and thirteen weeks ended June 25, 2022 include the dilutive impact of 884 and 2,551 options and awards, respectively. Diluted shares on a GAAP basis for the twenty-six weeks ended June 25, 2022 includes the dilutive impact of 1,861 options and awards.
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Per Share Impact of Adjusting Items
Thirteen Weeks Ended
July 1, 2023		Thirteen Weeks Ended
June 25, 2022		Twenty-six Weeks Ended
July 1, 2023		Twenty-six Weeks Ended
June 25, 2022
Stock compensation expense$0.02 $0.01 $0.03 $0.04 
Restructuring and other costs0.01 — 0.01 — 
Litigation expense— 0.01 — 0.02 
Transaction and integration expense — 0.01 0.01 0.01 
Change in fair value of contingent consideration0.01 (0.01)0.02 (0.02)
Total adjusting items$0.04 $0.02 $0.07 $0.06 
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:
July 1, 2023December 31, 2022
Revolving loans$8,000 $72,000 
Senior term loan, due 2028836,108 840,363 
Finance leases and other obligations7,356 6,406 
Gross debt $851,464 $918,769 
Less cash 37,656 31,081 
Net debt$813,808 $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.
Twenty-six Weeks Ended
July 1, 2023		Twenty-six Weeks Ended
June 25, 2022
Net cash provided by operating activities$115,046 $14,773 
Capital expenditures(37,029)(28,921)
Free cash flow$78,017 $(14,148)
Source: Hillman Solutions Corp.
###
11
Quarterly Earnings Presentation Q2 2023 August 8, 2023

 
2Earnings Presentation Q2 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) direct and indirect costs associated with the May 2023 ransomware attack, and our receipt of expected insurance receivables associated with that cybersecurity incident; (6) seasonality; (7) large customer concentration; (8) the ability to recruit and retain qualified employees; (9) the outcome of any legal proceedings that may be instituted against the Company; (10) adverse changes in currency exchange rates; (11) the impact of COVID-19 on the Company’s business; or (12) 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 Q2 2023 • Net sales decreased (3.6)% to $380.0 million versus Q2 2022 ◦ Hardware Solutions approximately flat ◦ Robotics and Digital Solutions ("RDS") down (2.0)% ◦ Canada down (7.9)% ◦ Protective Solution down (16.7)% • GAAP net income totaled $4.5 million, or $0.02 per diluted share, compared to $8.8 million, or $0.04 per diluted share, in Q2 2022 • Adjusted EBITDA totaled $58.0 million compared to $62.3 million in the prior year quarter • Adjusted EBITDA (ttm) / Net Debt: 4.0x at quarter end, improved from 4.2x from December 31, 2022 Q2 2023 Financial Review Please see reconciliation tables in the Appendix of this presentation for non-GAAP metrics. Highlights for the 13 Weeks Ended July 1, 2023

 
4Earnings Presentation Q2 2023 Q2 2023 Operational Review Highlights for the 13 Weeks Ended July 1, 2023 • Reiterated full year 2023 guidance across all metrics • Inventory reduced by $20.9 million during the quarter; bringing year-to-date total to $59.3 million • Fill rates averaged approximately 96% year to date • New business (with existing and new customers) wins secured across multiple business segments - expect to roll out two sizable new business wins in the second half of the year • Cost of goods peaked in May 2023 (driven by high container costs during the Summer of 2022) - as a result, margins are expected to expand during the second half of 2023

 
5Earnings Presentation Q2 2023 • Net sales decreased (3.6)% to $729.7 million versus the 26 weeks ended June 25, 2022 ◦ Hardware Solutions +3.6% ◦ Robotics and Digital Solutions ("RDS") (0.9)% ◦ Canada (6.8)% ◦ Protective Solutions (17.6)% (excl. COVID sales) • GAAP net loss totaled $(4.6) million, or $(0.02) per diluted share, compared to net income of $6.9 million, or $0.04 per diluted share, during the 26 weeks ended June 25, 2022 • Adjusted EBITDA totaled $98.2 million compared to $106.3 million during the the 26 weeks ended June 25, 2022 • Free Cash Flow totaled $78.0 million compared to $(14.1) million during the 26 weeks ended June 25, 2022 Q2 2023 Financial Review Please see reconciliation tables in the Appendix of this presentation for non-GAAP metrics. Highlights for the 26 Weeks Ended July 1, 2023

 
6Earnings Presentation Q2 2023 Quarterly Financial Performance Adjusted EBITDA (millions $ and % of Net Sales) Please see reconciliation of Non-GAAP metrics 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) $62.3 $58.0 Q2 2022 Q2 2023 15.3%15.8% $174.0 $163.5 Q2 2022 Q2 2023 $394.1 $380.0 Q2 2022 Q2 2023 43.0%44.1%

 
7Earnings Presentation Q2 2023 Hardware & Protective Q2 2022 Q2 2023 Δ Thirteen Weeks Ended 6/25/2022 7/1/2023 Comments Revenues $277,438 $268,794 (3.1)% HS flat; PS down due to lighter volumes Adjusted EBITDA $30,836 $27,847 (9.7)% Inflation from 2022 flowing through income statement Margin 11.1% 10.4% (70) bps Margin pressure from higher COGS and inflation Robotics & Digital Q2 2022 Q2 2023 Δ Thirteen Weeks Ended 6/25/2022 7/1/2023 Comments Revenues $63,716 $62,456 (2.0)% Increase in MinuteKey sales; decline in other volumes Adjusted EBITDA $22,130 $22,518 1.8% Higher margin MinuteKey sales increased Margin 34.7% 36.1% 140 bps Margins driven by shift to higher margin MinuteKey sales Canada Q2 2022 Q2 2023 Δ Thirteen Weeks Ended 6/25/2022 7/1/2023 Comments Revenues $52,960 $48,769 (7.9)% FX headwinds + volumes down 2% Adjusted EBITDA $9,310 $7,617 (18.2)% Inflation from 2022 flowing through income statement Margin 17.6% 15.6% (200) bps Margin pressure from higher COGS and inflation Consolidated Q2 2022 Q2 2023 Δ Thirteen Weeks Ended 6/25/2022 7/1/2023 Revenues $394,114 $380,019 (3.6)% Adjusted EBITDA $62,276 $57,982 (6.9)% Margin (Rev/Adj. EBITDA) 15.8% 15.3% (50) bps Performance by Segment (Q2) Please see reconciliation of Adjusted EBITDA to Net Income in the Appendix of this presentation. Figures in Thousands of USD unless otherwise noted..

 
8Earnings Presentation Q2 2023 Hardware & Protective YTD '22 YTD '23 Δ Twenty-six weeks ended 6/25/2022 7/1/2023 Comments Revenues $542,815 $522,645 (3.7)% Excluding COVID sales, revenues down 1% on lighter vol. Adjusted EBITDA $51,866 $46,726 (9.9)% Inflation from 2022 flowing through income statement Margin 9.6% 8.9% (70) bps Margin pressure from higher COGS and inflation Robotics & Digital YTD '22 YTD '23 Δ Twenty-six weeks ended 6/25/2022 7/1/2023 Comments Revenues $124,693 $123,522 (0.9)% Increase in MinuteKey sales; decline in other offerings Adjusted EBITDA $40,481 $42,043 3.9% Higher margin MinuteKey sales increased Margin 32.5% 34.0% 150 bps Near historical EBITDA margins of 32% to 33% Canada YTD '22 YTD '23 Δ Twenty-six weeks ended 6/25/2022 7/1/2023 Comments Revenues $89,619 $83,559 (6.8)% FX headwinds + volumes down <1% Adjusted EBITDA $13,940 $9,399 (32.6)% Inflation from 2022 flowing through income statement Margin 15.6% 11.2% (440) bps Margin pressure from higher COGS and inflation Consolidated YTD '22 YTD '23 Δ Twenty-six weeks ended 6/25/2022 7/1/2023 Revenues $757,127 $729,726 (3.6)% Adjusted EBITDA $106,287 $98,168 (7.6)% Margin (Rev/Adj. EBITDA) 14.0% 13.5% (50) bps Performance by Segment (YTD) Please see reconciliation of Adjusted EBITDA to Net Income in the Appendix of this presentation. Figures in Thousands of USD unless otherwise noted..

 
9Earnings Presentation Q2 2023 Hardware & Protective Robotics & Digital Canada Revenue (Q2) Thirteen Weeks Ended July 1, 2023 Fastening and Hardware $225,139 $— $44,743 $269,882 Personal Protective 43,655 — 1,928 45,583 Keys and Key Accessories — 49,021 2,091 51,112 Engraving and Resharp — 13,435 7 13,442 Total Revenue $268,794 $62,456 $48,769 $380,019 Revenue by Product Category (Q2) Hardware & Protective Robotics & Digital Canada Revenue (Q2) Thirteen Weeks Ended June 25, 2022 Fastening and Hardware $225,047 $— $48,810 $273,857 Personal Protective 52,391 — 2,287 54,678 Keys and Key Accessories — 48,768 1,852 50,620 Engraving and Resharp — 14,948 11 14,959 Total Revenue $277,438 $63,716 $52,960 $394,114 Figures in Thousands of USD unless otherwise noted.

 
10Earnings Presentation Q2 2023 Hardware & Protective Robotics & Digital Canada Revenue (YTD) Twenty-six weeks ended July 1, 2023 Fastening and Hardware $430,114 $— $75,965 $506,079 Personal Protective 92,531 — 3,541 96,072 Keys and Key Accessories — 97,568 4,033 101,601 Engraving and Resharp — 25,954 20 25,974 Total Revenue $522,645 $123,522 $83,559 $729,726 Revenue by Product Category (YTD) Hardware & Protective Robotics & Digital Canada Revenue (YTD) Twenty-six weeks ended June 25, 2022 Fastening and Hardware $415,111 $— $81,722 $496,833 Personal Protective 127,704 — 4,515 132,219 Keys and Key Accessories — 96,305 3,356 99,661 Engraving and Resharp — 28,388 26 28,414 Total Revenue $542,815 $124,693 $89,619 $757,127 Figures in Thousands of USD unless otherwise noted.

 
11Earnings Presentation Q2 2023 Total Net Leverage (Net Debt / TTM Adj. EBITDA) Capital Structure July 1, 2023 ABL Revolver ($283 million capacity) $8.0 Term Note $836.1 Finance Leases and Other Obligations $7.4 Total Debt $851.5 Cash $37.7 Net Debt $813.8 TTM Adjusted EBITDA $202.1 Net Debt/ TTM Adjusted EBITDA 4.0x Current Effective Interest Rate* 4.8% Committed to Improving Leverage as Inventory Converts to Cash 2023 Y/E Estimate4.7x 4.5x 4.2x 4.2x 4.0x 3.5x 6/ 25 /2 02 2 09 /2 4/ 20 22 12 /3 1/2 02 2 04 /0 1/2 02 3 07 /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 Non-GAAP metrics Adjusted EBITDA and Net Debt in the Appendix of this presentation. Figures in Millions of USD unless otherwise noted. *Current Effective Interest Rate as of July 31, 2023. <

 
12Earnings Presentation Q2 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 • 2H-23 Adj. EBITDA up approx. 20 percent vs. 2H-22 • Net Debt / Adj. EBITDA leverage ratio expected to be below 3.5x at the end of 2023 • Interest expense: $65 - $75 million (increased by $5 million) • Cash interest: $60 - $70 million (increased by $5 million) • Cash tax expense: Approx. $5 million (decreased from $5 - $10 million) • Capital expenditures: $65-$75 million • Fully diluted shares outstanding: ~198 million On August 8, 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 ending December 30, 2023. 2023 Full Year Guidance - Reiterated Please see reconciliation of Non-GAAP metrics Adjusted EBITDA and Free Cash Flow in the Appendix of this presentation.

 
13Earnings Presentation Q2 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; expected to be an increase spend on the home in the future as 90% of homes pass 20 years of age during 2024 and 2025. • 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 • Cost of goods peaked in May 2023, margins expected to expand during 2H 2023 and 2024 • Inventory reduced by $145 million since mid-2022 peak; will continue to improve and reduce debt with free cash flow 1) American Community Survey Data

 
14 Appendix

 
15Earnings Presentation Q2 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

 
16Earnings Presentation Q2 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

 
17Earnings Presentation Q2 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

 
18Earnings Presentation Q2 2023 Thirteen weeks ended June 25, 2022 July 1, 2023 Net income $8,816 $4,545 Income tax(benefit) expense 6,424 (1,823) Interest expense, net 12,533 18,075 Depreciation 14,172 13,800 Amortization 15,566 15,578 EBITDA $57,511 $50,175 Stock compensation expense 2,286 3,405 Restructuring and other (1) 513 1,440 Litigation expense (2) 2,703 — Transaction and integration expense (3) 1,438 510 Change in fair value of contingent consideration (2,175) 2,452 Adjusted EBITDA $62,276 $57,982 Adjusted EBITDA Reconciliation Footnotes: 1. Includes consulting and other costs associated with distribution center relocations and corporate restructuring activities. 2023 includes costs associated with the cybersecurity event that occurred in May 2023. 2. Litigation expense includes legal fees associated with our litigation with Hy-Ko Products Company LLC. 3. Transaction and integration expense includes professional fees and other costs related to the CCMP secondary offerings in 2022 and 2023.

 
19Earnings Presentation Q2 2023 Twenty-six weeks ended June 25, 2022 July 1, 2023 Net income (loss) $6,929 $(4,587) Income tax (benefit) expense 5,532 (9,679) Interest expense, net 24,161 36,152 Depreciation 27,426 30,505 Amortization 31,087 31,150 EBITDA $95,135 $83,541 Stock compensation expense 8,304 6,042 Restructuring and other(1) 565 2,848 Litigation expense (2) 3,713 260 Transaction and integration expense (3) 2,215 1,310 Change in fair value of contingent consideration (3,645) 4,167 Adjusted EBITDA $106,287 $98,168 Adjusted EBITDA Reconciliation Footnotes: 1. Includes consulting and other costs associated with distribution center relocations and corporate restructuring activities. 2023 includes costs associated with the cybersecurity event that occurred in May 2023. 2. Litigation expense includes legal fees associated with our litigation with Hy-Ko Products Company LLC. 3. Transaction and integration expense includes professional fees and other costs related to the CCMP secondary offerings in 2022 and 2023.

 
20Earnings Presentation Q2 2023 Thirteen weeks ended June 25, 2022 July 1, 2023 Net Sales $394,114 $380,019 Cost of sales (exclusive of depreciation and amortization) 220,146 216,499 Gross margin exclusive of depreciation and amortization $173,968 $163,520 Gross margin exclusive of depreciation and amortization % 44.1 % 43.0 % Twenty-six weeks ended June 25, 2022 July 1, 2023 Net Sales $757,127 $729,726 Cost of sales (exclusive of depreciation and amortization) 433,419 421,008 Gross margin exclusive of depreciation and amortization $323,708 $308,718 Gross margin exclusive of depreciation and amortization % 42.8 % 42.3 % Adjusted Gross Margin Reconciliation

 
21Earnings Presentation Q2 2023 Thirteen weeks ended June 25, 2022 July 1, 2023 Selling, general and administrative expenses $118,229 $111,452 SG&A Adjusting Items (1): Stock compensation expense 2,286 3,405 Restructuring 513 1,440 Litigation expense 2,703 — Acquisition and integration expense 1,438 510 Adjusted SG&A $111,289 $106,097 Adjusted SG&A as a % of Net Sales 28.2 % 27.9 % Twenty-six weeks ended June 25, 2022 July 1, 2023 Selling, general and administrative expenses $232,767 $222,517 SG&A Adjusting Items (1): Stock compensation expense 8,304 6,042 Restructuring 565 2,848 Litigation expense 3,713 260 Acquisition and integration expense 2,215 1,310 Adjusted SG&A $217,970 $212,057 Adjusted SG&A as a % of Net Sales 28.8 % 29.1 % Adjusted SG&A Expense Reconciliation 1. See adjusted EBITDA Reconciliation for details of adjusting items

 
22Earnings Presentation Q2 2023 As of December 31, 2022 July 1, 2023 Revolving loans $72,000 $8,000 Senior term loan 840,363 836,108 Finance leases and other obligations 6,406 7,356 Gross debt $918,769 $851,464 Less cash 31,081 37,656 Net debt $887,688 $813,808 Net Debt & Free Cash Flow Reconciliations June 25, 2022 July 1, 2023 Net cash provided by operating activities $14,773 $115,046 Capital expenditures (28,921) (37,029) Free cash flow $(14,148) $78,017 Reconciliation of Net Debt Reconciliation of Free Cash Flow

 
23Earnings Presentation Q2 2023 Thirteen weeks ended July 1, 2023 HPS RDS Canada Consolidated Operating income $4,367 $10,374 $6,056 $20,797 Depreciation & amortization 19,028 9,110 1,240 29,378 Stock compensation expense 2,865 329 211 3,405 Restructuring and other 1,128 202 110 1,440 Litigation expense — — — — Transaction and integration expense 459 51 — 510 Change in fair value of contingent consideration — 2,452 — 2,452 Adjusted EBITDA $27,847 $22,518 $7,617 $57,982 Thirteen weeks ended June 25, 2022 HPS RDS Canada Consolidated Operating income $10,079 $10,305 $7,389 $27,773 Depreciation & amortization 17,664 10,845 1,229 29,738 Stock compensation expense 1,374 220 692 2,286 Restructuring 479 34 — 513 Litigation expense — 2,703 — 2,703 Transaction and integration expense 1,240 198 — 1,438 Change in fair value of contingent consideration — (2,175) — (2,175) Adjusted EBITDA $30,836 $22,130 $9,310 $62,276 Segment Adjusted EBITDA Reconciliations

 
24Earnings Presentation Q2 2023 Twenty-six weeks ended July 1, 2023 HPS RDS Canada Consolidated Operating income $531 $14,836 $6,519 $21,886 Depreciation & amortization 37,571 21,675 2,409 61,655 Stock compensation expense 5,070 611 361 6,042 Restructuring and other 2,385 353 110 2,848 Litigation expense — 260 — 260 Transaction and integration expense 1,169 141 — 1,310 Change in fair value of contingent consideration — 4,167 — 4,167 Adjusted EBITDA $46,726 $42,043 $9,399 $98,168 Twenty-six weeks ended June 25, 2022 HPS RDS Canada Consolidated Operating income $8,132 $17,707 $10,783 $36,622 Depreciation & amortization 34,720 21,328 2,465 58,513 Stock compensation expense 6,562 1,050 692 8,304 Restructuring 525 40 — 565 Litigation expense — 3,713 — 3,713 Transaction and integration expense 1,927 288 — 2,215 Change in fair value of contingent consideration — (3,645) — (3,645) Adjusted EBITDA $51,866 $40,481 $13,940 $106,287 Segment Adjusted EBITDA Reconciliations

 
v3.23.2
Cover
Aug. 08, 2023
Cover [Abstract]  
Document Type 8-K
Document Period End Date Aug. 08, 2023
Entity Registrant Name Hillman Solutions Corp.
Entity Incorporation, State or Country Code DE
Entity File Number 001-39609
Entity Tax Identification Number 85-2096734
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Entity Address, Address Line One 1280 Kemper Meadows Drive
Entity Address, City or Town Cincinnati
Entity Address, State or Province OH
Entity Address, Postal Zip Code 45240
City Area Code 513
Local Phone Number 851-4900
Entity Central Index Key 0001822492
Amendment Flag false
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