Hillman Solutions Corp. — Call Transcript 2026

Good morning, welcome to the First Quarter 2026 Results presentation for Hillman Solutions Corporation. My name is Carmen, I will be your conference call operator today. Before we begin, I would like to remind our listeners that today's presentation is being recorded and simultaneously webcast. The company's earnings release presentation and 10-Q were issued this morning. These documents and a replay of today's presentation can be accessed on Hillman's Investor Relations website at ir.hillmangroup.com. I would now like to turn the call over to Michael Koehler with Hillman. Please proceed. Thank you, operator. Good morning, everyone, and thank you for joining us for Hillman's first quarter 2026 results presentation. I am Michael Koehler, Vice President of Corporate Development, Investor Relations, and Treasury. Joining me on today's call are Hillman's President and Chief Executive Officer, Jon Michael Adinolfi, or JMA as we call him, and our Chief Financial Officer, Rocky Kraft. I would like to remind our audience that certain statements made today may be considered forward-looking and are subject to safe harbor provisions of applicable securities laws. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, assumptions, and other factors, many of which are beyond the company's control and may cause actual results to differ materially from those projected in such statements. Some of the factors that could influence our results are contained in our periodic and annual reports filed with the SEC. For more information regarding these risks and uncertainties, please see slide two in our earnings call slide presentation, which is available on our website. In addition, on today's call, we will refer to certain non-GAAP financial measures. Information regarding our use of and reconciliations of these measures to our GAAP results are available in our earnings call slide presentation. JMA will begin today's call by giving some highlights from our first-ever Investor Day last month, which included five-year financial targets. He will provide commentary on our quarterly results and guidance, followed by a discussion on the market and our performance by business. Rocky will then give a more detailed walk through our financial results and guidance before turning the call back over to JMA for some closing comments. We will open up the call for your questions. It's now my pleasure to turn the call over to our President and CEO, Jon Michael Adinolfi. JMA? Thanks, Michael. Good morning, everyone, and thank you for joining us. Before we get into our results for the quarter, I wanted to highlight the long-term strategic initiatives we shared during our first-ever Investor Day. During our presentation, we outlined our blueprint and the catalyst for creating long-term shareholder value. During the presentation, we discussed how we win in our core business. We gave a detailed look into how our core Hardware and Protective Solutions business is fortified by unique competitive advantages, including category leadership, product innovation, integrated operations, our 1,200+ member field sales team, and our diverse product and category offerings. We discussed how we build on Hillman's long history of growth by expanding categories and extending into adjacent aisles with our existing customers through both organic initiatives and acquisitions. We unpacked the near-term opportunities in our Robotics and Digital Solutions business with our MinuteKey 3.5 rollout. We highlighted how our diverse global supply chain provides flexibility and leverage. We talked about how empowering our associates leads to an award-winning culture and efficient operations. We laid the groundwork for how we plan to win the pro and outlined the right to win in this channel. Growing the pro channel is a new critical initiative for Hillman, which provides meaningful new white space to grow and expand our addressable market by $12 billion, bringing our total addressable market to over $18 billion. We detailed how we will win in industrial MRO and pro distribution, which includes specialty distribution, LBM, and growing with our existing retail customers as they go after the pro through their internal initiatives as well as the companies they acquire. Over the next five years, we are confident we will grow Hillman's total net sales to $2.5 billion in 2030. To reach this number, we are targeting 8%-12% growth per year, which will be driven by core performance, new business wins, both at retail and in the pro channel, and M&A. During the same timeline, our goal is to grow adjusted EBITDA at a low double-digit CAGR, maintain a healthy balance sheet while targeting leverage of 2.5x or below, and drive our return on invested capital into the high teens. With that, let's go to our results. Net sales for the first quarter of 2026 increased 3%. The quarter had a strong finish, driven by an improvement in sales during March. That was not enough to make up for a slow January and February, which were impacted by weather and some customer destocking. We also believe the uncertainty consumers are feeling due to the current economic environment impacted our results. For the quarter, our growth was driven by nearly 5% lift from new business wins and a 2% headwind from our core performance. As a reminder, our core performance is a combination of market volume, customer footprint expansion, category management, FX, product mix, and price. Driving our new business wins for the quarter were the builder's hardware expansion at a top customer in the U.S., the expansion of specialty fasteners and builder's hardware at a top customer in Canada, the launch of a pro initiative at a top customer also in Canada. While M&A did not impact our first quarter results, we are pleased that subsequent to the end of the quarter, we closed on two acquisitions, Campbell Chain & Fittings and Delaney Hardware. Campbell Chain is a U.S.-based manufacturer of chain and related products, which expands Hillman's chain offering into higher grade industrial products. The deal strengthens our position in industrial MRO channel and builds on our recent entry into chain category with our acquisition of Koch in 2024. Founded in 1919, Campbell serves a broad range of industrial, commercial, and retail customers and will make a great addition to Hillman. Delaney Hardware expands our pro distribution channel by adding door hardware to our product categories. Delaney supplies lock sets, deadbolts, and smart locks and related products to builders, contractors, and distributors, primarily in the Southeast U.S. The acquisition strengthens our pro distribution strategy and will serve as a platform from which we can expand in the future to serve the pro. We anticipate that Campbell will contribute over $20 million of net sales, and Delaney will contribute over $10 million net sales to Hillman this year. Therefore, we expect M&A will contribute an additional $30 million of net sales and a very modest amount of bottom-line growth to Hillman during 2026. Both acquisitions will be accretive, fit our strategy, and will provide excellent growth and profitability opportunities for Hillman. Customers are excited about Hillman being the new owners of both Campbell and Delaney, and our early feedback has been very positive. As such, we are raising our full year net sales guidance range by the same amount. We anticipate that our full year net sales will be between $1.63 billion-$1.73 billion, with a midpoint of $1.68 billion. Our increased net sales midpoint now represents 8% growth over last year, which is in line with our long-term growth target. We are reiterating both our full year 2026 Adjusted EBITDA and free cash flow guidance. We expect our full year adjusted EBITDA to be between $275 million-$285 million, and our full year free cash flow to be between $100 million-$120 million. Since our founding over 62 years ago, we have navigated all kinds of economic cycles and challenging environments. We view today's uncertain times as another challenge that we will manage through. Our top-line growth during the quarter demonstrates the resilience of Hillman's model and the ability to navigate this environment as well. As we have seen throughout the last year, changes in tariff policy happen quickly and shift the market rapidly. Our dual-faceted supply chain allows us to react to these changes so that we can consistently deliver high-quality products to our customers at the best value. Over the past few months, there have been some puts and takes resulting from changing policy and legal rulings. Altogether, the impact on Hillman has not been changed materially over the past few quarters and remains around $150 million annually. The timing of how tariffs have impacted our bottom line have been and will continue to be choppy. As you know, we rolled our price increases during the second half of 2025, yet most of our higher tariff costs just started impacting our P&L the first quarter of 2026. The result was an outsized benefits to earnings, which peaked during Q3 of 2025. On the contrary, there was an outsized impact to our cash flow as we had to pay for those higher cost goods during 2025 without benefiting from the related higher cash receipts. Our earnings and cash flow during the quarter were fully impacted by higher prices and higher costs resulting from tariffs. Managing tariffs has been a tremendous effort throughout the Hillman organization. Our top priority is always, and especially during this tariff uncertainty, to deliver high-quality products at a good value to our customers with orders delivered on time and in full. Like others, on April 20th, we began the process to initiate IEPA tariff refunds via the Consolidated Administration and Processing of Entries platform. At this point, there are lots of unknowns, including the potential impact to Hillman. Remember, following the ruling that certain IEPA tariffs were deemed illegal, there were quickly new tariffs put in place, so the net impact to Hillman is neutral. More recently, the price of oil has increased. While oil and gas prices have limited impact on our product costs, areas like packaging and freight are directly impacted. Because of the timing of how costs flow through our income statement, we believe the impact of inflation driven by higher oil prices will not be significant during 2026. With that said, we are monitoring this headwind closely, and if these amounts do become material, we'll price for them as we've done in the past. Despite all this, our team has not lost focus on taking great care of our customers, winning new business, and consistently striving to make our operations more efficient. Let's turn to our results for the quarter. Net sales in the first quarter of 2026 totaled $370.1 million, which was an increase of 3% versus the first quarter of 2025. For this quarter, ajusted EBITDA decreased 8% to $50.1 million compared to $54.5 million during the year-ago quarter. As expected, and as we said on our last earnings call, we had a high-cost inventory flowing through our income statement given the timing of high reciprocal tariffs from last year. This, coupled with soft volume and the slower nature of the first quarter, weighed on our adjusted EBITDA during the quarter. Our biggest segment, Hardware and Protective Solutions, or HPS, increased 1.2% versus Q1 of 2025. HS performed well for the quarter, up 7%, driven by a 3% lift from new business wins, coupled with a 4% lift in core performance. PS had a tough quarter, down 17% total. Weighing the results in PS was a decrease in promotional off-shelf activity, destocking, and lower sell-through of gloves. We remain committed to working with our PS customers, providing merchandising solutions for gloves and work gear, and we expect to see PS improve throughout the year, but it is expected to remain below 2025 levels for the full year. Robotics and Digital Solutions, or RDS, had a great quarter, driving healthy top-line growth, showing leverage in its bottom-line performance. Net sales were up 6% versus the year ago quarter and adjusted EBITDA increased by 11.4% to $16.2 million. We have not seen top-line growth like this in RDS since 2021. Adjusted gross margins and adjusted EBITDA margins were both healthy, totaling 74.7% and 28.9% respectively. Driving our performance during the quarter was our MinuteKey 3.5 rollout, as this strategy is gaining traction. Today, we have approximately 3,900 MinuteKey 3.5 machines in the field, an increase of over 400 since our last earnings call in February. We expect to end 2026 with over 5,000 MinuteKey 3.5 machines in the field and are on track to finish these rollouts of these kiosks. Turning to Canada. Net sales in our Canadian business during the quarter increased 15.1% compared to the prior year quarter. Driving the increase was 15% increase in new business wins with flat core performance. New business was driven by specialty fasteners, builder's hardware, and pro wins at a top customer that I mentioned earlier. We are pleased to see Canada return to growth during the quarter. Overall, we navigated the environment well this quarter, and we expect an improvement in our business as we shift to our busy spring season and summer selling seasons. The Hillman team is focused on operational discipline, consistent execution, and taking great care of our customers. We believe doing so enables us to generate consistent results no matter the market. With that, let me turn it over to Rocky to talk financials and guidance. Rocky? Thanks, JMA. Let's get to our results, then we'll review our guidance. Net sales in the first quarter of 2026 totaled $370.1 million, an increase of 3% versus the prior year quarter. First quarter adjusted gross margin decreased by 130 basis points to 45.6% versus the prior year quarter. Adjusted SG&A as a percentage of sales was 32% during the quarter, which was in line with the year ago quarter. Adjusted EBITDA in the first quarter totaled $50.1 million, decreasing 8% versus the year ago quarter. Adjusted EBITDA to net sales margin during the quarter decreased by 170 basis points from a year ago to 13.5%. As JMA mentioned, and we told you during our last earnings call, because of tariffs and the timing of how costs flow through our income statement, our adjusted gross margin and adjusted EBITDA to net sales margin for Q1 will be the lowest of the year. As 2026 goes on, we expect to see margins improve as we work through high cost tariff impacted inventory. This, coupled with soft volume and the slower nature of the first quarter, weighed on our results. Let me turn to cash flow. For the quarter, net cash used for operating activities was $19.5 million, and free cash flow was -$34.3 million. Both were in line with our expectations as we prepared for our busy spring and summer selling seasons with an increase in working capital while prudently trimming a modest amount of net inventory. Let me turn to leverage and liquidity. We ended the first quarter of 2026 with $710 million of total net debt outstanding, which increased by $44 million from the end of the last year. Liquidity available totaled $282 million, consisting of $255 million of availability on our credit facility and $28 million of cash and equivalents. At quarter end, our net debt to trailing twelve-month Adjusted EBITDA ratio was 2.6x versus 2.4x at the end of 2025. The acquisitions we closed following the end of the quarter will not have a material impact on our liquidity or our leverage ratio. During the quarter, we deployed $10.1 million to buy back 1.2 million shares at an average price of $8.29 per share. Our repurchase activity during the quarter accelerated as we opportunistically bought more stock back given the valuation and share price. Our objective remains to offset dilution resulting from employee equity grants and opportunistically buying stock back if there is a meaningful discount between the value of Hillman and where the stock is trading. We plan to continue buying stock on a regular basis. Now turning to our guidance. As JMA mentioned, we are raising our full-year net sales guidance by $30 million, which is the result of the contribution from Campbell and Delaney that closed after the quarter ended. We now anticipate 2026 net sales to be between $1.63 billion-$1.73 billion, with a midpoint of $1.68 billion. We are reiterating both our full year 2026 adjusted EBITDA and free cash flow guidance. We expect our full year 2026 adjusted EBITDA to be between $275 million and $285 million and our full year 2026 free cash flow to be between $100 million and $120 million. Adjusted gross margins for the year should be between 46% and 47%. We expect these margins to improve sequentially throughout the year. We are confident we can continue to navigate this market well. We're well-positioned to capitalize on opportunities as they arise and drive long-term value for our shareholders through the rest of this year and beyond. With that, JMA, back to you. Thanks, Rocky. We are pleased with our performance during the quarter. Operationally, we ran the business well and took great care of our customers. Our hardware business had a solid quarter, growing 7% on the top line. RDS was stronger in the quarter, growing 6% on the top line, and we are excited about the momentum we're seeing in the business, and we look forward to the rest of the year. Canada had an excellent quarter, up 15%, having executed some meaningful new business wins. Lastly, our pro and industrial teams were both off to a great start, showing strong growth during the quarter. In a period marked by macro uncertainty, shifting policies, and ongoing volatility across the markets, our teams executed well, delivered strong growth and discipline. Before I wrap up, I want to once again thank the entire Hillman team for their hard work during the quarter. We are very excited to welcome the team from Campbell and the team from Delaney to Hillman. These two companies are a great fit in our blueprint for creating long-term value, and we can't wait to grow together. Looking ahead, we are staying focused on what we can control: operations, execution, and proper allocation of resources. We will do this while seeking to strengthen our customer relationships and support their ever-evolving needs in a dynamic environment. Hillman is well positioned for what's ahead, and I'm optimistic about where we will take the business from here. With that, I'll turn it back to the operator for the Q&A portion of the call. Operator, please open the call for questions. Thank you. As a reminder, to ask a question, press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. Please limit yourself to one question with one follow-up and hop back in the queue. One moment while we compile the Q&A roster. Our first question comes from Lee Jagoda with CJS Securities. Please proceed. Hi. Good morning, guys. Morning, Lee. Good morning. I guess, JMA, I'll start with just trying to get a little more color on some of your comments around the destocking activities that were in the prepared remarks. Where are those customers from, like an inventory position standpoint, and how should we be thinking about this dynamic over the next couple of quarters? Yeah, I mean, we, you know, when we look at it, Lee, from our business, we really saw destocking only in our PS business. We feel, you know, our overall business and our customers have rebalanced throughout 2025 into 2026. That is a short-term dynamic for us, and we feel like the worst of that is behind us. Okay. I guess shifting to some of your Analyst Day commentary, you know, when you rolled out this Pro initiative to the world, and then it sounded like to some extent your sales force was learning on the fly about, you know, what they could sell and, you know, the more tools in their toolbox. What's been the initial feedback from customers from the sales force, you know, around the Pro strategy, and are there any early successes you wanna call out? Yeah, thanks, Lee. You know, we're really excited. Now, just to give everybody some perspective, you know, 30%-ish of our business is pro today. What we really added was our resi pro team. That team has come up to speed quickly, interacted, you know, with a number of our customers. We've already gotten some nice wins. You know, that team, you know, started working on late last year into this year. That was actually one of the things I referenced up in Canada, where we had a large pro win. We see some great momentum. The customer feedback has been excellent. They know that we can take care of their customers, get them the product they need on the job site or for the job site, or the initial feedback's been great. You know, too early to declare victory. You know my approach to this. That is, we saw a really good solid first quarter. Pro for the overall company is growing faster than DIY. That is the first step in the equation and certainly a big part of our strategy to get to $2.5 billion. We're excited about our initial results, but we got a lot of work to do and a ton of opportunity in front of us. Great. I'll hop back in queue, let others ask. Thanks. Thanks, Lee. Thank you. Our next question comes from the line of David Manthey with Baird. Please proceed. Hey, guys. Good morning. Morning, David. Yeah, first question, you sort of touched on it, in terms of the gross margin. Are you giving us the impression that gross margin is normalizing right now in this quarter, next quarter? Could you just talk about how you think about the trajectory of gross margin through 2026? Yeah. Hey, Lee, or sorry, Dave, it's Rocky. The reality is, as we said in our remarks, we believe Q1 is the low water mark in our gross margin for the year. It was driven by just the timing of the tariff impact of inventory flowing through the P&L. We see margins stepping up throughout the year. Again, as we said in my prepared remarks, we expect to be between 46% and 47% for the full year. Okay. By the time we reach that level, given that you started at 45.6%, maybe you reach the top end of that on a quarterly basis, maybe in the second half of this year? That'd be a good way to think about it. I mean, again, I think there's a shot, depending on how the year plays out, that we could be a little bit above that as you get into the second half of the year, above the 46%, 47%. Okay. Good. You touched on fuel/freight. I was wondering if you could just walk us through the mechanisms within your P&L, like your freight in and your freight out and sort of where it hits your P&L, and then what are your mechanisms for offsetting higher prices should they start to impact you? Yeah. I'll start, and then I'll let JMA add some color, Dave. I think as you think about the pieces, you know, packaging clearly is impacted by the price of oil, that will go into product cost as you think about the cost of a product. More importantly and quicker impacting is obviously ocean freight and the impact on rates there. That while, you know, still delayed, as you think about those costs flowing through the inventory, call it, you know, six to eight months after we incur the cost, still, you know, can be an impact. Quicker even than that would be freight in the U.S. We have seen in some instances already where carriers are installing or putting in place fuel surcharges. At this point, we don't believe material to the 2026 results, but as that moves, you know, we always work with our customers to adjust pricing based upon what happens in those markets. Dave, yeah. There's no. Yeah, go. No, go ahead. Sorry. Yeah, go ahead. Go ahead, Dave. Okay. I'll ask a follow-up if that's okay on that. You outlined product costs and freight in and that sort of thing. What about, what about delivery costs? I mean, you have more than 1,000 people out there visiting store locations. Obviously, they have to fill up at the pump. I don't know how that works through your P&L in terms of reimbursing those folks. Is that a meaningful number? Just trying to make sure we have all the bases covered as it relates to higher oil prices here. Dave, you're correct. That is a real cost. I would not call it a meaningful number. That is tracked all in our SG&A. We have, you know, certain cars have people have cars or car allowances, and we do use, you know, outbound freight, of course. There's fuel does weigh on those charges, but I would not call it a material number. As Rocky framed it, you know, we'll just make sure we account for it and adjust if we need to. Yeah. To, to be clear, Dave, on my comments, when I talked about freight in the United States, the quickest impact will be that last mile to our customer. That's a cost that we incur in the period that we're shipping the product. Anything that's happening between dock and our DCs, again, gets caught up in the inventory and is capitalized and gets spread out over time. Yep. All right. That's very helpful. Thanks, guys. Thanks, Dave. Thanks, Dave. Thank you. Our next question comes from the line of Matthew Bouley with Barclays. Please proceed. Hey, morning, everyone. Thank you for taking the questions. I just want on on the PS business, you know, it sounded like there was some impact there around promotion timing and destocking, but I think I heard you suggest that it was gonna stay below 2025 going forward, and correct me if I'm wrong. I just wanted to maybe unpack that a little and understand if you think there's anything kind of bigger picture going on from a structural perspective in that business and kinda what's it gonna take to sort of turn that business around. Thank you. Matthew, good question. Yeah, certainly had a challenging period. The overall, I'll say HPS business was strong. PS in particular, we saw really promotional activity was the biggest portion of that drop in Q1, and that will be a pressure point for the full year. That, given sensitivity at the shelf with rising prices, we did see some pressure in that business. Our team is committed to driving innovation. We got some great new products that are hitting the market this year. We still have reason to be optimistic about that business. That said, we're focusing on the truth, and that will be the fact that it'll be below 2025 in total. We don't feel like we have issues beyond a tough Q1, Q2 timeframe. The business will improve as the year goes on. It certainly is that promotional activity. The core is healthy. That is, to me, the most important part of the underlying, you know, elements of it. We believe as the markets improve, not that we need that, but we believe as the markets improve, that business will improve as well. Yeah, I guess the only thing, Matt, I would add is, you know, as you think about JMA talked about the promotional activity and the health of the actual business, you know, we believe if you exclude the promotional impact in 2026, that business will be, at worst case, flat to slightly up. Okay. Got it. Perfect. Thank you for all that color. Secondly, on the tariff topic, maybe just diving into that a little bit. So number one, if the refunds were, you know, ultimately make their way to you, how would you think about either shareholder return or, you know, other investments you'd be looking to make on the other side of that? For the, for the rest of the tariff impact, it sounded like you called out effectively neutral. You know, IEPA kind of went away and I know, you know, new tariffs were kind of introduced on the other side of that. I'm just curious why the net impact would still be neutral because, you know, you would think on balance more went away, just kind of, you know, was it the Section 232, et cetera? What ended up kind of fully offsetting that benefit? Thank you. Matt, good question. It's certainly complex. Yeah, from a big picture perspective, absolutely accurate. You know, IEPA did go away. That did create tailwind for a portion of our business. The problem was, is, you know, 232, you know, full steel content is an impact for us going forward. You know, we're not breaking those numbers out specifically, but also 122 went into place. We know that there's limitations on the timeframe there. You know, we'll see what happens. As we stand today, when you take the tailwind from the IEPA and then the headwind from 232 and 122, it is nearly a wash in totality, so an immaterial change in our total exposure. That is really the challenge there. I'll let Rocky, you know, add more color, but on the refunds we get through it. Our team is filing them, we're going through them, but we did, you know, incur quite a bit of cost in prior periods. The balance of what we have to pay going forward, we don't see material change. Rocky, anything to add? No, I don't think there's anything to add to that, JMA. All right. Thanks, guys. Good luck. Thanks, Matthew. Appreciate it. Yeah. Thank you. Our next question comes from the line of William Carter with Stifel. Please proceed. Hey, thank you. Good morning. Wanted to ask, in terms of you said improvement through the quarter. Could you get into the magnitude of the differences between March, January, February, just to get an idea of how the slower start impacted and better understand what the exit rate is to think about for March going into April, 2Q, rest of the year? Thanks. Andrew, I'm gonna, you know, speak in big picture. You know, we saw March start to be, you know, see the spring build. It was normal with our sequential improvement. As far as the month-over-month differences, we're not gonna start breaking that out now. You know, we did see that continue in April. That's the, I'll say, the positive that we're seeing at this point. We certainly saw a tough start to the year. January and February were rough months. You know, we saw in the quarter, you know, new business getting some nice traction, and we think overall, you know, we are moving in the right direction. You know, you think about down, you know, single digits, in that first month or so, January to February timeframe, going positive in March was certainly a step in the right direction. Rocky, anything to add? Nope. Understood. Second question. RDS up six. That's in the keys and accessory up nine. You've obviously got the rollout coming in. You're also kinda lapping some unfavorable customer moves there as well. At this point, like, given your rollout, kinda given a like for like, I mean, when would this business peak in terms of sales? At the Investor Day, you did outline kind of a slower rate of growth for that business, more like the mid-single digits. How much could this rollout kinda carry that kind of close to the old average? How much and how long is that path and when does it kinda regress? Thanks. Yeah, great question. We feel that momentum on sales in RDS is gonna continue throughout 2026. That statement on, you know, mid-single digits for the five-year period, that's where we are today 'cause we don't have, you know, we don't have, I'll say, a path to what's next beyond. We're getting some great traction in the, you know, the 3.5 rollout. Really excited about how our teams are coming together in the field, working with store associates, driving the 3.5 rollout, doing blitzes. We've been doing blitzes heavily in December, January, you know, all the way through April here, and they'll continue. I'm really proud about how the team has come together, driving awareness, driving the execution, and we think that business has got some room to run within our guidance, of course. We're really excited about the performance there and proud of what the team did inside the core, and we expect that to continue for the balance of the year. Yeah. The only thing I would add, Andrew, is, as you think about the headwind from a customer that you spoke about, we kind of finalized that direct headwind in the second quarter this year. You know, we've got a year after that where we should have some favorable comps because we don't have the negative headwind that we've had for quite a period of time. Thanks. I'll pass it on. Thank you, sir. Thank you. Our next question comes from the line of Reuben Garner with Benchmark. Please proceed. Thank you. Good morning, guys. Morning, Reuben. I wanted to dive into the acquisitions a little bit more. Can you kinda give some color on what exactly they bring to you guys that you didn't already have in each case? Then you raised the revenue guide. I assume the profitability on these is a little lower. Can you just talk about the ways that you think you can improve the profitability on the acquisitions you made? Absolutely, Reuben. I'll start with Campbell. Campbell was a great deal. It complemented our Koch chain business, brings us manufacturing in both chain and fittings. The exciting part there is it really opens up a whole new set of customers for us. There's a number of customers we don't do any, or if we do, it's a very small amount of business on the industrial side. The excitement for us was, we believe we can own the category, have, you know, manufacturing capability, bring some new products that could help us on our retail side of the business, and really, you know, fuel growth in our industrial, which is, you know, we talked about during our Investor Day as one of our paths to growth. That was really the exciting part of it's a business that we believe fits better with us than its prior owner. We got great exciting team there, is really energized to be a part of the Hillman family. They're only three, going on four weeks into it, but, you know, we really believe we can take that business and, you know, make it a nice contributor not only on top line, but also on bottom line. We think that's why it fits into the portfolio and our overall strategy. On the Delaney side, really interesting business. We're not in lock sets. I know you and everyone knows we're big into keys. Think about how many keys, you know, we not only design the machines and we, you know, distribute and cut the keys out there, but why not have lock sets and really finish out the door, if you will, right? We have hinges, we have different parts. Now we have door locks. We bought that business. We think it's gonna fit really nicely in our portfolio. It's pure resi pro, so very pro concentrated. We think, one, we're timing it and buying it in the right time in the market. Two, we believe with our capabilities and what we can do with distribution, sourcing, product development, that we can really move that business forward. We, you know, we're excited to have that team on board. We brought in a, you know, a leader in the field, a leader to run that business who we're really excited. We think we're gonna put those two pieces together and really grow it as we go forward. That one we think will show you not only top line, but also profitability in the future. We're also excited about Delaney being a nice fit in the portfolio. Got it. Then switching gears a little bit, RDS, if I am looking at it correctly and correct me if I'm wrong, you know, profitability inflected positive year-over-year from an EBITDA margin standpoint. I think it had been a little while since that happened. Do we feel like we've reached kind of a bottoming on the margin side? Just talk about that portion going forward. You talked about the sales comps and that kind of thing, but what about profitability? Yeah, we think profitability will be steady over throughout the year. I'll turn it to Rocky to add on if there's anything else. I mean, the real thing there is we believe we've got the, you know, the magic happening, if you will, and that the machine's working. We're getting some growth in automotive keys, the endless aisle. That's really the excitement. As volume goes, that'll help the profitability. Really proud of the RDS team and our sales and, you know, sales folks out in the field and what they're doing with it. Reuben, we have reason to be, you know, not getting over my skis, but certainly excited about what's in front of us here for 2026. Rocky, anything to add? Great. Thanks, guys, and good luck. Thank you. Have a good day. Thank you. Our last question comes from the line of Brian McNamara with Canaccord Genuity. Please proceed. Hey, good morning, guys. Thanks for taking the question. Just another one on M&A from me. You guys weren't kidding with the two deals done pretty quickly after Investor Day. It sounds like both were relatively opportunistic. I'm curious, how does the current deal environment look, and how are conversations with potential targets going? Does having those two deals in the bag by mid-April make a third one more likely this year? Thank you. Brian, yeah, great question. Two things. One is, you know, we are really excited by opening up our M&A pipeline now that we've expanded beyond just the retail business that we love into serving the pro. That was one of the key points of Investor Day. That has definitely opened up the view and certainly opened up the pipeline for potential opportunities for acquisition. On the pipeline side, we do see some good deal activity. To your point, you know, having two done early in the year, we feel really good about those two, and I would say there's a high probability we'll see another this year. Can't predict anything at this point, but we certainly have some good opportunities in the pipeline that we're excited about. Excellent. Best of luck, guys. Thank you. Thanks, Brian. Thank you. This concludes the Q&A portion of today's call. I would like to turn the call back to Mr. Adinolfi for some closing comments. Thanks again, everyone, for joining us this morning. We look forward to continue to update on our progress in the near-term future. We're gonna continue to go focusing on taking care of our customers and moving the markets forward. Thanks for all you do, and have a great day. Thank you. You may now disconnect.

Speaker 7: Good morning, welcome to the First Quarter 2026 Results presentation for Hillman Solutions Corporation. My name is Carmen, I will be your conference call operator today. Before we begin, I would like to remind our listeners that today's presentation is being recorded and simultaneously webcast. The company's earnings release presentation and 10-Q were issued this morning. These documents and a replay of today's presentation can be accessed on Hillman's Investor Relations website at ir.hillmangroup.com. I would now like to turn the call over to Michael Koehler with Hillman. Please proceed. Good morning, welcome to the First Quarter 2026 Results presentation for Hillman Solutions Corporation. good morning welcome to the first quarter 2026 results presentation for hillman solutions corporation My name is Carmen, I will be your conference call operator today. my name is carmen i will be your conference call operator today Before we begin, I would like to remind our listeners that today's presentation is being recorded and simultaneously webcast. before we begin i would like to remind our listeners that today's presentation is being recorded and simultaneously webcast The company's earnings release presentation and 10-Q were issued this morning. the company's earnings release presentation and 10-q were issued this morning These documents and a replay of today's presentation can be accessed on Hillman's Investor Relations website at ir.hillmangroup.com. these documents and a replay of today's presentation can be accessed on hillman's investor relations website at ir.hillmangroup.com I would now like to turn the call over to Michael Koehler with Hillman. i would now like to turn the call over to michael koehler with hillman Please proceed. please proceed

Speaker 6: Thank you, operator. Good morning, everyone, and thank you for joining us for Hillman's first quarter 2026 results presentation. I am Michael Koehler, Vice President of Corporate Development, Investor Relations, and Treasury. Joining me on today's call are Hillman's President and Chief Executive Officer, Jon Michael Adinolfi, or JMA as we call him, and our Chief Financial Officer, Rocky Kraft. I would like to remind our audience that certain statements made today may be considered forward-looking and are subject to safe harbor provisions of applicable securities laws. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, assumptions, and other factors, many of which are beyond the company's control and may cause actual results to differ materially from those projected in such statements. Thank you, operator. thank you operator Good morning, everyone, and thank you for joining us for Hillman's first quarter 2026 results presentation. good morning everyone and thank you for joining us for hillman's first quarter 2026 results presentation I am Michael Koehler, Vice President of Corporate Development, Investor Relations, and Treasury. i am michael koehler vice president of corporate development investor relations and treasury Joining me on today's call are Hillman's President and Chief Executive Officer, Jon Michael Adinolfi, or JMA as we call him, and our Chief Financial Officer, Rocky Kraft. joining me on today's call are hillman's president and chief executive officer jon michael adinolfi or jma as we call him and our chief financial officer rocky kraft I would like to remind our audience that certain statements made today may be considered forward-looking and are subject to safe harbor provisions of applicable securities laws. i would like to remind our audience that certain statements made today may be considered forward-looking and are subject to safe harbor provisions of applicable securities laws These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, assumptions, and other factors, many of which are beyond the company's control and may cause actual results to differ materially from those projected in such statements. these forward-looking statements are not guarantees of future performance and are subject to certain risks uncertainties assumptions and other factors many of which are beyond the company's control and may cause actual results to differ materially from those projected in such statements Some of the factors that could influence our results are contained in our periodic and annual reports filed with the SEC. For more information regarding these risks and uncertainties, please see slide two in our earnings call slide presentation, which is available on our website. In addition, on today's call, we will refer to certain non-GAAP financial measures. Information regarding our use of and reconciliations of these measures to our GAAP results are available in our earnings call slide presentation. JMA will begin today's call by giving some highlights from our first-ever Investor Day last month, which included five-year financial targets. He will provide commentary on our quarterly results and guidance, followed by a discussion on the market and our performance by business. Rocky will then give a more detailed walk through our financial results and guidance before turning the call back over to JMA for some closing comments. Some of the factors that could influence our results are contained in our periodic and annual reports filed with the SEC. some of the factors that could influence our results are contained in our periodic and annual reports filed with the sec For more information regarding these risks and uncertainties, please see slide two in our earnings call slide presentation, which is available on our website. for more information regarding these risks and uncertainties please see slide two in our earnings call slide presentation which is available on our website In addition, on today's call, we will refer to certain non-GAAP financial measures. in addition on today's call we will refer to certain non-gaap financial measures Information regarding our use of and reconciliations of these measures to our GAAP results are available in our earnings call slide presentation. information regarding our use of and reconciliations of these measures to our gaap results are available in our earnings call slide presentation JMA will begin today's call by giving some highlights from our first-ever Investor Day last month, which included five-year financial targets. jma will begin today's call by giving some highlights from our first-ever investor day last month which included five-year financial targets He will provide commentary on our quarterly results and guidance, followed by a discussion on the market and our performance by business. he will provide commentary on our quarterly results and guidance followed by a discussion on the market and our performance by business Rocky will then give a more detailed walk through our financial results and guidance before turning the call back over to JMA for some closing comments. rocky will then give a more detailed walk through our financial results and guidance before turning the call back over to jma for some closing comments We will open up the call for your questions. It's now my pleasure to turn the call over to our President and CEO, Jon Michael Adinolfi. JMA? We will open up the call for your questions. we will open up the call for your questions It's now my pleasure to turn the call over to our President and CEO, Jon Michael Adinolfi. it's now my pleasure to turn the call over to our president and ceo jon michael adinolfi JMA? jma

Speaker 3: Thanks, Michael. Good morning, everyone, and thank you for joining us. Before we get into our results for the quarter, I wanted to highlight the long-term strategic initiatives we shared during our first-ever Investor Day. During our presentation, we outlined our blueprint and the catalyst for creating long-term shareholder value. During the presentation, we discussed how we win in our core business. We gave a detailed look into how our core Hardware and Protective Solutions business is fortified by unique competitive advantages, including category leadership, product innovation, integrated operations, our 1,200+ member field sales team, and our diverse product and category offerings. We discussed how we build on Hillman's long history of growth by expanding categories and extending into adjacent aisles with our existing customers through both organic initiatives and acquisitions. Thanks, Michael. thanks michael Good morning, everyone, and thank you for joining us. good morning everyone and thank you for joining us Before we get into our results for the quarter, I wanted to highlight the long-term strategic initiatives we shared during our first-ever Investor Day. before we get into our results for the quarter i wanted to highlight the long-term strategic initiatives we shared during our first-ever investor day During our presentation, we outlined our blueprint and the catalyst for creating long-term shareholder value. during our presentation we outlined our blueprint and the catalyst for creating long-term shareholder value During the presentation, we discussed how we win in our core business. during the presentation we discussed how we win in our core business We gave a detailed look into how our core Hardware and Protective Solutions business is fortified by unique competitive advantages, including category leadership, product innovation, integrated operations, our 1,200+ member field sales team, and our diverse product and category offerings. we gave a detailed look into how our core hardware and protective solutions business is fortified by unique competitive advantages including category leadership product innovation integrated operations our 1,200+ member field sales team and our diverse product and category offerings We discussed how we build on Hillman's long history of growth by expanding categories and extending into adjacent aisles with our existing customers through both organic initiatives and acquisitions. we discussed how we build on hillman's long history of growth by expanding categories and extending into adjacent aisles with our existing customers through both organic initiatives and acquisitions We unpacked the near-term opportunities in our Robotics and Digital Solutions business with our MinuteKey 3.5 rollout. We highlighted how our diverse global supply chain provides flexibility and leverage. We talked about how empowering our associates leads to an award-winning culture and efficient operations. We laid the groundwork for how we plan to win the pro and outlined the right to win in this channel. Growing the pro channel is a new critical initiative for Hillman, which provides meaningful new white space to grow and expand our addressable market by $12 billion, bringing our total addressable market to over $18 billion. We detailed how we will win in industrial MRO and pro distribution, which includes specialty distribution, LBM, and growing with our existing retail customers as they go after the pro through their internal initiatives as well as the companies they acquire. We unpacked the near-term opportunities in our Robotics and Digital Solutions business with our MinuteKey 3.5 rollout. we unpacked the near-term opportunities in our robotics and digital solutions business with our minutekey 3.5 rollout We highlighted how our diverse global supply chain provides flexibility and leverage. we highlighted how our diverse global supply chain provides flexibility and leverage We talked about how empowering our associates leads to an award-winning culture and efficient operations. we talked about how empowering our associates leads to an award-winning culture and efficient operations We laid the groundwork for how we plan to win the pro and outlined the right to win in this channel. we laid the groundwork for how we plan to win the pro and outlined the right to win in this channel Growing the pro channel is a new critical initiative for Hillman, which provides meaningful new white space to grow and expand our addressable market by $12 billion, bringing our total addressable market to over $18 billion. growing the pro channel is a new critical initiative for hillman which provides meaningful new white space to grow and expand our addressable market by $12 billion bringing our total addressable market to over $18 billion We detailed how we will win in industrial MRO and pro distribution, which includes specialty distribution, LBM, and growing with our existing retail customers as they go after the pro through their internal initiatives as well as the companies they acquire. we detailed how we will win in industrial mro and pro distribution which includes specialty distribution lbm and growing with our existing retail customers as they go after the pro through their internal initiatives as well as the companies they acquire Over the next five years, we are confident we will grow Hillman's total net sales to $2.5 billion in 2030. To reach this number, we are targeting 8%-12% growth per year, which will be driven by core performance, new business wins, both at retail and in the pro channel, and M&A. During the same timeline, our goal is to grow adjusted EBITDA at a low double-digit CAGR, maintain a healthy balance sheet while targeting leverage of 2.5x or below, and drive our return on invested capital into the high teens. With that, let's go to our results. Net sales for the first quarter of 2026 increased 3%. The quarter had a strong finish, driven by an improvement in sales during March. Over the next five years, we are confident we will grow Hillman's total net sales to $2.5 billion in 2030. over the next five years we are confident we will grow hillman's total net sales to $2.5 billion in 2030 To reach this number, we are targeting 8%-12% growth per year, which will be driven by core performance, new business wins, both at retail and in the pro channel, and M&A. to reach this number we are targeting 8%-12% growth per year which will be driven by core performance new business wins both at retail and in the pro channel and m&a During the same timeline, our goal is to grow adjusted EBITDA at a low double-digit CAGR, maintain a healthy balance sheet while targeting leverage of 2.5x or below, and drive our return on invested capital into the high teens. during the same timeline our goal is to grow adjusted ebitda at a low double-digit cagr maintain a healthy balance sheet while targeting leverage of 2.5x or below and drive our return on invested capital into the high teens With that, let's go to our results. with that let's go to our results Net sales for the first quarter of 2026 increased 3%. net sales for the first quarter of 2026 increased 3% The quarter had a strong finish, driven by an improvement in sales during March. the quarter had a strong finish driven by an improvement in sales during march That was not enough to make up for a slow January and February, which were impacted by weather and some customer destocking. We also believe the uncertainty consumers are feeling due to the current economic environment impacted our results. For the quarter, our growth was driven by nearly 5% lift from new business wins and a 2% headwind from our core performance. As a reminder, our core performance is a combination of market volume, customer footprint expansion, category management, FX, product mix, and price. That was not enough to make up for a slow January and February, which were impacted by weather and some customer destocking. that was not enough to make up for a slow january and february which were impacted by weather and some customer destocking We also believe the uncertainty consumers are feeling due to the current economic environment impacted our results. we also believe the uncertainty consumers are feeling due to the current economic environment impacted our results For the quarter, our growth was driven by nearly 5% lift from new business wins and a 2% headwind from our core performance. for the quarter our growth was driven by nearly 5% lift from new business wins and a 2% headwind from our core performance As a reminder, our core performance is a combination of market volume, customer footprint expansion, category management, FX, product mix, and price. as a reminder our core performance is a combination of market volume customer footprint expansion category management fx product mix and price Driving our new business wins for the quarter were the builder's hardware expansion at a top customer in the U.S., the expansion of specialty fasteners and builder's hardware at a top customer in Canada, the launch of a pro initiative at a top customer also in Canada. While M&A did not impact our first quarter results, we are pleased that subsequent to the end of the quarter, we closed on two acquisitions, Campbell Chain & Fittings and Delaney Hardware. Campbell Chain is a U.S.-based manufacturer of chain and related products, which expands Hillman's chain offering into higher grade industrial products. The deal strengthens our position in industrial MRO channel and builds on our recent entry into chain category with our acquisition of Koch in 2024. Founded in 1919, Campbell serves a broad range of industrial, commercial, and retail customers and will make a great addition to Hillman. Driving our new business wins for the quarter were the builder's hardware expansion at a top customer in the U.S., the expansion of specialty fasteners and builder's hardware at a top customer in Canada, the launch of a pro initiative at a top customer also in Canada. While M&A did not impact our first quarter results, we are pleased that subsequent to the end of the quarter, we closed on two acquisitions, Campbell Chain & Fittings and Delaney Hardware. driving our new business wins for the quarter were the builder's hardware expansion at a top customer in the u.s the expansion of specialty fasteners and builder's hardware at a top customer in canada the launch of a pro initiative at a top customer also in canada. while m&a did not impact our first quarter results we are pleased that subsequent to the end of the quarter we closed on two acquisitions campbell chain & fittings and delaney hardware Campbell Chain is a U.S.-based manufacturer of chain and related products, which expands Hillman's chain offering into higher grade industrial products. campbell chain is a u.s.-based manufacturer of chain and related products which expands hillman's chain offering into higher grade industrial products The deal strengthens our position in industrial MRO channel and builds on our recent entry into chain category with our acquisition of Koch in 2024. the deal strengthens our position in industrial mro channel and builds on our recent entry into chain category with our acquisition of koch in 2024 Founded in 1919, Campbell serves a broad range of industrial, commercial, and retail customers and will make a great addition to Hillman. founded in 1919 campbell serves a broad range of industrial commercial and retail customers and will make a great addition to hillman Delaney Hardware expands our pro distribution channel by adding door hardware to our product categories. Delaney supplies lock sets, deadbolts, and smart locks and related products to builders, contractors, and distributors, primarily in the Southeast U.S. The acquisition strengthens our pro distribution strategy and will serve as a platform from which we can expand in the future to serve the pro. We anticipate that Campbell will contribute over $20 million of net sales, and Delaney will contribute over $10 million net sales to Hillman this year. Therefore, we expect M&A will contribute an additional $30 million of net sales and a very modest amount of bottom-line growth to Hillman during 2026. Both acquisitions will be accretive, fit our strategy, and will provide excellent growth and profitability opportunities for Hillman. Delaney Hardware expands our pro distribution channel by adding door hardware to our product categories. delaney hardware expands our pro distribution channel by adding door hardware to our product categories Delaney supplies lock sets, deadbolts, and smart locks and related products to builders, contractors, and distributors, primarily in the Southeast U.S. delaney supplies lock sets deadbolts and smart locks and related products to builders contractors and distributors primarily in the southeast u.s The acquisition strengthens our pro distribution strategy and will serve as a platform from which we can expand in the future to serve the pro. the acquisition strengthens our pro distribution strategy and will serve as a platform from which we can expand in the future to serve the pro We anticipate that Campbell will contribute over $20 million of net sales, and Delaney will contribute over $10 million net sales to Hillman this year. we anticipate that campbell will contribute over $20 million of net sales and delaney will contribute over $10 million net sales to hillman this year Therefore, we expect M&A will contribute an additional $30 million of net sales and a very modest amount of bottom-line growth to Hillman during 2026. therefore we expect m&a will contribute an additional $30 million of net sales and a very modest amount of bottom-line growth to hillman during 2026 Both acquisitions will be accretive, fit our strategy, and will provide excellent growth and profitability opportunities for Hillman. both acquisitions will be accretive fit our strategy and will provide excellent growth and profitability opportunities for hillman Customers are excited about Hillman being the new owners of both Campbell and Delaney, and our early feedback has been very positive. As such, we are raising our full year net sales guidance range by the same amount. We anticipate that our full year net sales will be between $1.63 billion-$1.73 billion, with a midpoint of $1.68 billion. Our increased net sales midpoint now represents 8% growth over last year, which is in line with our long-term growth target. We are reiterating both our full year 2026 Adjusted EBITDA and free cash flow guidance. We expect our full year adjusted EBITDA to be between $275 million-$285 million, and our full year free cash flow to be between $100 million-$120 million. Customers are excited about Hillman being the new owners of both Campbell and Delaney, and our early feedback has been very positive. customers are excited about hillman being the new owners of both campbell and delaney and our early feedback has been very positive As such, we are raising our full year net sales guidance range by the same amount. as such we are raising our full year net sales guidance range by the same amount We anticipate that our full year net sales will be between $1.63 billion-$1.73 billion, with a midpoint of $1.68 billion. we anticipate that our full year net sales will be between $1.63 billion-$1.73 billion with a midpoint of $1.68 billion Our increased net sales midpoint now represents 8% growth over last year, which is in line with our long-term growth target. our increased net sales midpoint now represents 8% growth over last year which is in line with our long-term growth target We are reiterating both our full year 2026 Adjusted EBITDA and free cash flow guidance. we are reiterating both our full year 2026 adjusted ebitda and free cash flow guidance We expect our full year adjusted EBITDA to be between $275 million-$285 million, and our full year free cash flow to be between $100 million-$120 million. we expect our full year adjusted ebitda to be between $275 million-$285 million and our full year free cash flow to be between $100 million-$120 million Since our founding over 62 years ago, we have navigated all kinds of economic cycles and challenging environments. We view today's uncertain times as another challenge that we will manage through. Our top-line growth during the quarter demonstrates the resilience of Hillman's model and the ability to navigate this environment as well. As we have seen throughout the last year, changes in tariff policy happen quickly and shift the market rapidly. Our dual-faceted supply chain allows us to react to these changes so that we can consistently deliver high-quality products to our customers at the best value. Over the past few months, there have been some puts and takes resulting from changing policy and legal rulings. Altogether, the impact on Hillman has not been changed materially over the past few quarters and remains around $150 million annually. Since our founding over 62 years ago, we have navigated all kinds of economic cycles and challenging environments. since our founding over 62 years ago we have navigated all kinds of economic cycles and challenging environments We view today's uncertain times as another challenge that we will manage through. we view today's uncertain times as another challenge that we will manage through Our top-line growth during the quarter demonstrates the resilience of Hillman's model and the ability to navigate this environment as well. our top-line growth during the quarter demonstrates the resilience of hillman's model and the ability to navigate this environment as well As we have seen throughout the last year, changes in tariff policy happen quickly and shift the market rapidly. as we have seen throughout the last year changes in tariff policy happen quickly and shift the market rapidly Our dual-faceted supply chain allows us to react to these changes so that we can consistently deliver high-quality products to our customers at the best value. our dual-faceted supply chain allows us to react to these changes so that we can consistently deliver high-quality products to our customers at the best value Over the past few months, there have been some puts and takes resulting from changing policy and legal rulings. over the past few months there have been some puts and takes resulting from changing policy and legal rulings Altogether, the impact on Hillman has not been changed materially over the past few quarters and remains around $150 million annually. altogether the impact on hillman has not been changed materially over the past few quarters and remains around $150 million annually The timing of how tariffs have impacted our bottom line have been and will continue to be choppy. As you know, we rolled our price increases during the second half of 2025, yet most of our higher tariff costs just started impacting our P&L the first quarter of 2026. The result was an outsized benefits to earnings, which peaked during Q3 of 2025. On the contrary, there was an outsized impact to our cash flow as we had to pay for those higher cost goods during 2025 without benefiting from the related higher cash receipts. Our earnings and cash flow during the quarter were fully impacted by higher prices and higher costs resulting from tariffs. Managing tariffs has been a tremendous effort throughout the Hillman organization. The timing of how tariffs have impacted our bottom line have been and will continue to be choppy. the timing of how tariffs have impacted our bottom line have been and will continue to be choppy As you know, we rolled our price increases during the second half of 2025, yet most of our higher tariff costs just started impacting our P&L the first quarter of 2026. as you know we rolled our price increases during the second half of 2025 yet most of our higher tariff costs just started impacting our p&l the first quarter of 2026 The result was an outsized benefits to earnings, which peaked during Q3 of 2025. the result was an outsized benefits to earnings which peaked during q3 of 2025 On the contrary, there was an outsized impact to our cash flow as we had to pay for those higher cost goods during 2025 without benefiting from the related higher cash receipts. on the contrary there was an outsized impact to our cash flow as we had to pay for those higher cost goods during 2025 without benefiting from the related higher cash receipts Our earnings and cash flow during the quarter were fully impacted by higher prices and higher costs resulting from tariffs. our earnings and cash flow during the quarter were fully impacted by higher prices and higher costs resulting from tariffs Managing tariffs has been a tremendous effort throughout the Hillman organization. managing tariffs has been a tremendous effort throughout the hillman organization Our top priority is always, and especially during this tariff uncertainty, to deliver high-quality products at a good value to our customers with orders delivered on time and in full. Like others, on April 20th, we began the process to initiate IEPA tariff refunds via the Consolidated Administration and Processing of Entries platform. At this point, there are lots of unknowns, including the potential impact to Hillman. Remember, following the ruling that certain IEPA tariffs were deemed illegal, there were quickly new tariffs put in place, so the net impact to Hillman is neutral. More recently, the price of oil has increased. While oil and gas prices have limited impact on our product costs, areas like packaging and freight are directly impacted. Our top priority is always, and especially during this tariff uncertainty, to deliver high-quality products at a good value to our customers with orders delivered on time and in full. our top priority is always and especially during this tariff uncertainty to deliver high-quality products at a good value to our customers with orders delivered on time and in full Like others, on April 20th, we began the process to initiate IEPA tariff refunds via the Consolidated Administration and Processing of Entries platform. like others on april 20th we began the process to initiate iepa tariff refunds via the consolidated administration and processing of entries platform At this point, there are lots of unknowns, including the potential impact to Hillman. at this point there are lots of unknowns including the potential impact to hillman Remember, following the ruling that certain IEPA tariffs were deemed illegal, there were quickly new tariffs put in place, so the net impact to Hillman is neutral. remember following the ruling that certain iepa tariffs were deemed illegal there were quickly new tariffs put in place so the net impact to hillman is neutral More recently, the price of oil has increased. more recently the price of oil has increased While oil and gas prices have limited impact on our product costs, areas like packaging and freight are directly impacted. while oil and gas prices have limited impact on our product costs areas like packaging and freight are directly impacted Because of the timing of how costs flow through our income statement, we believe the impact of inflation driven by higher oil prices will not be significant during 2026. With that said, we are monitoring this headwind closely, and if these amounts do become material, we'll price for them as we've done in the past. Despite all this, our team has not lost focus on taking great care of our customers, winning new business, and consistently striving to make our operations more efficient. Let's turn to our results for the quarter. Net sales in the first quarter of 2026 totaled $370.1 million, which was an increase of 3% versus the first quarter of 2025. For this quarter, ajusted EBITDA decreased 8% to $50.1 million compared to $54.5 million during the year-ago quarter. Because of the timing of how costs flow through our income statement, we believe the impact of inflation driven by higher oil prices will not be significant during 2026. because of the timing of how costs flow through our income statement we believe the impact of inflation driven by higher oil prices will not be significant during 2026 With that said, we are monitoring this headwind closely, and if these amounts do become material, we'll price for them as we've done in the past. with that said, we are monitoring this headwind closely and if these amounts do become material we'll price for them as we've done in the past Despite all this, our team has not lost focus on taking great care of our customers, winning new business, and consistently striving to make our operations more efficient. despite all this our team has not lost focus on taking great care of our customers winning new business and consistently striving to make our operations more efficient Let's turn to our results for the quarter. let's turn to our results for the quarter Net sales in the first quarter of 2026 totaled $370.1 million, which was an increase of 3% versus the first quarter of 2025. net sales in the first quarter of 2026 totaled $370.1 million which was an increase of 3% versus the first quarter of 2025 For this quarter, ajusted EBITDA decreased 8% to $50.1 million compared to $54.5 million during the year-ago quarter. for this quarter ajusted ebitda decreased 8% to $50.1 million compared to $54.5 million during the year-ago quarter As expected, and as we said on our last earnings call, we had a high-cost inventory flowing through our income statement given the timing of high reciprocal tariffs from last year. This, coupled with soft volume and the slower nature of the first quarter, weighed on our adjusted EBITDA during the quarter. Our biggest segment, Hardware and Protective Solutions, or HPS, increased 1.2% versus Q1 of 2025. HS performed well for the quarter, up 7%, driven by a 3% lift from new business wins, coupled with a 4% lift in core performance. PS had a tough quarter, down 17% total. Weighing the results in PS was a decrease in promotional off-shelf activity, destocking, and lower sell-through of gloves. As expected, and as we said on our last earnings call, we had a high-cost inventory flowing through our income statement given the timing of high reciprocal tariffs from last year. as expected and as we said on our last earnings call we had a high-cost inventory flowing through our income statement given the timing of high reciprocal tariffs from last year This, coupled with soft volume and the slower nature of the first quarter, weighed on our adjusted EBITDA during the quarter. Our biggest segment, Hardware and Protective Solutions, or HPS, increased 1.2% versus Q1 of 2025. this coupled with soft volume and the slower nature of the first quarter weighed on our adjusted ebitda during the quarter. our biggest segment hardware and protective solutions or hps increased 1.2% versus q1 of 2025 HS performed well for the quarter, up 7%, driven by a 3% lift from new business wins, coupled with a 4% lift in core performance. hs performed well for the quarter up 7% driven by a 3% lift from new business wins coupled with a 4% lift in core performance PS had a tough quarter, down 17% total. ps had a tough quarter down 17% total Weighing the results in PS was a decrease in promotional off-shelf activity, destocking, and lower sell-through of gloves. weighing the results in ps was a decrease in promotional off-shelf activity destocking and lower sell-through of gloves We remain committed to working with our PS customers, providing merchandising solutions for gloves and work gear, and we expect to see PS improve throughout the year, but it is expected to remain below 2025 levels for the full year. Robotics and Digital Solutions, or RDS, had a great quarter, driving healthy top-line growth, showing leverage in its bottom-line performance. Net sales were up 6% versus the year ago quarter and adjusted EBITDA increased by 11.4% to $16.2 million. We have not seen top-line growth like this in RDS since 2021. Adjusted gross margins and adjusted EBITDA margins were both healthy, totaling 74.7% and 28.9% respectively. Driving our performance during the quarter was our MinuteKey 3.5 rollout, as this strategy is gaining traction. We remain committed to working with our PS customers, providing merchandising solutions for gloves and work gear, and we expect to see PS improve throughout the year, but it is expected to remain below 2025 levels for the full year. we remain committed to working with our ps customers providing merchandising solutions for gloves and work gear and we expect to see ps improve throughout the year but it is expected to remain below 2025 levels for the full year Robotics and Digital Solutions, or RDS, had a great quarter, driving healthy top-line growth, showing leverage in its bottom-line performance. robotics and digital solutions or rds had a great quarter driving healthy top-line growth showing leverage in its bottom-line performance Net sales were up 6% versus the year ago quarter and adjusted EBITDA increased by 11.4% to $16.2 million. net sales were up 6% versus the year ago quarter and adjusted ebitda increased by 11.4% to $16.2 million We have not seen top-line growth like this in RDS since 2021. we have not seen top-line growth like this in rds since 2021 Adjusted gross margins and adjusted EBITDA margins were both healthy, totaling 74.7% and 28.9% respectively. adjusted gross margins and adjusted ebitda margins were both healthy totaling 74.7% and 28.9% respectively Driving our performance during the quarter was our MinuteKey 3.5 rollout, as this strategy is gaining traction. driving our performance during the quarter was our minutekey 3.5 rollout as this strategy is gaining traction Today, we have approximately 3,900 MinuteKey 3.5 machines in the field, an increase of over 400 since our last earnings call in February. We expect to end 2026 with over 5,000 MinuteKey 3.5 machines in the field and are on track to finish these rollouts of these kiosks. Turning to Canada. Net sales in our Canadian business during the quarter increased 15.1% compared to the prior year quarter. Driving the increase was 15% increase in new business wins with flat core performance. New business was driven by specialty fasteners, builder's hardware, and pro wins at a top customer that I mentioned earlier. We are pleased to see Canada return to growth during the quarter. Today, we have approximately 3,900 MinuteKey 3.5 machines in the field, an increase of over 400 since our last earnings call in February. today we have approximately 3,900 minutekey 3.5 machines in the field an increase of over 400 since our last earnings call in february We expect to end 2026 with over 5,000 MinuteKey 3.5 machines in the field and are on track to finish these rollouts of these kiosks. we expect to end 2026 with over 5,000 minutekey 3.5 machines in the field and are on track to finish these rollouts of these kiosks Turning to Canada. turning to canada Net sales in our Canadian business during the quarter increased 15.1% compared to the prior year quarter. net sales in our canadian business during the quarter increased 15.1% compared to the prior year quarter Driving the increase was 15% increase in new business wins with flat core performance. driving the increase was 15% increase in new business wins with flat core performance New business was driven by specialty fasteners, builder's hardware, and pro wins at a top customer that I mentioned earlier. new business was driven by specialty fasteners builder's hardware and pro wins at a top customer that i mentioned earlier We are pleased to see Canada return to growth during the quarter. we are pleased to see canada return to growth during the quarter Overall, we navigated the environment well this quarter, and we expect an improvement in our business as we shift to our busy spring season and summer selling seasons. The Hillman team is focused on operational discipline, consistent execution, and taking great care of our customers. We believe doing so enables us to generate consistent results no matter the market. With that, let me turn it over to Rocky to talk financials and guidance. Rocky? Overall, we navigated the environment well this quarter, and we expect an improvement in our business as we shift to our busy spring season and summer selling seasons. overall we navigated the environment well this quarter and we expect an improvement in our business as we shift to our busy spring season and summer selling seasons The Hillman team is focused on operational discipline, consistent execution, and taking great care of our customers. the hillman team is focused on operational discipline consistent execution and taking great care of our customers We believe doing so enables us to generate consistent results no matter the market. we believe doing so enables us to generate consistent results no matter the market With that, let me turn it over to Rocky to talk financials and guidance. with that let me turn it over to rocky to talk financials and guidance Rocky? rocky

Speaker 9: Thanks, JMA. Let's get to our results, then we'll review our guidance. Net sales in the first quarter of 2026 totaled $370.1 million, an increase of 3% versus the prior year quarter. First quarter adjusted gross margin decreased by 130 basis points to 45.6% versus the prior year quarter. Adjusted SG&A as a percentage of sales was 32% during the quarter, which was in line with the year ago quarter. Adjusted EBITDA in the first quarter totaled $50.1 million, decreasing 8% versus the year ago quarter. Adjusted EBITDA to net sales margin during the quarter decreased by 170 basis points from a year ago to 13.5%. Thanks, JMA. thanks jma Let's get to our results, then we'll review our guidance. let's get to our results then we'll review our guidance Net sales in the first quarter of 2026 totaled $370.1 million, an increase of 3% versus the prior year quarter. net sales in the first quarter of 2026 totaled $370.1 million an increase of 3% versus the prior year quarter First quarter adjusted gross margin decreased by 130 basis points to 45.6% versus the prior year quarter. first quarter adjusted gross margin decreased by 130 basis points to 45.6% versus the prior year quarter Adjusted SG&A as a percentage of sales was 32% during the quarter, which was in line with the year ago quarter. adjusted sg&a as a percentage of sales was 32% during the quarter which was in line with the year ago quarter Adjusted EBITDA in the first quarter totaled $50.1 million, decreasing 8% versus the year ago quarter. adjusted ebitda in the first quarter totaled $50.1 million decreasing 8% versus the year ago quarter Adjusted EBITDA to net sales margin during the quarter decreased by 170 basis points from a year ago to 13.5%. adjusted ebitda to net sales margin during the quarter decreased by 170 basis points from a year ago to 13.5% As JMA mentioned, and we told you during our last earnings call, because of tariffs and the timing of how costs flow through our income statement, our adjusted gross margin and adjusted EBITDA to net sales margin for Q1 will be the lowest of the year. As 2026 goes on, we expect to see margins improve as we work through high cost tariff impacted inventory. This, coupled with soft volume and the slower nature of the first quarter, weighed on our results. Let me turn to cash flow. For the quarter, net cash used for operating activities was $19.5 million, and free cash flow was -$34.3 million. Both were in line with our expectations as we prepared for our busy spring and summer selling seasons with an increase in working capital while prudently trimming a modest amount of net inventory. As JMA mentioned, and we told you during our last earnings call, because of tariffs and the timing of how costs flow through our income statement, our adjusted gross margin and adjusted EBITDA to net sales margin for Q1 will be the lowest of the year. as jma mentioned and we told you during our last earnings call because of tariffs and the timing of how costs flow through our income statement our adjusted gross margin and adjusted ebitda to net sales margin for q1 will be the lowest of the year As 2026 goes on, we expect to see margins improve as we work through high cost tariff impacted inventory. as 2026 goes on we expect to see margins improve as we work through high cost tariff impacted inventory This, coupled with soft volume and the slower nature of the first quarter, weighed on our results. this coupled with soft volume and the slower nature of the first quarter weighed on our results Let me turn to cash flow. let me turn to cash flow For the quarter, net cash used for operating activities was $19.5 million, and free cash flow was - $34.3 million. for the quarter net cash used for operating activities was $19.5 million and free cash flow was - $34.3 million Both were in line with our expectations as we prepared for our busy spring and summer selling seasons with an increase in working capital while prudently trimming a modest amount of net inventory. both were in line with our expectations as we prepared for our busy spring and summer selling seasons with an increase in working capital while prudently trimming a modest amount of net inventory Let me turn to leverage and liquidity. We ended the first quarter of 2026 with $710 million of total net debt outstanding, which increased by $44 million from the end of the last year. Liquidity available totaled $282 million, consisting of $255 million of availability on our credit facility and $28 million of cash and equivalents. At quarter end, our net debt to trailing twelve-month Adjusted EBITDA ratio was 2.6x versus 2.4x at the end of 2025. The acquisitions we closed following the end of the quarter will not have a material impact on our liquidity or our leverage ratio. During the quarter, we deployed $10.1 million to buy back 1.2 million shares at an average price of $8.29 per share. Let me turn to leverage and liquidity. let me turn to leverage and liquidity We ended the first quarter of 2026 with $710 million of total net debt outstanding, which increased by $44 million from the end of the last year. we ended the first quarter of 2026 with $710 million of total net debt outstanding which increased by $44 million from the end of the last year Liquidity available totaled $282 million, consisting of $255 million of availability on our credit facility and $28 million of cash and equivalents. liquidity available totaled $282 million consisting of $255 million of availability on our credit facility and $28 million of cash and equivalents At quarter end, our net debt to trailing twelve-month Adjusted EBITDA ratio was 2.6x versus 2.4x at the end of 2025. at quarter end our net debt to trailing twelve-month adjusted ebitda ratio was 2.6x versus 2.4x at the end of 2025 The acquisitions we closed following the end of the quarter will not have a material impact on our liquidity or our leverage ratio. the acquisitions we closed following the end of the quarter will not have a material impact on our liquidity or our leverage ratio During the quarter, we deployed $10.1 million to buy back 1.2 million shares at an average price of $8.29 per share. during the quarter we deployed $10.1 million to buy back 1.2 million shares at an average price of $8.29 per share Our repurchase activity during the quarter accelerated as we opportunistically bought more stock back given the valuation and share price. Our objective remains to offset dilution resulting from employee equity grants and opportunistically buying stock back if there is a meaningful discount between the value of Hillman and where the stock is trading. We plan to continue buying stock on a regular basis. Now turning to our guidance. As JMA mentioned, we are raising our full-year net sales guidance by $30 million, which is the result of the contribution from Campbell and Delaney that closed after the quarter ended. We now anticipate 2026 net sales to be between $1.63 billion-$1.73 billion, with a midpoint of $1.68 billion. We are reiterating both our full year 2026 adjusted EBITDA and free cash flow guidance. Our repurchase activity during the quarter accelerated as we opportunistically bought more stock back given the valuation and share price. our repurchase activity during the quarter accelerated as we opportunistically bought more stock back given the valuation and share price Our objective remains to offset dilution resulting from employee equity grants and opportunistically buying stock back if there is a meaningful discount between the value of Hillman and where the stock is trading. our objective remains to offset dilution resulting from employee equity grants and opportunistically buying stock back if there is a meaningful discount between the value of hillman and where the stock is trading We plan to continue buying stock on a regular basis. we plan to continue buying stock on a regular basis Now turning to our guidance. now turning to our guidance As JMA mentioned, we are raising our full-year net sales guidance by $30 million, which is the result of the contribution from Campbell and Delaney that closed after the quarter ended. as jma mentioned we are raising our full-year net sales guidance by $30 million which is the result of the contribution from campbell and delaney that closed after the quarter ended We now anticipate 2026 net sales to be between $1.63 billion-$1.73 billion, with a midpoint of $1.68 billion. we now anticipate 2026 net sales to be between $1.63 billion-$1.73 billion with a midpoint of $1.68 billion We are reiterating both our full year 2026 adjusted EBITDA and free cash flow guidance. we are reiterating both our full year 2026 adjusted ebitda and free cash flow guidance We expect our full year 2026 adjusted EBITDA to be between $275 million and $285 million and our full year 2026 free cash flow to be between $100 million and $120 million. Adjusted gross margins for the year should be between 46% and 47%. We expect these margins to improve sequentially throughout the year. We are confident we can continue to navigate this market well. We're well-positioned to capitalize on opportunities as they arise and drive long-term value for our shareholders through the rest of this year and beyond. With that, JMA, back to you. We expect our full year 2026 adjusted EBITDA to be between $275 million and $285 million and our full year 2026 free cash flow to be between $100 million and $120 million. we expect our full year 2026 adjusted ebitda to be between $275 million and $285 million and our full year 2026 free cash flow to be between $100 million and $120 million Adjusted gross margins for the year should be between 46% and 47%. adjusted gross margins for the year should be between 46% and 47% We expect these margins to improve sequentially throughout the year. we expect these margins to improve sequentially throughout the year We are confident we can continue to navigate this market well. we are confident we can continue to navigate this market well We're well-positioned to capitalize on opportunities as they arise and drive long-term value for our shareholders through the rest of this year and beyond. we're well-positioned to capitalize on opportunities as they arise and drive long-term value for our shareholders through the rest of this year and beyond With that, JMA, back to you. with that jma back to you

Speaker 3: Thanks, Rocky. We are pleased with our performance during the quarter. Operationally, we ran the business well and took great care of our customers. Our hardware business had a solid quarter, growing 7% on the top line. RDS was stronger in the quarter, growing 6% on the top line, and we are excited about the momentum we're seeing in the business, and we look forward to the rest of the year. Canada had an excellent quarter, up 15%, having executed some meaningful new business wins. Lastly, our pro and industrial teams were both off to a great start, showing strong growth during the quarter. In a period marked by macro uncertainty, shifting policies, and ongoing volatility across the markets, our teams executed well, delivered strong growth and discipline. Thanks, Rocky. thanks rocky We are pleased with our performance during the quarter. we are pleased with our performance during the quarter Operationally, we ran the business well and took great care of our customers. operationally we ran the business well and took great care of our customers Our hardware business had a solid quarter, growing 7% on the top line. our hardware business had a solid quarter growing 7% on the top line RDS was stronger in the quarter, growing 6% on the top line, and we are excited about the momentum we're seeing in the business, and we look forward to the rest of the year. rds was stronger in the quarter growing 6% on the top line and we are excited about the momentum we're seeing in the business and we look forward to the rest of the year Canada had an excellent quarter, up 15%, having executed some meaningful new business wins. canada had an excellent quarter up 15% having executed some meaningful new business wins Lastly, our pro and industrial teams were both off to a great start, showing strong growth during the quarter. lastly our pro and industrial teams were both off to a great start showing strong growth during the quarter In a period marked by macro uncertainty, shifting policies, and ongoing volatility across the markets, our teams executed well, delivered strong growth and discipline. in a period marked by macro uncertainty shifting policies and ongoing volatility across the markets our teams executed well delivered strong growth and discipline Before I wrap up, I want to once again thank the entire Hillman team for their hard work during the quarter. We are very excited to welcome the team from Campbell and the team from Delaney to Hillman. These two companies are a great fit in our blueprint for creating long-term value, and we can't wait to grow together. Looking ahead, we are staying focused on what we can control: operations, execution, and proper allocation of resources. We will do this while seeking to strengthen our customer relationships and support their ever-evolving needs in a dynamic environment. Hillman is well positioned for what's ahead, and I'm optimistic about where we will take the business from here. With that, I'll turn it back to the operator for the Q&A portion of the call. Operator, please open the call for questions. Before I wrap up, I want to once again thank the entire Hillman team for their hard work during the quarter. before i wrap up i want to once again thank the entire hillman team for their hard work during the quarter We are very excited to welcome the team from Campbell and the team from Delaney to Hillman. we are very excited to welcome the team from campbell and the team from delaney to hillman These two companies are a great fit in our blueprint for creating long-term value, and we can't wait to grow together. these two companies are a great fit in our blueprint for creating long-term value and we can't wait to grow together Looking ahead, we are staying focused on what we can control: operations, execution, and proper allocation of resources. looking ahead we are staying focused on what we can control operations execution and proper allocation of resources We will do this while seeking to strengthen our customer relationships and support their ever-evolving needs in a dynamic environment. we will do this while seeking to strengthen our customer relationships and support their ever-evolving needs in a dynamic environment Hillman is well positioned for what's ahead, and I'm optimistic about where we will take the business from here. hillman is well positioned for what's ahead and i'm optimistic about where we will take the business from here With that, I'll turn it back to the operator for the Q&A portion of the call. with that i'll turn it back to the operator for the q&a portion of the call Operator, please open the call for questions. operator please open the call for questions

Speaker 7: Thank you. As a reminder, to ask a question, press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. Please limit yourself to one question with one follow-up and hop back in the queue. One moment while we compile the Q&A roster. Our first question comes from Lee Jagoda with CJS Securities. Please proceed. Thank you. thank you As a reminder, to ask a question, press star one one on your telephone and wait for your name to be announced. as a reminder to ask a question press star one one on your telephone and wait for your name to be announced To remove yourself, press star one one again. to remove yourself press star one one again Please limit yourself to one question with one follow-up and hop back in the queue. please limit yourself to one question with one follow-up and hop back in the queue One moment while we compile the Q&A roster. one moment while we compile the q&a roster Our first question comes from Lee Jagoda with CJS Securities. our first question comes from lee jagoda with cjs securities Please proceed. please proceed

Speaker 4: Hi. Good morning, guys. Hi. hi Good morning, guys. good morning guys

Speaker 3: Morning, Lee. Morning, Lee. morning lee

Speaker 9: Good morning. Good morning. good morning

Speaker 4: I guess, JMA, I'll start with just trying to get a little more color on some of your comments around the destocking activities that were in the prepared remarks. Where are those customers from, like an inventory position standpoint, and how should we be thinking about this dynamic over the next couple of quarters? I guess, JMA, I'll start with just trying to get a little more color on some of your comments around the destocking activities that were in the prepared remarks. i guess jma i'll start with just trying to get a little more color on some of your comments around the destocking activities that were in the prepared remarks Where are those customers from, like an inventory position standpoint, and how should we be thinking about this dynamic over the next couple of quarters? where are those customers from like an inventory position standpoint and how should we be thinking about this dynamic over the next couple of quarters

Speaker 3: Yeah, I mean, we, you know, when we look at it, Lee, from our business, we really saw destocking only in our PS business. We feel, you know, our overall business and our customers have rebalanced throughout 2025 into 2026. That is a short-term dynamic for us, and we feel like the worst of that is behind us. Yeah, I mean, we, you know, when we look at it, Lee, from our business, we really saw destocking only in our PS business. yeah i mean we you know when we look at it lee from our business we really saw destocking only in our ps business We feel, you know, our overall business and our customers have rebalanced throughout 2025 into 2026. we feel you know our overall business and our customers have rebalanced throughout 2025 into 2026 That is a short-term dynamic for us, and we feel like the worst of that is behind us. that is a short-term dynamic for us and we feel like the worst of that is behind us

Speaker 4: Okay. I guess shifting to some of your Analyst Day commentary, you know, when you rolled out this Pro initiative to the world, and then it sounded like to some extent your sales force was learning on the fly about, you know, what they could sell and, you know, the more tools in their toolbox. What's been the initial feedback from customers from the sales force, you know, around the Pro strategy, and are there any early successes you wanna call out? Okay. okay I guess shifting to some of your Analyst Day commentary, you know, when you rolled out this Pro initiative to the world, and then it sounded like to some extent your sales force was learning on the fly about, you know, what they could sell and, you know, the more tools in their toolbox. i guess shifting to some of your analyst day commentary you know when you rolled out this pro initiative to the world and then it sounded like to some extent your sales force was learning on the fly about you know what they could sell and you know the more tools in their toolbox What's been the initial feedback from customers from the sales force, you know, around the Pro strategy, and are there any early successes you wanna call out? what's been the initial feedback from customers from the sales force you know around the pro strategy and are there any early successes you wanna call out

Speaker 3: Yeah, thanks, Lee. You know, we're really excited. Now, just to give everybody some perspective, you know, 30%-ish of our business is pro today. What we really added was our resi pro team. That team has come up to speed quickly, interacted, you know, with a number of our customers. We've already gotten some nice wins. You know, that team, you know, started working on late last year into this year. That was actually one of the things I referenced up in Canada, where we had a large pro win. We see some great momentum. The customer feedback has been excellent. They know that we can take care of their customers, get them the product they need on the job site or for the job site, or the initial feedback's been great. You know, too early to declare victory. Yeah, thanks, Lee. yeah thanks lee You know, we're really excited. you know we're really excited Now, just to give everybody some perspective, you know, 30%-ish of our business is pro today. now just to give everybody some perspective you know 30%-ish of our business is pro today What we really added was our resi pro team. what we really added was our resi pro team That team has come up to speed quickly, interacted, you know, with a number of our customers. that team has come up to speed quickly interacted you know with a number of our customers We've already gotten some nice wins. we've already gotten some nice wins You know, that team, you know, started working on late last year into this year. you know that team you know started working on late last year into this year That was actually one of the things I referenced up in Canada, where we had a large pro win. that was actually one of the things i referenced up in canada where we had a large pro win We see some great momentum. we see some great momentum The customer feedback has been excellent. the customer feedback has been excellent They know that we can take care of their customers, get them the product they need on the job site or for the job site, or the initial feedback's been great. they know that we can take care of their customers get them the product they need on the job site or for the job site or the initial feedback's been great You know, too early to declare victory. you know too early to declare victory You know my approach to this. That is, we saw a really good solid first quarter. Pro for the overall company is growing faster than DIY. That is the first step in the equation and certainly a big part of our strategy to get to $2.5 billion. We're excited about our initial results, but we got a lot of work to do and a ton of opportunity in front of us. You know my approach to this. you know my approach to this That is, we saw a really good solid first quarter. that is we saw a really good solid first quarter Pro for the overall company is growing faster than DIY. pro for the overall company is growing faster than diy That is the first step in the equation and certainly a big part of our strategy to get to $2.5 billion. that is the first step in the equation and certainly a big part of our strategy to get to $2.5 billion We're excited about our initial results, but we got a lot of work to do and a ton of opportunity in front of us. we're excited about our initial results but we got a lot of work to do and a ton of opportunity in front of us

Speaker 4: Great. I'll hop back in queue, let others ask. Thanks. Great. great I'll hop back in queue, let others ask. i'll hop back in queue let others ask Thanks. thanks

Speaker 3: Thanks, Lee. Thanks, Lee. thanks lee

Speaker 7: Thank you. Our next question comes from the line of David Manthey with Baird. Please proceed. Thank you. thank you Our next question comes from the line of David Manthey with Baird. our next question comes from the line of david manthey with baird Please proceed. please proceed

Speaker 2: Hey, guys. Good morning. Hey, guys. hey guys Good morning. good morning

Speaker 3: Morning, David. Morning, David. morning david

Speaker 2: Yeah, first question, you sort of touched on it, in terms of the gross margin. Are you giving us the impression that gross margin is normalizing right now in this quarter, next quarter? Could you just talk about how you think about the trajectory of gross margin through 2026? Yeah, first question, you sort of touched on it, in terms of the gross margin. yeah first question you sort of touched on it in terms of the gross margin Are you giving us the impression that gross margin is normalizing right now in this quarter, next quarter? are you giving us the impression that gross margin is normalizing right now in this quarter next quarter Could you just talk about how you think about the trajectory of gross margin through 2026? could you just talk about how you think about the trajectory of gross margin through 2026

Speaker 9: Yeah. Hey, Lee, or sorry, Dave, it's Rocky. The reality is, as we said in our remarks, we believe Q1 is the low water mark in our gross margin for the year. It was driven by just the timing of the tariff impact of inventory flowing through the P&L. We see margins stepping up throughout the year. Again, as we said in my prepared remarks, we expect to be between 46% and 47% for the full year. Yeah. yeah Hey, Lee, or sorry, Dave, it's Rocky. hey lee or sorry dave it's rocky The reality is, as we said in our remarks, we believe Q1 is the low water mark in our gross margin for the year. the reality is as we said in our remarks we believe q1 is the low water mark in our gross margin for the year It was driven by just the timing of the tariff impact of inventory flowing through the P&L. it was driven by just the timing of the tariff impact of inventory flowing through the p&l We see margins stepping up throughout the year. we see margins stepping up throughout the year Again, as we said in my prepared remarks, we expect to be between 46% and 47% for the full year. again as we said in my prepared remarks we expect to be between 46% and 47% for the full year

Speaker 2: Okay. By the time we reach that level, given that you started at 45.6%, maybe you reach the top end of that on a quarterly basis, maybe in the second half of this year? Okay. okay By the time we reach that level, given that you started at 45.6%, maybe you reach the top end of that on a quarterly basis, maybe in the second half of this year? by the time we reach that level given that you started at 45.6% maybe you reach the top end of that on a quarterly basis maybe in the second half of this year

Speaker 9: That'd be a good way to think about it. I mean, again, I think there's a shot, depending on how the year plays out, that we could be a little bit above that as you get into the second half of the year, above the 46%, 47%. That'd be a good way to think about it. that'd be a good way to think about it I mean, again, I think there's a shot, depending on how the year plays out, that we could be a little bit above that as you get into the second half of the year, above the 46%, 47%. i mean again i think there's a shot depending on how the year plays out that we could be a little bit above that as you get into the second half of the year above the 46%, 47%

Speaker 2: Okay. Good. You touched on fuel/freight. I was wondering if you could just walk us through the mechanisms within your P&L, like your freight in and your freight out and sort of where it hits your P&L, and then what are your mechanisms for offsetting higher prices should they start to impact you? Okay. okay Good. good You touched on fuel/freight. you touched on fuel/freight I was wondering if you could just walk us through the mechanisms within your P&L, like your freight in and your freight out and sort of where it hits your P&L, and then what are your mechanisms for offsetting higher prices should they start to impact you? i was wondering if you could just walk us through the mechanisms within your p&l like your freight in and your freight out and sort of where it hits your p&l and then what are your mechanisms for offsetting higher prices should they start to impact you

Speaker 9: Yeah. I'll start, and then I'll let JMA add some color, Dave. I think as you think about the pieces, you know, packaging clearly is impacted by the price of oil, that will go into product cost as you think about the cost of a product. More importantly and quicker impacting is obviously ocean freight and the impact on rates there. That while, you know, still delayed, as you think about those costs flowing through the inventory, call it, you know, six to eight months after we incur the cost, still, you know, can be an impact. Quicker even than that would be freight in the U.S. We have seen in some instances already where carriers are installing or putting in place fuel surcharges. Yeah. yeah I'll start, and then I'll let JMA add some color, Dave. i'll start and then i'll let jma add some color dave I think as you think about the pieces, you know, packaging clearly is impacted by the price of oil, that will go into product cost as you think about the cost of a product. i think as you think about the pieces you know packaging clearly is impacted by the price of oil that will go into product cost as you think about the cost of a product More importantly and quicker impacting is obviously ocean freight and the impact on rates there. more importantly and quicker impacting is obviously ocean freight and the impact on rates there That while, you know, still delayed, as you think about those costs flowing through the inventory, call it, you know, six to eight months after we incur the cost, still, you know, can be an impact. that while you know still delayed as you think about those costs flowing through the inventory call it you know six to eight months after we incur the cost still you know can be an impact Quicker even than that would be freight in the U.S. quicker even than that would be freight in the u.s We have seen in some instances already where carriers are installing or putting in place fuel surcharges. we have seen in some instances already where carriers are installing or putting in place fuel surcharges At this point, we don't believe material to the 2026 results, but as that moves, you know, we always work with our customers to adjust pricing based upon what happens in those markets. At this point, we don't believe material to the 2026 results, but as that moves, you know, we always work with our customers to adjust pricing based upon what happens in those markets. at this point we don't believe material to the 2026 results but as that moves you know we always work with our customers to adjust pricing based upon what happens in those markets

Speaker 3: Dave, yeah. Dave, yeah. dave yeah

Speaker 2: There's no. Yeah, go. There's no. there's no Yeah, go. yeah go

Speaker 9: No, go ahead. No, go ahead. no go ahead

Speaker 2: Sorry. Yeah, go ahead. Sorry. sorry Yeah, go ahead. yeah go ahead

Speaker 3: Go ahead, Dave. Go ahead, Dave. go ahead dave

Speaker 2: Okay. I'll ask a follow-up if that's okay on that. You outlined product costs and freight in and that sort of thing. What about, what about delivery costs? I mean, you have more than 1,000 people out there visiting store locations. Obviously, they have to fill up at the pump. I don't know how that works through your P&L in terms of reimbursing those folks. Is that a meaningful number? Just trying to make sure we have all the bases covered as it relates to higher oil prices here. Okay. okay I'll ask a follow-up if that's okay on that. i'll ask a follow-up if that's okay on that You outlined product costs and freight in and that sort of thing. you outlined product costs and freight in and that sort of thing What about, what about delivery costs? what about what about delivery costs I mean, you have more than 1,000 people out there visiting store locations. i mean you have more than 1,000 people out there visiting store locations Obviously, they have to fill up at the pump. obviously they have to fill up at the pump I don't know how that works through your P&L in terms of reimbursing those folks. i don't know how that works through your p&l in terms of reimbursing those folks Is that a meaningful number? is that a meaningful number Just trying to make sure we have all the bases covered as it relates to higher oil prices here. just trying to make sure we have all the bases covered as it relates to higher oil prices here

Speaker 3: Dave, you're correct. That is a real cost. I would not call it a meaningful number. That is tracked all in our SG&A. We have, you know, certain cars have people have cars or car allowances, and we do use, you know, outbound freight, of course. There's fuel does weigh on those charges, but I would not call it a material number. As Rocky framed it, you know, we'll just make sure we account for it and adjust if we need to. Dave, you're correct. dave you're correct That is a real cost. that is a real cost I would not call it a meaningful number. i would not call it a meaningful number That is tracked all in our SG&A. that is tracked all in our sg&a We have, you know, certain cars have people have cars or car allowances, and we do use, you know, outbound freight, of course. we have you know certain cars have people have cars or car allowances and we do use you know outbound freight of course There's fuel does weigh on those charges, but I would not call it a material number. there's fuel does weigh on those charges but i would not call it a material number As Rocky framed it, you know, we'll just make sure we account for it and adjust if we need to. as rocky framed it you know we'll just make sure we account for it and adjust if we need to

Speaker 9: Yeah. To, to be clear, Dave, on my comments, when I talked about freight in the United States, the quickest impact will be that last mile to our customer. That's a cost that we incur in the period that we're shipping the product. Anything that's happening between dock and our DCs, again, gets caught up in the inventory and is capitalized and gets spread out over time. Yeah. yeah To, to be clear, Dave, on my comments, when I talked about freight in the United States, the quickest impact will be that last mile to our customer. to to be clear dave on my comments when i talked about freight in the united states the quickest impact will be that last mile to our customer That's a cost that we incur in the period that we're shipping the product. that's a cost that we incur in the period that we're shipping the product Anything that's happening between dock and our DCs, again, gets caught up in the inventory and is capitalized and gets spread out over time. anything that's happening between dock and our dcs again gets caught up in the inventory and is capitalized and gets spread out over time

Speaker 2: Yep. All right. That's very helpful. Thanks, guys. Yep. yep All right. all right That's very helpful. that's very helpful Thanks, guys. thanks guys

Speaker 3: Thanks, Dave. Thanks, Dave. thanks dave

Speaker 9: Thanks, Dave. Thanks, Dave. thanks dave

Speaker 7: Thank you. Our next question comes from the line of Matthew Bouley with Barclays. Please proceed. Thank you. thank you Our next question comes from the line of Matthew Bouley with Barclays. our next question comes from the line of matthew bouley with barclays Please proceed. please proceed

Speaker 5: Hey, morning, everyone. Thank you for taking the questions. I just want on on the PS business, you know, it sounded like there was some impact there around promotion timing and destocking, but I think I heard you suggest that it was gonna stay below 2025 going forward, and correct me if I'm wrong. I just wanted to maybe unpack that a little and understand if you think there's anything kind of bigger picture going on from a structural perspective in that business and kinda what's it gonna take to sort of turn that business around. Thank you. Hey, morning, everyone. hey morning everyone Thank you for taking the questions. thank you for taking the questions I just want on on the PS business, you know, it sounded like there was some impact there around promotion timing and destocking, but I think I heard you suggest that it was gonna stay below 2025 going forward, and correct me if I'm wrong. i just want on on the ps business you know it sounded like there was some impact there around promotion timing and destocking but i think i heard you suggest that it was gonna stay below 2025 going forward and correct me if i'm wrong I just wanted to maybe unpack that a little and understand if you think there's anything kind of bigger picture going on from a structural perspective in that business and kinda what's it gonna take to sort of turn that business around. i just wanted to maybe unpack that a little and understand if you think there's anything kind of bigger picture going on from a structural perspective in that business and kinda what's it gonna take to sort of turn that business around Thank you. thank you

Speaker 3: Matthew, good question. Yeah, certainly had a challenging period. The overall, I'll say HPS business was strong. PS in particular, we saw really promotional activity was the biggest portion of that drop in Q1, and that will be a pressure point for the full year. That, given sensitivity at the shelf with rising prices, we did see some pressure in that business. Our team is committed to driving innovation. We got some great new products that are hitting the market this year. We still have reason to be optimistic about that business. That said, we're focusing on the truth, and that will be the fact that it'll be below 2025 in total. We don't feel like we have issues beyond a tough Q1, Q2 timeframe. Matthew, good question. matthew good question Yeah, certainly had a challenging period. yeah certainly had a challenging period The overall, I'll say HPS business was strong. the overall i'll say hps business was strong PS in particular, we saw really promotional activity was the biggest portion of that drop in Q1, and that will be a pressure point for the full year. ps in particular we saw really promotional activity was the biggest portion of that drop in q1 and that will be a pressure point for the full year That, given sensitivity at the shelf with rising prices, we did see some pressure in that business. that given sensitivity at the shelf with rising prices we did see some pressure in that business Our team is committed to driving innovation. our team is committed to driving innovation We got some great new products that are hitting the market this year. we got some great new products that are hitting the market this year We still have reason to be optimistic about that business. we still have reason to be optimistic about that business That said, we're focusing on the truth, and that will be the fact that it'll be below 2025 in total. that said we're focusing on the truth and that will be the fact that it'll be below 2025 in total We don't feel like we have issues beyond a tough Q1, Q2 timeframe. we don't feel like we have issues beyond a tough q1 q2 timeframe The business will improve as the year goes on. It certainly is that promotional activity. The core is healthy. That is, to me, the most important part of the underlying, you know, elements of it. We believe as the markets improve, not that we need that, but we believe as the markets improve, that business will improve as well. The business will improve as the year goes on. the business will improve as the year goes on It certainly is that promotional activity. it certainly is that promotional activity The core is healthy. the core is healthy That is, to me, the most important part of the underlying, you know, elements of it. that is to me the most important part of the underlying you know elements of it We believe as the markets improve, not that we need that, but we believe as the markets improve, that business will improve as well. we believe as the markets improve not that we need that but we believe as the markets improve that business will improve as well

Speaker 9: Yeah, I guess the only thing, Matt, I would add is, you know, as you think about JMA talked about the promotional activity and the health of the actual business, you know, we believe if you exclude the promotional impact in 2026, that business will be, at worst case, flat to slightly up. Yeah, I guess the only thing, Matt, I would add is, you know, as you think about JMA talked about the promotional activity and the health of the actual business, you know, we believe if you exclude the promotional impact in 2026, that business will be, at worst case, flat to slightly up. yeah i guess the only thing matt i would add is you know as you think about jma talked about the promotional activity and the health of the actual business you know we believe if you exclude the promotional impact in 2026 that business will be at worst case flat to slightly up

Speaker 5: Okay. Got it. Perfect. Thank you for all that color. Secondly, on the tariff topic, maybe just diving into that a little bit. So number one, if the refunds were, you know, ultimately make their way to you, how would you think about either shareholder return or, you know, other investments you'd be looking to make on the other side of that? For the, for the rest of the tariff impact, it sounded like you called out effectively neutral. You know, IEPA kind of went away and I know, you know, new tariffs were kind of introduced on the other side of that. I'm just curious why the net impact would still be neutral because, you know, you would think on balance more went away, just kind of, you know, was it the Section 232, et cetera? Okay. okay Got it. got it Perfect. perfect Thank you for all that color. thank you for all that color Secondly, on the tariff topic, maybe just diving into that a little bit. secondly on the tariff topic maybe just diving into that a little bit So number one, if the refunds were, you know, ultimately make their way to you, how would you think about either shareholder return or, you know, other investments you'd be looking to make on the other side of that? so number one if the refunds were you know ultimately make their way to you how would you think about either shareholder return or you know other investments you'd be looking to make on the other side of that For the, for the rest of the tariff impact, it sounded like you called out effectively neutral. for the for the rest of the tariff impact it sounded like you called out effectively neutral You know, IEPA kind of went away and I know, you know, new tariffs were kind of introduced on the other side of that. you know iepa kind of went away and i know you know new tariffs were kind of introduced on the other side of that I'm just curious why the net impact would still be neutral because, you know, you would think on balance more went away, just kind of, you know, was it the Section 232, et cetera? i'm just curious why the net impact would still be neutral because you know you would think on balance more went away just kind of you know was it the section 232 et cetera What ended up kind of fully offsetting that benefit? Thank you. What ended up kind of fully offsetting that benefit? what ended up kind of fully offsetting that benefit Thank you. thank you

Speaker 3: Matt, good question. It's certainly complex. Yeah, from a big picture perspective, absolutely accurate. You know, IEPA did go away. That did create tailwind for a portion of our business. The problem was, is, you know, 232, you know, full steel content is an impact for us going forward. You know, we're not breaking those numbers out specifically, but also 122 went into place. We know that there's limitations on the timeframe there. You know, we'll see what happens. As we stand today, when you take the tailwind from the IEPA and then the headwind from 232 and 122, it is nearly a wash in totality, so an immaterial change in our total exposure. That is really the challenge there. Matt, good question. matt good question It's certainly complex. it's certainly complex Yeah, from a big picture perspective, absolutely accurate. yeah from a big picture perspective absolutely accurate You know, IEPA did go away. you know iepa did go away That did create tailwind for a portion of our business. that did create tailwind for a portion of our business The problem was, is, you know, 232, you know, full steel content is an impact for us going forward. the problem was is you know 232 you know full steel content is an impact for us going forward You know, we're not breaking those numbers out specifically, but also 122 went into place. We know that there's limitations on the timeframe there. you know we're not breaking those numbers out specifically but also 122 went into place. we know that there's limitations on the timeframe there You know, we'll see what happens. you know we'll see what happens As we stand today, when you take the tailwind from the IEPA and then the headwind from 232 and 122, it is nearly a wash in totality, so an immaterial change in our total exposure. as we stand today when you take the tailwind from the iepa and then the headwind from 232 and 122 it is nearly a wash in totality so an immaterial change in our total exposure That is really the challenge there. that is really the challenge there I'll let Rocky, you know, add more color, but on the refunds we get through it. Our team is filing them, we're going through them, but we did, you know, incur quite a bit of cost in prior periods. The balance of what we have to pay going forward, we don't see material change. Rocky, anything to add? I'll let Rocky, you know, add more color, but on the refunds we get through it. i'll let rocky you know add more color but on the refunds we get through it Our team is filing them, we're going through them, but we did, you know, incur quite a bit of cost in prior periods. our team is filing them we're going through them but we did you know incur quite a bit of cost in prior periods The balance of what we have to pay going forward, we don't see material change. the balance of what we have to pay going forward we don't see material change Rocky, anything to add? rocky anything to add

Speaker 9: No, I don't think there's anything to add to that, JMA. No, I don't think there's anything to add to that, JMA. no i don't think there's anything to add to that jma

Speaker 5: All right. Thanks, guys. Good luck. All right. all right Thanks, guys. thanks guys Good luck. good luck

Speaker 3: Thanks, Matthew. Appreciate it. Thanks, Matthew. thanks matthew Appreciate it. appreciate it

Speaker 9: Yeah. Yeah. yeah

Speaker 7: Thank you. Our next question comes from the line of William Carter with Stifel. Please proceed. Thank you. thank you Our next question comes from the line of William Carter with Stifel. our next question comes from the line of william carter with stifel Please proceed. please proceed

Speaker 10: Hey, thank you. Good morning. Wanted to ask, in terms of you said improvement through the quarter. Could you get into the magnitude of the differences between March, January, February, just to get an idea of how the slower start impacted and better understand what the exit rate is to think about for March going into April, 2Q, rest of the year? Thanks. Hey, thank you. hey thank you Good morning. good morning Wanted to ask, in terms of you said improvement through the quarter. wanted to ask in terms of you said improvement through the quarter Could you get into the magnitude of the differences between March, January, February, just to get an idea of how the slower start impacted and better understand what the exit rate is to think about for March going into April, 2Q, rest of the year? could you get into the magnitude of the differences between march january february just to get an idea of how the slower start impacted and better understand what the exit rate is to think about for march going into april 2q rest of the year Thanks. thanks

Speaker 3: Andrew, I'm gonna, you know, speak in big picture. You know, we saw March start to be, you know, see the spring build. It was normal with our sequential improvement. As far as the month-over-month differences, we're not gonna start breaking that out now. You know, we did see that continue in April. That's the, I'll say, the positive that we're seeing at this point. We certainly saw a tough start to the year. January and February were rough months. You know, we saw in the quarter, you know, new business getting some nice traction, and we think overall, you know, we are moving in the right direction. Andrew, I'm gonna, you know, speak in big picture. andrew i'm gonna you know speak in big picture You know, we saw March start to be, you know, see the spring build. you know we saw march start to be you know see the spring build It was normal with our sequential improvement. it was normal with our sequential improvement As far as the month-over-month differences, we're not gonna start breaking that out now. as far as the month-over-month differences we're not gonna start breaking that out now You know, we did see that continue in April. you know we did see that continue in april That's the, I'll say, the positive that we're seeing at this point. that's the i'll say the positive that we're seeing at this point We certainly saw a tough start to the year. we certainly saw a tough start to the year January and February were rough months. january and february were rough months You know, we saw in the quarter, you know, new business getting some nice traction, and we think overall, you know, we are moving in the right direction. you know we saw in the quarter you know new business getting some nice traction and we think overall you know we are moving in the right direction You know, you think about down, you know, single digits, in that first month or so, January to February timeframe, going positive in March was certainly a step in the right direction. Rocky, anything to add? You know, you think about down, you know, single digits, in that first month or so, January to February timeframe, going positive in March was certainly a step in the right direction. you know you think about down you know single digits in that first month or so january to february timeframe going positive in march was certainly a step in the right direction Rocky, anything to add? rocky anything to add

Speaker 9: Nope. Nope. nope

Speaker 10: Understood. Second question. RDS up six. That's in the keys and accessory up nine. You've obviously got the rollout coming in. You're also kinda lapping some unfavorable customer moves there as well. At this point, like, given your rollout, kinda given a like for like, I mean, when would this business peak in terms of sales? At the Investor Day, you did outline kind of a slower rate of growth for that business, more like the mid-single digits. How much could this rollout kinda carry that kind of close to the old average? How much and how long is that path and when does it kinda regress? Thanks. Understood. understood Second question. second question RDS up six. rds up six That's in the keys and accessory up nine. that's in the keys and accessory up nine You've obviously got the rollout coming in. you've obviously got the rollout coming in You're also kinda lapping some unfavorable customer moves there as well. you're also kinda lapping some unfavorable customer moves there as well At this point, like, given your rollout, kinda given a like for like, I mean, when would this business peak in terms of sales? at this point like given your rollout kinda given a like for like i mean when would this business peak in terms of sales At the Investor Day, you did outline kind of a slower rate of growth for that business, more like the mid-single digits. at the investor day you did outline kind of a slower rate of growth for that business more like the mid-single digits How much could this rollout kinda carry that kind of close to the old average? how much could this rollout kinda carry that kind of close to the old average How much and how long is that path and when does it kinda regress? how much and how long is that path and when does it kinda regress Thanks. thanks

Speaker 3: Yeah, great question. We feel that momentum on sales in RDS is gonna continue throughout 2026. That statement on, you know, mid-single digits for the five-year period, that's where we are today 'cause we don't have, you know, we don't have, I'll say, a path to what's next beyond. We're getting some great traction in the, you know, the 3.5 rollout. Really excited about how our teams are coming together in the field, working with store associates, driving the 3.5 rollout, doing blitzes. We've been doing blitzes heavily in December, January, you know, all the way through April here, and they'll continue. I'm really proud about how the team has come together, driving awareness, driving the execution, and we think that business has got some room to run within our guidance, of course. Yeah, great question. yeah great question We feel that momentum on sales in RDS is gonna continue throughout 2026. we feel that momentum on sales in rds is gonna continue throughout 2026 That statement on, you know, mid-single digits for the five-year period, that's where we are today 'cause we don't have, you know, we don't have, I'll say, a path to what's next beyond. that statement on you know mid-single digits for the five-year period that's where we are today 'cause we don't have you know we don't have i'll say a path to what's next beyond We're getting some great traction in the, you know, the 3.5 rollout. we're getting some great traction in the you know the 3.5 rollout Really excited about how our teams are coming together in the field, working with store associates, driving the 3.5 rollout, doing blitzes. really excited about how our teams are coming together in the field working with store associates driving the 3.5 rollout doing blitzes We've been doing blitzes heavily in December, January, you know, all the way through April here, and they'll continue. we've been doing blitzes heavily in december january you know all the way through april here and they'll continue I'm really proud about how the team has come together, driving awareness, driving the execution, and we think that business has got some room to run within our guidance, of course. i'm really proud about how the team has come together driving awareness driving the execution and we think that business has got some room to run within our guidance of course We're really excited about the performance there and proud of what the team did inside the core, and we expect that to continue for the balance of the year. We're really excited about the performance there and proud of what the team did inside the core, and we expect that to continue for the balance of the year. we're really excited about the performance there and proud of what the team did inside the core and we expect that to continue for the balance of the year

Speaker 9: Yeah. The only thing I would add, Andrew, is, as you think about the headwind from a customer that you spoke about, we kind of finalized that direct headwind in the second quarter this year. You know, we've got a year after that where we should have some favorable comps because we don't have the negative headwind that we've had for quite a period of time. Yeah. yeah The only thing I would add, Andrew, is, as you think about the headwind from a customer that you spoke about, we kind of finalized that direct headwind in the second quarter this year. the only thing i would add andrew is as you think about the headwind from a customer that you spoke about we kind of finalized that direct headwind in the second quarter this year You know, we've got a year after that where we should have some favorable comps because we don't have the negative headwind that we've had for quite a period of time. you know we've got a year after that where we should have some favorable comps because we don't have the negative headwind that we've had for quite a period of time

Speaker 10: Thanks. I'll pass it on. Thanks. thanks I'll pass it on. i'll pass it on

Speaker 3: Thank you, sir. Thank you, sir. thank you sir

Speaker 7: Thank you. Our next question comes from the line of Reuben Garner with Benchmark. Please proceed. Thank you. thank you Our next question comes from the line of Reuben Garner with Benchmark. our next question comes from the line of reuben garner with benchmark Please proceed. please proceed

Speaker 8: Thank you. Good morning, guys. Thank you. thank you Good morning, guys. good morning guys

Speaker 3: Morning, Reuben. Morning, Reuben. morning reuben

Speaker 8: I wanted to dive into the acquisitions a little bit more. Can you kinda give some color on what exactly they bring to you guys that you didn't already have in each case? Then you raised the revenue guide. I assume the profitability on these is a little lower. Can you just talk about the ways that you think you can improve the profitability on the acquisitions you made? I wanted to dive into the acquisitions a little bit more. i wanted to dive into the acquisitions a little bit more Can you kinda give some color on what exactly they bring to you guys that you didn't already have in each case? can you kinda give some color on what exactly they bring to you guys that you didn't already have in each case Then you raised the revenue guide. then you raised the revenue guide I assume the profitability on these is a little lower. i assume the profitability on these is a little lower Can you just talk about the ways that you think you can improve the profitability on the acquisitions you made? can you just talk about the ways that you think you can improve the profitability on the acquisitions you made

Speaker 3: Absolutely, Reuben. I'll start with Campbell. Campbell was a great deal. It complemented our Koch chain business, brings us manufacturing in both chain and fittings. The exciting part there is it really opens up a whole new set of customers for us. There's a number of customers we don't do any, or if we do, it's a very small amount of business on the industrial side. The excitement for us was, we believe we can own the category, have, you know, manufacturing capability, bring some new products that could help us on our retail side of the business, and really, you know, fuel growth in our industrial, which is, you know, we talked about during our Investor Day as one of our paths to growth. Absolutely, Reuben. absolutely reuben I'll start with Campbell. i'll start with campbell Campbell was a great deal. campbell was a great deal It complemented our Koch chain business, brings us manufacturing in both chain and fittings. it complemented our koch chain business brings us manufacturing in both chain and fittings The exciting part there is it really opens up a whole new set of customers for us. the exciting part there is it really opens up a whole new set of customers for us There's a number of customers we don't do any, or if we do, it's a very small amount of business on the industrial side. there's a number of customers we don't do any or if we do it's a very small amount of business on the industrial side The excitement for us was, we believe we can own the category, have, you know, manufacturing capability, bring some new products that could help us on our retail side of the business, and really, you know, fuel growth in our industrial, which is, you know, we talked about during our Investor Day as one of our paths to growth. the excitement for us was we believe we can own the category have you know manufacturing capability bring some new products that could help us on our retail side of the business and really you know fuel growth in our industrial which is you know we talked about during our investor day as one of our paths to growth That was really the exciting part of it's a business that we believe fits better with us than its prior owner. We got great exciting team there, is really energized to be a part of the Hillman family. They're only three, going on four weeks into it, but, you know, we really believe we can take that business and, you know, make it a nice contributor not only on top line, but also on bottom line. We think that's why it fits into the portfolio and our overall strategy. On the Delaney side, really interesting business. We're not in lock sets. I know you and everyone knows we're big into keys. That was really the exciting part of it's a business that we believe fits better with us than its prior owner. that was really the exciting part of it's a business that we believe fits better with us than its prior owner We got great exciting team there, is really energized to be a part of the Hillman family. we got great exciting team there is really energized to be a part of the hillman family They're only three, going on four weeks into it, but, you know, we really believe we can take that business and, you know, make it a nice contributor not only on top line, but also on bottom line. they're only three going on four weeks into it but you know we really believe we can take that business and you know make it a nice contributor not only on top line but also on bottom line We think that's why it fits into the portfolio and our overall strategy. we think that's why it fits into the portfolio and our overall strategy On the Delaney side, really interesting business. on the delaney side really interesting business We're not in lock sets. we're not in lock sets I know you and everyone knows we're big into keys. i know you and everyone knows we're big into keys Think about how many keys, you know, we not only design the machines and we, you know, distribute and cut the keys out there, but why not have lock sets and really finish out the door, if you will, right? We have hinges, we have different parts. Now we have door locks. We bought that business. We think it's gonna fit really nicely in our portfolio. It's pure resi pro, so very pro concentrated. We think, one, we're timing it and buying it in the right time in the market. Two, we believe with our capabilities and what we can do with distribution, sourcing, product development, that we can really move that business forward. We, you know, we're excited to have that team on board. Think about how many keys, you know, we not only design the machines and we, you know, distribute and cut the keys out there, but why not have lock sets and really finish out the door, if you will, right? think about how many keys you know we not only design the machines and we you know distribute and cut the keys out there but why not have lock sets and really finish out the door if you will right We have hinges, we have different parts. we have hinges we have different parts Now we have door locks. now we have door locks We bought that business. we bought that business We think it's gonna fit really nicely in our portfolio. we think it's gonna fit really nicely in our portfolio It's pure resi pro, so very pro concentrated. it's pure resi pro so very pro concentrated We think, one, we're timing it and buying it in the right time in the market. we think one we're timing it and buying it in the right time in the market Two, we believe with our capabilities and what we can do with distribution, sourcing, product development, that we can really move that business forward. two we believe with our capabilities and what we can do with distribution sourcing product development that we can really move that business forward We, you know, we're excited to have that team on board. we you know we're excited to have that team on board We brought in a, you know, a leader in the field, a leader to run that business who we're really excited. We think we're gonna put those two pieces together and really grow it as we go forward. That one we think will show you not only top line, but also profitability in the future. We're also excited about Delaney being a nice fit in the portfolio. We brought in a, you know, a leader in the field, a leader to run that business who we're really excited. we brought in a you know a leader in the field a leader to run that business who we're really excited We think we're gonna put those two pieces together and really grow it as we go forward. we think we're gonna put those two pieces together and really grow it as we go forward That one we think will show you not only top line, but also profitability in the future. that one we think will show you not only top line but also profitability in the future We're also excited about Delaney being a nice fit in the portfolio. we're also excited about delaney being a nice fit in the portfolio

Speaker 8: Got it. Then switching gears a little bit, RDS, if I am looking at it correctly and correct me if I'm wrong, you know, profitability inflected positive year-over-year from an EBITDA margin standpoint. I think it had been a little while since that happened. Do we feel like we've reached kind of a bottoming on the margin side? Just talk about that portion going forward. You talked about the sales comps and that kind of thing, but what about profitability? Got it. got it Then switching gears a little bit, RDS, if I am looking at it correctly and correct me if I'm wrong, you know, profitability inflected positive year-over-year from an EBITDA margin standpoint. then switching gears a little bit rds if i am looking at it correctly and correct me if i'm wrong you know profitability inflected positive year-over-year from an ebitda margin standpoint I think it had been a little while since that happened. i think it had been a little while since that happened Do we feel like we've reached kind of a bottoming on the margin side? do we feel like we've reached kind of a bottoming on the margin side Just talk about that portion going forward. just talk about that portion going forward You talked about the sales comps and that kind of thing, but what about profitability? you talked about the sales comps and that kind of thing but what about profitability

Speaker 3: Yeah, we think profitability will be steady over throughout the year. I'll turn it to Rocky to add on if there's anything else. I mean, the real thing there is we believe we've got the, you know, the magic happening, if you will, and that the machine's working. We're getting some growth in automotive keys, the endless aisle. That's really the excitement. As volume goes, that'll help the profitability. Really proud of the RDS team and our sales and, you know, sales folks out in the field and what they're doing with it. Reuben, we have reason to be, you know, not getting over my skis, but certainly excited about what's in front of us here for 2026. Rocky, anything to add? Yeah, we think profitability will be steady over throughout the year. yeah we think profitability will be steady over throughout the year I'll turn it to Rocky to add on if there's anything else. i'll turn it to rocky to add on if there's anything else I mean, the real thing there is we believe we've got the, you know, the magic happening, if you will, and that the machine's working. i mean the real thing there is we believe we've got the you know the magic happening if you will and that the machine's working We're getting some growth in automotive keys, the endless aisle. we're getting some growth in automotive keys the endless aisle That's really the excitement. that's really the excitement As volume goes, that'll help the profitability. as volume goes that'll help the profitability Really proud of the RDS team and our sales and, you know, sales folks out in the field and what they're doing with it. really proud of the rds team and our sales and you know sales folks out in the field and what they're doing with it Reuben, we have reason to be, you know, not getting over my skis, but certainly excited about what's in front of us here for 2026. reuben we have reason to be you know not getting over my skis but certainly excited about what's in front of us here for 2026 Rocky, anything to add? rocky anything to add

Speaker 8: Great. Thanks, guys, and good luck. Great. great Thanks, guys, and good luck. thanks guys and good luck

Speaker 3: Thank you. Have a good day. Thank you. thank you Have a good day. have a good day

Speaker 7: Thank you. Our last question comes from the line of Brian McNamara with Canaccord Genuity. Please proceed. Thank you. thank you Our last question comes from the line of Brian McNamara with Canaccord Genuity. our last question comes from the line of brian mcnamara with canaccord genuity Please proceed. please proceed

Speaker 1: Hey, good morning, guys. Thanks for taking the question. Just another one on M&A from me. You guys weren't kidding with the two deals done pretty quickly after Investor Day. It sounds like both were relatively opportunistic. I'm curious, how does the current deal environment look, and how are conversations with potential targets going? Does having those two deals in the bag by mid-April make a third one more likely this year? Thank you. Hey, good morning, guys. hey good morning guys Thanks for taking the question. thanks for taking the question Just another one on M&A from me. just another one on m&a from me You guys weren't kidding with the two deals done pretty quickly after Investor Day. you guys weren't kidding with the two deals done pretty quickly after investor day It sounds like both were relatively opportunistic. it sounds like both were relatively opportunistic I'm curious, how does the current deal environment look, and how are conversations with potential targets going? i'm curious how does the current deal environment look and how are conversations with potential targets going Does having those two deals in the bag by mid-April make a third one more likely this year? does having those two deals in the bag by mid-april make a third one more likely this year Thank you. thank you

Speaker 3: Brian, yeah, great question. Two things. One is, you know, we are really excited by opening up our M&A pipeline now that we've expanded beyond just the retail business that we love into serving the pro. That was one of the key points of Investor Day. That has definitely opened up the view and certainly opened up the pipeline for potential opportunities for acquisition. On the pipeline side, we do see some good deal activity. To your point, you know, having two done early in the year, we feel really good about those two, and I would say there's a high probability we'll see another this year. Can't predict anything at this point, but we certainly have some good opportunities in the pipeline that we're excited about. Brian, yeah, great question. brian yeah great question Two things. two things One is, you know, we are really excited by opening up our M&A pipeline now that we've expanded beyond just the retail business that we love into serving the pro. one is you know we are really excited by opening up our m&a pipeline now that we've expanded beyond just the retail business that we love into serving the pro That was one of the key points of Investor Day. that was one of the key points of investor day That has definitely opened up the view and certainly opened up the pipeline for potential opportunities for acquisition. that has definitely opened up the view and certainly opened up the pipeline for potential opportunities for acquisition On the pipeline side, we do see some good deal activity. on the pipeline side we do see some good deal activity To your point, you know, having two done early in the year, we feel really good about those two, and I would say there's a high probability we'll see another this year. to your point you know having two done early in the year we feel really good about those two and i would say there's a high probability we'll see another this year Can't predict anything at this point, but we certainly have some good opportunities in the pipeline that we're excited about. can't predict anything at this point but we certainly have some good opportunities in the pipeline that we're excited about

Speaker 1: Excellent. Best of luck, guys. Excellent. excellent Best of luck, guys. best of luck guys

Speaker 3: Thank you. Thank you. thank you

Speaker 9: Thanks, Brian. Thanks, Brian. thanks brian

Speaker 7: Thank you. This concludes the Q&A portion of today's call. I would like to turn the call back to Mr. Adinolfi for some closing comments. Thank you. thank you This concludes the Q&A portion of today's call. this concludes the q&a portion of today's call I would like to turn the call back to Mr. Adinolfi for some closing comments. i would like to turn the call back to mr adinolfi for some closing comments

Speaker 3: Thanks again, everyone, for joining us this morning. We look forward to continue to update on our progress in the near-term future. We're gonna continue to go focusing on taking care of our customers and moving the markets forward. Thanks for all you do, and have a great day. Thanks again, everyone, for joining us this morning. thanks again everyone for joining us this morning We look forward to continue to update on our progress in the near-term future. we look forward to continue to update on our progress in the near-term future We're gonna continue to go focusing on taking care of our customers and moving the markets forward. we're gonna continue to go focusing on taking care of our customers and moving the markets forward Thanks for all you do, and have a great day. thanks for all you do and have a great day

Speaker 7: Thank you. You may now disconnect. Thank you. thank you You may now disconnect. you may now disconnect