Hillman Solutions Corp. · NASDAQ:HLMN
Hillman Solutions — Q2 2023 Earnings Presentation
24 slides from Hillman Solutions's earnings presentation, Aug 8, 2023
Slide 1: Quarterly Earnings Presentation Q2 2023
Quarterly Earnings Presentation Q2 2023 August 8, 2023
Slide 2: Forward Looking Statements
Forward Looking Statements All statements made in this presentation that are consider to be forward-looking are made in good faith by the Company and are intended to qualify for the safe harbor from liability established by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exc
Slide 3: Q2 2023 Financial Review
Q2 2023 Financial Review Highlights for the 13 Weeks Ended July 1, 2023 • Net sales decreased (3.6)% to $380.0 million versus Q2 2022 ◦ Hardware Solutions approximately flat ◦ Robotics and Digital Solutions ("RDS") down (2.0)% ◦ Canada down (7.9)% ◦ Protective Solution down (16.7)% • GAAP net income
Slide 4: Q2 2023 Operational Review
Q2 2023 Operational Review Highlights for the 13 Weeks Ended July 1, 2023 • Reiterated full year 2023 guidance across all metrics • Inventory reduced by $20.9 million during the quarter; bringing year-to-date total to $59.3 million • Fill rates averaged approximately 96% year to date • New business
Slide 5: Q2 2023 Financial Review (Year to Date)
Q2 2023 Financial Review Highlights for the 26 Weeks Ended July 1, 2023 • Net sales decreased (3.6)% to $729.7 million versus the 26 weeks ended June 25, 2022 ◦ Hardware Solutions +3.6% ◦ Robotics and Digital Solutions ("RDS") (0.9)% ◦ Canada (6.8)% ◦ Protective Solutions (17.6)% (excl. COVID sales)
Slide 6: Quarterly Financial Performance
Quarterly Financial Performance Top & Bottom Line Net Sales Adjusted Gross Margin Adjusted EBITDA (millions $) (millions $ and % of Net Sales) (millions $ and % of Net Sales) $394.1 $380.0 $174.0 $163.5 $62.3 $58.0 44.1% 43.0% 15.8% 15.3% Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 2022 Q2 2023 Please see re
Slide 7: Performance by Segment (Q2)
Performance by Segment (Q2) Hardware & Protective Q2 2022 Q2 2023 Δ Thirteen Weeks Ended 6/25/2022 7/1/2023 Comments Revenues $277,438 $268,794 (3.1)% HS flat; PS down due to lighter volumes Adjusted EBITDA $30,836 $27,847 (9.7)% Inflation from 2022 flowing through income statement Margin (Rev/Adj.
Slide 8: Performance by Segment (YTD)
Performance by Segment (YTD) Hardware & Protective YTD '22 YTD '23 Δ Twenty-six weeks ended 6/25/2022 7/1/2023 Comments Revenues $542,815 $522,645 (3.7)% Excluding COVID sales, revenues down 1% on lighter vol. Adjusted EBITDA $51,866 $46,726 (9.9)% Inflation from 2022 flowing through income statemen
Slide 9: Revenue by Product Category (Q2)
Revenue by Product Category (Q2) Hardware & Robotics & Canada Revenue (Q2) Protective Digital Thirteen Weeks Ended July 1, 2023 Fastening and Hardware $225,139 $— $44,743 $269,882 Personal Protective 43,655 — 1,928 45,583 Keys and Key Accessories — 49,021 2,091 51,112 Engraving and Resharp — 13,435
Slide 10: Revenue by Product Category (YTD)
Revenue by Product Category (YTD) Hardware & Robotics & Canada Revenue (YTD) Protective Digital Twenty-six weeks ended July 1, 2023 Fastening and Hardware $430,114 $— $75,965 $506,079 Personal Protective 92,531 — 3,541 96,072 Keys and Key Accessories — 97,568 4,033 101,601 Engraving and Resharp — 25
Slide 11: Capital Structure
Capital Structure Committed to Improving Leverage as Inventory Converts to Cash July 1, 2023 Total Net Leverage ABL Revolver ($283 million capacity) $8.0 (Net Debt / TTM Adj. EBITDA) Term Note $836.1 5.0x 2023 Y/E 4.7x Estimate Finance Leases and Other Obligations $7.4 4.5x 4.2x 4.2x Total Debt $851
Slide 12: 2023 Outlook & Guidance
2023 Outlook & Guidance 2023 Full Year Guidance - Reiterated On August 8, 2023, Hillman reiterated the following guidance (originally given on February 23, 2023) based on its current view of the market and its performance expectations for the fifty-two weeks ending December 30, 2023. (in millions US
Slide 13: Key Takeaways
Key Takeaways Inventory Turning to Cash; Focused on Delivering; Expected to Benefit from Price / Cost in 2H 2023 • Business has 59-year track record of success; proven to be resilient through multiple economic cycles • Repair, Remodel and Maintenance industry has meaningful long-term tailwinds; expe
Slide 14: Appendix
Appendix 14
Slide 15: Investment Highlights
Investment Highlights Indispensable partner embedded with winning retailers Customers love us, trust us and rely on us Market and innovation leader across multiple categories Large, predictable, growing and resilient end markets Significant runway for incremental growth: Organic + M&A Management tea
Slide 16: Hillman: Overview
Hillman: Overview Who We Are 2022: By The Numbers • We are a leading North American provider of ~20 billion ~400 million ~120 million hardware products and solutions, including; Fasteners Pairs of Gloves Keys ◦ Hardware and home improvement Sold Sold Duplicated products ◦ Protective and job site gea
Slide 17: Primary Product Categories
Primary Product Categories Hardware Solutions Protective Solutions Robotics & Digital Solutions #1 in Segment #1 in Segment #1 in Segment Fasteners Construction Work Gear Gloves Key and Fob Duplication & Specialty Fasteners Personalized Knife Picture Builders Hardware Tags Sharpening Hanging & Metal
Slide 18: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Thirteen weeks ended June 25, 2022 July 1, 2023 Net income $8,816 $4,545 Income tax(benefit) expense 6,424 (1,823) Interest expense, net 12,533 18,075 Depreciation 14,172 13,800 Amortization 15,566 15,578 EBITDA $57,511 $50,175 Stock compensation expense 2,286 3,405 Re
Slide 19: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Twenty-six weeks ended June 25, 2022 July 1, 2023 Net income (loss) $6,929 $(4,587) Income tax (benefit) expense 5,532 (9,679) Interest expense, net 24,161 36,152 Depreciation 27,426 30,505 Amortization 31,087 31,150 EBITDA $95,135 $83,541 Stock compensation expense 8,
Slide 20: Adjusted Gross Margin Reconciliation
Adjusted Gross Margin Reconciliation Thirteen weeks ended June 25, 2022 July 1, 2023 Net Sales $394,114 $380,019 Cost of sales (exclusive of depreciation and amortization) 220,146 216,499 Gross margin exclusive of depreciation and amortization $173,968 $163,520 Gross margin exclusive of depreciation
Slide 21: Adjusted SG&A Expense Reconciliation
Adjusted SG&A Expense Reconciliation Thirteen weeks ended June 25, 2022 July 1, 2023 Selling, general and administrative expenses $118,229 $111,452 (1) SG&A Adjusting Items : Stock compensation expense 2,286 3,405 Restructuring 513 1,440 Litigation expense 2,703 — Acquisition and integration expense
Slide 22: Net Debt & Free Cash Flow Reconciliations
Net Debt & Free Cash Flow Reconciliations Reconciliation of Net Debt As of December 31, 2022 July 1, 2023 Revolving loans $72,000 $8,000 Senior term loan 840,363 836,108 Finance leases and other obligations 6,406 7,356 Gross debt $918,769 $851,464 Less cash 31,081 37,656 Net debt $887,688 $813,808 R
Slide 23: Segment Adjusted EBITDA Reconciliations
Segment Adjusted EBITDA Reconciliations Thirteen weeks ended June 25, 2022 HPS RDS Canada Consolidated Operating income $10,079 $10,305 $7,389 $27,773 Depreciation & amortization 17,664 10,845 1,229 29,738 Stock compensation expense 1,374 220 692 2,286 Restructuring 479 34 — 513 Litigation expense —
Slide 24: Segment Adjusted EBITDA Reconciliations
Segment Adjusted EBITDA Reconciliations Twenty-six weeks ended June 25, 2022 HPS RDS Canada Consolidated Operating income $8,132 $17,707 $10,783 $36,622 Depreciation & amortization 34,720 21,328 2,465 58,513 Stock compensation expense 6,562 1,050 692 8,304 Restructuring 525 40 — 565 Litigation expen