Hillman Solutions Corp. (NASDAQ:HLMN) Q1 2025 Earnings Call Transcript

Hillman Solutions Corp. (NASDAQ:HLMN) Q1 2025 Earnings Call Transcript April 29, 2025

Hillman Solutions Corp. reports earnings inline with expectations. Reported EPS is $0.1 EPS, expectations were $0.1.

Operator: Good morning and welcome to the First Quarter 2025 Results Presentation for Hillman Solutions Corp. My name is Gigi and I’ll 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.

Michael Koehler: Thank you, Gigi. Good morning everyone and thank you for joining us. I’m Michael Koehler, Vice President of 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 Hillman’s Chief Financial Officer, Rocky Kraft. Before we get into today’s call, I would like to remind our audience that certain statements made today may be considered forward-looking and are subject to the 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 2 in our earnings call slide presentation which is available on our website, ir.hillmangroup.com. 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 providing some commentary on tariffs and our guidance. He will then get into our first quarter highlights. Following his comments, Rocky will give a more detailed walk through our financials and guidance before turning the call back over to JMA for some closing comments.

We will then open up the call for your questions. It’s my pleasure to turn the call over to our President and CEO, Jon Michael Adinolfi. JMA?

Jon Michael Adinolfi: Thanks, Michael. Good morning everyone and thank you for joining us. The first quarter of 2025 was a very good quarter for Hillman. We delivered both top and bottom line results that were in line with our expectations and we took great care of our customers. We continue to operate well and believe our business is well positioned. Given the current environment, I wanted to touch on our top and bottom line guidance before going further. Based on our first quarter results and the progress we’ve made since the end of the quarter, we are reiterating our full year 2025 net sales and adjusted EBITDA guidance. Since the end of the quarter, several things have changed, tariffs, the geopolitical environment, expectations about economic growth and the health of the consumer to name a few.

Our team has been monitoring and addressing the impacts of tariffs on our costs and how they will impact our overall business. Let me share some of the math that has gone into our top line assumptions. Today one-third of our products come from suppliers based in China, one-third come from suppliers based in North America and one-third comes from suppliers from the rest of the world. Depending on the product type and the country it is sourced from, the amount of these new tariffs vary greatly. Altogether, based upon what we know today, we estimate the impact of all new 2025 tariffs will be approximately $250 million on an annualized basis. We believe, we can mitigate the additional tariff-related costs through price increases. At the same time, we are working together with our customers and suppliers to optimize the country of origin where we source our products.

Conversations with our customers have been ongoing and we are gaining clarity. We are executing our plan. We expect to cover higher costs on a dollar-for-dollar basis, like we did during the first Trump administration. The midpoint of our top line guidance assumes that the lift we get from price will be offset by volumes. This assumes market volumes are down approximately 17% during the second half. For context, the worst year in the history of Hillman saw volumes down 10%. While the resilience of our Hillman business should prove our volumes will be better than our guide, we are holding our guidance to be prudent and conservative, as we are clearly in uncharted waters. Rocky will provide a deeper dive into these numbers and our guidance ranges in a bit.

Having been in business for over 60 years, Hillman has successfully managed through multiple market cycles and this business has proven resilient time and time again. We are confident that we can manage through this current set of challenges. What differentiates Hillman is the strength of our competitive moat, the resilience of repair and maintenance demand and the healthy long-term partnerships we have with our top customers. Hillman products tend to be small ticket items that are critical parts of home improvement jobs done by both pros and DIYers. This makes our business less susceptible to the swings in the economy. Whether the pack of fasteners costs $0.50 or $2, it’s relatively small versus the cost of most everyday items and it enables you to complete a project and in many times fix a problem.

What I love about Hillman is that we bring so much more to the table than a typical vendor or distributor. We have 1,200 folks in the field, managing the aisles for our customers. We have the ability to pick pack and ship products directly to the customer and we have over 60 years of experience and relationships throughout our customers’ organizations. The moat has been built over the past six decades has allowed us to become a trusted partner and become – being a trusted partner helps when you’re dealing with some of the world’s largest retailers. On the other side of the equation, we have our long-term supplier partners. In 2018, we sourced nearly 50% of our products from China. Since then we worked hard to diversify our global supply chain including working with new suppliers who source throughout the world.

Given the current environment, we are accelerating our Dual Faucet strategy and believe we can reduce our exposure to suppliers based in China to approximately 20% by the end of the year. The Dual Faucet strategy is the concept of buying product not only from multiple suppliers, which has always been our strategy but from multiple suppliers in multiple countries. Our goal is to have a flexible supply chain that allows us to deliver quality products at the best overall value for our customers. Our world-class logistics and operations team will continue bringing best-in-class products to our customers and importantly, deliver orders on time and in full. The core team at Hillman has worked side-by-side with very little turnover over the past several years.

We’ve been battle-tested, COVID, rampant inflation, supply chain disruptions. We have seen our challenges and our results prove that we can execute. Our approach to these tariffs will be straightforward. Our customers understand what is going on, our suppliers do too. We are confident we will manage through this and believe we will come out a stronger company on the other side. Now let’s jump into a more detailed look at the quarter. Net sales in the first quarter of 2025 totaled $359.3 million, which increased 2.6% versus the first quarter of 2024, driving our top line sales from the Intex acquisition, which closed at the end of 2024. This added about four points of growth versus last year. Also contributing to our net sales during the quarter was two points of growth from new business, a three-point headwind from market volumes and a neutral impact from price and FX.

For the quarter, adjusted EBITDA increased 4.2% to $54.5 million compared to $52.3 million last year and our adjusted EBITDA margins improved by 30 basis points to 15.2%. Adjusted gross margins for the quarter totaled 46.9%, which were down slightly from 47.6% during the year ago quarter and sequentially from 47.7% during the fourth quarter of 2024. Weighing on margins for the quarter was mixing in more Koch and Intex, which have margin rates slightly below our overall Hardware and Protective Solutions segment. We continue to grow and integrate these businesses and expect to see margin improvement in both as we continue to realize synergies. Net sales in Hardware and Protective Solutions or HPS, which is our biggest segment increased by 5.6% over the comparable period, while our adjusted EBITDA increased by 15.8% to $37.4 million.

Our results were driven by contributions from the Intex acquisition and new business wins. Net sales in Robotics and Digital Solutions or RDS were up 1.9% versus the year ago quarter. We are pleased to see RDS return to growth during the quarter, which is a positive reflection of our MinuteKey 3.5 rollout. Adjusted gross margins and adjusted EBITDA margins were down slightly, totaling 70.9% and 27.3% respectively. As of today, we have over 1700 MinuteKey 3.5 machines in the field and we expect to finalize our rollout to our two largest customers by the end of 2026. Turning to Canada, net sales in our Canadian business was down 18.7%, compared to the prior year quarter. Driving our results was the 12% decline in existing home sales during the quarter, political and economic uncertainty and a challenging retail environment.

FX headwinds weighed on Canada’s results as well. For the full year, we expect adjusted EBITDA margins to remain above 10%. We have the best retail partners and the highest market share in hardware in Canada and we are confident this business will return to profitable growth when we get help from the macro. As we look at Hillman overall, we believe we are in a great position with our customers and can successfully execute in this environment. With that, let me turn it over to Rocky, to talk financials and guidance, Rocky?

Rocky Kraft: Thanks JMA. Let’s dive right into our results, and then we’ll get to our guidance. Net sales in the first quarter of 2025 totaled $359.3 million, an increase of 2.6% versus the prior year quarter. First quarter adjusted gross margin decreased by 70 basis points to 46.9% versus the prior year quarter, and were in line with our expectations. Adjusted SG&A as a percentage of sales decreased to 31.7% during the quarter, from 32.7% from the year ago quarter, which was also in line with our expectations. Adjusted EBITDA in the first quarter was $54.5 million which grew 4% versus the year ago quarter. Our adjusted EBITDA to net sales ratio during the quarter was 15.2%, which compares favorably to 14.9% a year ago. Contributing to our healthy adjusted EBITDA margin was our positive mix of price/cost and efficient operations.

Now let me talk about cash flow. For the 13 weeks ended March 29, 2025, net cash used by operating activities was $0.7 million, compared to cash flow provided by operating activities of $11.7 million in the year ago period. Capital expenditures totaled $20.7 million for the quarter. This compared to $17.8 million in the prior year. For the first quarter of 2025, free cash flow of negative $21.3 million was consistent with our expectation compared to negative free cash flow of $6.1 million in the year ago quarter. Our spend was driven by our inventory build for our spring and summer busy season as well as building MinuteKey 3.5 machines and related retrofits. Next let me turn to Leverage and Liquidity. We ended the first quarter of 2025 with $703.7 million of total net debt outstanding.

Liquidity available totaled $200.9 million consisting of $164.6 million of availability on our credit facility and $36.3 million of cash and equivalents. At the end of the quarter, our net debt to trailing 12-month adjusted EBITDA ratio was 2.9 times, compared to 2.8 times at the end of 2024 and 3.2 times a year ago. Our long-term adjusted EBITDA to net debt leverage ratio remains — target remains at below 2.5 times. This will give us the flexibility to grow via M&A, and potentially use our improved financial strength in different ways to add stockholder value. Now let me turn to our guidance. Note that, all of these guidance numbers include tariffs, and assume the current tariff environment remains unchanged throughout the rest of 2025. We are reiterating our net sales guidance to be between $1.495 billion to $1.575 billion with a midpoint of $1.535 billion, reflecting 4% growth over last year.

We are also reiterating our adjusted EBITDA guidance to be between $255 million and $275 million with a midpoint of $265 million reflecting 10% growth over last year. Our top line, midpoint makes the following full year assumptions: approximately a 2% lift from new business wins, a 2% lift from Intex and a neutral impact from tariffs meaning, our pricing for tariffs will be offset by volumes. As JMA mentioned, we calculate the annualized run rate for these new tariffs will be approximately $250 million. To the extent we pay for these tariffs we expect to price for them dollar-for-dollar. For the top line, we believe that we will be successful in getting price increases done which will positively impact us. However, we expect that the consumer will be under pressure with higher prices and that will be a headwind to market volumes.

As for new business wins there are some opportunities for us to win new business in this tariff environment. For example, we are already talking to our customers about product categories where we source from low-tariff countries and the incumbent sources from China. For the bottom line, holding our top line plus the timing of how COGS and price flow through our income statement give us confidence to hold our EBITDA guidance. Today, tariffs are being charged when imported products hit U.S. ports, yet our price increases do not immediately go into effect. It is customary for us to give retailers time to adjust their retail prices. Because of this we are now expecting a working capital use for the year resulting directly from tariffs. Because of the uncertainties around the timing and magnitude of tariffs, we are withdrawing our free cash flow guidance.

However, there are many variables that impact leverage. We will manage those variables, and we are confident we can end the year around 2.5 times leverage, slightly elevated from our prior expectations. Now, let me spend a minute talking about the timing of how COGS flow through our income statement and its impact on our bottom line. Typically, Hillman has about four to six months of worth of inventory in the channel. That means the products that arrive at the port today that are subject to tariffs will not show up in our cost of goods sold until September, October, November time frames. And we don’t expect to see the full impact from price increases till the third quarter. During the second quarter, net sales will not see a material benefit from price and COGS will not yet increase from tariffs.

However, in the third quarter, net sales will benefit from price and COGS will not yet fully increase from tariffs. And then, during the fourth quarter, net sales will benefit from price and COGS will have increased from tariffs. Our focus remains controlling the controllables, and we believe we have done a great job doing that. The midpoint of our updated guidance for both of those metrics puts us relatively in line with our historic growth algorithm. With that, let me turn it back to JMA.

Jon Michael Adinolfi: Thanks, Rocky. As we laid out in our prepared remarks, we are confident we can handle this tariff situation. Let me summarize. Our sourcing team has been in Asia for the last several weeks meeting with current potential suppliers to continue implementing our global supply chain strategy. Our sales teams are working with our customers to make sure they are taken care of, while we get price to cover our tariff exposure. Remember, most of our products are for repair and maintenance projects. You can’t do a project without them. In addition, our products are typically inexpensive, have very little elasticity and are not a large portion of the cost of the project. I’m confident we will successfully navigate tariffs with our strategic partners on both the supplier and customer side of the business.

Our outstanding teams at Hillman have dealt with challenges successfully in the past, and we will do it again. With that, I’ll turn it back to Gigi for the Q&A portion of the call. Gigi, please open the call for questions.

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Lee Jagoda from CJS Securities.

Lee Jagoda: Hi. Good morning.

Jon Michael Adinolfi: Good morning, Lee.

Lee Jagoda : So thanks for all of the quantifications around the tariffs and the timing. So I’ll switch to other topics for now. I guess, starting with the RDS business, it looks like the margins had a pretty negative incremental margin impact, I would assume, partially as a result of the rollout. Given we’re expected to see some growth for the balance of the year, what do incremental margins look like either year-over-year or off of the Q1 base as we go forward and grow sales?

Jon Michael Adinolfi: Yes. Lee, the — what happened in the first quarter when you think about RDS is we did see because of the incremental rollout plus some of the moves that are happening at non-incremental rollout customer, we did see some pressure. Again, you also have to remember that Q1 is a light revenue month relative to the other quarters during the year. And so, we would expect that incrementally and even overall, we’ll be back at 30-plus EBITDA rate and in the 70s for gross margins for the rest of the year.

Lee Jagoda: Got it. That’s great. And then, just shifting over to personal protective for the follow-up, it outperformed our estimate by quite a bit. Was there any prebuying ahead in terms of the tariff impact or promotional-related activities? And how do we think about the balance of the year given that dynamic?

Jon Michael Adinolfi: I think the team — first off no material pull-forwards in that business. Promo activity was strong, was planned to be strong and we the team actually outperformed. We were really pleased with how the PS business performed. Some of the products that we mixed in last year, some of the new products have actually gotten some really good traction. So we’re proud of what the PS team has delivered.

Lee Jagoda: And then for the balance of the year, I know we reiterated the full year guidance but in promotional or in personal protective in particular, how does that look relative to the expectations you had starting the year?

Jon Michael Adinolfi: Yeah. I would say generally in line, Lee. I mean right now we’re not changing guidance. And at this point, we’re in a bit of a wait and see, but we feel really good about where that business is positioned.

Lee Jagoda: Okay. Great. I’ll hop back in queue. Thanks.

Jon Michael Adinolfi: Thanks, Lee.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Matthew Bouley from Barclays Investment Bank.

Anika Dholakia: Good morning. You have Anika Dholakia on for Matt today. Thank you for taking the question.

Jon Michael Adinolfi: No problem.

Anika Dholakia: So first off. Good morning. So first off, I wanted to speak on the full year guidance. So you guys spoke to volumes down 17% in the second half. Wondering how this compares to your prior volume assumptions. I’m just wondering more broadly what points of incremental upside could be offsetting this volume weakness, that’s leading you guys to holding the guide? Thanks.

Rocky Kraft: Yes. This is Rocky. Let me take that. Our initial guide when we thought about the full year, the midpoint was down about 1% market volumes, which compared — I would say it was below where our big retailers were. They were probably up one point or two points. As we said in our prepared remarks, we’ve held the guidance and that assumes down 17% market. This business has never seen that before. The worst year in the history of Hillman which was 2009, volumes were down 10%. And so, we do believe that this down 17% is a pretty conservative view of the back half. Now having said that as we said in our prepared remarks, no one has lived through tariffs like this at least in our lifetimes that we’ve had to deal with from a business perspective.

And so it’s uncharted territory. And saying that we’re going to go get all the price and volumes aren’t going to be impacted relatively significantly, we think would not be prudent given the situation we’re in. So that’s kind of where we landed on the numbers. Again, we would tell you we hope we’re wrong and we hope that market volumes aren’t impacted that much. But it’s — but again, being where we are, we thought it was prudent to hold and not change anything at least at this point.

Anika Dholakia: Got it. That’s very helpful. Thank you. And then on my second question, looking at tariffs longer term, I appreciate your details on the geographic supplier breakdown in 2025. But how does this translate to maybe how you’re thinking about this breakdown in the future? And then if there’s any other region that you’d like to drive higher exposure lower exposure? Thanks.

Jon Michael Adinolfi: Yes. Good question. We did share in the prepared remarks that we’re targeting to be about 20% by year-end in China. But to answer your question in more detail, we really want to continue to find the best places to source for our customers. We actually are very excited about opportunities that our teams have been actually working on for years. So the — when this I’ll say crisis or change in tariff strategy came into place, we’re already moving down the road to move into other areas of Southeast Asia and India for example. So we’ll continue to extend and drive volume into those areas and we’re excited about some of the opportunities that are in front of us. So you’ll see us continue to diversify our portfolio.

But at the same time, we’ll make sure that we have the right quality products for our customers that can deliver on time and in full. So we feel good about our strategy and what we talked about in the prepared remarks. So we’ll continue to update you on future quarters, but you’ll see us diversify our base.

Anika Dholakia: Great. Thanks. Good luck.

Jon Michael Adinolfi: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Stephen Volkmann from Jefferies.

Stephen Volkmann: Good morning, guys. Maybe just one more tug on the thread here around tariffs Rocky. So we’re sort of talking about 17% price in the second half. Is it all in the second half? Or is it more in the fourth quarter than the third?

Rocky Kraft: Stephen, you’re asking about when we take price, we expect all of the price by July 1.

Stephen Volkmann: Okay. Great. And then you talked about this being dollar for dollar. So I guess the implication is that margins are a little lower as we go through this process?

Rocky Kraft: Yeah, they are. If you think longer term, Stephen and we’ve said, we believe, we kind of structurally changed the margins in this business to 47%. Assuming the tariffs stay where they are and we price dollar for dollar for tariffs, this will impact that rate by about 300 basis points on a long-term once they’re all in place and we fully lap them. So, it is a margin rate impact. But again, we’re going to be good partners with our customers. We’re going to price dollar for dollar. So far those conversations are going very well. And again, we think we can come out of this a stronger company on the backside.

Stephen Volkmann: Got it. And then, is there an opportunity maybe over some longer period to get back to that previous target over time?

Rocky Kraft: It’s challenging. When you think about $250 million of cost, Stephen, the way to get back to those rates is going to be if tariffs come down, and if they come down substantially. If they stay at those levels, our goal will be to grow our margin rate and our EBITDA rate like we have in the business over time, but it’s going to be incremental. It’s not going to be at big numbers like that unless the tariffs come off.

Stephen Volkmann: Got it. Okay. Makes sense. Thank you. I’ll pass it on.

Rocky Kraft: Thanks.

Jon Michael Adinolfi: Thanks.

Operator: Thank you. One moment for our next question. Our next question comes from the line of David Manthey from Baird.

David Manthey: Yes. Hi. Good morning, everyone. First question is on — could you talk about the similarities and differences of the current environment versus what you experienced during the COVID supply chain issues? And I guess, you’ve outlined 2025 pretty well. I’m wondering if you can conceptually at least look forward and say, what happens in 2026 kind of good case versus bad case scenario?

Jon Michael Adinolfi: Yes. So I’ll start — Dave, good morning — with the supply chain side of it. So it is a different scenario right now. Actually, we feel really good about our service levels. The company is performing better candidly than we ever have on a service level taking care of our customers in aggregate. And just like anyone there’s going to be some disruptions here and there, but we haven’t seen anything material. Our supplier base has been supportive during these challenges and we’ve continued to flow products. So hopefully that answers your question. We don’t see the disruptions that we saw before. That said, we’re planning and believe that some of the moves we’re going to make are going to help us smooth out some of those challenges that we see coming down the road.

So at this point, supply chain is in good shape. From a 2026 perspective, I think that when we look at our business, we’re operating well. We’re going to continue to perform well. We started the year — or I should say, last year when we planned 2025, we felt like it was going to be a tale of two halves. Question is out now second half of the year, is it going to be challenging. As you heard Rocky and I both framed, we expect volumes to be down. We still believe there’s a tremendous amount of opportunity to pent-up demand longer term just like you hear a lot of our partners talk about in the marketplace that the home improvement market has been under pressure for the last several years. And we believe when it turns it will be a strong run. So too early for us to factor in any guide from a percentage or numbers perspective for 2026, but we’re going to still take care of our customers and make sure we’re ready when it comes.

David Manthey: Okay. Thank you. And second question, are your shipping container price contracts related to the mix of countries on slide 8? Or is it more of an open concept? And what I’m wondering is if there’s a shift in volumes like let’s say, the China tariffs are reduced and there’s an influx of container demand coming from China. Does that — is there a disconnect there? Or does it not matter?

Jon Michael Adinolfi: I won’t say it doesn’t matter. We actually don’t believe, there’s a disconnect. What I would say is, we actually just had this conversation yesterday at length. I mean we feel very good about where our container cost, and I’ll say pricing is for 2025. It is going to be — even though it is inflation, it’s going to be better than we initiated. And with where we’re looking to move products, we’re actually really well positioned. We believe there will be some disruptions in the marketplace for those that will go out there and float on spot. Since we have contracts in place, we believe we’ve got a nice supply chain again depending on what demand does. But assuming what we have in our guide and what we think the year could be, we feel like we’re well positioned Dave. So it will be interesting to see what happens but we feel like we got the right steps and contracts in place.

David Manthey: And just to clarify, is it based on country of origin or not?

Jon Michael Adinolfi: It is based on ports. So yes, it is based on country of origin, correct.

David Manthey: Okay. All right. Thanks very much.

Jon Michael Adinolfi: You’re welcome. Thank you.

Operator: Thank you. [Operator Instructions] One moment for our next question. Our next question comes from the line of Reuben Garner from Benchmark.

Q – Reuben Garner: Thank you. Good morning, guys.

Jon Michael Adinolfi: Good morning, Reuben.

Q – Reuben Garner: Sorry, to harp on the tariff thing, but a couple of follow-ups. So first of all, what is left in China from a product perspective? And those categories, I guess, can you talk about the price elasticity you’ve seen in them historically, relative to some of your other products?

Jon Michael Adinolfi: So what’s left? I mean, so Reuben, to your point, I’ll say core fastening for instance, nuts and bolts regular core fastening, some hardware products. We do buy dip gloves out of China today and some other products like that. So there is a mix in the HPS business that is there. We have been developing sources outside of that region for those product lines for a while, as I mentioned earlier and we’ll continue to move those, when we have the right overall cost and quality. So, that is something the teams are working hard on and we’ll continue to do so. So, those are some of the products that are there. Elasticity, we believe based on the increase in the percentages, as you know, they vary greatly in those products, not as concerned on the fastening side as we would be in something like gloves.

So there is definitely elasticity. We don’t have numbers to share with the broader audience, but we’re working those activities now, and we’ll make sure that we’re continuing to move those products out of those countries, so they’re less impacted than they would be today.

Q – Reuben Garner: Got it. And then on the pricing side, are these price increases already announced and in place? Are they “permanent”? Or are you using — have you or the industry ever used, surcharges before? I know this is kind of unusual, but just trying to get some context, if this were to kind of go away in three months, like what it would look like?

Jon Michael Adinolfi: Yes. So, I mean as the price increases — I won’t go into great detail — ongoing conversation with our customers and they’re progressing. How we’re going to do it? Surcharges, the way our pricing is set up, as you can imagine with the number of SKUs and the number of customers that’s typically not how our customers like to operate. So there would be price increases. And then just like, we always would in the extreme times especially where we’re able to move out of tariff-related areas, we’re going to work with our customers to make sure that we have the right cost position, over the right time horizon.

Q – Reuben Garner: Perfect. Thank you, guys and good luck.

Jon Michael Adinolfi: You’re welcome.

Rocky Kraft: Thanks, Reuben.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Brian McNamara from Canaccord Genuity.

Q – Madison Callinan: Good morning. This is Madison Callinan on for Brian. Thanks for taking our questions. I’m not going to beat the dead horse on price increases, but when do you expect those to hit the shelves of retailers? And like have competitors preemptively taken price? Thanks.

Jon Michael Adinolfi: Yes. I mean — so I can’t speak for what the retailers are going to do. They are obviously managing their P&L. So Madison, we are working with them on our cost side and being transparent, and you’ll start seeing some of that flow through when they feel it’s the right time. So it’s hard to be vague, but I can’t go any deeper than that at this point.

Q – Madison Callinan: That’s okay. And then secondly, how is the current macro uncertainty impacting M&A? Like presumably isn’t helping, but maybe it’s pushing some operators to throw in the towel. Thanks.

Jon Michael Adinolfi: Yes. I think, what we would tell you Madison is, the M&A pipeline is strong. I do think like you said, we’re going to have more inbound than we probably had previously, because the tariff challenges for a smaller company who is like one product and not a strategic partner, is going to be tough for a lot of these large retailers. That being said, as you think about valuation today, we would tell you it’s virtually impossible to determine what the value of a business is with all of the tariff uncertainty. And so, while we’re talking to a lot of people and we’ll continue to and we’ll continue to build our pipeline, until tariffs settle down and we’ve kind of gotten through the first cycle of understanding pricing and how that plays out, you’re not going to see us actively doing any acquisitions.

Q – Madison Callinan: Thank you, guys.

Jon Michael Adinolfi: You’re welcome. Thanks, Madison.

Operator: This concludes the Q&A portion of today’s call. I would like to turn the call back over to Mr. Adinolfi for some closing comments.

Jon Michael Adinolfi: Well, thank you everyone for joining. We appreciate you taking the time to listen to our call today on Q1. We look forward to coming back to you, next quarter and talking about the progress we continue to make at Hillman. Thanks and have a great day.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.