• Hillman Reports Third Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 08 Nov 2023 07:30:00   America/New_York

    CINCINNATI, Nov. 08, 2023 (GLOBE NEWSWIRE) -- Hillman Solutions Corp. (Nasdaq: HLMN) (the “Company” or “Hillman”), a leading provider of hardware products and merchandising solutions, reported financial results for the thirteen and thirty-nine weeks ended September 30, 2023.

    Third Quarter 2023 Highlights (Thirteen weeks ended September 30, 2023)

    • Net sales increased 5.4% to $398.9 million compared to $378.5 million in the prior year quarter
    • Net income totaled $5.1 million, or $0.03 per diluted share, compared to net loss of $(9.5) million, or $(0.05) per diluted share, in the prior year quarter
    • Adjusted diluted EPS1 was $0.11 per diluted share compared to $0.14 per diluted share in the prior year quarter
    • Adjusted EBITDA1 totaled $66.8 million compared to $59.0 million in the prior year quarter

    Third Quarter YTD 2023 Highlights (Thirty-nine weeks ended September 30, 2023)

    • Net sales decreased (0.6)% to $1,128.7 million compared to $1,135.7 million in the prior year period
    • Net income totaled $0.5 million, or $0.00 per diluted share, compared to net loss of $(2.5) million, or $(0.01) per diluted share, in the prior year period
    • Adjusted diluted EPS1 was $0.30 per diluted share compared to $0.38 per diluted share in the prior year period
    • Adjusted EBITDA1 totaled $165.0 million compared to $165.3 million in the prior year period
    • Net cash provided by operating activities totaled $171.5 million compared to $63.2 million in the prior year period
    • Free Cash Flow1 totaled $119.3 million compared to $16.8 million in the prior year period

    Balance Sheet and Liquidity at September 30, 2023

    • Gross debt was $811.1 million, compared to $918.8 million on December 31, 2022; net debt1 outstanding was $771.8 million, compared to $887.7 million on December 31, 2022
    • Liquidity available totaled approximately $291.2 million, consisting of $251.9 million of available borrowing under the revolving credit facility and $39.3 million of cash and equivalents

    Management Commentary

    Doug Cahill, Chairman, President and Chief Executive Officer of Hillman, commented: “During the quarter our team successfully navigated the challenging macroeconomic environment to produce mid-single-digit top line growth and double-digit Adjusted EBITDA growth. Margins improved to historical norms, driven by strength in our Hardware and Protective Solutions segment, lower priced inventory being sold, and the resilience of Hillman’s competitive moat. Additionally, we continued to reduce inventory which, together with our improved bottom line, has driven robust year to date free cash flow of $119.3 million. We used this free cash flow to pay down debt, allowing us to improve our net debt to adjusted EBITDA ratio to 3.7 times continuing the downward trend for the fifth straight quarter.”

    “Hillman has proven resilient throughout multiple economic cycles. Despite lower foot traffic at our customers, our business remains partially insulated because of our focus on small ticket items used for necessary repair and maintenance projects. We expect gross margins to expand sequentially into the fourth quarter as we derive the benefits of new business wins, our prior pricing actions, and prudent cost controls. We have narrowed our top and bottom line guidance within our original range to reflect the macro environment. We continue to see our business produce free cash flow at healthy levels, which gives us confidence to increase our free cash flow outlook for the year. We look forward to entering 2024 on solid footing to capture market share and with a much stronger balance sheet to build additional value in our Company.”

    Full Year 2023 Guidance - Update

    Based on year-to-date performance and improved visibility on the remainder of the year, management is updating its full year 2023 guidance originally provided on February 27, 2023.

     Original 2023 GuidanceUpdated 2023 Guidance
    Net Sales$1.45 to $1.55 billion$1.455 to $1.485 billion
    Adjusted EBITDA1$215 to $235 million$215 to $220 million
    Free Cash Flow1$125 to $145 million$135 to $155 million

    1) Denotes Non-GAAP metric. For additional information, including our definitions, use of, and reconciliations of these metrics to the most directly comparable financial measures under GAAP, please see the reconciliations toward the end of the press release.

    Third Quarter 2023 Results Presentation

    Hillman plans to host a conference call and webcast presentation today, November 8, 2023, at 8:30 a.m. Eastern Time to discuss its results. Chairman, President, and Chief Executive Officer Doug Cahill, Chief Financial Officer Rocky Kraft, and Chief Operating Officer Jon Michael Adinolfi will host the results presentation.

    Date: Wednesday, November 8, 2023

    Time: 8:30 a.m. Eastern Time

    Listen-Only Webcast: https://edge.media-server.com/mmc/p/vrzpqs3k

    A webcast replay will be available approximately one hour after the conclusion of the call using the link above.

    Hillman’s quarterly presentation and Form 10-Q are expected to be filed with the SEC and posted to its Investor Relations website, https://ir.hillmangroup.com, before the webcast presentation begins.

    About Hillman Solutions Corp.

    Founded in 1964 and headquartered in Cincinnati, Ohio, Hillman is a leading North American provider of complete hardware solutions, delivered with industry best customer service to over 40,000 locations. Hillman designs innovative product and merchandising solutions for complex categories that deliver an outstanding customer experience to home improvement centers, mass merchants, national and regional hardware stores, pet supply stores, and OEM & Industrial customers. Leveraging a world-class distribution and sales network, Hillman delivers a “small business” experience with “big business” efficiency. For more information on Hillman, visit www.hillmangroup.com.

    Forward Looking Statements

    All statements made in this press release that are consider to be forward-looking are made in good faith by the Company and are intended to qualify for the safe harbor from liability established by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. You should not rely on these forward-looking statements as predictions of future events. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," “target”, “goal”, "may," "will," "could," "should," "believes," "predicts," "potential," "continue," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, the Company’s expectations with respect to future performance. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside the Company's control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) unfavorable economic conditions that may affect operations, financial condition and cash flows including spending on home renovation or construction projects, inflation, recessions, instability in the financial markets or credit markets; (2) increased supply chain costs, including raw materials, sourcing, transportation and energy; (3) the highly competitive nature of the markets that we serve; (4) the ability to continue to innovate with new products and services; (5) direct and indirect costs associated with the May 2023 ransomware attack, and our receipt of expected insurance receivables associated with that cybersecurity incident; (6) seasonality; (7) large customer concentration; (8) the ability to recruit and retain qualified employees; (9) the outcome of any legal proceedings that may be instituted against the Company; (10) adverse changes in currency exchange rates; (11) the impact of COVID-19 on the Company’s business; or (12) regulatory changes and potential legislation that could adversely impact financial results. The foregoing list of factors is not exclusive, and readers should also refer to those risks that are included in the Company’s filings with the Securities and Exchange Commission (“SEC”), including this Annual Report on Form 10-K filed on February 27, 2023. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward looking statements.

    Except as required by applicable law, the Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this communication to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.

    Contact:

    Michael Koehler
    Vice President of Investor Relations & Treasury
    513-826-5495
    IR@hillmangroup.com   


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

     Thirteen Weeks Ended
    September 30, 2023    		 Thirteen Weeks Ended
    September 24, 2022    		 Thirty-nine Weeks Ended
    September 30, 2023    		 Thirty-nine Weeks Ended
    September 24, 2022
    Net sales$398,943  $378,538  $1,128,669 $1,135,665 
    Cost of sales (exclusive of depreciation and amortization shown separately below) 222,644   214,802   643,652  648,221 
    Selling, warehouse, general and administrative expenses 113,359   133,246   335,876  366,013 
    Depreciation 14,434   14,312   44,939  41,738 
    Amortization 15,583   15,557   46,733  46,644 
    Other (income) expense, net (1,819)  1,070   841  (3,124)
    Income (loss) from operations 34,742   (449)  56,628  36,173 
    Interest expense, net 16,728   14,696   52,880  38,857 
    Income (loss) before income taxes 18,014   (15,145)  3,748  (2,684)
    Income tax expense (benefit) 12,957   (5,679)  3,278  (147)
    Net income (loss)$5,057  $(9,466) $470 $(2,537)
            
    Basic income (loss) per share$0.03  $(0.05) $0.00 $(0.01)
    Weighted average basic shares outstanding 194,794   194,370   194,662  194,171 
            
    Diluted income (loss) per share$0.03  $(0.05) $0.00 $(0.01)
    Weighted average diluted shares outstanding 196,575   194,370   195,832  194,171 


    HILLMAN SOLUTIONS CORP.
    Condensed Consolidated Balance Sheets
    (dollars in thousands)
    Unaudited

     September 30, 2023 December 31, 2022
    ASSETS   
    Current assets:   
    Cash and cash equivalents$39,262  $31,081 
    Accounts receivable, net of allowances of $2,312 ($2,405 - 2022) 129,709   86,985 
    Inventories, net 397,077   489,326 
    Other current assets 29,778   24,227 
    Total current assets 595,826   631,619 
    Property and equipment, net of accumulated depreciation of $362,422 ($333,452 - 2022) 200,121   190,258 
    Goodwill 824,305   823,812 
    Other intangibles, net of accumulated amortization of $461,240 ($414,275 - 2022) 688,451   734,460 
    Operating lease right of use assets 88,578   66,955 
    Other assets 14,633   23,586 
    Total assets$2,411,914  $2,470,690 
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current liabilities:   
    Accounts payable$159,332  $131,751 
    Current portion of debt and financing lease liabilities 10,697   10,570 
    Current portion of operating lease liabilities 13,814   12,285 
    Accrued expenses:   
    Salaries and wages 9,188   15,709 
    Pricing allowances 10,917   9,246 
    Income and other taxes 5,786   5,300 
    Interest 352   697 
    Other accrued liabilities 23,390   29,854 
    Total current liabilities 233,476   215,412 
    Long-term debt 780,043   884,636 
    Deferred tax liabilities 142,103   140,091 
    Operating lease liabilities 81,795   61,356 
    Other non-current liabilities 14,897   12,456 
    Total liabilities$1,252,314  $1,313,951 
    Commitments and contingencies (Note 6)   
    Stockholders' equity:   
    Common stock, $0.0001 par, 500,000,000 shares authorized, 194,827,369 issued and outstanding at September 30, 2023 and 194,548,411 issued and outstanding at December 31, 2022 20   20 
    Additional paid-in capital 1,415,059   1,404,360 
    Accumulated deficit (226,147)  (226,617)
    Accumulated other comprehensive loss (29,332)  (21,024)
    Total stockholders' equity 1,159,600   1,156,739 
    Total liabilities and stockholders' equity$2,411,914  $2,470,690 


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

     Thirty-nine Weeks Ended
    September 30, 2023    		 Thirty-nine Weeks Ended
    September 24, 2022
    Cash flows from operating activities:   
    Net income (loss)$470  $(2,537)
    Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
    Depreciation and amortization 91,672   88,382 
    Deferred income taxes 1,835   5,670 
    Deferred financing and original issue discount amortization 3,993   2,251 
    Stock-based compensation expense 9,111   10,789 
    Change in fair value of contingent consideration 2,614   (2,926)
    Changes in operating items:   
    Accounts receivable, net (42,883)  (19,482)
    Inventories, net 92,833   (6,004)
    Other assets (5,697)  (5,549)
    Accounts payable 27,220   (34,648)
    Other accrued liabilities (9,691)  27,286 
    Net cash provided by operating activities 171,477   63,232 
    Net cash from investing activities   
    Acquisition of business, net of cash received (300)  (2,500)
    Capital expenditures (52,145)  (46,431)
    Other investing activities (318)  — 
    Net cash used for investing activities (52,763)  (48,931)
    Cash flows from financing activities:   
    Repayments of senior term loans (86,383)  (6,384)
    Borrowings on revolving credit loans 172,000   161,000 
    Repayments of revolving credit loans (197,000)  (154,000)
    Principal payments under finance lease obligations (1,687)  (998)
    Proceeds from exercise of stock options 1,600   1,885 
    Payments of contingent consideration  (1,175)  (115)
    Other financing activities 883   1,809 
    Cash payments related to hedging activities —   (1,421)
    Net cash (used for) provided by financing activities (111,762)  1,776 
    Effect of exchange rate changes on cash 1,229   (1,454)
    Net increase in cash and cash equivalents 8,181   14,623 
    Cash and cash equivalents at beginning of period 31,081   14,605 
    Cash and cash equivalents at end of period$39,262  $29,228 


    Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

    The Company uses non-GAAP financial measures to analyze underlying business performance and trends. The Company believes that providing these non-GAAP financial measures enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance. These non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP. The Company’s definitions of its non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, reconciliations to GAAP financial measures are not provided for forward-looking non-GAAP measures. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

    Non-GAAP financial measures such as consolidated adjusted EBITDA and Adjusted Diluted Earnings per Share (EPS) exclude from the relevant GAAP metrics items that neither relate to the ordinary course of the Company’s business, nor reflect the Company’s underlying business performance.

    Reconciliation of Adjusted EBITDA (Unaudited)

    (dollars in thousands)

    Adjusted EBITDA is a non-GAAP financial measure and is the primary basis used to measure the operational strength and performance of our businesses as well as to assist in the evaluation of underlying trends in our businesses. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of our businesses and from intangible assets recognized in business combinations. It is also unaffected by our capital and tax structures, as our management excludes these results when evaluating our operating performance. Our management use this financial measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. Additionally, we believe that Adjusted EBITDA is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure of Adjusted EBITDA may not be directly comparable to similar measures used by other companies.

     Thirteen Weeks Ended
    September 30, 2023    		 Thirteen Weeks Ended
    September 24, 2022    		 Thirty-nine Weeks Ended
    September 30, 2023    		 Thirty-nine Weeks Ended
    September 24, 2022
    Net income (loss)$5,057  $(9,466) $470 $(2,537)
    Income tax expense (benefit) 12,957   (5,679)  3,278  (147)
    Interest expense, net 16,728   14,696   52,880  38,857 
    Depreciation 14,434   14,312   44,939  41,738 
    Amortization 15,583   15,557   46,733  46,644 
    EBITDA$64,759  $29,420  $148,300 $124,555 
            
    Stock compensation expense 3,069   2,485   9,111  10,789 
    Restructuring   and other (1) 179   916   3,027  1,481 
    Litigation expense (2) 79   25,255   339  28,968 
    Transaction and integration expense (3) 289   178   1,599  2,393 
    Change in fair value of contingent consideration (1,553)  719   2,614  (2,926)
    Total adjusting items  2,063   29,553   16,690  40,705 
    Adjusted EBITDA$66,822  $58,973  $164,990 $165,260 

    (1)  Includes consulting and other costs associated with distribution center relocations and corporate restructuring activities. 2023 includes costs associated with the cybersecurity event that occurred in May 2023.
    (2)  Litigation expense includes legal fees associated with our litigation with Hy-Ko Products Company LLC.
    (3)  Transaction and integration expense includes professional fees and other costs related to the CCMP secondary offerings in 2022 and 2023.


    Reconciliation of Adjusted Diluted Earnings Per Share
    (in thousands, except per share data)
    Unaudited

    We define Adjusted Diluted EPS as reported diluted EPS excluding the effect of one-time, non-recurring activity and volatility associated with our income tax expense. The Company believes that Adjusted Diluted EPS provides further insight and comparability in operating performance as it eliminates the effects of certain items that are not comparable from one period to the next. The following is a reconciliation of reported diluted EPS from continuing operations to Adjusted Diluted EPS from continuing operations:

     Thirteen Weeks Ended
    September 30, 2023    		 Thirteen Weeks Ended
    September 24, 2022    		 Thirty-nine Weeks Ended
    September 30, 2023    		 Thirty-nine Weeks Ended
    September 24, 2022
    Reconciliation to Adjusted Net Income        
    Net income (loss)$5,057  $(9,466) $470  $(2,537)
    Remove adjusting items (1) 2,063   29,553   16,690   40,705 
    Remove amortization expense 15,583   15,557   46,733   46,644 
    Remove tax benefit on adjusting items and amortization expense (2) (1,055)  (7,685)  (4,907)  (10,720)
    Adjusted Net Income$21,648  $27,959  $58,986  $74,092 
            
    Reconciliation to Adjusted Diluted Earnings per Share       
    Diluted Earnings per Share $0.03  $(0.05) $0.00  $(0.01)
    Remove adjusting items (1) 0.01   0.15   0.09   0.21 
    Remove amortization expense 0.08   0.08   0.24   0.24 
    Remove tax benefit on adjusting items and amortization expense (2) (0.01)  (0.04)  (0.03)  (0.05)
    Adjusted Diluted Earnings per Share $0.11  $0.14  $0.30  $0.38 
            
    Reconciliation to Adjusted Diluted Shares Outstanding (3)       
    Diluted Shares, as reported 196,575   194,370   195,832   194,171 
    Non-GAAP dilution adjustments:       
    Dilutive effect of stock options and awards —   655   —   1,456 
    Adjusted Diluted Shares 196,575   195,025   195,832   195,627 

    Note: Adjusted EPS may not add due to rounding.

    (1)  Please refer to "Reconciliation of Adjusted EBITDA" table above for additional information on adjusting items. See "Per share impact of Adjusting Items" table below for the per share impact of each adjustment.

    (2)  We have calculated the income tax effect of the non-GAAP adjustments shown above at the applicable statutory rate of 25.1% for the U.S. and 26.2% for Canada except for the following items:

    1. The tax impact of stock compensation expense was calculated using the statutory rate of 25.1%, excluding certain awards that are non-deductible.
    2. The tax impact of acquisition and integration expense was calculated using the statutory rate of 25.1%, excluding certain charges that were non-deductible.
    3. Amortization expense for financial accounting purposes was offset by the tax benefit of deductible amortization expense using the statutory rate of 25.1%.

    (3)  Diluted shares on a GAAP basis for the thirteen and thirty-nine weeks ended September 30, 2023 include the dilutive impact of 1,781 and 1,170 options and awards, respectfully.

    Per Share Impact of Adjusting Items

      Thirteen Weeks Ended
    September 30, 2023    		 Thirteen Weeks Ended
    September 24, 2022    		 Thirty-nine Weeks Ended
    September 30, 2023    		 Thirty-nine Weeks Ended
    September 24, 2022
    Stock compensation expense $0.02  $0.01 $0.05 $0.06 
    Restructuring and other costs  0.00   0.00  0.02  0.01 
    Litigation expense  0.00   0.13  0.00  0.15 
    Transaction and integration expense   0.00   0.00  0.01  0.01 
    Change in fair value of contingent consideration  (0.01)  0.00  0.01  (0.01)
    Total adjusting items $0.01  $0.15 $0.09 $0.21 

    Note: Adjusting items may not add due to rounding.

    Reconciliation of Net Debt

    We define Net Debt as reported gross debt less cash on hand. Net debt is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. The Company believes that Net Debt provides further insight and comparability into liquidity and capital structure. The following is a the calculation of Net Debt:

     September 30, 2023 December 31, 2022
    Revolving loans$47,000  $72,000
    Senior term loan, due 2028 753,980   840,363
    Finance leases and other obligations 10,118   6,406
    Gross debt $811,098  $918,769
    Less cash  39,262   31,081
    Net debt$771,836  $887,688

    Reconciliation of Free Cash Flow

    We calculate free cash flow as cash flows from operating activities less capital expenditures. Free cash flow is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. We believe free cash flow is an important indicator of how much cash is generated by our business operations and is a measure of incremental cash available to invest in our business and meet our debt obligations.

     Thirty-nine Weeks Ended
    September 30, 2023    		 Thirty-nine Weeks Ended
    September 24, 2022
    Net cash provided by operating activities$171,477  $63,232 
    Capital expenditures (52,145)  (46,431)
    Free cash flow$119,332  $16,801 

    Source: Hillman Solutions Corp.


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