NASDAQ:HLMN Hillman Solutions Q3 2024 Earnings Report $7.31 +0.14 (+1.95%) Closing price 04:00 PM EasternExtended Trading$7.30 0.00 (-0.07%) As of 05:10 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Hillman Solutions EPS ResultsActual EPS$0.16Consensus EPS $0.16Beat/MissMet ExpectationsOne Year Ago EPS$0.11Hillman Solutions Revenue ResultsActual Revenue$393.30 millionExpected Revenue$389.50 millionBeat/MissBeat by +$3.80 millionYoY Revenue Growth-1.40%Hillman Solutions Announcement DetailsQuarterQ3 2024Date11/5/2024TimeBefore Market OpensConference Call DateTuesday, November 5, 2024Conference Call Time8:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Hillman Solutions Q3 2024 Earnings Call TranscriptProvided by QuartrNovember 5, 2024 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Good morning, and welcome to the Third Quarter 20 24 Results Presentation for Hillman Solutions Corp. My name is Jonathan, and 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. Operator00:00:32Ir. Hillmangroup.com. I would now like to turn the call over to Michael Koehler with Hillman. Speaker 100:00:39Thank you, Jonathan. Good morning, everyone, and thank you for joining us. I am Michael Koehler, Vice President of Investor Relations and Treasury. Joining me on today's call are Doug Cahill, our Chairman, President and Chief Executive Officer John Michael Adanalffy, our Chief Operating Officer and Rocky Craft, our Chief Financial Officer. As a reminder, we announced in August that effective January 1, 2025, Doug will step into the Executive Chairman role and John Michael or JMA as we call him will step into the CEO role. Speaker 100:01:11Before 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. In addition, on today's call, we will refer to certain non GAAP financial measures. Speaker 100:01:57Information regarding our use of and reconciliations of these measures to our GAAP results are available in our earnings call slide presentation. With that, Doug will begin today's call with some recent highlights, then he will provide some market commentary, touch on our updated guidance and hit on our Q3 results. J. M. A. Speaker 100:02:17Will then hit on the value of our note, our acquisition of Intex and our operations. Rocky will then give a more detailed walk through our financials and updated guidance before turning the call back over to Doug for some closing comments. We will then open up the call for your questions. It's now my pleasure to turn the call over to our Chairman, President and CEO, Doug Cahill. Doug? Speaker 200:02:38Thanks, Michael. Good morning, everyone. Before we get too far into the call today, I wanted to take a moment and recognize the Hillman team for actually accomplishing something that we've never done before in our history. On October 1, we won the 2024 Divisional Vendor Partner of the Year in hardlines at Lowe's. And 8 days later, we won the 2024 Partner of the Year in hardware at Home Depot. Speaker 200:03:06Our Lowe's team led by Justin Fox and our Home Depot team led by Brad Helbing do an outstanding job taking care of our 2 biggest customers. You guys, your teams have been doing and continue to do a fantastic job working with these 2 world class retailers. For 60 years, the mindset at Hillman has always been nothing happens until you sell something and I'm happy to report it's alive and well today. Being recognized by our 2 biggest customers in the same year is not possible without this mindset. There are a lot of folks to thank like our customer service and back office support teams as well as our logistics and operations teams moving product across the global network. Speaker 200:03:51But I think I can speak for Justin, Brad and the entire team and say the most valuable players at Hillman are the dedicated warriors in the field taking care of the shells at Home Depot, Lowe's and all of our customers each and every day. We're humbled by the recognition and we strive to ensure all of our customers are well taken care of by our team. Again, my hats off to the Hillman team, you guys are amazing. As we look at 2025 and beyond, this company is in a great position. We believe we're approaching an actual inflection point where the macro will start to benefit both Hillman and our retail partners. Speaker 200:04:33Our retailers aren't predicting when existing home sales start to turn positive, but they're convinced that when it happens, it's going to be a historic run, not for a year or 2, but closer to 3 to 5 years. Driving this confidence are a few factors. Let's break it down. Number 1, lower rates are likely on their way and it will make it cheaper for existing homeowners to tap their home equity to fund home improvement projects. Homeowners in the U. Speaker 200:05:04S. Are sitting on a record $35,000,000,000,000 of home equity, a number that has increased 81% since the end of 2019. Additionally, lower rates should drive an increase in existing home sales, down from over 6,000,000 homes sold in the U. S. In 2021. Speaker 200:05:272024 is projected to be at a 30 year low of 3,800,000 homes sold. We believe lower rates will start to relieve this pent up demand and existing home sales will improve next year. Number 2, the age of existing homes in the U. S. 48% of homes are at least 45 years old, which includes over 24,000,000 homes that are expected to reach their prime remodeling age in the next 3 years. Speaker 200:05:57We believe this will drive consistent demand for remodeling and renovation projects for years to come. Number 3, the lack of housing supply in the U. S. With roughly 4,500,000 home shortage in the U. S. Speaker 200:06:11And no near term solution with roughly 1,500,000 homes being built a year, home values are expected to remain strong and homeowners will continue to invest in their homes. Meanwhile, we know the macro has not been a tailwind the last few years. But what I love about this business model of ours is that even with unit volume being a headwind for our industry, our trailing 12 month adjusted EBITDA is up 18% versus the year ago period. Because of the great position we're in with our customers, we believe we will grow both top line and bottom line in 2025. But for now, let's go back to 2024. Speaker 200:06:55During the quarter, we acquired Intex, a leading provider of cleaning rags, cloths and textiles. Most every home improvement job again ends with cleaning. So this is another great product category that fits perfectly in our portfolio and one that we're excited to be in. Because of the additional contributions from Intex and our October results, we're increasing our 2024 full top line full year top line and adjusted EBITDA guidance. Our new net sales guidance range is $1,455,000,000 to $1,485,000,000 and has a midpoint of 1,470,000,000 dollars The new midpoint is an increase of 7.5 percent compared to Speaker 300:07:42$200,000,000,000 Speaker 200:07:45for the year marked in a 2% Speaker 300:07:51of our operating cash and 14% January stage over 2023. Our net free cash flow guide of $100,000,000 to $115,000,000 Speaker 200:07:58or $410,000,000 is $5,000,000 lower than our previous guide with no change to the bottom end. Rocky will provide more details on our 2024 guidance and our CapEx investments shortly. Turning to the quarter. Net sales in the Q3 of 2024 totaled $393,300,000 which were down 1.4 compared to the prior year quarter. Driving our top line were sales from Cook and Intex acquisitions, which added about 4 points, which were offset by 2 main factors. Speaker 200:08:32Number 1 is the overall market volumes, which were down about 4% for the quarter. Number 2 was a 1 point headwind from price, which was in line with our expectations, coupled with a small headwind from FX. For the quarter, our adjusted EBITDA increased 9 percent to $72,600,000 compared to $66,800,000 during the Q3 of 2023. Our adjusted EBITDA margins improved to a healthy 18.4%. Adjusted gross margins for the quarter totaled 48.2%, marking a 400 basis point improvement over 44.2% during the year ago quarter and declined sequentially from 48.7% during the Q2 of 2024. Speaker 200:09:22We believe we've structurally improved our gross margin profile and we expect it to be above 47% for the foreseeable future. We have managed to maintain these healthy margins by improving efficiencies, selling a better mix of products similar to what we've seen over the past few quarters. For our top line results, hardware and protective solutions or HPS, which is our biggest segment, net sales increased 0.1% over the comparable period. While our adjusted EBITDA increased 19.8%, Our results were driven by contributions from Cook and Intex, partially offset by softer market volumes and price. Net sales in Robotics and Digital or RDS were down 5.3% versus the year ago quarter. Speaker 200:10:13This compares sequentially to 8% decline between Q2 of 2024 and Q2 of 2023. The trend has improved because the green shoots in Miniquis 3.5 and our new kiosk service contracts. Adjusted gross margins and adjusted EBITDA margins remain healthy at 72.3% and 32.2% respectively, both improved sequentially. As of today, we have 900 Minutekeen 3.5 machines in the field and we believe that we will have over 1200 in stores by year end. The deployment plan has accelerated throughout 2024 and we expect to continue to ramp in 2025. Speaker 200:11:01We know RDS is a great business and we're laser focused on getting RDS back to growth beginning in 2025. Now turning to Canada. Net sales in our Canadian business were down 6.5% compared to the prior year quarter. The quarter and the rest of the year are helped by contributions from new business rollouts as we continue to gain market share north of the border. These wins were offset by a very sluggish economy in Canada. Speaker 200:11:31For the year, we expect to maintain 10% adjusted EBITDA margins in Canada. And like our business in the U. S, we have this business in a strong position for when the economy turns and a great team in Canada. Before I turn it over to JMA, let me sum up 2024. As we told you in November last year, even if volumes were down in 2024, our EBITDA would be up and this year has played out as we anticipated. Speaker 200:12:03We also told you that we expect to turn the tuck in acquisition machine on and we've added Cook and Intex this year. The contributions from these businesses have moved our full year top line expectations to be roughly flat versus last year and our full year EBITDA will grow about 14% versus 2023. We've improved our gross margin rate to 48% and our EBITDA rate to 17%, and we believe we've structurally improved the profitability of our business. We continue to strengthen relationships with our customers and reinforce our competitive moat illustrated by our vendor of the year wins at Depot and Lowe's. We feel great about where we are with our customers right now and it's fun to be back on offense. Speaker 200:12:53We're ready to grow alongside our customers when the macro starts to shift and we'll be ready for what our retailers will believe that what our retailers believe will be a historic run over the next several years. With that, I'll turn it over to JMA. As we announced in August, JMA will take the reins from me in January of 2025 as only the 6th CEO in the 60 year history of Hillman. I love this company because of the people we get to work with and the customers we get to take care of and I'm very proud of this transition. JMA, Rocky and I have worked together every day for the past 5 years. Speaker 200:13:33It's been an honor and an absolute blast. JMA is doing a great Speaker 300:13:37job and as Executive Chairman, I will support JMA in every way that I can. JMA, take it away. Speaker 400:13:49Daniel will hit on how we win with our vote, the M and A landscape and operations before turning the call over to Rocky. Let me give you a quick refresher on the 3 differentiators of our moat. Number 1, pick, pack and ship directly to our customers. Number 2, 1100 field sales and service warriors and number 3, our 60 years of experience. Next, I will share a few real life examples how each part of our moat creates value for our customers. Speaker 400:14:171st, by shipping 75% of our products direct to store, we take care of our customer when they need it most. For example, during the recent hurricanes that impacted the Southeast, we were able to support our customers before and after the storms with minimal impact to service levels. 2nd, our 1100 sales and service warriors not only take care of our normal customer needs, but also enable us to flawlessly execute in store resets across the country. For example, one of our top five customers is investing alongside of us for a multi year nationwide reset of the fastener aisle. This is an entire reset of the 40 plus foot run of fasteners, which includes thousands of Hillman SKUs and complex merchandising. Speaker 400:15:03We're ripping everything out, going all new, which takes well over 100 labor hours to complete and is one Speaker 500:15:09of the most important aisles of Speaker 400:15:11the store. And so far, the results are encouraging. 3rd, with 60 years of experience, we understand the products, categories and markets. For example, we recently launched a new range of high performance patented Power Pro Structural Screws. These new products are being rolled out in the traditional hardware channel and will contribute to growth in 2025. Speaker 400:15:34Now that you understand the 3 pillars and how they add value for our customers, let me now give you some examples of what the Mote does for helmet. Vendor of the year at Lowe's and the Home Depot, adjusted gross margin of 48%, adjusted EBITDA margins of 17%, double digit EBITDA growth for the year even in a challenging macro environment, generated meaningful cash flow, investing for long term growth with our customers and we are executing low risk accretive acquisitions where our customers want us to grow. Look at what happened with Cook. We secured a meaningful piece of new business shortly after the acquisition that will increase that business by 20% over time. Our customers trust us and have confidence that Hillman can handle the complexity of a national rollout of new products and resets. Speaker 400:16:27This moat is critical to growing both organically and through M and A. When we offer new categories, it allows our teams to bring more value to our customers and do so efficiently. As Doug mentioned, in August, we closed on the acquisition of Intex, a leading supplier of cleaning rags, cloths and textiles. We love Intex because it expands our product offering to new aisles and new customers. And importantly, we can leverage our moat to grow this business in the future as we take advantage of the cross selling opportunities with both new and existing customers. Speaker 400:17:01For nearly 20 years, Intex has developed patented and innovative cleaning rags, cloths and textiles for use in home improvement, painting, cleaning and maintenance projects, as well as janitorial, auto and marine care. Intex has great products, an excellent team and great customers, many of which we share. When you combine that with the unique strengths Hillman brings to our customers every day like in store service, direct ship capabilities and 25 plus years of retailer relationships at every level, you get accretive acquisitions that should gain market share for years to come. Intex marks our 2nd acquisition of the year with Coke and Rope and Chain being our first. Our M and A pipeline is healthy as we continue to see companies like Coke and Intex that would be great additions to the Hillman family. Speaker 400:17:51Koch has been successfully integrated into our operations and we are working to fully integrate Intex. I'm proud of how Hillman has welcomed Koch and Intex to the Hillman family. With the team on board and aligned, we are now ready and focused on growth opportunities. We would love to do at least 2 similar acquisitions every year. Now let me touch on operations. Speaker 400:18:13Our global operations team continues to do a fantastic job and add value throughout the supply chain. We ship products on time and in full to our customers with industry leading fill rates. Our North American distribution network continues to run efficiently. We have never seen our team operating as well and believe there's still room for improvement. We continue to have great relationships with our suppliers around the globe. Speaker 400:18:39About 1 third of our products are currently sourced from North America, 1 third are sourced from Taiwan and the rest of the world and 1 third are sourced from China, which is down approximately 50% from less than 5 years ago. Further, about a dozen of our major long term suppliers are in the process of expanding operations outside of China. We have healthy relationship with our reliable long term suppliers and we believe as do our customers do this strategy gives us flexibility and options when it comes to tariffs and geopolitical tensions. Let me now give you a quick update on ocean freight. The spot market for ocean containers has been volatile, but this does not have a material impact on our business because we continue to ship approximately 90% of our containers under our 12 month contracts, which were put in place on May 1, 2024. Speaker 400:19:29That said, we will begin to negotiate ocean container contracts in the Q1 of next year ahead of the May 1, 2025 renewal date. Current industry projections are for higher rates and if true, we would plan to offset and or price for this increase. Our team is controlling the controllables, efficiently running our operations and taking care of our customers. We are and we will be ready for when the market improves. With that, let me turn it over to Rocky to talk financials. Speaker 400:19:57Rodney? Speaker 500:19:58Thanks, J. M. A. Let's dive right in. Our net sales for the Q3 of 2024 totaled $393,300,000 decrease of 1.4% versus the prior year quarter. Speaker 500:20:113rd quarter adjusted gross margin increased by 400 basis points to 48.2% versus the prior year quarter of 44.2%. Sequentially, adjusted gross margins were down slightly from 48.7% or were in line with our expectations and what we said on last quarter's call. We expect our adjusted gross margins to come down during the Q4 as a result of Intech's lower margin products, but will remain above 47% this year and next as we believe we have structurally improved our gross margin profile. Adjusted SG and A as a percentage of sales increased to 29.9% during the quarter from 27.5% from the year ago quarter, which was also in line with our expectations. Driving the increase was our standard employee bonus expense, which was the result of a strong bottom line during the year to date period when compared to 2023. Speaker 500:21:05Adjusted EBITDA in the 3rd quarter was 72,600,000 which grew 9% versus the year ago quarter. Our adjusted EBITDA to net sales ratio during the quarter was 18.4%, which compares favorably to 16.7% a year ago. Contributing to our healthy adjusted EBITDA margin was our positive mix of price cost and efficient operations. Now let me turn to our cash flows. For the 39 weeks ended September 28, 2024, operating activities generated $142,200,000 of cash as compared to $171,500,000 in the year ago period. Speaker 500:21:45Remember, during 2023, we had outsized working capital benefit as we were able to reduce our net inventory by over $100,000,000 throughout the year as we returned to normal inventory levels. Free cash flow for the 2024 year to date period totaled $76,000,000 and totaled $39,600,000 for the quarter. Capital expenditures totaled $64,200,000 for the 1st 9 months of 2024. This compared to $52,100,000 in the prior year period. For 2024, we will invest between $80,000,000 $85,000,000 of CapEx and anticipate 2025 capital spend to be slightly above our 2024 number as we invest in RDS and other growth initiatives like racks for resets in our hardware business. Speaker 500:22:33We continue to strategically invest in our high margin RDS business. So let's be clear, this is not a build it and they will come strategy with Minikey 3.5. Our service teams are retrofitting existing 3.0 machines in the stores and we will only build new machines where we see a return on our invested capital or new store growth opportunities. As Doug mentioned, our 900 plus MinuteKey 3.5 machines are performing well and where there is a return on our investment we will ramp up our capital spend to deliver more machines during 2025 with our strategic RDS customers. Now to the balance sheet. Speaker 500:23:12We ended the Q3 of 2024 with $698,700,000 of total net debt outstanding. We were able to reduce our debt during the quarter while funding the Intex acquisition from our free cash flow. We have not had a net debt figure below $700,000,000 since 2013 and that was when our total annual sales were just $700,000,000 and our leverage ratio was nearly 5 times net debt to adjusted EBITDA. At the end of the Q3 of 2024, our net debt to trailing 12 month adjusted EBITDA ratio was 2.8 times compared to 3.3 times at the end of 2023 and 3.7 times just a year ago. Looking forward, we maintain our expectation that we will end 2024 around 2.7 times net leverage. Speaker 500:24:00Our long term adjusted EBITDA to net debt leverage ratio target is to be at or below 2.5 times. This will give us the flexibility to grow via M and A and allows us to be strategic and opportunistic when it comes to using our balance sheet to add stockholder value. As Doug mentioned earlier, we have a few changes to our 2024 guidance. We are increasing our net sales to be between $1,455,000,000 to $1,485,000,000 with a midpoint of $1,470,000,000 Driving the increase are sales contributions from Intex partially offset by the market. Our new midpoint makes the following full year assumptions, a 1% headwind from price, a 2% lift from new business wins, a 4% lift from Cook and Intex and market volumes being down about 5%. Speaker 500:24:54Altogether, our new net sales midpoint guide is down less than 0.5% from 2023. Similarly, we are increasing our 2024 adjusted EBITDA guidance. Based on our year to date and October results, our expectations for our 2024 full year adjusted EBITDA is now approximately $250,000,000 which is a 14% increase from 2023. And lastly, we are adjusting down the top end of our 2024 free cash flow guide as a result of our anticipated CapEx spend, which is between $80,000,000 $85,000,000 for the year. The new range for our 2024 free cash flow is $100,000,000 to 115,000,000 dollars and has a midpoint of $107,500,000 versus $110,000,000 previously. Speaker 500:25:40More information on the assumptions that have driven our guidance are available in our earnings call presentation. A few weeks ago, one of our customers True Value filed for Chapter 11 at the corporate level. The hardware co op made the filing while entering into an agreement to be sold to another hardware co op Do It Best. We have a great relationship with Do It Best and they have been a Hillman customer for over 30 years. Because of its co op nature, True Value serves as a wholesaler for independently owned hardware stores throughout the U. Speaker 500:26:10S. They are not hardware store operators. Filament will continue taking care of its independent hardware store customers that fly the True Value banner, shipping products directly to stores, while having its field and service folks continue to write orders and manage the shelves. We believe the long term health of these independently owned hardware stores remain strong and True Value's Chapter 11 and potential sales to do it best should not have a material impact on our long term business. That said, in the shorter term across all our business segments, we have about $8,800,000 of receivables at risk from true value net of discounts and allowances. Speaker 500:26:49Based on what we've learned so far since the filing, we are not assuming we will recover a material amount of these receivables. Accordingly, our Q3 results will reflect a Accordingly, our Q3 results will reflect a $7,800,000 charge for the balance of receivables we do not expect to collect. Due to the one time nature of this event, this has been backed out of our adjusted non GAAP financials. Hillman does business with 12,000 independently owned hardware stores throughout the U. S. Speaker 500:27:14And Canada, which generate about $215,000,000 or nearly 20% of our revenue. ACE is by far the market leader in this space, making up about 2 thirds of the market along with 13% of our revenues. ACE continues to grow revenues, open new stores and be financially sound. Your local hardware store is expected continues to perform during this cycle as they focus and cater to the repair and maintenance categories and differentiate themselves with their customer service. Last November, we said that even if the top line is down in 2024, our adjusted EBITDA will increase and that is exactly what we have seen so far this year, up 17.1% during the 1st 9 months of the year. Speaker 500:27:58Our focus remains controlling the controllables and we believe we have done a great job doing that. Historically, our business has seen organic growth of 6% per year and high single to low double digit organic adjusted EBITDA growth before M and A. Assuming we can get some help from the macro, we think returning to our historic growth algorithm is achievable for 2025. Longer term, now that we are active on the M and A front, top line growth of high single to low teens is realistic and should yield adjusted EBITDA growth in the low to mid teens assuming a healthy macro environment. With that, let me turn it back to Doug. Speaker 200:28:37Thanks, Rocky. Before we get to the Q and A session, I want to express our condolences to the families who have lost loved ones and have seen their lives just turned upside down in the wake of Hurricane Helene and Hurricane Milton, just awful. No surprise, our Hillman team has stepped up during this time of need by working long hours, expediting deliveries and servicing our customers in order to ensure those affected have the products they need to start their rebuilding process. Additionally, Hillman as well as all of our retailers have donated products and cleaning supplies to assist with the cleanup efforts. Helping those in need is deeply ingrained in the Hillman spirit. Speaker 200:29:21We're proud of the way our employees have showed up for their teams and our customers. Without these Hillman warriors, we would not be where we are today and I want to express my gratitude for their loyalty, their teamwork and for always taking great care of our customers. As we look to the future, we firmly believe taking a disciplined approach to strengthening our moat, while seeking accretive growth opportunities will drive long term shareholder value for years to come. And with what we can see on the horizon, we're very excited about the future. With that, let me turn it back to Jonathan, the operator for the Q and A portion. Speaker 200:29:59Jonathan, I'm not sure if you have a face for radio, but you definitely have Operator00:30:03a voice. Let's open it up for questions. Thank And our first question for today comes from the line of Matthew Bouvet from Barclays. Your question please. Speaker 600:30:31Good morning. You have Anika Delacchi on for Matt today. Thanks for taking my questions. Good morning. First off, I was wondering on foot traffic and demand trends. Speaker 600:30:39I'm wondering if you can just parse out how this trended in October relative to September and if you guys have any early thoughts on R and R growth expectations for 2025? Thanks. Yes. Speaker 200:30:49I mean, yes, right now, we're seeing kind of same thing, right? The volume is soft and margin continues strong. Mix has been good. I think everybody is rooting for this thing to return. But when you think about our business, there's going to be a lot of retailers focused on holidays and then we'll really get started in 2025. Speaker 200:31:14But nothing's really changed. We continue to see our share grow slightly with some wins. But again, market has stayed about the same. As we look at 2025, it's hard to say. The macro, nobody knows. Speaker 200:31:31I think interest rates declining will definitely help. Our retailers are bullish. But as I said, they really are not predicting when, but they know that as that starts to go, there's pent up demand, existing home sales and a lot of equity in homes that can be used for expansions and then people definitely want to move and that's good for our business. Speaker 600:31:57Super helpful. Thank you. And then I guess on my second question, I know you guys in your prepared remarks mentioned that 1 third is sourced from Taiwan. I think it was 1 third from China, but correct me if I'm wrong there. If you can just go into more detail, if we were to see an increase in tariffs, how you guys would be equipped to mitigate the impact that this could have on your cost structure? Speaker 600:32:17Any details would be helpful. Thanks. Speaker 200:32:19Yes. So first of all, I'll turn it to JMA, but 1 third North America, 1 third Taiwan and then rest of really the Asia like if you think Vietnam, Indonesia, you think of all the different places. So it's a third North America, a third Taiwan and all other and then a third China. But Jay may I want you to touch on that? Speaker 400:32:41Yes. So to build on that point there, I mean the 3rd China, I mean when you think about tariffs and where you're going after with your question, I mean, we look at it just like we handled tariffs last time they came through. We'll price dollar for dollar. We work with our retailers to pass that cost on, and we'll be ready in the event that is what happens. Speaker 600:33:01Great. Thanks guys and good luck. Speaker 300:33:03Thank you. Thank you. Operator00:33:05Thank you. And our next question comes from the line of Dave Manthey from Baird. Your question please. Speaker 700:33:16Hi, good morning everyone. First off, Intex, is that could you talk about who that's being carried by in terms of your partners currently? And is there any limitation where you can sell it? And you mentioned the gross margins are lower there. Is that structural? Speaker 700:33:32Is there room for improvement? Thanks. Speaker 400:33:35Hey, great. Good morning, Dave. For the Intech businesses, they sell to really a lot of the same customers we do, not nearly as deep in the traditional hardware channel where we're strong. But you think about Depot, Lowe's, Walmart, all the major customers that are out there that we serve each and every day they sell into and some others like they are in the paint and auto channels where we don't serve today. So we're really excited about the growth opportunities and expansion. Speaker 400:33:58There are no limitations in where we take what products we have. We've got some good innovative products with IP around them. So we're really excited about Speaker 500:34:06the future and where we're going. Yes, I guess, hey, David, it's Rocky. On your second question, I think the answer is yes. They're structurally lower at Intex. We will improve those over time as you think about areas like freight and overseas and things like that, where we just have a lot more volume. Speaker 500:34:22So we'll improve their margins, but they will be structurally lower than fleet. Speaker 700:34:28Okay. Thanks for that. And then on RDS, as we move into 2025, if I heard you right, it sounded like MinuteKey 3.5 is might kind of tail off and ReSharp wasn't mentioned at all. What might move the needle that would lead to growth in RDS next year? Speaker 200:34:49Yes. So 35 is not tailing off. It's just really starting, Dave. That's basically taking the existing MiniKey 3.0 and adding RFID, auto, both transponder and smart as well as endless aisle any key you want. So we've got 900 out there. Speaker 200:35:09We've got great demand coming from our customers who want it because for them it's just all upside. We'll have 1200 at the end of the year and we will both have conversions of existing 3.0 machines in 2025 as well as new placement in stores that don't have them today by our major retailers who now want machines in stores. And I think you'll see over time some pricing opportunities there as well. So that's why we feel like we've turned that corner and that you'll see us begin growing in 2025 and certainly into 2026. Speaker 300:35:54Got it. Thanks, Doug. Operator00:35:55Sure. Thank you. And our next question comes from the line of Lee Yagoda from CJS Securities. Your question, please. Speaker 800:36:05Hi, good morning. So just starting with Intex. Rocky, can you break out the revenue that was added to the PPS segment in Q3? And then if you have any expectations for Q4? And then given that you've only owned it a little while, I assume the answer is probably not yet. Speaker 800:36:24But are there any early signs that existing customers are gearing up to award you guys new business because you own Intex now similar to the way that kind of evolved with Cook when you bought that? Speaker 500:36:36Yes, Lee. So I'm not going to get into the details around the specifics in the quarter for Intex. What I will tell you is we've said it's about $55,000,000 of annualized revenue. And so we owned it for a month in Q3 and we'll own it for 4 months in 4th and then over 3 months in 4th obviously. And then as we think about next year, we would expect that to be about the size of the business. Speaker 500:36:56Obviously, we would expect to grow it a bit. Finally, I would say, as we've said, it's kind of a high single to low double digit kind of EBITDA business. So if anyone's doing the modeling, that's the way to think about that business. Jaime, you want Speaker 400:37:09to talk about? Absolutely. Yes, Lee. So we're excited about the growth opportunities within Intex. We are seeing some nice opportunities pop up with our existing customer base and even beyond with some of the new customers out there as we look to leverage the Hillman mote and really integrate that business. Speaker 400:37:23So we are excited about growing that business next year, low double digits, and we feel good about the future of FinTechs with Hillman. Speaker 300:37:30We're just giving the revenue we're in store. We've Speaker 200:37:38done that with gloves and things over the years. And again, stack it high and watch it fly is our plan, but we will get that revved up probably mid year next year. And I'm excited about that because when you run into those you buy them and Intex while we love that team is very slim, had no service, no real ability to do that and we do that every day. Speaker 800:38:04Got it. And then one more for you Rocky. Just the $7,800,000 charge, I assume that hit your SG and A and assuming that was the only big add back, it looks like SG and A as a percent of sales would have been closer to 31% in Q3. How should we think about SG and A either as a percent of sales or in dollars in Q4? And then as we get into 2025 and start to integrate those 2 acquisitions, is there and how much is there leverage on that SG and A line in 2025? Speaker 500:38:36Yes. Clearly, there'll be some as we integrate. What I would tell you is, the Q4, we always have a little less leverage on our SG and A, as you know, because of volumes and the seasonality of the business. But so we'll probably be, I would say, a bit above 31% in the Q4. What we said is for the full year, we expect it to be around 30%. Speaker 500:38:54I think we'll still stick to that. Speaker 800:38:58And that's 30% adjusted, correct? Speaker 500:39:00Correct. That's right. Speaker 400:39:02Yes. Okay. Operator00:39:07Thank you. And our next question comes from the line of Chirag Patel from Jefferies. Your question please. Speaker 900:39:15Hi, good morning. Actually Steve here. That's all right. I do have a face for radio. So I have a couple of quick questions. Speaker 900:39:27So first, Jamie, I think you were talking I think it was you who was talking about renegotiating your container rates for next year. Just remind us how we should think about the timing differences sort of when you're able to pass that through? Is there a temporary impact on gross margin? Speaker 400:39:49Yes. So yes, that is correct. So we'll negotiate rates will go in effect as of May 1, 2025. We typically have 4 to 6 months depending on the contract and the timing at least for that to be able to hit the stacks up and the balance sheet rolls off. So any increases will really be nominal in the at the end or in the Q4 of 2025. Speaker 900:40:10Okay. And I think one of you said something about 47% or better kind of in 2025. Please correct me if I'm wrong, but just any puts and takes relative to kind of gross margin as we think about 2025? Speaker 500:40:24Yes. I think Steve as we think about our business, as we said on the call, we believe RDS returns to growth in 2025. And so that's a natural kind of barrier or floor to that rate because we see such good rates in that business. We've grown our gross margin and our EBITDA rate despite our largest business kind of being depressed over the last year or 2. And so as we see it returning that creates a natural floor to that number. Speaker 500:40:52I think over time as you see us winning categories, there'll be mix issues that could be positive or negative, but a lot of the categories that were likely to grow in the HPS business, they'll probably be slightly negative. Again, we're leaving a quarter at 48%, so we've got some room to start with. And I think, again, we create a natural floor with RDS growing that allows us to maintain that 47% type plus rate, not only in 2025%, but kind of for the foreseeable future. Speaker 900:41:21Okay, great. Appreciate it. Pass it on. Speaker 300:41:23Thank you. Thanks. Thank Operator00:41:26you. And our next question comes from the line of Brian McNamara from Canaccord Genuity. Your question please. Speaker 1000:41:34Hey, good morning guys. Thanks for taking the questions. Good morning, Brian. I guess I want to dig in a little more to the RDS and it's been weak for several quarters. Most of it's out of your control. Speaker 1000:41:44But I guess my question is, do you guys need to be there? And I guess I want to gauge your willingness to maybe move on from that asset if it doesn't significantly improve? Speaker 200:41:54Yes. I mean, first of all, we don't need to be there. I mean, our customers would love us with it or without it. I don't think there's any issue there on either side of that. What I've said before because of what's been out there is that this is a business that we will turn with new 3.5 investment and we'll have this thing in a place where it will be valuable to keep or valuable to sell. Speaker 200:42:25And I like having Brian the option because we have so many things we could do in addition to what we have planned if we did sell it. But again, it's not bad to hang on to a 72%, 73% gross margin, 32% EBITDA margin business that's growing. We're just in that period right now that we're transferring, transitioning from one technology to the next in an environment as you know that is existing home sales dependent. So we're going to get it going and then have options and no, but there's no negative here if we decided to there was better value for our shareholders to sell it versus to keep it. But we're going to put it in a position where it doesn't matter. Speaker 1000:43:19Great. Thanks for that. And then secondly, I'm just curious about how the Intex integration has gone so far relative to your expectations. I believe the Koch acquisition took about 90 days to complete. And then just any follow-up in terms of how the M and A pipeline is looking? Speaker 1000:43:34It looks like you had a few candidates the last time we spoke. Thanks. Speaker 400:43:39Hey, Brian. I'll take the Intex piece. Teams done a great job. Structurally, we have integrated that business. We have the teams operating with the different parts of our organization from sales, product operations. Speaker 400:43:51So we feel really good about that as quick as we did with Cook. The system side will be over the next couple of months, we'll finish that up, but we actually feel really good about where we are and where the alignment is in that business. So super excited about having Intex as part of Hillman. And I'll turn it over. To Yes. Speaker 200:44:07I mean, Brian, from what's exciting for me personally is that we've been able to get this going again. I will tell you that convincing an entrepreneur or a management team that they should be owned by Hillman is literally like shooting fish in a barrel. And so as Executive Chairman, I'm going to be helping JMA and Rocky and Hillman with that, super excited about that. As you know, with the debt markets right now, there's not a lot of private equity competition. Now flip side, when private equity comes back out, they're going to be obviously selling some things. Speaker 200:44:46So I think the prospects will be good as J and A said a couple of year makes great sense and I don't see any change to that. Speaker 1000:44:55Great. Thanks a lot guys. Best of luck. Operator00:44:58Thanks, Brian. Thanks, Brian. Take care. Thank you. And our next question comes from the line of Brian Butler from Stifel. Operator00:45:05Your question, please. Speaker 1000:45:07Hey, good morning. Thanks for taking my questions. Hi, Brian. Just the first one on the you talked about price was I think down 1%. When you think of the price cost spread, what does that trend look like in the Q3 and then I guess going into the Q4 and even 2025? Speaker 400:45:25Yes. I Speaker 500:45:25mean it's going to be a slight headwind, Brian, obviously, relative to where we were in the second, because of the rollout of the price giveback and pretty much we're at a good spot around the cost of our inventory now. There's not dramatic changes. What we would tell you is, yes, there will be in the first half of twenty twenty five, it will be a bit of a negative from price, unless we do something around pricing with our customers. And we would expect as we go into twenty twenty five that we could potentially see a little bit of commodity benefit. But as you think about things like freight, you think about things like rent as we renew facilities, you think about things like labor, none of those costs are going down in our business. Speaker 500:46:07So we have to think strategically about that, how we offset those costs. And then to the extent that we can't, we have to go to market with price. Historically, that's been every 3 years, we go to market with about 3% price. And we'll have to think about and are thinking strategically now about when and how we take price to market in the future. Speaker 1000:46:28Okay. And then a follow-up, just on the RBS segment, second quarter you talked about some opportunities post the Red Box liquidation. Speaker 500:46:38Do you have Speaker 1000:46:38an update there maybe on what those opportunities look like now if they've changed Speaker 500:46:43and maybe how they play out over the next couple of quarters? Speaker 200:46:47Yes. I think we've started we've secured 2 contracts. 1 has already started. The second one will start in this quarter and it's essentially us servicing machines for other kiosk operators. At this point, Brian, it should be good for us in 2025. Speaker 200:47:10Whether we expanded outside of that or not is really dependent on what we decide to do taking care of and how big the auto side of that is. So that's the juggling act right now. But no, both are signed, both are off and running and both are profitable about the same fleet margin rate and EBITDA rate that we have in our business. So yes, it's good right now. Both are on their way. Speaker 1000:47:42Okay, great. Thanks for taking the questions. Sure. Speaker 500:47:44Thanks, Bryce. Operator00:47:45Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Mr. Cahill for any further remarks. Speaker 200:48:03Thanks, gentlemen. Thank you everybody for joining us this morning. We look forward to updating you on our progress early next year. Operator00:48:13Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallHillman Solutions Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Hillman Solutions Earnings HeadlinesWilliam Blair Has Pessimistic Outlook of HLMN Q2 EarningsMay 2, 2025 | americanbankingnews.comHillman Solutions Corp. (NASDAQ:HLMN) Q1 2025 Earnings Call TranscriptMay 1, 2025 | msn.comThink NVDA’s run was epic? You ain’t seen nothin’ yetAsk most investors and they’ll probably tell you Nvidia is the undisputed AI stock of the decade. In 2023, it surged 239%. And in 2024, it soared another 171% on the year… But what if I told you there was a way to target those types of “peak Nvidia” profit opportunities in 24 hours or less?May 7, 2025 | Timothy Sykes (Ad)The Hillman Group: Hillman Reports First Quarter 2025 ResultsApril 30, 2025 | finanznachrichten.deHillman Solutions Corp (HLMN) Q1 2025 Earnings Call Highlights: Strong Sales Growth Amid Tariff ...April 30, 2025 | gurufocus.comHillman (NASDAQ:HLMN) Misses Q1 Revenue EstimatesApril 29, 2025 | msn.comSee More Hillman Solutions Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Hillman Solutions? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Hillman Solutions and other key companies, straight to your email. Email Address About Hillman SolutionsFounded 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.View Hillman Solutions ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Disney Stock Jumps on Earnings—Is the Magic Sustainable?Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release? 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There are 11 speakers on the call. Operator00:00:00Good morning, and welcome to the Third Quarter 20 24 Results Presentation for Hillman Solutions Corp. My name is Jonathan, and 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. Operator00:00:32Ir. Hillmangroup.com. I would now like to turn the call over to Michael Koehler with Hillman. Speaker 100:00:39Thank you, Jonathan. Good morning, everyone, and thank you for joining us. I am Michael Koehler, Vice President of Investor Relations and Treasury. Joining me on today's call are Doug Cahill, our Chairman, President and Chief Executive Officer John Michael Adanalffy, our Chief Operating Officer and Rocky Craft, our Chief Financial Officer. As a reminder, we announced in August that effective January 1, 2025, Doug will step into the Executive Chairman role and John Michael or JMA as we call him will step into the CEO role. Speaker 100:01:11Before 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. In addition, on today's call, we will refer to certain non GAAP financial measures. Speaker 100:01:57Information regarding our use of and reconciliations of these measures to our GAAP results are available in our earnings call slide presentation. With that, Doug will begin today's call with some recent highlights, then he will provide some market commentary, touch on our updated guidance and hit on our Q3 results. J. M. A. Speaker 100:02:17Will then hit on the value of our note, our acquisition of Intex and our operations. Rocky will then give a more detailed walk through our financials and updated guidance before turning the call back over to Doug for some closing comments. We will then open up the call for your questions. It's now my pleasure to turn the call over to our Chairman, President and CEO, Doug Cahill. Doug? Speaker 200:02:38Thanks, Michael. Good morning, everyone. Before we get too far into the call today, I wanted to take a moment and recognize the Hillman team for actually accomplishing something that we've never done before in our history. On October 1, we won the 2024 Divisional Vendor Partner of the Year in hardlines at Lowe's. And 8 days later, we won the 2024 Partner of the Year in hardware at Home Depot. Speaker 200:03:06Our Lowe's team led by Justin Fox and our Home Depot team led by Brad Helbing do an outstanding job taking care of our 2 biggest customers. You guys, your teams have been doing and continue to do a fantastic job working with these 2 world class retailers. For 60 years, the mindset at Hillman has always been nothing happens until you sell something and I'm happy to report it's alive and well today. Being recognized by our 2 biggest customers in the same year is not possible without this mindset. There are a lot of folks to thank like our customer service and back office support teams as well as our logistics and operations teams moving product across the global network. Speaker 200:03:51But I think I can speak for Justin, Brad and the entire team and say the most valuable players at Hillman are the dedicated warriors in the field taking care of the shells at Home Depot, Lowe's and all of our customers each and every day. We're humbled by the recognition and we strive to ensure all of our customers are well taken care of by our team. Again, my hats off to the Hillman team, you guys are amazing. As we look at 2025 and beyond, this company is in a great position. We believe we're approaching an actual inflection point where the macro will start to benefit both Hillman and our retail partners. Speaker 200:04:33Our retailers aren't predicting when existing home sales start to turn positive, but they're convinced that when it happens, it's going to be a historic run, not for a year or 2, but closer to 3 to 5 years. Driving this confidence are a few factors. Let's break it down. Number 1, lower rates are likely on their way and it will make it cheaper for existing homeowners to tap their home equity to fund home improvement projects. Homeowners in the U. Speaker 200:05:04S. Are sitting on a record $35,000,000,000,000 of home equity, a number that has increased 81% since the end of 2019. Additionally, lower rates should drive an increase in existing home sales, down from over 6,000,000 homes sold in the U. S. In 2021. Speaker 200:05:272024 is projected to be at a 30 year low of 3,800,000 homes sold. We believe lower rates will start to relieve this pent up demand and existing home sales will improve next year. Number 2, the age of existing homes in the U. S. 48% of homes are at least 45 years old, which includes over 24,000,000 homes that are expected to reach their prime remodeling age in the next 3 years. Speaker 200:05:57We believe this will drive consistent demand for remodeling and renovation projects for years to come. Number 3, the lack of housing supply in the U. S. With roughly 4,500,000 home shortage in the U. S. Speaker 200:06:11And no near term solution with roughly 1,500,000 homes being built a year, home values are expected to remain strong and homeowners will continue to invest in their homes. Meanwhile, we know the macro has not been a tailwind the last few years. But what I love about this business model of ours is that even with unit volume being a headwind for our industry, our trailing 12 month adjusted EBITDA is up 18% versus the year ago period. Because of the great position we're in with our customers, we believe we will grow both top line and bottom line in 2025. But for now, let's go back to 2024. Speaker 200:06:55During the quarter, we acquired Intex, a leading provider of cleaning rags, cloths and textiles. Most every home improvement job again ends with cleaning. So this is another great product category that fits perfectly in our portfolio and one that we're excited to be in. Because of the additional contributions from Intex and our October results, we're increasing our 2024 full top line full year top line and adjusted EBITDA guidance. Our new net sales guidance range is $1,455,000,000 to $1,485,000,000 and has a midpoint of 1,470,000,000 dollars The new midpoint is an increase of 7.5 percent compared to Speaker 300:07:42$200,000,000,000 Speaker 200:07:45for the year marked in a 2% Speaker 300:07:51of our operating cash and 14% January stage over 2023. Our net free cash flow guide of $100,000,000 to $115,000,000 Speaker 200:07:58or $410,000,000 is $5,000,000 lower than our previous guide with no change to the bottom end. Rocky will provide more details on our 2024 guidance and our CapEx investments shortly. Turning to the quarter. Net sales in the Q3 of 2024 totaled $393,300,000 which were down 1.4 compared to the prior year quarter. Driving our top line were sales from Cook and Intex acquisitions, which added about 4 points, which were offset by 2 main factors. Speaker 200:08:32Number 1 is the overall market volumes, which were down about 4% for the quarter. Number 2 was a 1 point headwind from price, which was in line with our expectations, coupled with a small headwind from FX. For the quarter, our adjusted EBITDA increased 9 percent to $72,600,000 compared to $66,800,000 during the Q3 of 2023. Our adjusted EBITDA margins improved to a healthy 18.4%. Adjusted gross margins for the quarter totaled 48.2%, marking a 400 basis point improvement over 44.2% during the year ago quarter and declined sequentially from 48.7% during the Q2 of 2024. Speaker 200:09:22We believe we've structurally improved our gross margin profile and we expect it to be above 47% for the foreseeable future. We have managed to maintain these healthy margins by improving efficiencies, selling a better mix of products similar to what we've seen over the past few quarters. For our top line results, hardware and protective solutions or HPS, which is our biggest segment, net sales increased 0.1% over the comparable period. While our adjusted EBITDA increased 19.8%, Our results were driven by contributions from Cook and Intex, partially offset by softer market volumes and price. Net sales in Robotics and Digital or RDS were down 5.3% versus the year ago quarter. Speaker 200:10:13This compares sequentially to 8% decline between Q2 of 2024 and Q2 of 2023. The trend has improved because the green shoots in Miniquis 3.5 and our new kiosk service contracts. Adjusted gross margins and adjusted EBITDA margins remain healthy at 72.3% and 32.2% respectively, both improved sequentially. As of today, we have 900 Minutekeen 3.5 machines in the field and we believe that we will have over 1200 in stores by year end. The deployment plan has accelerated throughout 2024 and we expect to continue to ramp in 2025. Speaker 200:11:01We know RDS is a great business and we're laser focused on getting RDS back to growth beginning in 2025. Now turning to Canada. Net sales in our Canadian business were down 6.5% compared to the prior year quarter. The quarter and the rest of the year are helped by contributions from new business rollouts as we continue to gain market share north of the border. These wins were offset by a very sluggish economy in Canada. Speaker 200:11:31For the year, we expect to maintain 10% adjusted EBITDA margins in Canada. And like our business in the U. S, we have this business in a strong position for when the economy turns and a great team in Canada. Before I turn it over to JMA, let me sum up 2024. As we told you in November last year, even if volumes were down in 2024, our EBITDA would be up and this year has played out as we anticipated. Speaker 200:12:03We also told you that we expect to turn the tuck in acquisition machine on and we've added Cook and Intex this year. The contributions from these businesses have moved our full year top line expectations to be roughly flat versus last year and our full year EBITDA will grow about 14% versus 2023. We've improved our gross margin rate to 48% and our EBITDA rate to 17%, and we believe we've structurally improved the profitability of our business. We continue to strengthen relationships with our customers and reinforce our competitive moat illustrated by our vendor of the year wins at Depot and Lowe's. We feel great about where we are with our customers right now and it's fun to be back on offense. Speaker 200:12:53We're ready to grow alongside our customers when the macro starts to shift and we'll be ready for what our retailers will believe that what our retailers believe will be a historic run over the next several years. With that, I'll turn it over to JMA. As we announced in August, JMA will take the reins from me in January of 2025 as only the 6th CEO in the 60 year history of Hillman. I love this company because of the people we get to work with and the customers we get to take care of and I'm very proud of this transition. JMA, Rocky and I have worked together every day for the past 5 years. Speaker 200:13:33It's been an honor and an absolute blast. JMA is doing a great Speaker 300:13:37job and as Executive Chairman, I will support JMA in every way that I can. JMA, take it away. Speaker 400:13:49Daniel will hit on how we win with our vote, the M and A landscape and operations before turning the call over to Rocky. Let me give you a quick refresher on the 3 differentiators of our moat. Number 1, pick, pack and ship directly to our customers. Number 2, 1100 field sales and service warriors and number 3, our 60 years of experience. Next, I will share a few real life examples how each part of our moat creates value for our customers. Speaker 400:14:171st, by shipping 75% of our products direct to store, we take care of our customer when they need it most. For example, during the recent hurricanes that impacted the Southeast, we were able to support our customers before and after the storms with minimal impact to service levels. 2nd, our 1100 sales and service warriors not only take care of our normal customer needs, but also enable us to flawlessly execute in store resets across the country. For example, one of our top five customers is investing alongside of us for a multi year nationwide reset of the fastener aisle. This is an entire reset of the 40 plus foot run of fasteners, which includes thousands of Hillman SKUs and complex merchandising. Speaker 400:15:03We're ripping everything out, going all new, which takes well over 100 labor hours to complete and is one Speaker 500:15:09of the most important aisles of Speaker 400:15:11the store. And so far, the results are encouraging. 3rd, with 60 years of experience, we understand the products, categories and markets. For example, we recently launched a new range of high performance patented Power Pro Structural Screws. These new products are being rolled out in the traditional hardware channel and will contribute to growth in 2025. Speaker 400:15:34Now that you understand the 3 pillars and how they add value for our customers, let me now give you some examples of what the Mote does for helmet. Vendor of the year at Lowe's and the Home Depot, adjusted gross margin of 48%, adjusted EBITDA margins of 17%, double digit EBITDA growth for the year even in a challenging macro environment, generated meaningful cash flow, investing for long term growth with our customers and we are executing low risk accretive acquisitions where our customers want us to grow. Look at what happened with Cook. We secured a meaningful piece of new business shortly after the acquisition that will increase that business by 20% over time. Our customers trust us and have confidence that Hillman can handle the complexity of a national rollout of new products and resets. Speaker 400:16:27This moat is critical to growing both organically and through M and A. When we offer new categories, it allows our teams to bring more value to our customers and do so efficiently. As Doug mentioned, in August, we closed on the acquisition of Intex, a leading supplier of cleaning rags, cloths and textiles. We love Intex because it expands our product offering to new aisles and new customers. And importantly, we can leverage our moat to grow this business in the future as we take advantage of the cross selling opportunities with both new and existing customers. Speaker 400:17:01For nearly 20 years, Intex has developed patented and innovative cleaning rags, cloths and textiles for use in home improvement, painting, cleaning and maintenance projects, as well as janitorial, auto and marine care. Intex has great products, an excellent team and great customers, many of which we share. When you combine that with the unique strengths Hillman brings to our customers every day like in store service, direct ship capabilities and 25 plus years of retailer relationships at every level, you get accretive acquisitions that should gain market share for years to come. Intex marks our 2nd acquisition of the year with Coke and Rope and Chain being our first. Our M and A pipeline is healthy as we continue to see companies like Coke and Intex that would be great additions to the Hillman family. Speaker 400:17:51Koch has been successfully integrated into our operations and we are working to fully integrate Intex. I'm proud of how Hillman has welcomed Koch and Intex to the Hillman family. With the team on board and aligned, we are now ready and focused on growth opportunities. We would love to do at least 2 similar acquisitions every year. Now let me touch on operations. Speaker 400:18:13Our global operations team continues to do a fantastic job and add value throughout the supply chain. We ship products on time and in full to our customers with industry leading fill rates. Our North American distribution network continues to run efficiently. We have never seen our team operating as well and believe there's still room for improvement. We continue to have great relationships with our suppliers around the globe. Speaker 400:18:39About 1 third of our products are currently sourced from North America, 1 third are sourced from Taiwan and the rest of the world and 1 third are sourced from China, which is down approximately 50% from less than 5 years ago. Further, about a dozen of our major long term suppliers are in the process of expanding operations outside of China. We have healthy relationship with our reliable long term suppliers and we believe as do our customers do this strategy gives us flexibility and options when it comes to tariffs and geopolitical tensions. Let me now give you a quick update on ocean freight. The spot market for ocean containers has been volatile, but this does not have a material impact on our business because we continue to ship approximately 90% of our containers under our 12 month contracts, which were put in place on May 1, 2024. Speaker 400:19:29That said, we will begin to negotiate ocean container contracts in the Q1 of next year ahead of the May 1, 2025 renewal date. Current industry projections are for higher rates and if true, we would plan to offset and or price for this increase. Our team is controlling the controllables, efficiently running our operations and taking care of our customers. We are and we will be ready for when the market improves. With that, let me turn it over to Rocky to talk financials. Speaker 400:19:57Rodney? Speaker 500:19:58Thanks, J. M. A. Let's dive right in. Our net sales for the Q3 of 2024 totaled $393,300,000 decrease of 1.4% versus the prior year quarter. Speaker 500:20:113rd quarter adjusted gross margin increased by 400 basis points to 48.2% versus the prior year quarter of 44.2%. Sequentially, adjusted gross margins were down slightly from 48.7% or were in line with our expectations and what we said on last quarter's call. We expect our adjusted gross margins to come down during the Q4 as a result of Intech's lower margin products, but will remain above 47% this year and next as we believe we have structurally improved our gross margin profile. Adjusted SG and A as a percentage of sales increased to 29.9% during the quarter from 27.5% from the year ago quarter, which was also in line with our expectations. Driving the increase was our standard employee bonus expense, which was the result of a strong bottom line during the year to date period when compared to 2023. Speaker 500:21:05Adjusted EBITDA in the 3rd quarter was 72,600,000 which grew 9% versus the year ago quarter. Our adjusted EBITDA to net sales ratio during the quarter was 18.4%, which compares favorably to 16.7% a year ago. Contributing to our healthy adjusted EBITDA margin was our positive mix of price cost and efficient operations. Now let me turn to our cash flows. For the 39 weeks ended September 28, 2024, operating activities generated $142,200,000 of cash as compared to $171,500,000 in the year ago period. Speaker 500:21:45Remember, during 2023, we had outsized working capital benefit as we were able to reduce our net inventory by over $100,000,000 throughout the year as we returned to normal inventory levels. Free cash flow for the 2024 year to date period totaled $76,000,000 and totaled $39,600,000 for the quarter. Capital expenditures totaled $64,200,000 for the 1st 9 months of 2024. This compared to $52,100,000 in the prior year period. For 2024, we will invest between $80,000,000 $85,000,000 of CapEx and anticipate 2025 capital spend to be slightly above our 2024 number as we invest in RDS and other growth initiatives like racks for resets in our hardware business. Speaker 500:22:33We continue to strategically invest in our high margin RDS business. So let's be clear, this is not a build it and they will come strategy with Minikey 3.5. Our service teams are retrofitting existing 3.0 machines in the stores and we will only build new machines where we see a return on our invested capital or new store growth opportunities. As Doug mentioned, our 900 plus MinuteKey 3.5 machines are performing well and where there is a return on our investment we will ramp up our capital spend to deliver more machines during 2025 with our strategic RDS customers. Now to the balance sheet. Speaker 500:23:12We ended the Q3 of 2024 with $698,700,000 of total net debt outstanding. We were able to reduce our debt during the quarter while funding the Intex acquisition from our free cash flow. We have not had a net debt figure below $700,000,000 since 2013 and that was when our total annual sales were just $700,000,000 and our leverage ratio was nearly 5 times net debt to adjusted EBITDA. At the end of the Q3 of 2024, our net debt to trailing 12 month adjusted EBITDA ratio was 2.8 times compared to 3.3 times at the end of 2023 and 3.7 times just a year ago. Looking forward, we maintain our expectation that we will end 2024 around 2.7 times net leverage. Speaker 500:24:00Our long term adjusted EBITDA to net debt leverage ratio target is to be at or below 2.5 times. This will give us the flexibility to grow via M and A and allows us to be strategic and opportunistic when it comes to using our balance sheet to add stockholder value. As Doug mentioned earlier, we have a few changes to our 2024 guidance. We are increasing our net sales to be between $1,455,000,000 to $1,485,000,000 with a midpoint of $1,470,000,000 Driving the increase are sales contributions from Intex partially offset by the market. Our new midpoint makes the following full year assumptions, a 1% headwind from price, a 2% lift from new business wins, a 4% lift from Cook and Intex and market volumes being down about 5%. Speaker 500:24:54Altogether, our new net sales midpoint guide is down less than 0.5% from 2023. Similarly, we are increasing our 2024 adjusted EBITDA guidance. Based on our year to date and October results, our expectations for our 2024 full year adjusted EBITDA is now approximately $250,000,000 which is a 14% increase from 2023. And lastly, we are adjusting down the top end of our 2024 free cash flow guide as a result of our anticipated CapEx spend, which is between $80,000,000 $85,000,000 for the year. The new range for our 2024 free cash flow is $100,000,000 to 115,000,000 dollars and has a midpoint of $107,500,000 versus $110,000,000 previously. Speaker 500:25:40More information on the assumptions that have driven our guidance are available in our earnings call presentation. A few weeks ago, one of our customers True Value filed for Chapter 11 at the corporate level. The hardware co op made the filing while entering into an agreement to be sold to another hardware co op Do It Best. We have a great relationship with Do It Best and they have been a Hillman customer for over 30 years. Because of its co op nature, True Value serves as a wholesaler for independently owned hardware stores throughout the U. Speaker 500:26:10S. They are not hardware store operators. Filament will continue taking care of its independent hardware store customers that fly the True Value banner, shipping products directly to stores, while having its field and service folks continue to write orders and manage the shelves. We believe the long term health of these independently owned hardware stores remain strong and True Value's Chapter 11 and potential sales to do it best should not have a material impact on our long term business. That said, in the shorter term across all our business segments, we have about $8,800,000 of receivables at risk from true value net of discounts and allowances. Speaker 500:26:49Based on what we've learned so far since the filing, we are not assuming we will recover a material amount of these receivables. Accordingly, our Q3 results will reflect a Accordingly, our Q3 results will reflect a $7,800,000 charge for the balance of receivables we do not expect to collect. Due to the one time nature of this event, this has been backed out of our adjusted non GAAP financials. Hillman does business with 12,000 independently owned hardware stores throughout the U. S. Speaker 500:27:14And Canada, which generate about $215,000,000 or nearly 20% of our revenue. ACE is by far the market leader in this space, making up about 2 thirds of the market along with 13% of our revenues. ACE continues to grow revenues, open new stores and be financially sound. Your local hardware store is expected continues to perform during this cycle as they focus and cater to the repair and maintenance categories and differentiate themselves with their customer service. Last November, we said that even if the top line is down in 2024, our adjusted EBITDA will increase and that is exactly what we have seen so far this year, up 17.1% during the 1st 9 months of the year. Speaker 500:27:58Our focus remains controlling the controllables and we believe we have done a great job doing that. Historically, our business has seen organic growth of 6% per year and high single to low double digit organic adjusted EBITDA growth before M and A. Assuming we can get some help from the macro, we think returning to our historic growth algorithm is achievable for 2025. Longer term, now that we are active on the M and A front, top line growth of high single to low teens is realistic and should yield adjusted EBITDA growth in the low to mid teens assuming a healthy macro environment. With that, let me turn it back to Doug. Speaker 200:28:37Thanks, Rocky. Before we get to the Q and A session, I want to express our condolences to the families who have lost loved ones and have seen their lives just turned upside down in the wake of Hurricane Helene and Hurricane Milton, just awful. No surprise, our Hillman team has stepped up during this time of need by working long hours, expediting deliveries and servicing our customers in order to ensure those affected have the products they need to start their rebuilding process. Additionally, Hillman as well as all of our retailers have donated products and cleaning supplies to assist with the cleanup efforts. Helping those in need is deeply ingrained in the Hillman spirit. Speaker 200:29:21We're proud of the way our employees have showed up for their teams and our customers. Without these Hillman warriors, we would not be where we are today and I want to express my gratitude for their loyalty, their teamwork and for always taking great care of our customers. As we look to the future, we firmly believe taking a disciplined approach to strengthening our moat, while seeking accretive growth opportunities will drive long term shareholder value for years to come. And with what we can see on the horizon, we're very excited about the future. With that, let me turn it back to Jonathan, the operator for the Q and A portion. Speaker 200:29:59Jonathan, I'm not sure if you have a face for radio, but you definitely have Operator00:30:03a voice. Let's open it up for questions. Thank And our first question for today comes from the line of Matthew Bouvet from Barclays. Your question please. Speaker 600:30:31Good morning. You have Anika Delacchi on for Matt today. Thanks for taking my questions. Good morning. First off, I was wondering on foot traffic and demand trends. Speaker 600:30:39I'm wondering if you can just parse out how this trended in October relative to September and if you guys have any early thoughts on R and R growth expectations for 2025? Thanks. Yes. Speaker 200:30:49I mean, yes, right now, we're seeing kind of same thing, right? The volume is soft and margin continues strong. Mix has been good. I think everybody is rooting for this thing to return. But when you think about our business, there's going to be a lot of retailers focused on holidays and then we'll really get started in 2025. Speaker 200:31:14But nothing's really changed. We continue to see our share grow slightly with some wins. But again, market has stayed about the same. As we look at 2025, it's hard to say. The macro, nobody knows. Speaker 200:31:31I think interest rates declining will definitely help. Our retailers are bullish. But as I said, they really are not predicting when, but they know that as that starts to go, there's pent up demand, existing home sales and a lot of equity in homes that can be used for expansions and then people definitely want to move and that's good for our business. Speaker 600:31:57Super helpful. Thank you. And then I guess on my second question, I know you guys in your prepared remarks mentioned that 1 third is sourced from Taiwan. I think it was 1 third from China, but correct me if I'm wrong there. If you can just go into more detail, if we were to see an increase in tariffs, how you guys would be equipped to mitigate the impact that this could have on your cost structure? Speaker 600:32:17Any details would be helpful. Thanks. Speaker 200:32:19Yes. So first of all, I'll turn it to JMA, but 1 third North America, 1 third Taiwan and then rest of really the Asia like if you think Vietnam, Indonesia, you think of all the different places. So it's a third North America, a third Taiwan and all other and then a third China. But Jay may I want you to touch on that? Speaker 400:32:41Yes. So to build on that point there, I mean the 3rd China, I mean when you think about tariffs and where you're going after with your question, I mean, we look at it just like we handled tariffs last time they came through. We'll price dollar for dollar. We work with our retailers to pass that cost on, and we'll be ready in the event that is what happens. Speaker 600:33:01Great. Thanks guys and good luck. Speaker 300:33:03Thank you. Thank you. Operator00:33:05Thank you. And our next question comes from the line of Dave Manthey from Baird. Your question please. Speaker 700:33:16Hi, good morning everyone. First off, Intex, is that could you talk about who that's being carried by in terms of your partners currently? And is there any limitation where you can sell it? And you mentioned the gross margins are lower there. Is that structural? Speaker 700:33:32Is there room for improvement? Thanks. Speaker 400:33:35Hey, great. Good morning, Dave. For the Intech businesses, they sell to really a lot of the same customers we do, not nearly as deep in the traditional hardware channel where we're strong. But you think about Depot, Lowe's, Walmart, all the major customers that are out there that we serve each and every day they sell into and some others like they are in the paint and auto channels where we don't serve today. So we're really excited about the growth opportunities and expansion. Speaker 400:33:58There are no limitations in where we take what products we have. We've got some good innovative products with IP around them. So we're really excited about Speaker 500:34:06the future and where we're going. Yes, I guess, hey, David, it's Rocky. On your second question, I think the answer is yes. They're structurally lower at Intex. We will improve those over time as you think about areas like freight and overseas and things like that, where we just have a lot more volume. Speaker 500:34:22So we'll improve their margins, but they will be structurally lower than fleet. Speaker 700:34:28Okay. Thanks for that. And then on RDS, as we move into 2025, if I heard you right, it sounded like MinuteKey 3.5 is might kind of tail off and ReSharp wasn't mentioned at all. What might move the needle that would lead to growth in RDS next year? Speaker 200:34:49Yes. So 35 is not tailing off. It's just really starting, Dave. That's basically taking the existing MiniKey 3.0 and adding RFID, auto, both transponder and smart as well as endless aisle any key you want. So we've got 900 out there. Speaker 200:35:09We've got great demand coming from our customers who want it because for them it's just all upside. We'll have 1200 at the end of the year and we will both have conversions of existing 3.0 machines in 2025 as well as new placement in stores that don't have them today by our major retailers who now want machines in stores. And I think you'll see over time some pricing opportunities there as well. So that's why we feel like we've turned that corner and that you'll see us begin growing in 2025 and certainly into 2026. Speaker 300:35:54Got it. Thanks, Doug. Operator00:35:55Sure. Thank you. And our next question comes from the line of Lee Yagoda from CJS Securities. Your question, please. Speaker 800:36:05Hi, good morning. So just starting with Intex. Rocky, can you break out the revenue that was added to the PPS segment in Q3? And then if you have any expectations for Q4? And then given that you've only owned it a little while, I assume the answer is probably not yet. Speaker 800:36:24But are there any early signs that existing customers are gearing up to award you guys new business because you own Intex now similar to the way that kind of evolved with Cook when you bought that? Speaker 500:36:36Yes, Lee. So I'm not going to get into the details around the specifics in the quarter for Intex. What I will tell you is we've said it's about $55,000,000 of annualized revenue. And so we owned it for a month in Q3 and we'll own it for 4 months in 4th and then over 3 months in 4th obviously. And then as we think about next year, we would expect that to be about the size of the business. Speaker 500:36:56Obviously, we would expect to grow it a bit. Finally, I would say, as we've said, it's kind of a high single to low double digit kind of EBITDA business. So if anyone's doing the modeling, that's the way to think about that business. Jaime, you want Speaker 400:37:09to talk about? Absolutely. Yes, Lee. So we're excited about the growth opportunities within Intex. We are seeing some nice opportunities pop up with our existing customer base and even beyond with some of the new customers out there as we look to leverage the Hillman mote and really integrate that business. Speaker 400:37:23So we are excited about growing that business next year, low double digits, and we feel good about the future of FinTechs with Hillman. Speaker 300:37:30We're just giving the revenue we're in store. We've Speaker 200:37:38done that with gloves and things over the years. And again, stack it high and watch it fly is our plan, but we will get that revved up probably mid year next year. And I'm excited about that because when you run into those you buy them and Intex while we love that team is very slim, had no service, no real ability to do that and we do that every day. Speaker 800:38:04Got it. And then one more for you Rocky. Just the $7,800,000 charge, I assume that hit your SG and A and assuming that was the only big add back, it looks like SG and A as a percent of sales would have been closer to 31% in Q3. How should we think about SG and A either as a percent of sales or in dollars in Q4? And then as we get into 2025 and start to integrate those 2 acquisitions, is there and how much is there leverage on that SG and A line in 2025? Speaker 500:38:36Yes. Clearly, there'll be some as we integrate. What I would tell you is, the Q4, we always have a little less leverage on our SG and A, as you know, because of volumes and the seasonality of the business. But so we'll probably be, I would say, a bit above 31% in the Q4. What we said is for the full year, we expect it to be around 30%. Speaker 500:38:54I think we'll still stick to that. Speaker 800:38:58And that's 30% adjusted, correct? Speaker 500:39:00Correct. That's right. Speaker 400:39:02Yes. Okay. Operator00:39:07Thank you. And our next question comes from the line of Chirag Patel from Jefferies. Your question please. Speaker 900:39:15Hi, good morning. Actually Steve here. That's all right. I do have a face for radio. So I have a couple of quick questions. Speaker 900:39:27So first, Jamie, I think you were talking I think it was you who was talking about renegotiating your container rates for next year. Just remind us how we should think about the timing differences sort of when you're able to pass that through? Is there a temporary impact on gross margin? Speaker 400:39:49Yes. So yes, that is correct. So we'll negotiate rates will go in effect as of May 1, 2025. We typically have 4 to 6 months depending on the contract and the timing at least for that to be able to hit the stacks up and the balance sheet rolls off. So any increases will really be nominal in the at the end or in the Q4 of 2025. Speaker 900:40:10Okay. And I think one of you said something about 47% or better kind of in 2025. Please correct me if I'm wrong, but just any puts and takes relative to kind of gross margin as we think about 2025? Speaker 500:40:24Yes. I think Steve as we think about our business, as we said on the call, we believe RDS returns to growth in 2025. And so that's a natural kind of barrier or floor to that rate because we see such good rates in that business. We've grown our gross margin and our EBITDA rate despite our largest business kind of being depressed over the last year or 2. And so as we see it returning that creates a natural floor to that number. Speaker 500:40:52I think over time as you see us winning categories, there'll be mix issues that could be positive or negative, but a lot of the categories that were likely to grow in the HPS business, they'll probably be slightly negative. Again, we're leaving a quarter at 48%, so we've got some room to start with. And I think, again, we create a natural floor with RDS growing that allows us to maintain that 47% type plus rate, not only in 2025%, but kind of for the foreseeable future. Speaker 900:41:21Okay, great. Appreciate it. Pass it on. Speaker 300:41:23Thank you. Thanks. Thank Operator00:41:26you. And our next question comes from the line of Brian McNamara from Canaccord Genuity. Your question please. Speaker 1000:41:34Hey, good morning guys. Thanks for taking the questions. Good morning, Brian. I guess I want to dig in a little more to the RDS and it's been weak for several quarters. Most of it's out of your control. Speaker 1000:41:44But I guess my question is, do you guys need to be there? And I guess I want to gauge your willingness to maybe move on from that asset if it doesn't significantly improve? Speaker 200:41:54Yes. I mean, first of all, we don't need to be there. I mean, our customers would love us with it or without it. I don't think there's any issue there on either side of that. What I've said before because of what's been out there is that this is a business that we will turn with new 3.5 investment and we'll have this thing in a place where it will be valuable to keep or valuable to sell. Speaker 200:42:25And I like having Brian the option because we have so many things we could do in addition to what we have planned if we did sell it. But again, it's not bad to hang on to a 72%, 73% gross margin, 32% EBITDA margin business that's growing. We're just in that period right now that we're transferring, transitioning from one technology to the next in an environment as you know that is existing home sales dependent. So we're going to get it going and then have options and no, but there's no negative here if we decided to there was better value for our shareholders to sell it versus to keep it. But we're going to put it in a position where it doesn't matter. Speaker 1000:43:19Great. Thanks for that. And then secondly, I'm just curious about how the Intex integration has gone so far relative to your expectations. I believe the Koch acquisition took about 90 days to complete. And then just any follow-up in terms of how the M and A pipeline is looking? Speaker 1000:43:34It looks like you had a few candidates the last time we spoke. Thanks. Speaker 400:43:39Hey, Brian. I'll take the Intex piece. Teams done a great job. Structurally, we have integrated that business. We have the teams operating with the different parts of our organization from sales, product operations. Speaker 400:43:51So we feel really good about that as quick as we did with Cook. The system side will be over the next couple of months, we'll finish that up, but we actually feel really good about where we are and where the alignment is in that business. So super excited about having Intex as part of Hillman. And I'll turn it over. To Yes. Speaker 200:44:07I mean, Brian, from what's exciting for me personally is that we've been able to get this going again. I will tell you that convincing an entrepreneur or a management team that they should be owned by Hillman is literally like shooting fish in a barrel. And so as Executive Chairman, I'm going to be helping JMA and Rocky and Hillman with that, super excited about that. As you know, with the debt markets right now, there's not a lot of private equity competition. Now flip side, when private equity comes back out, they're going to be obviously selling some things. Speaker 200:44:46So I think the prospects will be good as J and A said a couple of year makes great sense and I don't see any change to that. Speaker 1000:44:55Great. Thanks a lot guys. Best of luck. Operator00:44:58Thanks, Brian. Thanks, Brian. Take care. Thank you. And our next question comes from the line of Brian Butler from Stifel. Operator00:45:05Your question, please. Speaker 1000:45:07Hey, good morning. Thanks for taking my questions. Hi, Brian. Just the first one on the you talked about price was I think down 1%. When you think of the price cost spread, what does that trend look like in the Q3 and then I guess going into the Q4 and even 2025? Speaker 400:45:25Yes. I Speaker 500:45:25mean it's going to be a slight headwind, Brian, obviously, relative to where we were in the second, because of the rollout of the price giveback and pretty much we're at a good spot around the cost of our inventory now. There's not dramatic changes. What we would tell you is, yes, there will be in the first half of twenty twenty five, it will be a bit of a negative from price, unless we do something around pricing with our customers. And we would expect as we go into twenty twenty five that we could potentially see a little bit of commodity benefit. But as you think about things like freight, you think about things like rent as we renew facilities, you think about things like labor, none of those costs are going down in our business. Speaker 500:46:07So we have to think strategically about that, how we offset those costs. And then to the extent that we can't, we have to go to market with price. Historically, that's been every 3 years, we go to market with about 3% price. And we'll have to think about and are thinking strategically now about when and how we take price to market in the future. Speaker 1000:46:28Okay. And then a follow-up, just on the RBS segment, second quarter you talked about some opportunities post the Red Box liquidation. Speaker 500:46:38Do you have Speaker 1000:46:38an update there maybe on what those opportunities look like now if they've changed Speaker 500:46:43and maybe how they play out over the next couple of quarters? Speaker 200:46:47Yes. I think we've started we've secured 2 contracts. 1 has already started. The second one will start in this quarter and it's essentially us servicing machines for other kiosk operators. At this point, Brian, it should be good for us in 2025. Speaker 200:47:10Whether we expanded outside of that or not is really dependent on what we decide to do taking care of and how big the auto side of that is. So that's the juggling act right now. But no, both are signed, both are off and running and both are profitable about the same fleet margin rate and EBITDA rate that we have in our business. So yes, it's good right now. Both are on their way. Speaker 1000:47:42Okay, great. Thanks for taking the questions. Sure. Speaker 500:47:44Thanks, Bryce. Operator00:47:45Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Mr. Cahill for any further remarks. Speaker 200:48:03Thanks, gentlemen. Thank you everybody for joining us this morning. We look forward to updating you on our progress early next year. Operator00:48:13Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.Read morePowered by