10-K: Hillman Solutions Corp. Reports Mixed Results Amidst Economic Headwinds in 2024

Hillman Solutions Corp.'s 2024 results reflect resilience through strategic acquisitions offsetting declines from soft home improvement spending and price reductions.

Summary

• Hillman Solutions Corp. reported a slight decrease in net sales for 2024, totaling $1,472.6 million compared to $1,476.5 million in 2023.
• The company's performance was bolstered by acquisitions of Koch Industries and Intex DIY, which contributed $39.9 million and $21.1 million in net sales, respectively.
• These gains were offset by reduced sales volume due to market softness and price reductions.
• Net income improved to $17.3 million, or $0.09 per diluted share, compared to a net loss of $9.6 million, or $(0.05) per diluted share in 2023.
• Adjusted EBITDA increased to $241.8 million from $219.4 million in the previous year.
• The company faced challenges including a True Value bankruptcy, resulting in an $8.6 million charge, and a $5 million settlement with a kiosk development partner.
• Looking ahead to 2025, Hillman aims to drive stakeholder value through its competitive advantages and customer relationships.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. While net income improved and strategic acquisitions contributed positively, the slight decrease in net sales, the True Value bankruptcy charge, and the settlement with a kiosk development partner temper the overall outlook. The company's future outlook is cautiously optimistic.

Positives

• Net income improved significantly, turning from a loss to a profit.
• Adjusted EBITDA increased, indicating improved operational efficiency.
• Strategic acquisitions contributed positively to net sales.
• The company won vendor of the year awards from Home Depot and Lowe's.
• The company successfully repriced its term loan, reducing interest expenses.

Negatives

• Net sales decreased slightly compared to the previous year.
• Market softness and price reductions negatively impacted sales volume.
• The True Value bankruptcy resulted in a significant charge.
• A settlement with a kiosk development partner added to expenses.
• The Robotics and Digital Solutions segment experienced a decrease in sales.

Risks

• Dependence on the health and stability of the general economy.
• Large customer concentration, with Home Depot and Lowe's accounting for a significant portion of net sales.
• Inability to penetrate new channels of distribution, including e-commerce.
• Inflation or deflation in supply chain costs, including raw materials, sourcing, transportation, and energy.
• Risks associated with sourcing product from overseas, including tariffs and political instability.
• Inventory management risks, including insufficient or excess inventory.
• Risks of doing business internationally, including currency exchange rate fluctuations.
• Cybersecurity threats and potential data breaches.
• Failure to adequately protect intellectual property.
• Significant indebtedness and potential inability to borrow additional funds.
• Fluctuations in interest rates.
• Legal proceedings and legal compliance risks.
• Seasonality affecting business operations.
• Future tax law changes that may increase income tax expense.

Future Outlook

Hillman remains committed to driving value for its stakeholders in 2025, leveraging its competitive advantages and customer relationships.

Management Comments

• We are pleased with the progress we made during 2024.
• Looking to 2025, we remain committed to driving value for our stakeholders, and believe that our competitive moat and long-standing relationships with customers will allow us to continue to win.

Industry Context

The company's performance is affected by general economic conditions, particularly in the U.S. and Canadian retail markets, including hardware stores, home centers, and mass merchants. The decline in existing home sales to a 30-year low in the U.S. during 2024 impacted the company's top-line results.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• Comparable companies in the fasteners and hardware market include Illinois Tool Works Inc. and Spectrum Brands.
• In the gloves and personal protective equipment market, competitors include Techtronic Industries and West Chester Protective Gear.
• The document does not provide enough information to compare Hillman's results to these specific companies or projects.

Legal Proceedings

• The Company entered into a settlement agreement with a kiosk development partner, pursuant to which the Company paid the Kiosk Partner a $5 million settlement payment on December 30, 2024 to resolve all claims and disputes alleged by the Kiosk Partner.

Related Party Transactions

• Sales to related parties, which are included in net sales, consist primarily of the sale of excess inventory to Ollie's Bargain Outlet Holdings, Inc.

Stakeholder Impact

• Shareholders: Improved net income and adjusted EBITDA are positive for shareholders.
• Employees: The company's commitment to employee health and safety is a positive factor.
• Customers: The company's focus on customer service and product innovation benefits customers.
• Suppliers: The company's management of its supply chain is important for suppliers.
• Creditors: The company's indebtedness and ability to manage its debt are relevant for creditors.

Next Steps

• The company expects to realize the entire December 28, 2024 backlog during fiscal 2025.
• The company expects to spend $90 million for capital expenditures in 2025.
• The company plans to continually invest in efforts to enhance data security in response to developments in the cybersecurity landscape.

Key Dates