Good morning, and welcome to the Fourth Quarter and Full Year 2025 Results and 2026 Guidance Presentation for Hillman Solutions Corp. My name is Liz, and I'll be your conference call operator today. Before we begin, I'd like to remind our listeners that today's presentation is being recorded and simultaneously webcast. The company's earnings release and earnings presentation were issued this morning. These documents and a replay of today's presentation can be accessed on Hillman's Investor Relations website at ir.hillmangroup.com. I would now like to turn the call over to Michael Koehler with Hillman.

Thank you, operator. Good morning, everyone, and thank you for being with us for our earnings call. I am Michael Koehler, Vice President of Investor Relations and Treasury. Joining me on today's call are Hillman's President and Chief Executive Officer, Jon Michael Adinolfi, or JMA, as we call them; and our Chief Financial Officer, Rocky Kraft. I would like to remind our audience that certain statements made today may be considered forward-looking and are subject to 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. Information regarding our use of and reconciliations of these measures to our GAAP results are available in our earnings call slide presentation. JMA will begin today's call by providing some commentary on our full year 2025 results, briefly introduce our '26 guidance and then discuss our performance for the year by business. Rocky will then provide a more detailed walk through our 2025 financial results and our '26 guidance before turning the call back to JMA for some closing comments. Then we will open the call up for your questions. It's now my pleasure to turn the call over to our President and CEO, Jon Michael Adinolfi. JMA?

Thanks, Michael. Good morning, everyone, and thank you for joining us. Let me start by saying how proud I am that the Hillman team successfully navigated the impact of tariffs in the dynamic environment during 2025. The entire organization worked extremely hard taking care of our customers during the year, and our team rose to the occasion to put the best year in this company's 62-year history, delivering record net sales and adjusted EBITDA. For 2025, net sales increased 5.4% to $1.552 billion, and adjusted EBITDA increased 13.9% to $275.3 million versus 2024. We are pleased with our results for 2025 and remain focused on the growth opportunities that lie ahead. Looking to 2026, we estimate full year 2026 net sales will be between $1.6 billion and $1.7 billion. The midpoint of $1.65 billion represents top line growth of 6.3% compared to 2025. Additionally, we expect to generate between $275 million and $285 million of adjusted EBITDA for 2026. This midpoint of $280 million represents growth of 1.7% compared to 2025. And finally, we expect to deliver free cash flow between $100 million and $120 million for 2026. The midpoint of $110 million reflects a 90% plus conversion of adjusted net income into free cash flow. The main contributor to our top line growth during 2026 will be the rollover from pricing that went into effect during 2025. Our sales team is focused on winning new business, and we are confident that new business wins during 2026 will outpace last year. As for the markets, we are yet to see any meaningful changes in the macro that could produce tailwinds for Hillman and therefore, do not expect any help from the market this year. Rocky will provide more details on our guidance shortly. But for now, let's turn it back…

Thanks, JMA. Let's start with our fourth quarter and year-end results before I get into our guidance for 2026. Fourth quarter 2025 net sales increased 4.5% to $365.1 million versus the prior year quarter. 2025 full year net sales totaled $1.552 billion. Fourth quarter adjusted gross profit margins were 47.6%, which stepped down sequentially as expected. Compared to last year, margins were down 10 basis points. For the full year 2025, adjusted gross profit margin increased 60 basis points to 48.7% from 48.1% during 2024. Adjusted SG&A as a percentage of sales for Q4 2025 increased to 31.8% from 31.5% during the year ago quarter. For the full year 2025, adjusted SG&A as a percentage of sales decreased to 31% from 31.6%. Adjusted EBITDA in the fourth quarter increased 2.3% to $57.5 million. Adjusted EBITDA for 2025 increased 13.9% to $275.3 million. Our adjusted EBITDA to net sales margin during the quarter was 15.8%, which compares to 16.1% a year ago. Adjusted EBITDA to net sales margin for the full year was 17.7%, which compares favorably to 16.4% a year ago. Now turning to our cash flow and balance sheet. During 2025, operating activities generated $105 million versus $183 million in 2024. Impacting our operating cash flow and therefore, free cash flow was about $65 million of tariff impact. Free cash flow for the year totaled $35.1 million, which included the $65 million of tariff impact versus $98.1 million in 2024. We ended the year with $665.8 million of net debt outstanding versus $674 million at the end of 2024, an improvement of $8 million. Liquidity available totaled $306 million, consisting of $279 million of available borrowing under our revolving credit facility and $27 million of cash and equivalents. At the end of the year, our net debt to trailing…

Thanks, Rocky. We're optimistic about the year ahead and energized to keep pushing forward. We expect to grow share and achieve solid revenue and earnings gains throughout 2026. Our unwavering focus is on taking care of all of our stakeholders, customers, suppliers, team members and investors, and we will work diligently to deliver on that responsibility. We look forward to updating you during the year with our progress. With that, we'll begin the Q&A portion of our call. Operator, please open the call for questions.

[Operator Instructions] Our first question comes from Lee Jagoda with CJS Securities.

Rocky, can we just -- I know you gave the full year gross margin expectations. Can you kind of walk through the cadence of the gross margins? And I guess, just given Q1 -- I would assume Q1 is going to be the low point, but can you give us any sense for how low is low in Q1?

Yes. I think, Lee, as we said on the call in our prepared remarks, we believe the year will be between 46% and 47%. I think Q1 will be the low point of the year. There's a couple of things. First off, obviously, it's the lowest volume quarter that we have each year heading into the Q2 spring busy season. Secondarily, we actually have -- in the first quarter, we'll probably have the highest cost inventory flowing through the system that we've probably had in the history of Hillman, just given the timing of where reciprocal were last year and the timing of flowing through. So I would expect that we'll be slightly below that 46%, 47% in the first quarter. We should see it step up sequentially in Q2. And then the back half, I would expect we'll be at the high end of that range as we think about the second half of the year.

Got it. And then, Rocky, I think you were talking pretty positively on new business wins and looking for them to be higher year-over-year in '26 versus '25. Can you talk to kind of what gives you the confidence there? How much of the new business wins anniversary on stuff that you've already started to load in, in '25? And then on the stuff that isn't anniversary-ing, what have you won already? And what should we be looking forward to?

Sure. I'm going to throw that over to JMA and let him comment.

All right. Thanks, Rocky. Yes, Lee, we're excited for several reasons. First off, we've got a solid set of initiatives this year. We have some nice wins that we're building off of in '25 that will cascade into '26 to your point. I'm really fired up because we have actually our national sales meeting this coming week, Friday, Saturday, Sunday in Colorado. So we'll be in Denver with 300 of our sales folks getting really fired up about the year. We've got some great new products. We got business development, while it was a core function inside of Hillman, we've actually grown and invested that. We've got a business development team that's focused on a number of our brands where we got some exciting products and then the Pro. You heard us sprinkle a little bit of that into the presentation. But the real exciting thing is we're actually here this week in Orlando for the International Builder Show. We're actually broadcasting live from here. We got our booth. We got Power Pro. We got a lot of great Pro product that we're showing off. And our business is over $400 million of its Pro, and we're really fired up about the team that we have assembled that's driving it. So we got a lot of reasons to be confident that we're going to go win new business in a tough environment in '26. And we look forward to talking more about that when we're together on March 19 for Investor Day.

Our next question comes from Andrew Carter from Stifel.

I wanted to ask about the deterioration in sales in Protective Solutions. Correct me if I'm wrong, that is the business that can be subject to some channel load because it goes through the DCs. But anything else going on there besides just some near-term dynamics?

Yes, Andrew, thank you. Yes, I mean, near-term dynamics, I think, is probably the right way to think about it. Yes, there's a little bit of a channel inventory balancing that we went through in the fourth quarter. That business actually has quite a few new products coming out in 2026. So we feel good about the trajectory as we move forward. We've also successfully integrated our Intex DIY business, and that platform is performing pretty well in a tough market. So nothing else to really share at this point. Rocky, unless you have anything.

No. I mean, again, as we've said many times, that business is more subject to timing around when products launch, when they come into the market and when like off-shelf activities are happening. And so I think that's what we saw in the fourth quarter. And we think as we -- as you go into '26, it should be growing like the rest of the business.

Second question to kind of think about RDS and kind of the machine rollout. You also have customer transition in that business. Could you quantify the headwind from that customer transition? Did that peak in 4Q? Therefore, it slows during next year? Anything else to help with the modeling or frame expectations on RDS?

Yes. The customer transition, Andrew, is -- will continue in Q1 and Q2, and then we'll anniversary that and that will be behind us finally. So that would be one way to think about that as you're putting your numbers together for 2026. I think the big thing with that business is 3.5 rollouts, as we -- as I framed in my prepared comments, is actually doing well. Our RDS team and our field teams are doing a great job. We've actually been out in the field now that we've got scale in several markets, really focusing on driving the business, fine-tuning the technology, which we feel really good about, and we are confident that, that business will continue to grow after putting up a year of growth in '25, we'll build on that in 2026. So we're excited about where that business is moving to, and we look forward to reporting more as those results come in.

[Operator Instructions] Our next question comes from Stephen Volkmann with Jefferies.

I'm curious, I guess it sounds like '26, we're sort of transitioning to what we might consider sort of a more normal year from an operating perspective. So I'm trying to think about leverage when things do start to come back. So if those existing home sales come back that you talked about, JMA, what's the right way to think about sort of the incremental EBITDA margin sort of based on where we're starting from here?

Yes. Stephen, it's Rocky. I think the way to think about it is we would expect anything and everything that we do to be above fleet. The easy way to think about it is plus 20%. When you think about most of the business, obviously, RDS, a little bit better than that, probably plus 30% when you think about incremental sales. But when we think about the business, that's what we're looking for as we grow.

Okay. And then any thoughts on sort of Canada as we model 2026?

Yes. I think Canada is still under a fair amount of pressure. We actually have -- our sales team up there is really fired up about the new year. We've got some exciting things we're doing in Pro and other areas. So not a lot more detail to go into there. We think that economy as we get through or into the spring season will be better. So we expect it to return to growth in 2026.

Our next question comes from David Manthey with Baird.

First off, on the sort of the long-term targets here, the 6% and 10% organic revenues and EBITDA growth. I guess if I look over the past couple of years, the top line has been pretty consistent with that view. EBITDA has tracked a little bit below that. And I guess, philosophically, when we think about when you set those targets initially, I think RDS was expected to be a bigger contributor maybe to growth, but definitely to contribution margins. Can you just talk about that, the 6% and 10%, and going forward, you're still feeling comfortable that those are the right targets for the company?

Yes. Dave, it's Rocky. I think you hit the nail on the head when you talk about -- we would have expected coming out of the IPO that RDS would have been a bigger growth driver. And because of that, you would have seen higher growth relative to EBITDA from an organic perspective, again, 7% if you look back since the IPO, compounded growth in EBITDA in the business, which we feel pretty good about. I think what I would say is in March, we are going to do our first Investor Day. I think you're going to hear us at Investor Day talk a lot about those longer-term targets. I don't think it's going to be a revolution. It will be an evolution of those targets but I think we're going to give you the building pieces about how we think about the business, how we think about it over the next 3 to 5 years. And I really don't want to steal the thunder, as you can imagine today from Investor Day. So I look forward to talking to everyone about that then.

Yes. Fair enough. And a minor point here but we're starting to hear whispers out in the market about chip shortages. And I don't know if that's the same type of chips that you guys use in your machines, but how are you situated relative to supply versus your growth goals in RDS and the MinuteKey 3.5?

Yes. I think we're in good shape, Dave. I think as you think about the wind down of having to do retrofits and new builds for 3.5, we're in good shape. As you think about once we've completed the entire fleet on the 3.5 by the end of 2026, then we're going to go into more maintenance mode around those. And I've not heard anything from our teams around chip issues, and I don't think we expect that, that will be a challenge going forward.

Our next question comes from Brian McNamara with Canaccord Genuity.

I just had a question on the guidance overall. I think it implies a bit of a step down. I think you had prior gave a directional guidance of plus high single to plus low double digits, and I think you're at plus 6% at the midpoint. Just trying to figure out what drove the change there.

Yes. I think, Brian, it's Rocky. I mean, obviously, the fourth quarter was a little softer than we expected. And we would tell you, even early in the year, our -- what we saw in January and what we've seen because of weather in February has been a little softer than probably what we would have anticipated. And so we're going to come out with a conservative guide given just what we've seen in the markets. It kind of puts you down a few points. We're not going to give exact guidance but of a market, if you think about the midpoint, which if you go back a few quarters ago, when we talked about directional guidance, we talked about a flat market. That was the hypothetical that we used to get to the high single or the low double digits. And so if you assume a few points down in market, that gets you down to kind of a mid-single-digit kind of number at the midpoint.

Great. That's helpful. And then second, is there like a magic existing home sales number where it would meaningfully impact your business? We're at 4.1% right now. January is a rough month. Anything where you're like that number, our business starts to hung along a little bit better?

Brian, I don't know that there's a magic number but we do like in the mid-4s to 5 feels like the right better spot for us where we'll see some of that home improvement, whether you're putting houses on the market or you're looking to buy a house and you're making some modifications to it. So that's really where we'd like to be. So I don't know if there's really a sweet spot, if you will, but we'd like to see a bit of improvement from where we are today. Our repair and maintenance side of our business actually humming along pretty nicely. I just love to see a little bit more of that get houses ready and also getting homes ready to be lived in, if you will, we'll see a little benefit from that. So stay tuned, but we're excited to capitalize that. That's why we're excited about the Pro side of our business as well.

Great. If I could just squeeze in one last one on M&A. It sounds like you guys are -- it sounds like you're a little more constructive on the M&A environment. I'm just curious how that environment looks relative to last year. I'm assuming a lot of talks were kind of paused because of tariffs and policy uncertainty. Is it just a function of maybe some targets coming back to the table? Is it new opportunities? -- anything you could -- any more color there would be helpful.

Yes. We are more excited now than we were last quarter or the quarter before that. So I think we feel confident we'll do 1 to 2 deals in 2026. So we're excited about what we see in front of us. To answer your question where they're coming from, it is -- there's some opportunities that are coming back to the table that were put on pause. We're also seeing some new ones and we see some activity and some definitely more M&A opportunities coming our way. So our M&A team is actually quite busy right now looking at a lot of deals, and we're excited about what's in front of us.

Thank you. This concludes the Q&A portion of today's call. I'd like to turn the call back over to Mr. Adinolfi for some closing comments.

Thank you, Liz. We look forward to hosting our first Annual Investor Day on March 19. So please keep an eye out for more information as the date approaches. Thank you for joining us this morning, and I hope everybody has a great day. Take care.