HLMN Q1 Earnings Call: Tariffs and Supply Chain Strategy Take Center Stage
Hardware products and merchandising solutions provider Hillman (NASDAQ:HLMN) missed Wall Street's revenue expectations in Q1 CY2025 as sales rose 2.6% year on year to $359.3 million. On the other hand, the company's full-year revenue guidance of $1.54 billion at the midpoint came in 0.5% above analysts' estimates. Its non-GAAP profit of $0.10 per share was in line with analysts' consensus estimates.
Is now the time to buy HLMN? Find out in our full research report (it's free).
Revenue: $359.3 million vs analyst estimates of $361.3 million (2.6% year-on-year growth, 0.5% miss)
Adjusted EPS: $0.10 vs analyst estimates of $0.10 (in line)
Adjusted EBITDA: $54.53 million vs analyst estimates of $54.15 million (15.2% margin, 0.7% beat)
The company reconfirmed its revenue guidance for the full year of $1.54 billion at the midpoint
EBITDA guidance for the full year is $265 million at the midpoint, above analyst estimates of $261.9 million
Operating Margin: 4.2%, in line with the same quarter last year
Free Cash Flow was -$21.31 million compared to -$6.08 million in the same quarter last year
Market Capitalization: $1.66 billion
Hillman's first quarter results reflected execution in a challenging environment, with the company attributing its performance to new business wins and contributions from its recent Intex acquisition. Management discussed how the rollout of MinuteKey 3.5 machines and the strength of the Hardware and Protective Solutions segment offset weakness in the Canadian business, which faced macroeconomic and retail headwinds. CEO Jon Michael Adinolfi emphasized the company's resilience, noting, 'We have successfully managed through multiple market cycles and this business has proven resilient time and time again.'
Looking ahead, management reaffirmed its full-year guidance, citing confidence in price increases to offset the impact of new tariffs. The leadership team described ongoing efforts to diversify the supply chain and reduce reliance on Chinese suppliers, as well as proactive engagement with customers around pricing. CFO Rocky Kraft acknowledged the near-term pressure on volumes and margins due to tariff costs, but maintained that guidance is intentionally conservative given the uncertainty. The company expects to see the full impact of pricing actions and tariffs reflected in financial results by the third and fourth quarters.
Hillman's management focused on the significant impact of new tariffs, supply chain strategy, and the integration of recent acquisitions on the quarter's performance. The team outlined how proactive pricing and supplier diversification are central to navigating current external pressures.
Tariff Impact and Mitigation: Management disclosed that new 2025 tariffs affect roughly one-third of Hillman's products, estimating an annualized impact of $250 million. The company's strategy is to implement dollar-for-dollar price increases to offset these costs, mirroring its approach during previous tariff cycles.
Supplier Diversification: The ongoing Dual Faucet strategy aims to reduce reliance on China to about 20% of overall sourcing by year-end. Management highlighted efforts to shift production to Southeast Asia and India to minimize tariff exposure and maintain supply chain flexibility.
Intex Acquisition Contribution: The Intex acquisition provided approximately four points of growth in the quarter, supporting top-line results. Management noted that integration efforts are ongoing and expected to improve margins as synergies are realized.
MinuteKey 3.5 Rollout: The Robotics and Digital Solutions segment returned to growth, with over 1,700 MinuteKey 3.5 machines now deployed. Management expects this rollout to continue driving segment performance through 2026.
Canadian Market Weakness: Net sales in Canada declined nearly 19% due to lower home sales and macro uncertainty. Management remains confident in the segment's long-term prospects, citing strong retail partnerships and market share.
Management's outlook for the remainder of the year is shaped by tariff-related pricing actions, supply chain adjustments, and the pace of margin recovery, while recognizing risks from consumer demand and ongoing macroeconomic pressures.
Tariff Pricing Pass-Through: The company's ability to implement price increases to fully offset additional tariff costs is expected to be the primary driver of revenue and profit stabilization in the second half of the year.
Supply Chain Diversification: Further progress in shifting sourcing away from China is central to Hillman's strategy for mitigating long-term tariff risk and maintaining cost competitiveness.
Volume and Margin Pressure: Management cautioned that price increases may dampen market volumes, and that adjusted gross margins could remain below historical rates if tariffs persist. The full benefit of price actions is not expected to be realized until the third and fourth quarters.
Lee Jagoda (CJS Securities): Asked about incremental margins in the RDS segment and impact from the MinuteKey rollout; management expects margins to improve and return to historical levels as growth accelerates later in the year.
Anika Dholakia (Barclays Investment Bank): Inquired about the significant volume decline assumption in the second half; CFO Rocky Kraft described the guidance as conservative, reflecting unprecedented market conditions due to tariffs.
Stephen Volkmann (Jefferies): Sought clarification on the timing and structural impact of tariffs on margins; management expects tariff-related margin compression to be lasting unless tariffs are reversed.
David Manthey (Baird): Questioned how current supply chain conditions compare to the COVID disruption; CEO Adinolfi stated that service levels are strong and disruptions are minimal compared to prior years.
Reuben Garner (Benchmark): Explored product categories still sourced from China and price elasticity; management indicated that core fastening and gloves remain exposed but are actively being diversified to reduce tariff impact.
In the quarters ahead, the StockStory team will be closely monitoring (1) the pace and effectiveness of tariff-related price increases on both customer retention and market volumes, (2) the company's progress in reducing sourcing from China and integrating new supply partners, and (3) the realization of expected margin improvements from the Intex acquisition and MinuteKey 3.5 rollout. The timing and impact of tariff pass-through on both top and bottom lines will be essential to evaluate.
Hillman currently trades at a forward P/E ratio of 14.9×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our free research report.
Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
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