Hillman Solutions (NASDAQ:HLMN) Q3 2026 Earnings Call

0:00 Hillman is committed to delivering exceptional customer service, innovative products, and dependable solutions to its customers and regularly earns vendor of the year recognition from top customers. With over 4,000 employees across North America, Hillman's mission is to empower its customers with industry-leading products and the highest level of service to meet the needs of people who fix, build, and create. Together, We are Built Hillman Strong. Thank you.

1:54 Thank you. Founded in 1964 and headquartered in Cincinnati, Hillman is a leading provider of hardware and related products serving retail, pro-distribution and industrial MRO customers. Over the last six decades, Hillman has built a legacy of service and growth by forming strategic partnerships with North America's leading home improvement, hardware and farm and fleet retailers.

2:41 Hillman differentiates itself from the competition with its dedicated field sales team of 1,200 associates, direct-to-store distribution capabilities and world-class global sourcing and supply chain expertise. Hillman offers an extensive product portfolio of more than 111,000 SKUs, including fasteners, hardware, project gear and supplies, and keys and engraving services, Hillman is committed to delivering exceptional customer service, innovative products, and dependable solutions to its customers and regularly earns vendor of the year recognition from top customers. With over 4,000 employees across North America, Hillman's mission is to empower its customers with industry-leading products and the highest level of service to meet the needs of people who fix, build, and create.

3:41 Together, We are Built Hillman Strong. ¶¶ We want to introduce you to the Hillman Group.

5:12 Who we are, what we do, and the customers we serve. Founded in 1964 and headquartered in Cincinnati, Hillman is a leading provider of hardware and related products serving retail, pro-distribution and industrial MRO customers. Over the last six decades, Hillman has built a legacy of service and growth by forming strategic partnerships with North America's leading home improvement, hardware and farm and fleet retailers. Hillman differentiates itself from the competition with its dedicated field sales team of 1,200 associates, direct-to-store distribution capabilities, and world-class global sourcing and supply chain expertise.

6:07 Hillman offers an extensive product portfolio of more than 111,000 SKUs, including fasteners, hardware, project gear and supplies, and keys and engraving services, Hillman is committed to delivering exceptional customer service, innovative products, and dependable solutions to its customers and regularly earns vendor of the year recognition from top customers. With over 4,000 employees across North America, Hillman's mission is to empower its customers with industry-leading products and the highest level of service to meet the needs of people who fix, build, and create. Together, We are Built Hillman Strong.

7:17 Thank you. Good morning and welcome to the third quarter 2026 results presentation for Hillman Solutions Corp. My name is Grace and I will be your conference call operator today. Before we begin, I would like to remind our listeners that today's

8:48 presentation is being recorded and simultaneously webcast. The company's earning release and presentation were issued yesterday and the 10Q was 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.

9:18 Thank you, operator. Good morning, everyone, and thank you for joining us for Hillman's third quarter 2026 results presentation. I am Michael Koehler, Vice President of Corporate Development, 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 him, and our Chief Financial Officer, Rocky Krause. 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.

10:03 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, ir.hillmangroup.com. 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. Jay May will begin today's call by discussing our strong quarterly results and providing an update on our guidance. Thereafter, he will discuss the market, the traction we are seeing with our initiatives, and our performance by business. Rocky will then walk through our financials and guidance before turning the call back over to JMA for some closing comments. Then we will open the call up for your questions.

10:55 It's now my pleasure to turn the call over to our President and CEO, Jon Michael Adinolfi. JMA?

11:01 Thanks, Michael. Good morning, everyone, and thank you for joining us. The third quarter was another strong quarter for Hillman. highlighted by our record top line and record bottom line results driven by 8% net sales growth, plus we completed the acquisition of Cambridge. Cambridge serves as a long tail master distributor of fasteners for industrial distribution customers. As the long tail distributor, Cambridge provides its customers a wide assortment of hard to find and low turnover products from a convenient single source. In total, Cambridge stocks over 44,000 SKUs and can ship orders the same day. Similarly, Hillman serves as a long-tail master distributor of fasteners for our retail customers. Together, we are now one of the largest long-tail distributors of fasteners to retail, pro and industrial.

11:55 When you combine having all the products our customers need, supported by our industry-leading sales and service team, you can see how the Hillman moat continues to widen. We close the Cambridge We believe we purchased one of the best businesses in the space, and Cambridge is a great fit for our long-term strategic growth plans. During our investor day in March of this year, we highlighted M&A as a crucial part of our blueprint for strategic growth. This plan also includes fortifying, growing our retail, pro, and industrial channels. Looking forward, we remain confident that we can grow net sales between 8% and 12% per year, and by 2030 we expect to reach $2.5 billion in net sales.

12:49 During the third quarter, net sales increased 8% to $457 million. We are especially proud of these results given the challenging macro environment that is impacting the DIY and the residential pro portions of our business. Our top line results were a record for Hillman, marking the highest quarter of net sales in our 62-year history. Additionally, the 8% growth during the quarter is in line with our long-term growth targets. Adjusted EBITDA for the quarter increased 2% to a record 90.2 million, surpassing our previous high of 88 million during the third quarter of 2025. And free cash flow during the quarter totaled a very healthy 51.1 million.

13:34 compared to just 9.1 million in the year-ago quarter. RDS had a great quarter. Net sales growth accelerated 19% versus the year-ago quarter, driven by performance of Minikey 3.5. The RDS field service team has done a great job executing the retrofits and installing these machines across the country. Well done, team. Since we began rolling out this enhanced technology platform to our top two customers, We've seen healthy growth in our overall Minikey business. The economics per upgraded 3.5 machine are meaningful and improved over the previous generation. Minikey 3.5 continues to prove itself as a platform for both top and bottom line growth for helmets.

14:22 Today, we have approximately 4,800 Minikey 3.5 machines in the field, bringing the total number of installs to over 1,700 this year. will finalize the deployment of these machines at our top two customers during the fourth quarter. We expect RDS will see another strong period of growth during Q4. This momentum will carry into 2027 and beyond as we continue to strengthen our strategic partnerships with our top customers. For the third quarter of 2026, our 8% net sales growth was driven by approximately five points of growth from new business wins, five points of growth from M&A, partially offset by two points headwind in core performance. As a reminder, core performance represents a combination of market volume, customer footprint expansion, category management, FX, product mix, and price.

15:18 We think of our core performance to be similar to our customers' same-store comparable sales metrics. Of the nearly five points of new business wins, About three and a half points were driven by new wins in retail, highlighted by the sizable builder's hardware expansion at one of our top customers. And nearly one and a half points were driven by new business wins in the pro channel, where we continue to make progress. Hillman generated over $460 million of net sales with the pro last year. Using this existing foothold with our pro base, our renewed strategies to gain share are working. Whether it's new lumber yards, our retail partners shipping Hillman products directly to their pro customers, or growth in our commercial and industrial businesses, it all contributes to pro growth for Hillman.

16:09 We are taking share in the pro channel. Our pro business is and will continue to outgrow the market. These proof points, among many others, demonstrate Hillman's right to win in the pro space. For 2026, we believe new business wins in PRO will generate about 1% of top line growth for all of Hillman. This is about 16 million of new business wins. For 2027, we are confident new business wins in PRO will continue to accelerate. We expect this can generate 2% top line growth for all of Hillman, which is over 33 million. Now to turn to guidance for the year. Given our year to date performance and expectations for the rest of the year, we are updating and narrowing down our net sales guidance.

16:54 We now expect our full year net sales to be between 1.66 billion to 1.68 billion. This midpoint of 1.67 billion now represents nearly 8% growth versus 2025, which is just shy of our long-term growth targets. Our previous guidance assumed a modest sequential improvement in market volumes during the second half of the year. While volumes have improved, they were lower than anticipated. As a result, we're lowering the midpoint of our full year net sales outlook by about a point and a half. We continue to believe in our full year adjusted EBITDA will be approximately 285 million, marking an increase of 3.5% over last year.

17:39 And we continue to believe our full year free cash flow will be between 105 and 115 million. The midpoint of 110 million marks a meaningful increase over 2025 when cash flows were severely impacted by tariffs. Speaking of, the net impact of tariffs during the quarter remained consistent with the first half of the year. That said, during the third quarter, we received modest net tariff-related refunds which contributed to our adjusted EBITDA. The reason the net benefit was modest is that it was mostly offset by tariff-related adjustments from Section 232 steel tariffs. Our supply chain team continues to be a strength for Hillman. Our dual faucet strategy gives us flexibility to quickly react to changes in geopolitical and tariff landscape.

18:29 Recently, I had the privilege of attending our annual supplier summit with our global supply chain team in Vietnam. It was great to be able to interact in person with well over 100 of our vendors. Our relationships with them continue to be very healthy, and they're excited about the M&A activity because they see new growth opportunities with Hillman. This annual event serves as an important in-person touchpoint to strengthen relationships with our supplier partners, which is especially important given the environment. We view our supply chain and global logistics team as a critical advantage over the competition and one of the most important core competencies. Now let's turn to results by business for the quarter. Hardware and protective solutions is our biggest segment and is the foundation of Hillman.

19:18 Our breadth of product offerings, diversified supply chain, and world-class service is a moat that keeps widening, and it's the platform we're now extending to the pro. HPS grew 5% in the third quarter. Driving this was an approximate 2% lift from new business wins, split equally between pro and retail, and a 5% benefit from M&A. These were partially offset by a 2% headwind in our core performance. RDS is our highest margin segment and had another great quarter, as I mentioned before. Net sales in RDS were up 19% versus the year-ago quarter, and adjusted EBITDA increased by 13%. Robotics and Digital Solutions, or RDS, is our high-margin, technology-enabled platform. We have over 31,000 kiosks in retail locations across North America, which are destinations that solve a critical need for our customers.

20:18 Adjusted gross margins and adjusted EBITDA margins at RDS were both healthy during the quarter, totaling 79% and 30% respectively. Turning to Canada, Canada was another standout during the third quarter, with net sales of 9%. That was driven by eight points of new business wins, the majority of which came from the pro channel, and one point of core performance growth. New wins, included revenue generated from new product categories at an existing retail customer and the bulk faster program with one of our top customers in Canada. Our Canadian team continues to execute very well and has had a great year. We expect that momentum to continue through year end.

21:04 In summary, Q3 was another quarter of proof points as we execute our blueprint for strategic growth. We delivered record net sales and record adjusted EBITDA. Strong Cash Flow, a Cambridge acquisition that closed early and is outperforming, and an RDS business with accelerating growth. I'm proud of our execution this quarter and how we continue to take care of our customers. We are excited about the opportunities that lie ahead, and I'm very confident Hillman is poised for a great 2027. With that, I'll now hand it over to Rocky to take you through the numbers. Rocky? Thanks, JMA.

21:42 Let's get to our results, then we will review our guidance. Net sales in the third quarter of 2026 totaled $457.5 million, an increase of 8% versus the prior year quarter. Third quarter adjusted gross margin was 50.8%, down 90 basis points compared to a year ago, but improving 370 basis points sequentially and consistent with our expectations. We expect our full year 2026 margins to be approximately 48%. Adjusted SG&A as a percentage of sales was 31.2% during the quarter, relatively consistent with a year ago. Adjusted EBITDA in the third quarter totaled 90.2 million, increasing 2.4% versus the year-ago quarter.

22:33 Adjusted EBITDA to net sales margin during the quarter totaled 19.7%, down 100 basis points from a year ago, but improving sequentially by 230 basis points. As you can imagine, our margin percentage performance over the past several quarters have been heavily influenced by the timing and magnitude of tariffs. Now turning to our cash flows. For the quarter, net cash generated by operating activities was $69.9 million, and free cash flow increased to a healthy $51.1 million, which was in line with our expectations. From a liquidity perspective, we ended the third quarter of 2026 with $933 million of total net debt outstanding, which increased due to the recent Cambridge acquisition.

23:23 Assuming that we had benefited from the approximately $29 million of EBITDA that Cambridge has generated over the past 12 months, our net debt to trailing 12-month adjusted EBITDA ratio would be 3.1 times. Assuming we do not do any other meaningful M&A, we should end 2027 at roughly two and a half times leverage, which is the high end of our long-term leverage target. That said, we continue to evaluate the market for accretive acquisition opportunities. During the quarter, we closed a new $735 million term loan B and put in place our new $375 million ABL revolver. Shortly thereafter, we executed an additional $200 million add-on to the term loan to finance the Cambridge acquisition.

24:13 This activity extended our term loan B maturities to 2033 and our ABL maturities to 2031. Pricing on these was consistent with our prior facilities with the term loan B at SOFR plus 200 basis points and the ABL currently at SOFR plus 125 basis points. During the quarter, we deployed $5 million to buy back 639,000 shares at an average price of $7.75 per share. We continue to be in the market buying stock back. Now let's talk about our guidance. As JMA mentioned, we now anticipate 2026 net sales to be between $1.66 billion and $1.68 billion, with a midpoint of $1.67 billion.

25:01 We continue to expect our full year 2026 adjusted EBITDA to be approximately $285 million. We continue to expect our full year 2026 free cash flow to be between $105 and $115 million with the same $110 million midpoint. And we continue to expect our full year 2026 CapEx to be in the $70 to $75 million range. Now, as we start to think about 2027, We expect growth to be in line with our long-term growth targets, which is between 8% to 12%. Driving this growth will be new business wins in both pro and retail, as well as M&A. We believe M&A will contribute between 3% and 4% of growth next year.

25:49 Unfortunately, at this point, we are not anticipating the macro will be a tailwind next year. We expect our CapEx to increase slightly compared to what we will do this year as we will continue to invest in organic growth opportunities in HPS and RDS, as well as our facilities and distribution network. Of note, we plan to continue investing into the consolidation of our new state-of-the-art distribution center in Cincinnati, which we plan to start to move into during 2027. Additionally, we will make planned capital investments into the facilities at Campbell Chain and Fittings, which we acquired in April of this year. Let me leave you with this. In 2026, we expect to deliver record net sales and adjusted EBITDA. We're on track for roughly three times the free cash flow of last year.

26:39 We've closed three acquisitions. We refinanced our capital structure, pushing our maturities out to 2031 and 2033. And we did all of this while absorbing a challenging tariff and macro environment. We are not slowing down. In 2027, we expect to meet our long-term growth expectations powered by new business wins in retail and pro, as well as M&A. We're a bigger, stronger, more cash-generative Hillman than a year ago, and we're just getting started. With that, I'll turn it back to JMA.

27:12 Thanks, Rocky. Before we open up for Q&A, I want to thank our associates across Hillman for their continued commitment and hard work. Your dedication and execution are what enable us to deliver for our customers every day. To our customers, partners, and stakeholders, thank you for your continued trust and partnership. We're proud of our execution this quarter and confident in the opportunities ahead. We remain focused on executing our plan, building on our momentum, and delivering long-term value for our shareholders. We look forward to updating you on our progress in the near future Operator, please open up the call for questions. Thank you. At this time, we will conduct the question and answer session.

27:59 To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question with one follow-up and hop back in the queue. Please stand by while I compile the Q&A roster. Our first question comes from the line of Lee Yagoda with CJS Securities. Your line is live.

28:33 Hey, good morning guys. So start with a couple of easy ones. Just do you have the Cambridge revenue and EBITDA contribution for the partial quarter in Q3?

28:45 Lee, we're not breaking out Cambridge separately. The acquisition actually performed quite well. We're really pleased with the momentum, and it's certainly a part of our pro and industrial strategy. So you can take away from this that we're really pleased with the momentum for the first couple of months we've owned it.

29:01 Okay. And then, Rocky, just the guidance you give, the soft guidance for 2027, the 3% to 4% from M&A, I assume that's stuff that's already been completed that anniversaries next year and not incremental M&A, or am I thinking about that wrong?

29:16 No, you're thinking about the right way, Lee. That's just the anniversary of the deals that we've done.

29:20 Okay, perfect. And then maybe one more if I can. Just on the RDS side of the business, growth was great. It looks like it was all key and key accessories. What are the biggest drivers of that? Because I assume foot traffic is not in your favor. And Can you talk through like the incremental margins on that growth both in Q3 and how we should think about it going forward to the extent that that level of growth is sustainable?

29:47 Yeah, let me take the business side of it first. We're really excited and encouraged by the traction we're getting with 3.5. The new capabilities we've talked about in the past continue to come to life in the field. So that is really from us expanding from home and office to auto is really the biggest driver there of that opportunity with our two largest customers. So That's what's really driving the growth. So getting the 3-5 machines in, seeing them ramp and continue to drive, that technology has been very, very impactful. We're excited about the progress we made in the quarter and equally as excited about what we'll do in Q4. Rocky, we'll add some color.

30:21 Yeah, I would say, Lee, just from an economic perspective, as we think about RDS, we're always targeting 30% EBITDA margin. and everything we're doing kind of comes out at that rate. So you can see it for the quarter, we were right at like 29.9 in that business. You know, we feel really good about where we are and that's how we're kind of pricing all of the new services as we go forward.

30:47 Okay, thanks very much. Thanks, Lee. One moment for our next question. Our next question comes from the line of David Manthe with Baird. Your line is live.

31:05 Thank you. Good morning, everyone. So, yeah, back to the 2027 guidance, Rocky. If we assume the midpoint there and 3.5% from M&A, 2% from new business wins, the remaining 4.5%, you're saying that happens without help from the macro? Could you talk about what drives that remainder? Is it expected price? What other sources do you see there?

31:35 Yeah, I think, you know, I'll just take you back, Dave, to our investor day in the algorithm, right? And so if you think about M&A at three to four, that's pretty much in line with kind of what we said. Again, that assumes that we don't do any more transactions in 2027. And we're obviously hopeful that there'll be some businesses that meet our thresholds that we can acquire. New business wins. We're feeling really good about where we are. The number where we are in the third quarter to be above kind of our goal was a good sign. And we expect that to be at least four as we go into next year. The remainder is that core performance. So you think about price, you think about market, you think about what we do every day at the shelf. That's what drives that incremental piece. Again, as we think about next year and what we're seeing in the marketplace today, again, we just thought it was prudent to tell folks we're not going to plan for the markets to get better. We're not going to plan for them to get worse either, but we're going to plan for them to be, you know, kind of a bit of a headwind as it is today.

32:35 Okay. Did I, I thought JMA said 200 basis points from new business wins in 27. Was that not correct?

32:44 No, I think as you think about two, I think JMA was talking about the pro that we expect that to be two plus. you know this year we're running at one plus and we've really just started kicked off a lot of those initiatives in the last six to nine months and so as it continues to gain momentum I think you look at two plus from the pro and then two plus from our normal retail business that you know we've done historically I see okay and then on pricing container prices tariffs general inflation I think we know how that mechanically works through the core Hillman model

33:21 Could you discuss how Cambridge deals with those inflationary forces and sort of what's been their track record over the past five to six years?

33:30 Yeah, very similar. They've actually done a great job of pricing their business accordingly based on market conditions. And that's actually one where we view as a positive for us. We believe that the combination of the Cambridge business, which, as I said, it's performed well, strong gross margins great service adding our you know global you know sourcing team logistics we actually believe we'll be able to make them one better and two they'll continue to factor that into their annual applies uh prices marketplace so with the market pressures that you mentioned there in that business as well so that the uh the price passed through at Cambridge more of a um

34:14 Just a product pricing exercise as opposed to a shelf price exercise. As you said, their experience over the past five, six years has been pretty good doing that, translating that to the market and keeping ahead of it.

34:29 Yes, they have. They've done a really nice job being able to manage that over time. We've got a great team that's in the business still operating it today. and we feel very confident not only have they done it to your point over the last you know I'll say five plus years and really over their entire history they've been in business for over 50 you know we feel like that'll continue in 20 you know in 2026 into 2027 so yes they've covered it and will continue to do so. All right thanks very much. One moment for our next question. Our next question comes from the line of Andrew Carter at Steifel. Your line is live.

35:10 Hey, thank you. Good morning. First thing I wanted to ask is just going into kind of the fourth quarter, what you're implying, just assuming RDS holds steady, is kind of a core performance across the other businesses, kind of flat up six. You take out the new business wins and kind of some residual pricing. You're kind of volumes down mid-single digits to flat six. Is that fair? Does it assume just kind of steady from the year to date? And have you seen really as existing home sales have come on any pressure in that core, in the HPS and Canada business? And of course, that's also an impact RDS. Thanks.

35:49 Yeah, Andrew, you know, when you think about where we are, when you think about the market first, and I'll hand it over to Rocky to go through the specifics for the quarter. But, you know, from a market perspective, you know, If there is a bright spot here, we've seen actually the market improve throughout the year or be less negative. That's what we continue to expect. Q3 was better than Q2. We believe Q4 will be slightly better than Q3. So I'll let Rocky add on some color here for numbers. But I mean, that's how we're thinking about it. And while existing home sales have not improved, I agree. They've stabilized and we view that as a small positive, if you will, in where we are in the market. I don't know where they're going to go from here, but we feel pretty good about what we can see in Q4.

36:30 Yeah, I guess what both of you, Andrew, you and JMA said, I'll just reiterate. I mean, as you think about the market, we anticipate that it will continue to be a headwind in the fourth quarter, although more like the third than in prior quarters and maybe even a little better than that. You know, price becomes less of a tailwind in the fourth quarter as we continue to lap price in the third and fourth quarter that we took in the prior year. We do expect that we'll, you know, we'll grow new business as we have. So, you know, call it somewhere north of three and a half up to five percent in that range. And then obviously in the fourth quarter, we will see more benefit from M&A than we have throughout the year, just given the fact that we'll own Cambridge for the entire period.

37:14 Thanks. And just wanted to ask, your trailing 12 gross margin hardware protective is 43.1%. I just want to kind of confirm, is that a kind of a good all-in number that's a run rate for the tariffs? And of course, you have one month in Cambridge in there, and then I think you have $60 million of revenue from Delaney and Campbell, which I would assume is gross margin dilutive, correct me if I'm wrong, but just all in that 43.1% for that business. Is that a good run rate? Plus, of course, Cambridge, as it gets fully anniversary, will be accretive.

37:48 Yeah, I think if we think about it, that's a good number when you put all the numbers together. We're at a good baseline, we believe, around the gross margin. The only thing I would say is you have to remember that there is seasonality in our business. So we'll see lower gross and EBITDA margins in the first and fourth quarters. And in the second and third, when we have higher volumes, we will see higher rates in those quarters. That would be the only caveat I would give to the numbers that you articulated, Andrew.

38:14 Final question. On RDS, kind of the performance you have this year is you broke out the new business wins, which would be the minute key three and a half. I guess as you sit there and think about run rating, both the new business wins you have as a fully anniversary next year, plus the pricing that you put into place that you called out, kind of what would that say for RDS growth next year and I'm assuming you put all that together, you will be above kind of that four to six or the kind of company long-term rate that you put for RDS next year. Of course, that's all organic. Thanks.

38:47 Yeah, I think what we would say there as you think about next year, the third quarter was a little bit of outsized growth. As we think about 2027 and RDS, it would be our expectation that it would definitely be above and then likely that it would be double digits as we think about just the continued rollout of 3.5 and the year-over-year roll of 3.5 and the benefits.

39:08 You know just to tack on to that I mean that goes back to the you know our organic growth being plus three percent you know for the quarter really important proof point for us RDS obviously drove a good piece that but we're really you know excited about not only RDS but also the HS business which had a good solid quarter. I think it just gives you an idea of what we're expecting and what we continue to drive in you know Q forward into 27.

39:34 Thanks, pass it on. Thanks Andrew. Thank you. As a reminder, To ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for our next question. Our next question comes from the line of Matthew Boulay at Barclays. Your line is now open.

40:07 Matthew Boulay Morning everyone. Thank you for taking the questions. Just wanted to ask on the SG&A. It looked like it was, as you mentioned, kind of flattish as a percentage of sales year-over-year, maybe even deleveraged slightly. Obviously, you had some good growth in the quarter. Anything kind of one-time in there? I know in the past you talked about bonus accruals and Q3s, so just anything we should consider about how to model that going forward? Thank you.

40:30 The only thing I would call out there, and I don't think it's one time, Matt, is as we grow our RDS business, you do see the revenue share that we pay to our customers is a big portion and a big percentage, and it's in SG&A. that number does move a little higher because of the outsized growth in that business again we love the clearly the EBITDA rate that we get from RDS and we love the gross profit rate but it does increase what we see as an SG&A percent when you just look at SG&A so if you were to take out that growth and that we do believe there was a bit of leverage again it was modest in SG&A for the quarter.

41:13 Okay got it now thank you for that Rocky and it does explain Just the RDS margin as well a little bit. It's very helpful there. Secondly, just personal protective. It still seems like it's under a little bit of pressure. Maybe just kind of unpack what's going on there and any kind of visibility to sort of flattening out, if not even recovering in that business. Thank you.

41:34 Yeah, Matt. Very fair. PS had a challenging Q3 in our business there. We certainly continue to see that business a little bit less promo activity out in the marketplace. Certainly impact us in Q3. We do actually see that starting to improve and we expect that to improve in Q4. And we have some really solid growth plans into 2027. So we're excited about getting that business back to flat and then growing it off that base. So yeah, tough quarter, but we're excited about where we're going in Q4 and beyond.

42:05 Cool. Thanks guys. Good luck. Thanks, Matt. Thanks, Matt. One moment for our next question. Our next question comes from the line of Brian McNamara at Conaccord Genuity. Your line is live.

42:22 Hey, good morning, guys. Thanks for taking the question. Good morning. Morning, Brian. I'm curious if you can kind of give a little more detail on your progress in pro, particularly new business wins, and kind of split that out between, you know, your current retail DIY customers and brand new customers.

42:38 Yeah, so as I mentioned, over close to a point and a half of pro growth, and that is, you know, most of that actually is outside of the, I'll say, retail channel that has a pro component to it. Brian, we're really excited about the proof point that we're seeing in the resi and the commercial pro side. I'll start there, but we've seen a number of, you know, I won't go into each of the details, but we certainly are seeing traction at the pro level with customers outside of retail. We're seeing traction and fastening as well as even our glove business. And we're excited about what the Resi Pro and our commercial proteins are putting together and laying out. That's why we're so excited about 2027. And then the other piece on pro is industrial. We've talked already about quite a bit about Cambridge, but I'd also be remiss if I didn't mention our Canadian industrial business has had another excellent quarter.

43:28 Really impressed with what that team has been able to do and drive. So that's more about winning with, you know, I'll say smaller opportunities on a repetitive basis. And we're really excited about the momentum in both of those businesses and we're going to keep leaning into it in Q4 and beyond.

43:43 Great, and then just a quick follow-up on the M&A environment. Obviously, the macro picture's probably not gotten better in the last three months since we last spoke. I'm curious what that means for bid-ask spreads and just market activity. Thanks, man.

43:58 Yeah, we continue to see a blind fill with M&A opportunities, so there are deals in the marketplace. Yeah, I think your question's a good one as far as the bid and the ask. I mean, expectations are still I'll say moderate right now so you know there's still good high quality businesses that we think we can buy at attractive prices but it has you know there has definitely been a little bit of a I'll say softening in my expectation so pipeline's filling up there is still still activity there and we're you know excited about the three deals we did in 2026 and we want to make the right next move and if it comes up we'll we'll keep you posted on what it is.

44:34 Great I'll pass it on best of luck guys.

44:36 Thanks Brian thanks Brian. Thank you. This now concludes the Q&A portion of today's call. I would like to turn the call back over to Mr. Adinolfi for closing comments.

44:52 Yeah, thank you very much. Well, I appreciate everybody joining today. I want to leave you with three elements to remember Hillman by. So first, organic growth, solid in the quarter. We expect that to continue. Really proud of what our team's been able to do there and what we'll continue to drive in Q4 and beyond. M&A solid acquisitions in 2026 and we expect those to continue to deliver accretion in 2027 and then the strategic blueprint proof points which we touched on a number of points during the call the Q&A but excited about new business and I'm even more excited about what we're going to do in 2027. Traction with the pro we've got many different I'll say irons in the fire and traction is starting to read and then the industrial momentum so with that I want to thank everybody for joining us this morning. We look forward to updating you soon. Have a great day. Thank you.

45:59 Founded in 1964 and headquartered in Cincinnati, Hillman is a leading provider of hardware and related products serving retail, pro-distribution and industrial MRO customers. Over the last six decades, Hillman has built a legacy of service and growth by forming strategic partnerships with North America's leading home improvement, hardware and farm and fleet retailers. Hillman differentiates itself from the competition with its dedicated field sales team of 1,200 associates, direct-to-store distribution capabilities and world-class global sourcing and supply chain expertise. Hillman offers an extensive product portfolio of more than 111,000 SKUs, including fasteners, hardware, project gear and supplies, and keys and engraving services,